As we said before, there are immense possibilities that the next decade, which begins in less than two months, will be marked, as a fundamental economic trend, by the continued growth of the United States and China while the rest of the world You will find yourself caught in stagnation. This stagnation will generate political and social events that will force governments and the most important economic decision makers to create a new growth model to face such a terrible situation.
Each country or each group of nations will invoke the economic advantages that it possesses to devise, design and execute a growth plan that allows to bury the despair, the bad news and the dreary life that awaits millions and millions of human beings throughout the planet. . Unfortunately, these plans are unlikely to succeed. Only the powerful technological change looks like the factor that allows a nation to obtain high growth rates for a prolonged period of time in order to leave the group of stagnant countries and get into the category of privileged countries, represented by the United States and China
The war of knowledge will not start the next decade. This confrontation began a hundred years ago with the United States and some European nations as protagonists. In the years to come she will worsen because it will be the only viable way out of the secular stagnation, therefore, we will see a significant number of countries struggling to produce technology of high economic impact. At the moment, the United States has a quasi-monopoly situation in technology production, followed by China that has not yet entered the era of high-impact technology production; while other nations venture into the field of low and very low impact technological production.
The American nation has a long way to go in terms of technology production thanks to the incentives offered by a free market economy system and a large amount of military defense. The United States has many decades producing technology of all kinds that are successfully applied in the economy through various business fields. Necessarily and without prior planning, some of these technologies became, almost fortuitously, high-impact technology and generated for several years investment flows that generously remunerated the productive factors involved and indirectly yielded abundant economic benefits even to those who did not they got involved in the activity; This is how the money flows created by the emergence of high-impact technologies stimulate economic growth and provide the resources that will allow governments to combat social problems. The most recent example of high impact technology is reflected in cell phone production. However, just as the rulers and scholars have noticed the effects caused by high impact technologies, entrepreneurs are more cautious in that regard. Indeed, these technologies cause colossal volumes of money that could not be properly channeled by any company and could still jeopardize their existence. As we can see, we can mention what happened with the investment flows that entered the telecommunications sector in the 1990s: no corporation, however gigantic, could monopolize such magnitudes of money and economic activity and the immense proliferation of companies that linked to the sector makes us see the inability of corporations to face the multiplicity of new businesses that result from the emergence of high impact technology. So, it seems, it is the new companies that capitalize on the benefits of the emergence of these technologies, while the corporation that directly linked with the project only takes advantage of a very small fraction of all the immense benefits generated and can even become threatened by a hostile acquisition that a greedy investor wishes to make. Implicit in this phenomenon we see how the luck factor becomes decisive for the appearance, and implementation, of a high-impact technology. How Technology Affects Economic Growth - Andrea O'Sullivan - The Bridge - Mercatus Center
A high impact technology is that set of techniques and procedures that will allow the manufacture of a new good, capable of being marketed worldwide, that will have such a huge demand that the company that introduces it to the market will never be able to satisfy . Therefore, to meet this demand, a gigantic number of new companies will also be required to be created to supply the new product. This also implies the rapid creation of a large number of business chains that manage to provide, in the same way, the goods and services related to the main product or that undertakes investments in infrastructure, physical plant, buildings, etc. , that are necessary for That the supply of the main product is a reality. All this without mentioning the colossal volume of marketing tasks that implies taking advantage of the emergence of this high impact technology. As we can see, it is an economic process that, practically, does not harm other economic sectors or create unemployment, but instead stimulates the growth of other productive sectors and is a powerful direct and indirect creator of employment, even for unskilled labor and young people seeking their first job.
The situation of global stagnation will create endless social and political problems that cannot be addressed by the factors that will hold political power. These will be against the wall because they cannot have the capacity to deal with such a number of inconveniences, as they do not have useful tools that will allow them to reactivate the economy and by not having pressure mechanisms to convince the leaders of the USA and China to abandon Your economic isolation policy. Thus, those nations that already have experience in the production of technology will see in the search for high impact technologies the only way to reactivate the economy to get out of the situation of stagnation and mitigate the social and political requirements that beset them .
