The S&P 500 index ended the year near a record high, as did the French Cac-40 index and the German DAX. Inflation began to decline sharply throughout the developed world, and bond yields also began to fall.
The American economy expanded rapidly, and although Europe remained unchanged, it managed to avoid outright recession. Chinese property values have fallen slightly, but have hardly collapsed. And despite several regional setbacks in the US and the dramatic merger of bankrupt Credit Suisse with UBS, by the end of the year ATMs were still working and there was no sign of a full-blown banking collapse. /p>
At the beginning of this year, the global economy looked precarious, facing multiple threats across multiple continents. However, at the time of closure the situation was generally stable. It was a year of dangers and successful escapes. But no disasters occurred.
But here’s the problem. Stability is very rarely permanent, and no one's luck lasts forever. Just because central banks and policymakers have managed to get through the last 12 months without any full-blown disasters doesn't mean the coming year will be as good.
There are still many threats to the global economy, some of them in the past and some completely new. Such as? Here are 10 major events that could undermine global prosperity in 2024.
1) Donald Trump will become president (or not)
It may have been chaotic, offensive and lacking in charm. Despite this, Trump Mark I managed to achieve some significant achievements during his presidency. He lowered the ridiculously uncompetitive corporate tax rate and brought the US in line with the rest of the world; he cut red tape and launched investment zones; and he began trying to protect the economy from China without the absurd subsidies of his successor.
The problem is that Trump Mark II has nothing to do with this. His main economic promise is a 10 percent tariff on all imports, a policy that would plunge the world into a 1930s-style depression (perhaps most worrying for the UK, since the US is our largest trading partner).
Polls suggest it is likely that next year's election will be a repeat of 2020, with Donald Trump hoping to reverse his defeat by Joe Biden. Photo: Scott Morgan/ReutersIn addition, he may well sharply reduce support for Ukraine. Of course, you never know exactly what Trump is going to do, and he may move closer to the mainstream if he is back in the White House. However, what we have heard so far is alarming. If he wins, his protectionism could easily trigger a global recession.
The only problem is that there is another, even more alarming possibility. Trump is not becoming president. If he loses narrowly, his embittered and angry supporters, incited by a leader who has little respect for the Constitution, may well pose the most serious threat to the American Republic since its founding in 1776.
And of course, increasingly A weak President Biden will stagger into the White House, facing multiple legal threats and spending even more money on an insane program of so-called green subsidies that is already distorting global markets.
True, President Biden is trying to counter this by building up American green energy capabilities, as is the European Union (although this is mostly just rhetoric for now). And yet, it may already be too late.
In fact, in the transition to net zero, we handed over control of our energy and transportation systems to China. If he decides to weaponize this, we could be in big trouble.
5) Blockade of Taiwan
There will be many important elections in the coming year, but the first of them will be held in Taiwan. Tensions have been running high between the island and mainland China for years. Close elections in January between the pro-Washington Democratic Progressive Party and the more Beijing-leaning Kuomintang may well exacerbate the situation.
A full-scale invasion is still relatively unlikely. But if China wants to put real pressure on Taiwan, especially if its preferred candidate narrowly wins the presidency, a naval blockade is the most likely option. If exports are stopped, the global economy will soon feel the impact.
Taiwanese soldiers are always ready for Chinese aggression, which could affect global supply of microchips. Photo: AP Photo/Chang Ying-ying
Taiwan produces 60 percent of the world's microchips and 90 percent of the most advanced microchips that are not made anywhere else. The brain of the global economy will not shut down overnight, as all existing chips will continue to work. But hardly any new advanced processing devices will be produced, and it will take years to replace that capacity elsewhere. The tech industry will grind to a halt.
6) Hackers Using Artificial Intelligence
Over the past year, we have heard a lot about the risks that rapid advances in technology pose to the economy, and indeed to humanity itself. artificial intelligence (AI). Super smart software may or may not turn against us. We'll soon find out.
But there's another threat posed by AI, one that's much more immediate. This will exponentially increase the vulnerability of the global economy to major cyber attacks. Hacker and phishing attacks are already breaching firewalls and security systems in banks, companies and government departments almost daily.
But AI can speed up this process, making it much easier to collect the data needed to breach security systems. , which, especially in government, are often years out of date.
Likewise, Al can allow hackers to impersonate people or create fake identities with relative ease, which can then infiltrate sensitive information systems. This can be used in different ways. Financial systems could be shut down and banks could demand ransom from gangs of hackers. The government may be forced to make concessions to hostile powers. Or global trading systems could collapse simply to wreak havoc and confusion.
One thing is certain. AI will greatly increase computing power, and in the hands of smart, well-organized criminals, it may well increase the potential for damage by a factor of ten or more.
7) The Collapse of Private Equity
The world has experienced a series of financial collapses, and while they all share the same fundamental characteristics (arrogance, greed and arrogance are the first three), each one is always a little different. We've seen crashes start in currency markets, tech bubbles, subprime mortgages, and the eurozone. If there were another financial crisis, it would start where no one expected. For example?
Take a look at the giant private equity (PE) industry. It has grown significantly over the past 20 years, with the total global value of the private equity sector, including private debt, real estate and infrastructure, reaching US$7.3 trillion, according to research firm Preqin.
One thing we know for sure about PE firms is that they love to saddle themselves with debt. Indeed, it often seems that this is the only trick his financiers know. And, of course, the value of that debt has increased at least fivefold in the last couple of years. There will be a lot of problems when it has to be refinanced.
We're seeing early rumors of this in companies such as supermarket chain Morrisons, which was taken over in 2021 at a ridiculous price by a private equity firm that has made deep cost cuts to cope with its borrowings. But in some larger firms this figure will be increased many times over. If one of the largest private equity firms were to default on its debts, the losses would be so enormous that it would create a systemic risk for the entire financial system. And this can happen at any moment.
8) Deep recession in Germany
Cheap energy is gone. The export boom to China is over. Its heavy industry looks hopelessly old-fashioned, and the devaluation that followed the country's entry into the eurozone has long since passed. The German economy is in dire straits, performing even worse than the UK.
Most forecasts call for only a mild recession. But with the Constitutional Court demanding huge spending cuts, the situation could get much worse. Germany may well face a deep structural decline.
Being the fourth largest economy in the world, this will be reflected on a global level. This will pull the eurozone down, putting pressure on the currency. And this will only increase support for the right-wing Alternative for Germany party, while Chancellor Scholz's power becomes weaker and weaker and the country becomes less and less willing to foot the bill for the rest of the EU. A German depression could well sink the common currency.
9) India Stock Market Crash
While all eyes were on China, India was gradually catching up with its larger neighbor. It has already overtaken the country in population and has also become the world's fifth largest economy, overtaking the UK and France.
And although it doesn't make many headlines, it now has the seventh largest stock market in the world by total market value. Global capital has poured into India, partly to benefit from its strong growth and partly as an alternative to weak returns in Chinese stocks.
The benchmark Sensex index is up 18% this year and 100%. over the past five years. After the spring elections it may well increase even more, especially if the Modi government returns to power.
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