Key economcis analists have warned about the risks of a new economic recession,somehow as a follow up of the one the wrold is remembering these days.Just a few day ago (septemeber,18th), a Global Outlook conference call organized by Roubini associatte team took place to analize the risk of the next global economics recession.Covering a variety sides of the economic perfomance of key economies as well as those in Emerging Europe, Asia and Latin America, ,the main lines of thought, goes on to keep attention on the year 2020 .-
The year 20020, at least in the USA economcy seems to be the turning point from higher to lower economic expansion mainlly assuming that the fiscal boost in the USA economy would be close to fully exhausted its effect, while the Fed would have its normalizing monetary policy totally in place.This means that in that year and unless potential output expand throuhgout supply side gains (higher productivity, innovation ,lower regulation and so forth)) there would not be a counterfactor to overcome the contractionary effect of higher interest rate.For this matter the European Central Bank, would also be on the same track of normalizing .So, theses effects would be the first signal to watch in that year.-
Besides the basics, there are other isssues which should also be in the surveillance area .On this regards , most of the focus is on the expected effect of the currrent trade adjustment policies between USA and China, as long as the current trade conditions impose the heavy losses of the monopsony powwer of one oversized consumer (China), which means welfare lost for those which are its trade partner.The consensus seems to be that this adjustmenet will no escalate to become a policy with most of the economices imposing tariff at its discretion to one another . Moreover , trade adjustment do not have a huge share(25%) on the chance of recession. Other variables goes on the microeocnomics foundations of markets.That is the case for the perception variables: Credibility,Trust and expectation.-
Credibility on the quality of the economic policy implemented, Trust about its positve expected aoutcome, and expectations about what comes next once its impact is fully in place to support steady economic growth. Whether these variables goes on the upside mood , the virtuous cricle of growth may be in place for a longer period of time even beyond 2020.
It follows that on top of the list for risking a new recession, are economic policy mistakes whether it comes either from the Central Banks and its tightening approach(faster than what market expect), or over expansion of public expenditure and total debt both public and prvate, beyond long run fundamentals) . In the latest case ,it leads the econoomy to the complex scenario in which there will not be too much of policy tools to chose from. So ,after controllling the risk of policy mistake, it arises the problem of lacking policy menus in case the econonmy moves toward a contractonary pace.This is what make more relevant the supply side oriented policies -
On the strenght side, it is worth to consider that Private banks are in a better shape than some years ago.Inflation at the global economoy level does not seem to be on the path of being a factor for a recession. Finally, new trade agreeement under the new rules may also be an impulse for econoomic growth .-
So, it is both a good and necessary idea to think about the risk of a new recession. Whether it take place in two or more years from now it is a matter of usual business cycles which macroeconomics policies are trying try hard to solve.-