Obviously, not all technological advances can be considered as high impact technology. Such a characteristic is given by the presence of a colossal demand for the goods produced by this new technology. We can qualify a demand as colossal when, for example, existing companies cannot meet even 1% of the requirements that consumers make to obtain the new good. Hence, it is imperative that a gigantic number of new companies appear to replace the remaining 99% by overcoming the legal and technical obstacles inherent in the use of a technology produced by a third party. On the other hand, a colossal demand does not appear out of nowhere, it needs two fundamental conditions: it must satisfy some need of at least one hundred million human beings and, at the same time, have an affordable price. It is not easy to accurately predict which will be the field in which the new technology appears high impact, but there are some candidates. Climate change will create new needs for several billion people, of which at least one hundred million could be able to pay for such attention. Humans will need to withstand high temperatures, inclement rains and fierce hurricanes and for this some high impact technology may be available.
In a superficial and fast way we could estimate the composition of the global technology production that is being carried out at the moment. We believe that, today, in the era of vertiginous technological change, 99% of all technology production is of low or very low impact, while the remaining 1%, or less, corresponds to medium impact technology. The technology production model that takes place on the planet does not contemplate the emergence of high impact technologies, hence its appearance is a fundamentally fortuitous event. That is why, from the next decade, a select group of countries, beset by major political problems, will begin the path of designing economic policies aimed at increasing the chances of high-impact technologies.
Industrial revolution and high impact technology are not synonymous, the fundamental difference between the two processes is that the former does not exert great influence in the field of the macro-economy and can even deteriorate it, while the latter affects with great power the magnitude of macro-economic variables and national accounts. High-impact technology creates large investment flows that will improve the balance of payments profile, increase the volume of commercial transactions with the rest of the world in order to strengthen the trade balance; These two factors, together, will give a powerful incentive to economic growth and then increase consumption, which will also become another engine of growth; on the other hand, it will eliminate unemployment and substantial wage increases will occur in the range of workers and employees of medium and high qualification; the fiscal deficit can be eradicated without the need for rulers to adopt fiscal measures; interest rates may return to be within reasonable margins to strengthen the health of financial systems; uncertainty would disappear and we would have new times, better times.
Industrial revolutions introduce new products to the market, create powerful companies, change the habits of a large number of people, are a sign of power and ingenuity but, definitely, do not exert a great influence on the macro-economy and do not allow to address social problems , but often creates or increases them. While high impact technology is a fundamentally economic process, industrial revolutions are evidently technological processes that appear through the action of a scientific discovery. Today's industrial revolutions are not driven by scientific discoveries but by the profit motive of corporations and where scientific discovery is one more gear in the technology production chain. The perspectives indicate that the set of phenomena that will overwhelm many during the next decade will force the rulers to put science and technology as a source of wealth, not only for large corporations and for the richest 1% of the planet but also for the less favored, for those who have never had anything. In that sense, high impact technology will help reduce inequality.
In these pages we have been stating that the global economy is currently at a crossroads in which three paths are not encouraging: recession, depression or economic stagnation. This situation is caused by the urgent need of the US economy to correct the size of the trade deficit that it presents today and has as a pivot or channel what happens with the Chinese economy. We are witnessing facts that show us how the decisions taken in the two largest economies on the planet will inevitably affect the rest of the world's economies with strength and power that cannot be countered by these nations.
Since, depending on the decisions made by the Chinese government, the trade war will take one course or another. We indicated then that the most sensible position of the Asian planning entities would be to make every effort so that China is not dragged into an economic depression, but that it would be willing to accept some years of economic recession, a phenomenon that would be transmitted to the rest of the world to cause a global economic recession. Understanding that, although recessions are painful processes that involve a high political cost, it is a way to make the necessary adjustments in economic matters to be able to open a new path of global economic growth. This is how a global recession could be the basis for the next decade to culminate with excellent prospects for the performance of the global economy.
