FLASH
Shkruar nga Wolfgang Munchau
The US president's impulsive policies and the Gulf states' dubious demands for dollars are signaling a global financial collapse. This situation could lead to a global trade blockade and an economic crisis worse than the one in 2008...
Financial crises are never the same. But what they have in common is the spread of strange stories. The 1929 crash came with stories about shoeshine boys giving stock advice based on rumors they had heard.
Meanwhile, in the early 2000s, investors thought that complex financial instruments and modern mathematical methods would make it safe to invest in dubious products in the field of real estate.
The folly of these narratives was described in the book “This Time Is Different,” written by Kenneth Rogoff and Carmen Reinhart, which emphasizes that financial euphoria usually arises from forgetting financial history.
The "shoe shine boy" of our time is the American soldier who bet $400,000 on Polymarket before the capture of Venezuelan President Nicolás Maduro in January of this year.
But the strangest story is one that has escaped most people because it is hidden deep in the financial news portals. United States Treasury Secretary Scott Bessent said that several Gulf states, including the United Arab Emirates, have requested dollar swap lines with the United States.
In a foreign exchange swap, two parties agree to exchange their currencies - in this case US dollars for the Emirati local currency, the dirham - and such a line would allow the Emirates to activate this swap immediately.
The reason why they would want this remains a mystery, as the Emirates are very wealthy and the amount of dollars they own is more than 10 times greater than the US administration's Exchange Stabilization Fund, which would be the other party to this agreement.
Gita Gopinath says this could indicate that the fallout from the Iran conflict is much greater than markets are reflecting. Meanwhile, Brad Setser calls this something radically new, which looks like a dubious off-balance sheet deal where the Emirates get the main benefit.
Betting market manipulation and shady dealings are often warning signs of a financial crisis. And while it's unclear how the war with Iran will end, diplomacy is proving to be more difficult than Donald Trump claims.
This was seen when he canceled a diplomatic trip by envoys Steve Witkoff and Jared Kushner. A diplomatic solution will take months to reach and implement. Even then, oil and gas prices will not return to previous levels due to the infrastructure damage. If Iran were to profit from traffic in the Strait of Hormuz, as Trump has suggested, it would set a dangerous precedent - a tax on international shipping - an idea that was also followed by Indonesian Minister Purbaya Yudhi Sadewa for the Strait of Malacca, through which about 40 percent of global trade passes.
These measures would challenge the United Nations principle of freedom of the seas, returning us to the era of pirates and blackmail diplomacy. The biggest risk is not just rising oil prices, but a new global financial crisis.
Because if the Strait of Hormuz is blocked, it could trigger a global recession and a chain of financial crises, which is precisely why economists are concerned about talks between the United States and the Emirates about a currency swap.
In the worst-case scenario, the global financial system could suffer a "cardiac arrest" and then we would no longer be talking about the price of oil, but about a Great Depression.
Unlike 2008, when world leaders collaborated within the G20 to establish joint stabilization measures, today a coordinated response seems impossible and such a crisis could develop without effective intervention.
I personally do not miss that era, as policies like quantitative easing and fiscal tightening had long-term negative consequences. But without international cooperation, a new crisis will be much harder to manage. Meanwhile, the great powers are not showing strategic restraint, with Vladimir Putin, Donald Trump and others often acting impulsively, while critical voices within the Trump administration are lacking and figures like Pete Hegseth and Marco Rubio are unable to balance decision-making.
In this bleak picture, there is hope in Artificial Intelligence as the greatest innovation since electricity to transform the economy. However, its effects are still in their early stages and will not arrive in time to mitigate the consequences of a potential crisis.
This means that even if things are different this time, it won't be different in a good way./ Pamphlet from "Unherd"
Lini një Përgjigje