Thursday September 24, 2020

The anatomy of the coming recession

The next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option

23rd August, 2019
Donald Trump with Chinese president Xi Jinping in Beijing. Pic: Getty

There are three negative supply shocks that could trigger a global recession by 2020. All of them reflect political factors affecting international relations, two involve China, and the United States is at the centre of each. Moreover, none of them is amenable to the traditional tools of countercyclical macroeconomic policy.

The second concerns the slow-brewing cold war between the US and China over technology, with both vying for dominance over the industries of the future: artificial...

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