However, recent months have shown us that the content of the reports issued by the Chinese authorities reveal that, despite the effects of the trade war, China will create the necessary spending and investment matrices so that economic growth is not halted ; in what is undoubtedly an excessively optimistic strategy that carries high risks for the normal functioning of this economy and that, unfortunately, could lead it, at the end of the next decade, to a pit of consecutive economic contractions of high magnitude. Indeed, the next ten years will show us a break in the behavior of global trade and globalization since, on the one hand, the United States will gradually turn towards economic and political isolation, with high chances of success; while China will do the same as it must also enter into a trend of economic and political isolation, but with high chances of failure.
Within this context, the outlook for the rest of the world is perfectly predictable: although little by little the ghost of the global recession disappears, it is evident that global economic stagnation is the phenomenon that characterizes the economic development of the entire planet, except, of course, to the United States and China; for at least a decade.
Indeed, the basis of globalization lies in the dependence, to a large extent, of the economies of the planet on economic activity that takes place in the United States and, more recently, in China. If these nations are undertaking measures that are oriented to the establishment of economic isolationism, such as the correction of the trade deficit or trade war or the strengthening of China's internal economy; then the main source of growth of most of the planet's economies would be diminishing. That is, from the next few years, the economic growth of each nation will depend excessively on the correct application of measures of internal economic policies of various types. Global Impact of a Protectionist U.S. Trade Policy - GED Focus Paper - Thieß Petersen
But is not economic independence a necessary condition for prosperity ?, as dependence may be preferable to independence ?. It seems that we are emerging from an era that was characterized, not by economic dependence, but by economic interdependence framed within the globalizing context. If globalization loses strength because the two largest economies in the world want greater autonomy, in the sense of restricting their contacts with the rest of the world and not in the sense of regaining the freedom to make decisions since they have never lost it, then, economic isolation will be the tone that characterizes the economic activity of the future.
For two giant economies, such as the United States and China, increasing the degree of economic isolation is an option, although isolation implies a reduction in efficiency and a cost to society; since this can have as a counterpart the strengthening of indigenous cultural values and a decrease in anxiety that is a consequence of having contact or being surrounded by people with different physical traits and with cultural values that could be different. However, for a small economy, as almost every economy in the world is, economic isolation can mean collapse since none of these nations could bear the immense cost of reducing efficiency and productivity for them. An example of what is pointed out here could be represented by the process called Brexit , which is nothing more than the sharp increase in economic isolation, with lethal consequences for the British economy. Even so, a situation of global stagnation does not lead to a sharp increase in economic isolation but would drag the economies of the planet into a slow process of isolation, but, not for that reason, absent from trauma. In this sense, the fluctuation process in the values of the various national currencies will be of first order importance for the purpose of counteracting this isolation process.
On the other hand, although the situation of stagnation will be reinforced by the gradual increase in economic isolation in each country, the absence of effectiveness of monetary and fiscal policies will be the factor that determines that no nation can leave this unfortunate situation. Given this scenario, we can foresee that it is feasible that those nations whose leaders are dominated by despair and, therefore, are committed to implementing expansive fiscal and monetary policies, will suffer the consequences of such a mistake and could easily lead their country from situation of permanent stagnation to one of permanent recession. In such a way that the International Monetary Fund, as a multilateral agency that contributes to removing national economies from a situation of financial bankruptcy, will be sharply increased by the abundance of cases of national economies that need to be "reflimed" or rescued.
It is evident that in such a terrifying scenario, such as the scenario of permanent global stagnation, with all the social and political problems that this implies; Economic science must enter into a process of self-criticism and conceptual re-ordering that marks the path that guides the new research that will produce the techniques and tools that will allow us to reach, again, the path of global economic growth.
My intuition tells me that the economy will abandon issues related to the application of certain term solutions to get involved in optics that emphasize long-term perspectives. In this way, the object of study of the macro-economy and the mega-economy would be shifting from the search for rapid growth of aggregate demand towards the search for gradual and constant growth of aggregate supply; a growth that goes beyond the simple increase of the population. This means that the role of the economy will no longer be linked to simple tax increases, subsidy increases or interest rate reductions. The economy could be merging with other disciplines to create the theoretical framework that will sustain the schemes adopted to achieve economic growth through careful control of the economic behavior of the inhabitants of a nation. Indeed, citizens will be willing to give up their freedom to the State in order for it to control their lives so that society can get out of the situation of permanent stagnation. ¿ How can it be possible ?.
