The financial industry is clamoring to get ready for a global recession as economic growth continues to slow down significantly. Central banks across the world, especially the powerhouse economies like China and Germany, are set to introduce global monetary stimuli to stave off impending doom. Damon Vickers, New York Times bestseller and professional investor,
Damon Vickers clarifies factors for monetary stimulus
Unlike the strong, synchronized growth of the global economy last 2018, this year’s plight saw a decline in the momentum and diversification of trends that weakened many economies in the world. The US Federal Reserve is looking to cut interest rates in October and December, while Japan is also poised to loosen monetary policies due to the investor and counterpart pressure.
Additionally, central banks of South Africa, Brazil, Switzerland, the UK, and Norway are set to have respective meetings amid the rising problem.
Damon Vickers, notes that the escalating trade conflicts, volatility, and rising interest rates have all contributed to the fiscal tightening in different parts of the world. These factors make the introduction of monetary stimulus imminent on a global scale.
Different stimulus from big economies
According to the IHS Markit, global growth stands to decrease from 2018’s 3.2% to 3.1% this year. This number will keep declining in the next several years.
This global economic slowdown has prompted several large economies to take action. US President Donald Trump advised a short-term tax cut on payroll to encourage consumers to spend more. However, Vickers says that a bipartisan agreement on legislation may not take place until a severe decline in the economy is already happening.
In China, fiscal easing comes in the form of infrastructure. Earlier this year, a $250B stimulus package consists of reduced social security contributions for the corporate sector and several tax cuts. Signs of an economic slowdown are apparent despite this, which may prompt them to inject around $100-125B through infrastructure spending.
Germany, on the other hand, is considering implementing deficit spending as soon as the growth rate declines at an alarming speed. Their government also indicated a $55B allocation to boost employment and consumer spending should the worst-case scenario come.
“We will be seeing more global monetary stimulus in the coming months to years,” Damon Vickers suggests. “With the economy at a falloff, it’s not only a matter of when but also what measures are to be implemented to battle an upcoming recession.”