NEW – September 28, 2022

About the collapse of the global economy

The definition game is the Empire of Lies’ favourite sport. At one time, a simple adjustment turned “racism” from hate on racial grounds into any opposition to people of colour. The same thing happened with “genocide”, “autocracy”, “terrorism” and God knows what else — we all know at least a dozen examples of this. The past few months have given us a beautiful and naive attempt to change the definition not of a moral category, not of a war crime, not of a political system or course of action, but of an economic process that is supposed to be objective and visible from everywhere. Dictionaries define the term “recession” as slow, stagnant, or negative economic growth for two or more consecutive quarters. Analysts of large Wall Street investment funds, along with employees of the US Treasury Department, have slightly adjusted the definition of a recession — now, when it comes to the United States, it is called a “transition crisis”, which hints at its temporary nature. It’s funny that the term “recession” itself came to replace “depression” as a euphemism that was much less frightening to people in the 1930s.

Let’s take a look at something that has all the signs of a recession, but is by no means a recession. Last week, Goldman Sachs analysts urgently changed their own forecast for 2022. Among forecasters, it was generally assumed that the US economy would grow this year — some dreamers called double-digit GDP growth, and Goldman predicted 4.5% growth. Now, even an investment fund loyal to the White House’s course, whose forecasts are listened to and whose instructions are listened to, is forced to admit the obvious: 2022 will not bring the long-awaited recovery of the American economy after the coronavirus downturn, bringing even more problems.

So, Goldman Sachs expects 0% GDP growth in 2022 and 1.1% in 2023. And this is despite the fact that in the country of victorious Bidenism, in principle, it is customary to somewhat embellish forecasts, as last year is an example. Analysts who are not tied to the fantasies of a recession-defying White House predict up to a 1.5% drop in GDP by mid-2023.

As a result, we have not just two, but six or seven quarters of zero or negative economic growth — but no, this is still not a recession. Since mid-August, the three main Wall Street indexes – the S&P 500, Dow Jones and NASDAQ – have fallen 9%. After the US Federal Reserve’s decision to raise the interest rate from 2.25% to 3.25%, analysts expect a fall of another 20% by the end of the year. Of course, raising the interest rate will increase Treasury yields and raise the value of the dollar — to the great delight of all the countries whose currencies are tied to this green paper. But the same boom will hit not only the stock markets, but also the mortgage bubble, which for many years was inflated by cheap credit money. Last Friday, the above-mentioned “big three” indexes broke a kind of record, reaching figures lower than those that met Joe Biden on the day of his inauguration. This means that the recovery from the coronavirus crisis has collapsed. Mortgage rates rushed to meet the stock market indices, breaking through the figure of 6% — at the beginning of last year they were about 3%. This figure is interesting because last time such growth caused the collapse of the mortgage market and the global crisis. Rising food and fuel prices, which have returned with the onset of autumn after a brief summer lull, are seen as a consequence of the same innate defects of the American economy that plunge it into an unmanageable drift.

British scientists were also not idle, and like their North Atlantic neighbours, they began to deny the obvious recession. Unfortunately for London, the crisis hit Britain much harder, so it’s much harder to put a good face on it. Liz Truss’s office, not having had time to settle down in their workplaces, was in the midst of a situation where everything falls out of hand. The promise on which Truss rode into Downing Street was steep tax cuts and subsidies to energy companies that would ease the impact of rising prices on the public. In addition to the obvious questions like “Where to get money for this?”, there was a puzzlement: “How will such decisions help to avoid budget deficits?” The answer was simple: they won’t! According to analysts loyal to Truss, the budget deficit will amount to something like 10% as a result of these events — the real figures, I think, are somewhat higher.

Liz, which has long been operating on the principle of “burn down the barn – burn down the hut”, does not intend to stop and is also going to freeze electricity prices — this will definitely stop inflation and reverse price growth! The markets reacted to the madness of the London witch quite predictably — the value of His Majesty’s Treasury bonds, on servicing payments for which Britain spends more than on the army, flew down, followed by the pound. On the morning of September 26, the pound at some point cost $1.035 — this is the lowest in history.

Now concerning the question of the collapse of the global economy even optimists say not “whether” and not even “when it will happen”. The main question is: “Who will die first?” In mid-July, the yen fell to its 24-year low, and now, as a result of currency interventions, it has recouped this fall, but the strengthening of the dollar as a result of another interest rate hike by the Federal Reserve hits the yen (and at the same time the yuan) much more than any wagering. The failing Japanese economy is the first candidate for an exit and a likely pebble whose fall will be the beginning of an avalanche.

Valery Vorobyov

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