Good things come in threes, but so do bad things. Especially in economies. The financial crisis everybody has been waiting for is a “hard landing” of the Chinese economy, the world’s second-biggest. It now seems to have arrived, though the Chinese government is still denying it.
The second crisis is a credit crunch sabotaging economic growth in almost all developing countries except India. Since commodity prices have collapsed, their dollar earnings from exports have collapsed, and in many cases their currencies have fallen to historic lows against the dollar.
A third crisis is looming in the developed economies of Europe, North America and Japan, which can see another recession on the horizon before they have even fully recovered from the effects of the banking crash of 2007-08.
These crises are all connected. When the huge mistakes and misdeeds of American and European banks caused the Great Recession of 2008, China escaped the low growth and high unemployment that hurt Western countries by flooding its economy with cheap credit. Between 2007 and 2014 total debt in China increased fourfold.
Crazy, maybe, but the Chinese government is more terrified of mass unemployment than anything else. It believes, probably correctly, the Communist regime’s survival depends on delivering continuously rising living standards. So the Chinese economy went on booming for another six years, but the “solution” was fraudulent and now it’s over.
For the rest of this column, click here: http://www.lfpress.com/2015/08/26/global-economy-now-on-verge-of-perfect-storm