An economic bragging rights referee
The global economy has become more likely to fail
The number of political and economic germs that are flitting around the world has increased and there are mounting fears that these are becoming resistant to the fiscal and monetary pills, powders and injections. The recession word is popping up with increasing frequency. Global trade is in the doldrums, industrial production is hit hard, debts have reached record highs and growth is slowing in most places.
There are plenty of flashing and rotation lights for those who want to see them. Global political and economic insecurity is rife and reflected in the financial markets as investors are fleeing into assets that are deemed safe such as gold, U.S. treasuries and the dollar.
There are growing doubts about America's position as a superpower. The country may at times come across as thoughtless or opportunistic or both. Yet, at the same time the U.S. is in some regards still 'the indispensable nation' supporting and sometimes propping up the global economy and its underlying structures.
Quite often the world's policeman is no longer in control or does not want to be. Other great powers try to use this vacuum to their advantage while smaller players often think - rightly so - that they can get away with actions that would have drawn the ire of the United States in the past.
All this while democracy is under pressure all over the globe and populism and nationalism/nativism are clearly not outmoded yet. The geopolitical game is adrift whereas the rules governing this new (or transition) era are anything but clear.
Bad news is bad news once again
This does not look like a healthy political backdrop for the world economy - particularly now that monetary stimulus measures appear to be less and less effective.
The stock markets also have recently indicated this, considering the lukewarm reception of looser monetary policy by the Fed and the ECB. Markets had become used to acting, in recent years, on the premise that "bad news is good news."
That is to say, investors thought that disappointing economic data would be more than offset by central banks pressing down harder on the monetary accelerator. The bad/good news mechanism has not totally disappeared yet it appears to be in a transition phase.
This is very relevant for politicians as central banks have regularly enabled them, albeit willy-nilly, to defer painful reform.
After all, why take electoral risks if central banks are prepared to gloss over economic weaknesses by shoring up the stock markets and facilitating government lending at rock-bottom prices or for a song? As the global geopolitical and political-economic climate is worsening, I doubt if central bankers can still conjure up a sufficient number of umbrellas.
Asia looks particularly vulnerable right now. Not long ago many heralded the Asian Century. Now the area is facing a variety of destabilizing domestic and transnational showdowns and tensions are encompassing all of the largest economies in the region, including China, India, Japan and South Korea.
As Michael Auslin wrote, "the dynamism that was supposed to propel the region into a glorious future seems to be falling apart."
At the same time, the big three Latin American economies are in a slow state -Argentina showed how susceptible jittery stock markets can be to political upheaval - whereas the developed markets are struggling too. So the TINA climate (There Is No Alternative) dominating financial markets will probably become even more prevalent and appropriate in the sense that investors will start shunning equities too and will switch more to cash and gold.
Equity markets do not appear to have priced this in sufficiently as yet. Perhaps they think central banks still have enough ammunition to compensate for political setbacks and/or that the major countries will open the fiscal floodgates eventually in order to supply massive injections to their economies. As indicated I fear that any monetary ammunition that is still available has partly become wet whereas the fiscal clout of many countries is limited due to high indebtedness.
Gold as well as the bond markets are already anticipating less-than-good times ahead. Equities still seem uncertain, but with the upcoming recession in the month it is obvious that the global economy has become more liable to failure.
Andy Langenkamp is a senior political analyst at ECR Research and political commentator, who specializes in assessing the repercussions for the financial markets of economic and geopolitical events.