A global slowdown? (Recessionary fears in world economy)

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 A global slowdown? (Recessionary fears in world economy)

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• 2018 was challenging : Extreme volatility returned to global stock markets after some time in 2018, and they sank quite a lot.
• There is fear : Markets suspect that economic growth may halt soon, as the second-longest economic expansion in US history has been going on post the 2008 recession. A correction (recession) is overdue.
• China's effort to contain a credit-fuelled bubble : Markets are scared due to PBC's (People's Bank of China) effort to rein in the massive bubble, creating a slowing impact (with a time lag). China's private mfg. sector shrunk in Dec.2018 first time in 19 months.
• Europe and Japan : They are showing signs of slowing down as well.
• Central Banks changing course : Both the US Federal Reserve and European Central Bank (ECB) have decided to normalise interest rates (from historic lows - due to 2008 crisis). This "tightening of monetary policy" can naturally lead to an economic slowdown.
• Oil price drop : It shows that demand for commodities is down, as global economic growth is down.
• This time it's tougher : Central Banks globally have used their power post-2007 crisis, and if there is a full recession from 2019, they have little power left. They lowered interest rates to near-zero for many years already to boost liquidity and fight recession. (Then they started raising rates, and unwinding asset purchases)
• Conventional methods only now : That unconventional approach (in a crisis) won't happen now. Hope is also that governments will step in by ramping spending as monetary policy leverage vanishes. (so fiscal makes up for monetary). How feasible would that be?
• Don't overuse monetary policy : The diminishing returns will be visible otherwise.
• Trade War : If Trump escalates the trade war with China, then overall tax burden on economies will grow.
• Solution : Bring reforms to boost economic productivity, instead of looking at Central Banks for help.
• Summary : Logically speaking, the world may be set for a period of slow economic growth, even a recession.

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