Macroscope | The global economy is collapsing, and neither the banks nor governments can save it
- With interest rates rising, markets are waking up to what central banks already know: that inflation isn’t coming down and there won’t be a swift return to easy money
- This policy unravelling is going to be painful, but may be necessary to purge the worst excesses of the past decade
And now it begins: the great unravelling of monetary excess and faux prosperity that has characterised the past decade. Where it will end is still uncertain but the bursting of the monetary bubble must ultimately prove salutary for the global economy, and for the planet itself.
It may seem odd to speak of this process as just “beginning”, but the truth is that the slowing economic growth, falling markets and rising inflation we have witnessed so far are but a prelude to the cascading impact that such trends will have as they feed on each other.
Slipping growth was always going to accelerate into an uncontrolled slide, but the inability of liquidity-gorged markets to see beyond the “first-round” effects of an economic downturn has masked that inevitability.
As both the cost and quantity of bank borrowing tighten, debt distress will inevitably grow in both corporate and household sectors of the global economy, where borrowing has reached record levels on the back of historically low interest rates.