The new economy should not have many obstacles to establish profitable technological change as the fundamental agent that creates prosperity and that will get any nation out of the situation of permanent stagnation. In this sense, in nations with the capacity to produce technology, a process that would be classified as the "knowledge war" should be unleashed. Certainly, given the uselessness of traditional economic policy measures to revive the economy, the desperate search for new technologies that yield a margin of profitability could become the fundamental task of the new economists.
This war of knowledge does not necessarily imply the emergence of a new industrial revolution but the undertaking of a set of activities that result in the production of technologies superior to that of rivals. These new technologies would create economic gains that, of course, would allow remuneration of productive factors, mainly capital, and address the multiplicity of social problems that derive from a situation of permanent global stagnation.
At this time it is impossible to glimpse what could be the fundamental elements that make up this war of knowledge, but, without a doubt, we can affirm that the platforms that will sustain this confrontation will be the educational systems of the countries involved in this struggle.
The war of knowledge is not a new concept since its origin dates back to the application of technology to war and military industry. However, it is from the end of the 19th century when the company captains, corporate leaders with great power to monopolize the production of numerous goods and services, warn that the production technique is not unique or exclusive but that a fairly large amount can be devised large production techniques aimed at providing identical goods or services and that some of these techniques are superior to others, both in terms of efficiency and in terms of profitability. This is how the North American and European company captains are dedicated to the search for talent that would allow them to devise as many modes of production and marketing as possible, to finance the academic activity of some universities and to finance various scientific projects carried out by researchers from Various branches of knowledge. This war is intensifying more and more, so that at the end of the 60s of the last century, transnational corporations begin to create research and development departments, that is, the search for new profitable technologies is not limited to the financing of some research initiatives but it becomes a constant, continuous and permanent activity. In other words, from that moment on, companies are not limited to producing a certain good or service to satisfy a specific market but also, in parallel, they are dedicated to producing efficient and profitable techniques that allow satisfying the good market. or specific service that it provides under conditions of advantage such that it allows it not to disappear.
Today all global corporations have a research and development department to which they dedicate a budget of colossal magnitude. That the is area that will allow the corporation to survive, achieve new conquests and displace its rivals.
Very recently, the press and social networks showed a high sensitivity to the dissemination of information related to data that indicate a possible contraction of manufacturing activity in the United States, in what some argue would be a sign that the country is moving Towards a recession.
All specialists, investors, politicians and the public in general focus their attention on the facts related to the North American and Chinese economies for a fundamental reason: being the largest economies on the planet, they exert a very strong indirect influence on the rest of The national economies of the world. In the same way, for cultural reasons, mostly Americans, educated or not, devote special interest to the macro-economy issues of their country and participate, in one way or another, in the political discussions related to it. This attitude contrasts with the extraordinary passivity with which the rest of the world assumes the political acts of its representatives or of those who hold power. Passivity and stoicism that breaks from time to time and explodes to become a cycle of uncontrollable violence.
However, macro-economics is a subject of specialists, who need to possess a certain level of scientific background to be able to address, understand and explain the behavior of economic, political and social phenomena that are of some complexity. If such levels of difficulty can lead specialists to make mistakes, we cannot expect the general public to succeed in all their interpretations or views.
The content of the data to which I refer feed a periodic report that publishes the ISM with some frequency and reflects the behavior of the US manufacturing and non-manufacturing product corresponding to the months immediately prior to the publication of said report.
Although capitalist economies are based, among other things, on the principle of freedom of enterprise and the right to make the best decision that favors our interests as economic agents, we see that economic activity is not carried out in a manner unordered but presents regulatory elements whose operation depends on a system of signals and alerts that indicate the moment in which a specific action must be taken. Just as the pilot of an aircraft constantly monitors its navigation instruments and maintains permanent contact with its control tower to carry out the appropriate and precise actions that allow the trip to be executed smoothly; in the same way, the political systems of the different countries execute the necessary acts to reach high rates of economic growth and, in this way, fulfill the first necessary condition so that the citizens who live there aspire to enjoy a standard of living highest.
