Misguided policies are causing an unprecedented collapse in global economic confidence leading to further inflation and rising costs of living and a global recession.
Did someone forget to read “the basic rules of economics”?
The war in Ukraine has caused global energy and food prices to rise causing widespread inflation putting pressures on the cost of living in the West. In China the Covid Zero policy has damaged the economy to such an extent that economic growth is stuttering just as exports growth is slowing forcing the government to pump financial aid and stimulus into the economy. The impact on shipping and ports became evident from July onward as overcapacity appeared on the Transpacific and European trades, crashing freight rates whilst tankers, particularly LNG vessels boomed. Overall, consumer demand became more discretionary, and consumption is beginning to slow.
And then came along a new government in the United Kingdom promising tax cuts and economic growth based on the theory of “trickle down economics” which supposes that investments and a greater money supply will lead to growth at the lower end of the income spectrum. This has never been substantiated and the last person that tried this, Ronald Reagan, ended up with a sharp recession. In short, the UK Government’s misguided economic policy, and that is being polite, has resulted in economic chaos and for the need for massive borrowing at home that has spread uncertainty across the major industrial world with hits on stock markets and rising interest rates to follow.
The UK Pound sterling collapsed, and interest rates are rising quickly, both leading to further pressures on the cost of living with absolutely no gain to the economy. The UK is now in a state of potential economic collapse only salvageable by a U-turn, but national and international trust is gone. The IMF has sharply criticized the policy as have most economists.
The impact of these events will lead to a global recession with the UK and Germany already sliding in that direction. The only issue now is whether it will be a short one, “V” shaped with a strong recovery, or a long one “L” shaped with no recovery in sight, particularly as Russia is threatening a nuclear war.
Six months ago there was no container space available for shippers, today the excess supply is staring the industry in the face as demand is crumbling. Ports will begin to see declining volumes as well.
