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A World in the Balance: The Economy Towards Recession

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  • Giovanni Antonio COSSIGA

Abstract

The global economy is moving uncertainly towards recession. An economy in the balance that remains uncertain on the threshold of recession, relying on the benevolent contribution of support policies. Without the help of fiscal policy and the complacency of the Central Banks through new liquidity injections, and therefore through easy credit, it can certainly be admitted that the recession would tend to prevail. But the recession is not a bad thing in itself, it’s rather the treatment for the evil afflicting the economy- the growing instability of economic systems under the increasing weight of excessive liquidity and an abnormal increase of public and private debt. The result of this negative equation is the growth of the economy sustained by abundant liquidity and credit availability and then a weak and doped development. A development line that cannot go on without the resources of politics. The problem is therefore whether this dependency condition can last. That is, if the economy can find the virtuous energies to reabsorb the accumulated excesses through a sustainable growth. The compulsive use of fiscal policy to fight the damage caused by the serious 2008-2010 crisis has undoubtedly reduced the economic and above all social damage due to the loss of jobs, and therefore helped the recovery. However, the massive use of public debt could hide a dark side. First of all, it fueled a legacy of recessive prices and weak development. And this, despite the large river of liquidity injected into the system by the Central Banks. However, the availability of new liquidity did not defeat the tendency of the economy to deflation and then couldn’t support development, which appears generally weak. The US case, which sees the relaunch of development by the fiscal reform that reduces taxation particularly in favor of higher incomes, doesn’t seem to be an exception. However, we are facing economies that require the continuous support of political policies in order to confirm their (weak) growth. On the other hand, it’s quite clear the dark side created by the trap "liquidity - weak growth" now affecting the global development, although without this trick the world in the balance could fall into recession.

Suggested Citation

  • Giovanni Antonio COSSIGA, 2019. "A World in the Balance: The Economy Towards Recession," Review of European Studies, Canadian Center of Science and Education, vol. 11(3), pages 1-50, December.
    • Handle: RePEc:ibn:resjnl:v:11:y:2019:i:3:p:50
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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