So that economic activity is under constant scrutiny and scrutiny through a set of statistics and indicators of various kinds in order to allow us to form an idea about what is happening with the fundamental economic trends so that they are then activated political or governmental mechanisms, if necessary.
For management, logistics and review reasons; Statistics that measure the level of the national product, either general or by economic sector, are issued several months after the period they are evaluating. In the case of the United States, this delay is within a period of approximately 6 months; while in other countries this period of time can reach up to 24 months. As we can see, such prolonged periods of time between the date of issuance of the statistics and the period under evaluation prevent the necessary information from being taken to make the appropriate decisions regarding economic policy or act urgently before the appearance of emergencies in the macro-economy plane.
In this sense, each nation has a set of statistical systems that show the behavior of the real sector of the economy immediately after the end of the period under study. In the United States, we can point out the ISM report as one of several examples; while in other countries figures such as the consumption of electricity are often used. In any case, the main objective is to have quick information that provides clues about the behavior of the national product. However, to have instant information you have to sacrifice other elements, such as accuracy.
The ISM report is a report that condenses unweighted qualitative data, which means that the figures she throws may present a much higher margin of error than that usually used by specialists in their research. These levels of error are not the result of the lack of competence and professionalism of those involved in the task of constructing this report, but rather the sacrifice that is made in order to have some information in the instant immediately after the end of the period under study.
Obviously, the data corresponding to the national product come largely from the accounting systems, statistical systems, management systems and control systems used by private and public companies that are considered representative of the national economy and, therefore, enter in the sample that will be used to calculate the official statistics of the nation. However, these companies, despite having data processing systems of high complexity, high speed and high cost, do not have a definitive figure of any item at the end of the current period. Without this information it is impossible to build a system of indicators that illustrates, quickly, about the trends that are materializing in the national economy. Despite this, we know that the senior officials of these companies, who are considered representative of the economy, because they handle information related to the activity of the company in which they work, can provide data and clarify their nature. qualitative, which are likely to be processed schematically, to result in the report we are referring to.
It is evident that the margin of error associated with the information obtained in an interview or through the emptying of surveys, which do not imply commitment or responsibility, is much greater than the data coming from the financial statements of these companies, these being endorsed by signatures of public accountants, consulting firms, auditing firms and support of the corresponding supervisory public body. Here is the reason why we should be aware of the margin of error implied in reports of this type. If these possibilities of inaccuracy exist in these reports of rapid emission, we must not hurry to affirm that the North American economy is heading towards the disaster. On the other hand, we see that the aforementioned report, although it indicates a contraction in the manufacturing product, we see that it also indicates that the non-manufacturing product maintains a growing trend, which minimizes the possibility that the US economy is entering a recession stage But then, how can we interpret the content of the ISM report ?
First of all, we have to be clear that the US economy is going through a period of radical transformation in its structure during the last thirty years due to the rise of the telecommunications sector, the digital economy and the overvaluation of the dollar . To illustrate this phenomenon, we must take into account that fifty years ago the presence of the manufacturing sector in the stock market activity was evident. Then we must evaluate the representative value of the sample used to produce this report since a sample of companies representing the manufacturing sector designed five or ten years ago may not be reflecting the reality that prevails today. An economy in constant transformation, as is the US economy, must constantly make the necessary adjustments to its statistical systems and indicators, otherwise, we could be observing things that do not exist.
My personal opinion is that the North American manufacturing sector has been growing for many years by a magnitude less than proportional to the growth of the national product, which means that, in relative terms, this sector is less and less important. In the same way, I suspect that within the manufacturing sector there has been a process of closing companies and shrinking existing companies that fails to counteract the expansive effect generated by another group of companies in the sector that take advantage of their comparative advantages for such purposes. This is how the consequences on employment in the sector can be devastating since on the one hand a long process of job loss would be occurring as a result of the disappearance and operational shrinkage of existing companies that is not compensated by the productive expansion of the winning manufacturing companies for reasons of automation, robotization and the handling of very high technology elements.
