Into the 'perfect storm'

The gathering of the storm clouds

On Tuesday, we published our monthly forecasts and the outlook for the world economy. We mapped the hallmarks for a deepening downturn in the global economy, most likely starting this month. We also warned on the possibility of an “extremely adverse shock” of the war in Ukraine escalating into an (actual) war between Russia and NATO.

Past week I published two rather heavy posts. The first one was, maybe, the last entry to my ‘trilogy’ on the Russo-Ukrainian war. In it, I have sketched a worst-case scenario for the war and where I, for example, warned already in mid-October on the possibility of a major Russian winter offensive.

The second one was something I had been planning to write for long. That is, to explain the plan of, or preparation for a global financial lockdown by our leaders put in place after the Global Financial Crisis (GFC) of 2007-2009 and the European debt (banking) crisis of 2010-2012.

In this post, I will continue to map the worsening economic situation leading into a ‘perfect storm’, we have been warning for a while. It, the perfect storm, is the situation, which would most likely lead politicians to enact the “Ice-Nine” of the global financial system or the global financial lockdown.

Currently, there are two forces driving it: the soon-intensifying global recession and the destabilization of the financial system.

Into a global recession

It has been somewhat funny to read the comments of some of my economist colleagues on how the “recession is avoided” or that it will be “a mild one”. These “forecasts” tend to be based on a fallacious views, which do not establish 1) why there has been a recent growth spurt and, thus, 2) how will the economy develop in the near-future.