In recent times, as I was going through so many analyses and news all over the world. The war in between Ukraine and Russia made me start my long-lost treasure. I was going through many articles, Many old youtube videos. Reading some blogs and so today whatever I am writing, I can say that situation is not at all great on the front of economy. In the world and India also. Significant economies are going through one or another crisis.
In a recent report, even Deutsche bank mention that a major recession is coming. “We will get a major recession,” Deutsche Bank economists wrote in a report to clients. The problem, according to the bank, is that while inflation may be peaking, it will take a “long time” before it gets back down to the Fed’s goal of 2%. “We regard it…as highly likely that the Fed will have to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel,” Deutsche Bank economists wrote in its report with the ominous title, “Why the coming recession will be worse than expected.”
When covid 19 came, many countries in the world faced lockdowns. Many industrial and financial operations were halted. I remember there were hardly any subjects. I wrote Corona aftershocks: Is recession imminent and How to tackle the crisis: Corona Recession
It was visible that COVID affects many industrial and logistics supply lines. But that is not why I am writing this post.
Atlanta FED Projecting Q2 GDP to fall by 1-2.1%. That is happening when FED is increasing interest rates. This is happening when War is going on in Europe. For quite some time, some western leaders were not serious about sending weapons to Ukraine. No one was expecting that Ukraine will keep fighting for more than 100 days. As I wring it is in 5th month. Russian logistics are not much good. As I am trusting Ukraine’s numbers, it is clear that Russia losing big. but as a big supplier of energy to Europe, it was natural for oil and gas prices to increase. The connection between Russian oil and German industry is not new. they are connected from the Cold war era. Recent Nordstream just increased it.
War increased the food crisis.
David Beasley, Executive director of the UN World Food Program, the Largest humanitarian program in the world, focused on global hunger and food security. Before the war started, he highlight that in 9 months the situation will be worse. He highlights that some countries are in such a situation that if we do not adders immediately over 9 months, we will see famine, destabilization, and mass migration. There is a program and solution, we need money. otherwise…
Of course, there are some reasons for what he said. large floods in china in the summer of 2021 made farming difficult. it affects 30 million-acre farmland across china, which lead to making their agricultural product in history. California, a state which made big crops for the US and we can find many types of food and fruit there, is affected by drought. Eastern Africa, another part faced severe drought in the last 40 years.
Just like a supply of food was affected, Demand is also heading toward the highest.
Taliban in Afghanistan made the situation of food security made worst. Internal civil war and sanctions are other financial reasons to think about. But civil war is not the only problem in Afghanistan. That is a problem in many other countries like Syria. Beirut, Lebanon blast destroys the capacity to store food. Import and export of food is way more important for a whole new country for non-covid a nonwar reason. That was the largest storage capacity in Lebanon and held nearly whole food for the nation. interestingly Lebanon was depending on Ukraine and Russia. All this increases the number of people who are threatened their livelihood by all situations of war by 80%. from 108million people to 193 million people.
I talked about the energy situation in Europe in one of my previous posts Ukraine war: What will be the effects on the world after the war. and Why did Russia attack Ukraine?
The global car industry is largely dependent on Russia and Ukraine. There were many parts of the car which are Manufactured in Ukraine. Now all that was destroyed. Russia was a big supplier of palladium. Now it is all sanctioned.
The situation in Europe and other parts is also worst. There is a standard of living crisis in the UK. Rishi Sunak successfully handles covid, but the Standard of living crisis is out of hand. Brexit proved to be the wrong choice.
The situation in the US is even worst. credit card debt increased by 20% in one month. Consumer confidence lowest since 1950. mortgage demand lowest since 2001. in all such situations, US FED is trying to convince the market that everything is ok. FED when previously tried to taper its portfolio by $750 billion in 2 years, was impossible. now they set a humongous target of reducing their portfolio by $1 trillion every year for the next 2 years. they bought many things from the open market like the government treasury and mortgage-backed securities.
PIMCO highlight that the Recession is “More likely than not” same for Europe.
Bloomberg, a well-known name in the Finance industry, highlights that Recessions, like unhappy families, are each painful in their own way… Many observers expect any decline to be a lot less wrenching than the 2007-09 Great Financial Crisis and the back-to-back downturns seen in the 1980s, when inflation was last this high. The economy is simply not as far out of whack as it was in those earlier periods, they say.