The decision that Americans must make is that they should apply incentives to manufacturing activity or allow the US economy to adopt the structure imposed by the circumstances. In this sense, the commercial war represents an incentive for the manufacturing sector because this commercial policy would allow US products to recover the space that, at the moment, is being occupied by foreign products.
To get an idea of the magnitude of the growth of the North American economy in the last decades, let's see that, the colossal North American trade deficit coincides with a slow growth of the North American manufacturing product. That is to say, there was not a displacement of North American products by foreign products, but the markets offered increasing quantity of both products.
United States GDP From Manufacturing
Despite the recent social problems, it is clear that the United States is the largest, strongest and most stable economy in the world. So far there are no reasons to think that economic events linked to a recession may occur in the coming months.
A few weeks ago we witnessed the announcement of the US government about the possibility of restrictions and obstacles to those US investments made in China directly or indirectly, using or not using the stock market; as well as Chinese investments made in the United States, especially those that are financial in nature, such as government bonds. As we can see, the Trump Administration is sending clear and clear signals to global economic agents that cannot be interpreted without increasing the risk margins that condition the economic activity they carry out. US investment in China rises despite trade war, says consultancy - Tom Hancock - Financial Times
The North American investment was the fundamental base on which rested the portentous growth of the Asian giant that, together with the low wages and the access of the Chinese products to the North American market, generated an economic dynamics so accelerated, as it has never been seen before. Now, things have been changing, the volume of North American investment has been surpassed by the volume of Chinese investment, so, although it continues to be important, it no longer has the primary character it had a few decades ago. However, it is gross investment volumes that temporarily prevent China from taking the path of economic recession.
Expectations anticipate that the process of correction of the US trade deficit will continue, so it is expected that the volume of Chinese exports to that country will be further reduced, which means a reduction in the aggregate demand of the Asian nation and the Entry into the route of the economic recession.
We would have said that the characteristics that the Chinese economy has prevents it from having an effective monetary and fiscal policy that would allow it to counteract the effects of a probable economic recession that is yet to come, so we suggested that a fairly heterodox measure, such as subsidy to companies, could contribute, to some extent, to shovel the effects of the referred recession.
However, connoisseurs of the Chinese economy and those who manage to obtain information circulating on the grounds of the Chinese Nomenclature say that such recession will not occur because the Asian giant has the resources to undertake investment projects that maintain the Chinese economy in constant dynamism.
If the Chinese Nomenclature, led by Xi Jinping , decides to allocate surplus sources of the Chinese economy to the execution of investment projects of various kinds, the global economic outlook changes substantially. We would have then that the next decade will show us two nations enjoying a great economic boom, China and the United States. This would happen despite the fact that as of 2023 the US economy began to experience problems with pricing and while, on the other hand, the rest of the world was torn between recession and economic stagnation. However, the scenario is still apocalyptic; by the end of the next decade we could be attending the most spectacular economic contraction event that has ever happened: China could undergo a process of economic contraction that would exceed 20% annually, but, without consequences for the rest of the world; it would be a kind of "disaster of the Tower of Babel".
One of the drawbacks posed by the very rapid growth of the Chinese economy was that it was not accompanied by the strengthening of the institutions of this immense nation, for the simple reason that there was no time for it; there was not even time to count the money generated by the spectacular profits.
Two of the social benefits that institutional strength brings are credibility and a political system that allows the best possible decision to be taken, given the circumstances. The credibility in the institutions contributes in many ways to the well-being of the citizens who belong to a society that has this characteristic, but, as far as we are concerned, institutional credibility is an indispensable requirement to have a very high Government borrowing capacity. China, despite having excellent economic, social and financial indicators, lacks a government order that has a very high debt capacity as it does, for example, the United States or some European countries. Being able to access a gigantic fiscal deficit is an indispensable requirement for government authorities to perform the necessary maneuvers to avoid economic collapse. China does not have that maneuvering power.
