The threat of a new financial crisis is not a sensation that appeared only yesterday. Now a number of systemic factors are appearing that indicate the possibility of a new crisis.
Speaking generally about the nature of world crises, Nassim Taleb has such a definition as “black swan”. This is a global phenomenon that is difficult to predict, but which, when it happens, has an all-pervasive effect. All in the analysis of this phenomenon agree that it was supposed to happen, but come to this conclusion retroactively. Therefore, any financial crisis is a black swan. We can neither predict the exact date of its appearance, nor its full negative effect on the global economy. But we can capture the outlines of this black swan and evaluate the degree of its approach.
Now we see that this crisis is approaching. Collapse can occur both in the fall of this year and in the winter of the next. But everyone understands that the crisis will come soon. Here are the basic premises that speak of this. Firstly, the global economy is subject to a certain cyclical nature. In the theory of economic cycles, there are short-term Kitchin cycles, medium-term Jughlars and long-term Kondratiev ones. And they all now converge at approximately the same point, being somehow connected with the last crisis of 2008.
Short-term cycles are connected with the fact that companies disproportionately react to changes in the global situation, that is, they react excessively to a decrease in demand and not enough to an increase. After the crisis, they drastically reduced production volumes, and now we see from commodity balances that there is a certain overproduction in the world economy.
Medium-term relate to capital investment of companies. In the case of long-term, we are talking about the transformation of the global economy. Now we see that the world has approached the creation of a new technological structure – the so-called NBIC convergence. The old economic system is already working with great disruptions. In fact, the world is now rebuilding on a new innovative development model. And in those countries where new products and technologies will appear, new points of economic growth will be noted. And whoever can’t adapt to the new paradigm will suffer greatly from this adjustment.
If we talk about simple things that are understandable to most people, we can say that the crisis of 2008 was a crisis of global finance. Unlike the “old” crises, it was associated with the overproduction of not goods, but money and financial instruments. It was overcome first of all with the help of the so-called quantitative expansion by the US Federal Reserve – trillions of dollars of extra money were issued, by lowering base interest rates to almost zero points and a cheap dollar policy.
Now in the American economy the consequences of this crisis have been overcome, and the main threat is inflation. Therefore, the United States is deploying the monetary mechanism in the opposite direction: instead of a policy of quantitative expansion, there will be a policy of quantitative compression, and instead of a policy of a cheap dollar, a policy of an expensive dollar. The previous paradigm contributed to the development of developing countries, because investors went to more profitable developing, that is, commodity markets. Now everything will be exactly the opposite: there will be a massive outflow of investments from emerging markets to the US market and the markets of other developed countries, and raw materials will become cheaper, because the expensive dollar policy provides for a drop in prices for raw materials. Emerging markets will not be able to adequately refinance their external debts, corporate and public.
From China to Ukraine
The epicenter of the crisis is expected to arise in China, because it will suffer the most from the trade wars that America begins, from the policy of trade protectionism. China is very dependent on foreign investment, there is a very high borrowing of banks, private and public companies. Any weakening of the renminbi will lead to a sharp rise in the cost of servicing Chinese foreign debts. This can lead to point defaults in various sectors. In addition, a slowdown in the Chinese economy is fraught for the whole world.
Ukraine is in a rather vulnerable situation in this situation, because we not only depend on exports of the same metal, which can become cheaper, but also enter a very busy cycle of paying off external debts. It will be very difficult for us to attract external financing. It is likely that we will not even be able to refinance old debts. This is the first possible crisis factor. The second point is the fall in prices for metal and other commodities, such as iron ore. This will drastically reduce our exports. In addition, the effect of “raw scissors” may occur – a paradoxical situation where prices for our traditional raw materials will fall, and oil and natural gas prices will remain at a relatively high level. That is, our exports will become cheaper, while imports will rise in price.
What to do
Already on this basis, we see what basic steps need to be taken. It is necessary to begin the search for alternative programs for attracting external financing. First of all, it will be necessary to work with large international donors. But they will no longer give a lot of money for any obligations and specific amendments to the laws: they will need to present a high-quality program of economic growth, a program of the country’s economic success for the next 5-10 years. And this should be a consensus program within the whole society, and not one political force.
Secondly, it is necessary now to start negotiations on a new debt restructuring, because the Yaresko restructuring has disastrous consequences, we cannot pay additional bonuses for our economic growth.
Thirdly, it is necessary to strengthen its energy security by creating a gas hub in Ukraine and opening a full-fledged natural gas market.
If we talk about export potential, it is necessary to undertake structural reform of the economy. And, most importantly, Ukraine must definitely find its place in the new technological order, which will be formed in the next few years. If we continue to lose our human resources and talk about the fact that we will become an agrarian superpower, in the next few years we may completely drop out of the global labor distribution system, and there will be no place for our economy in the new technological structure, we will slide into a very primitive raw material level.
It is necessary to attract intellectual, scientific forces, to bet on the innovative sphere of activity, to stimulate the development of a creative economy. But all this in the system of the current government is almost impossible. Because it aims at a completely different thing: preserving the rental model of the economy, so that with the help of rent, which is installed on the main financial flows in the country, the remaining juices are sucked out.