Inside Out | The world economy is headed for a recession. China won’t be there to save it this time
- China’s economic health is important to the world not just because of its importance as a buyer and supplier, but also because of anxieties that it is less well placed to provide the massive stimulus it did after the 2008 financial crash
A decade after the global financial crisis, with the world’s leading economies still addicted to the near-zero interest rates of the emergency response of quantitative easing, it seems the global economy remains on life support, with our experts still flummoxed about how to restore economic health.
Government and corporate debt sits at record levels, with most central banks warning political leaders the monetary armoury is empty. They are calling for fiscal stimulus – like building infrastructure and cutting taxes – when most governments are staring at deep budget deficits and under pressure to cut, rather than increase, spending.
Martin Wolf threw light on this elephant in the room in the Financial Times last month: “The astonishing fact is that the six largest high-income economies, including now even Italy, can borrow for 30 years at a fixed nominal rate of close to 2 per cent, or less … One has to be desperately pessimistic about growth prospects to believe it is impossible to manage substantial borrowings, on such terms.”