On the other hand, holding power does not guarantee the best decision. A system of political freedoms allows critics to point out, without any fear, what are the points at which some authority is failing; This system may also have mechanisms that oblige said authority to amend the course and correct the mistakes made in the event that it does not wish to do so. Just as the Chinese Nomenclature and the post-Mao reformers brought the Asian giant out of the economic and social disaster in which their country was located, so they can return this nation to its starting point; without anyone being able to do something to prevent it.
The North American investment that begins to be established in China from the decade of the 80 was an investment that generated very accelerated dynamics, an investment destined to the production of tradable goods and services that will be commercialized in other latitudes; it was an investment carried out by the private sector in order to generate large profits, therefore, it was a beneficial investment for society. On the contrary, the investment that China has been developing is fundamentally an investment in infrastructure, which generates a spiral of economic growth more violent than the investment destined to the production of goods and services due to the characteristics of its spending structure; but these do not have a favorable impact on the accounts of the external sector because the service provided by these structures is not transferable. In the same way, the expansive effect that these investments will cause in the internal economy will be merely transitory, since it does not generate the multiplier effects that will prolong this expansion during several economic periods. The operation of the infrastructure does not generate profits if same, but depend on the dynamics caused by other economic sectors. Basing a nation's economic growth on infrastructure investment is dragging that society to collective suicide.
Politicians know that the construction sector generates explosive growth dynamics throughout the economy. In Latin America, for example, political groups that hold power are very concerned about having good interaction with the representatives of the construction sector and providing all the collaboration so that this sector does not find any obstacle in their efforts and projects, but they understand It is also a sector that presents a very unique behavior, so it would be a major mistake to base the economic growth of the nation on the behavior of the construction sector. Such are the characteristics of this sector that Latin American politicians prefer, rightly, to continue with the growth model based on the export of raw materials.
Indeed, the content of what is discussed here is in line with the expectations of investors who handle large money flows globally. This is what indicates the evolution of the yields of Chinese bonds in the very long term since the onset of the trade war. If investors migrate from their long-term Chinese bond positions to other positions, it is because, given the current circumstances, they expect China to be in an unfavorable situation in ten years compared to its current situation. The admirers of the Chinese economy intend to overthrow the previous argument stating that, at this time, the US ten-year bond also shows an unusual rise without economists claiming that an economic catastrophe is expected to occur in the United States.
China Government Bond 10Y
In these pages we maintain that, in the very long term, the North American economy will suffer the consequences of a certain global economic recession caused by the commercial war but with a much lower intensity, so that this prediction would not justify an accentuated movement in the performance of the North American ten-year bond. The recent increases in the yield of these bonds can be attributed to adjustments carried out by the Federal Reserve at the time of operating its monetary policy. In any case, to know the different levels of alarm that the financial instruments of the United States have, we can observe the situation that occurred during the Second Petroleum Schock that occurred at the end of the 70s, during the Cold War and after losing the Vietnam War , was the worst moment in the recent history of that country after the bankruptcy of 1929. At that time the yield of the US bond at ten years reached 18%. Therefore, if this indicator reaches values of 2 or 3%, the last thing we can suspect is the advent of a disaster in the US economy.
United States Government Bond 10Y
In the same way, in these pages we maintain that the global economic recession should appear immediately after the arrival of the Chinese recession. Only if China undertakes an aggressive investment plan in order to prevent such recession from happening, would we have a situation in which Europe, Latin America and part of Asia have to face recession and economic stagnation events before the Chinese recession happens .
At this time some European economies show signs of economic stagnation that cannot be attributed exclusively to the commercial war. This phenomenon, together with Brexit , has caused European economic agents to be extremely cautious when making their consumption and investment decisions but, by themselves, they are not creators of the European stagnation. This extreme prudence may render the monetary incentive plan that the European Central Bank seeks to implement ineffective.
The trade war cannot be approached as an economic phenomenon that will impact the world economy for one or two quarters. It is an event that will generate consequences for one or two decades.
