Thursday, 25 February 2016

The Economic Triangle of Europe, China, and America

The global recession that is now about to show its hand started when Germany insisted on austerity for most of Europe more than three years ago. In a sense, Germany shot itself in the foot by insisting on this austerity policy for Europe which caused a slowdown in demand not just in Europe, but also in China. Its taken about three years of depressed demand to fully show up in China’s economy but now it has taken hold with many ghost towns where literally every factory is deserted and unfinished building projects resemble some sort of nuclear accident. What people fail to understand is the level of unemployment is rising in China and there is no state aid and the Chinese are natural savers and not spenders, so the move to a consumer led economy will be hard to achieve given these facts. 

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With many American companies relying on trade with China and Europe the feedback loop equally affects the American economy which hadn’t really recovered from the 2008 financial  crisis with many Americans on low wages and unable to spend. The commodities downturn which is ultimately dependent on demand has been savage and affects many emerging economies again adding to weak demand for export led economies such as Germany and so the feedback loop feeds the global recession. 

With negative interest rates in Europe and Japan this shows that these policies are not working and the only reasonable policy is to spend money on infrastructure and increase the level of wages for the low paid to a living wage and watch as their respective economies grow. Without this type of policy that serves the greatest majority (the low paid) and interest rates between 2 and 4% we will have more unrealistic asset bubbles that will only create a greater inequality in society and lead eventually to a breakdown of social cohesion. 

I believe governments around the world can avoid the worst of a global recession by seizing the moment by spending money on new innovation and technology that provides solutions to climate change such as Solar Power Stations, All Electric Vehicles, Wind and Wave Power, and Environmental Schemes to Clean up Pollution. 

It doesn’t make any sense for countries such as Brazil to be spending billions on hosting the Olympics yet they pour raw sewage into the sea. 

Anthony Fox MSc BSc Hons

Remember: Electric Vehicles = No Waste Technology = Clean Air 

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