In 2020, the global economy experienced a crisis, the worst since the Second World War: a collapse in the stock and oil markets, a record increase in unemployment. Quarterly GDP declines in some countries have been double-digit. Recovery began little by little in the past year. However, new threats are not far off.
Record inflation and the threat of the reserve currency
Danish Saxo Bank presented shocking economic predictions in the annual survey. Analysts have listed events that are unlikely, but quite real and extremely da-ngerous – each one will deal a strong blow to the markets.
One of the scenarios is a surge in inflation in the United States. The Fed expects ten million vacant jobs to finally be filled. However, the bank’s strategists assure that the situation on the labor market is not conducive to this: some Americans retired early due to the crisis, others do not want to return to low-paying jobs.
Energy problems and labor shortages will lead to double-digit wage increases. As a result, by 2023, inflation will reach 15 percent for the first time since World War II. The Fed will tighten monetary policy, but with a delay. Therefore, the stock and credit markets will be in a fever.
Another extreme scenario is a constitutional crisis following the midterm elections to the Senate and House of Representatives. If one or both parties do not accept the results, the new Congress will not be able to start work when it is supposed to – on January 3, 2023. This promises the economy extreme instability, and the dollar – a fall.
You will have to turn off the green course
The acceleration of inf-lation, rising prices for raw materials and social tensions will force European politicians to postpone a low-carbon future. In the coming years, you will definitely not be able to do without oil and gas.
Aware of the risks of a green energy transition, policymakers will take a controversial step: loosen environmental restrictions on investments in crude oil and natural gas production by five and ten years, respectively.
This will help stabilize the energy market and minimize the likelihood of so-cial unrest due to rising fo-od prices and utility tariffs.
Space Race and Cold War
Competition in the defense sector will intensify. “Hypersonic technologies leave traditional and even nuclear military eq-uipment far behind. A new arms race will begin in 20-22, as no country will agree to be lagging behind,” the bank’s analysts write.
In the summer, China tested a hypersonic missile that flew around the planet in low orbit and went unnoticed by missile defense sy-stems. As noted by the Fi-nancial Times, this was a c-omplete surprise for the Pe-ntagon and the CIA. In Be-ijing, however, they claim that it was not a weapon that was tested, but a launch vehicle for space flights.
However, it is clear that hypersound and space are an additional reason for the rivalry between the United States and China, Saxo Bank points out. Other major players with advanced technologies are entering the race: Russia, India, Israel and the EU.
Confrontation awaits at Deutsche Bank. Experts fear the militarization of outer space and its transformation into the “Wild West”. International agreements such as the 1967 Treaty on the Principles Governing the Activities of States in the Exploration and Use of Outer Space are not enough. And, as the bank’s strategists emphasize, there is no consensus about borders and control over space objects, which means that the risk of conflict is increasing.
The authors of the Deu-tsche Bank review remind that Russia in November successfully destroyed an old Soviet satellite in orbit as part of a space weapon test. This caused great concern in the West.
The battle for space is already a reality. The race in the realms of unmanned aviation, artificial intelligence and hypersound is gaining momentum.
“The fact that the United States and European allies are far behind China, Rus-sia and even India is unlikely to contribute to pacifism. Therefore, we should expe-ct an increase in investment in the development of wea-pons, as well as global ind-ustrial espionage,” says An-drey Kochetkov, a leading analyst at Otkritie Broker. “Washington and Beijing are waging a technological cold war over the 5G market. In addition, the Chine-se threaten the financial m-onopoly of the Americ-ans. The White House has adop-ted a strategy of constant pressure on the PRC on all fronts, including supporting separatism and restricting access to technology.”
The founder of the world’s largest hedge fund Bridgewater Associates, Ray Dalio, does not exclude that the confrontation between the two powers will turn into a global economic disaster. In his opinion, US attempts to make China and its culture “more American” are extremely dangerous.
Abnormal inflation in Russia
Yet the most obvious macroeconomic trend is high growth rates coupled with inflation. For this, even a special term was invented – “grooflation”. “Helicopter money” – funds directed by governments to support the population, will continue to drive prices up.
Another factor is the sharp recovery in the labor market after the recession. If it usually takes up to seven years, now everything is much faster, says Deutsche Bank. For example, in the USA, France, Spain, unemployment has returned to pre-dock levels, or even lower.
This problem will not bypass Russia either, the World Bank economist David Knight is sure. He does not exclude further tightening of the Central Bank’s policy and an increase in the key rate. In December, the regulator immediately added the percentage – from 7.5 to 8.5.
“Despite this, inflationary expectations of the population have not yet decreased – 13.5 against 13.6% in October. This is close to the maximum in the last four years. will continue to increase, and then will act according to the circumstances, “- said Olga Veretennikova, vice president of the analytical company” Borsell “.
Nevertheless, we can count on some improvement in the situation in the new year, believes Andrey Kochetkov from Otkritie Broker. Inflation is catching up with the overly weak ruble. Accordingly, the difference between internal and external prices is no longer as significant as at the beginning of 2021, the analyst explains. An increase in the Central Bank rate at relatively high prices for Russian exports will ensure the stability of the ruble and a gradual slowdown in the rise in prices for goods.