The impending world recession
January 21, 2023 Prabhat Patnaik

World Economic Forum in Davos, Switzerland, secured?.
The IMF managing director Kristalina Georgieva has now openly admitted that the year 2023 will witness the slowing down of the world economy to a point where as much as one-third of it will see an actual contraction in gross domestic product. This is because all three major economic powers in the world, the U.S., the European Union, and China, will witness slowdowns, the last of these because of the renewed COVID upsurge. Of the three, Georgieva believes the U.S. will perform relatively better than the other two because of the resilience of the labor market; indeed. the greater resilience of the U.S. labor market provides some hope for the world economy as a whole.
There are two ironical elements in Georgieva’s remarks. The first is that the best prospects for the world economy today, even the IMF concedes if only implicitly, lie in workers’ incomes in the U.S. not falling greatly. For an institution that has systematically advocated cuts in wages, whether in the form of remunerations or social wages, as an essential part of its stabilisation-cum-structural adjustment policies, this is a surprising, though welcome, admission. Of course Georgieva, many would argue, is seeing U.S. labor market resilience only as the result of U.S. economic performance and not as its cause. But her considering it a “blessing” (though not an unmixed one for reasons we shall soon see) leaves one in no doubt that the demand-sustaining role of workers’ incomes is also being recognized by her.
Some may contend that stabilisation-cum-structural adjustment policies of the IMF are typically meant for economies that are in crisis as a means of overcoming such a crisis, not as a panacea for growth, so seeing a change in IMF’s understanding in this regard may be unwarranted. But what the IMF is now saying is certainly out of line with what it usually says; it is, in effect, conceding that a resilient labor market in the U.S. is beneficial for its growth, which begs the question: why should other economies, too, not attempt to have resilient labor markets even when they are in crisis, and tackle their crises through other, more direct, means like import controls and price controls? Conceding that the resilience of the U.S. labor market can be beneficial for its economy, and hence for the world economy as a whole, thus fundamentally runs counter to what the IMF generally stands for, at least in the current neoliberal times.
The second ironic element in her remarks is her recognition that such a resilient labor market, while being beneficial for U.S. growth, will simultaneously keep up the inflation rate in the U.S., forcing the Federal Reserve Board to raise interest rates further. This has two clear implications. First, it means that the U.S. growth rate, while being less affected for the time being, will inevitably be constricted in the months to come as the Fed raises the interest rate. The U.S. performing relatively better in 2023 is thus not a phenomenon that will last long. Since any poor performance by the U.S. will have an adverse effect on the world economy as a whole, this amounts to saying that the world recession will worsen in the months to come unless China’s COVID situation improves substantially. It amounts to saying, in other words, that even if 2023 will only see a third of the world economy facing recession, a much larger swathe of it will fall victim to a recession later. This is certainly the most dire prediction made about the prospects of world capitalism at the present juncture by any major spokesperson of it.
The World Bank, too, has been warning of a serious recession looming over the capitalist world and discussing, in particular, its implications for third-world economies. In September 2022, it put out a paper in which it expected a 1.9% growth of the world economy in the year 2023. But both the IMF and the World Bank attribute the looming recession primarily to the Ukraine war and the inflation it has given rise to (and also in passing to the pandemic); the response to that inflation in the form of an all-round increase in interest rates is what underlies the current threat of recession. There is no recognition by these institutions of any problem arising from the neoliberal economy that could be underlying the looming crisis.
This analysis, first of all, is erroneous. Long before the Ukraine war, inflation had reared its head as the world economy had started recovering from the pandemic. At that time, such inflation had been attributed to the disruption in supply chains caused by the pandemic, though many had differed from this analysis even then. They had pointed out that, more than any actual disruption, the inflationary upsurge owed much to the jacking up of profit margins by large corporations in anticipation of shortages. The Ukraine war occurred against this backdrop of ongoing inflation and added to it quite gratuitously as the Western powers imposed sanctions against Russia.
A look at the movement of crude oil prices confirms this conclusion that the Ukraine war is not the genesis of the inflationary upsurge. The rise in brent crude prices occurred primarily in 2021 as the world economy started recovering from the pandemic: the rise between the beginning of 2021 and the end of that year was by more than 50%, from $50.37 per barrel to $77.24 per barrel; the corresponding rise in 2022, during which the Ukraine war occurred, was from $78.25 to $82.82, i.e., by 5.8%, which is less than the current inflation rate in most advanced capitalist countries, even though inflation is generally claimed to have been driven by oil prices. True, immediately after the imposition of sanctions against Russia, world oil prices shot up, reaching a high of 133.18 dollars per barrel during 2022, but then they came down quite sharply, as we have seen, so that simply blaming the Ukraine war for the price-rise is not only misleading (as it is not the war per se but the sanctions that were responsible) but also erroneous (as prices should have come down when the price-rise induced by the sanctions abated).
It is not just the analysis of the Bretton Woods institutions that is flawed. Even more noteworthy is the fact that they have no perception whatsoever, even in the terms of their own analysis, of how this world recession is going to end. If, as they believe, it is the Ukraine war that is responsible for the looming recessionary crisis, then they should, at the very least, have hoped for an early end to it. That, however, is unacceptable to Western imperialism, which wants the war to drag on so that Russia is “bled” into submission; this is why the twin institutions express no opinions on the need for ending the war. But even if they chose to remain silent on the question of ending the war, they could have expressed some opinion about tackling the inflationary crisis in some other way than by raising interest rates and unleashing a recession. The IMF and the World Bank, however, are so committed to free markets that they cannot contemplate any other inflation-control measure (such as direct price control), even as they lament the recessionary effects of interest rate hikes.
Likewise, even as the World Bank president David Malpass commiserates with debt-encumbered third world countries which are going to be badly hit in the coming months, and even says that a large chunk of their debt burden has arisen because of the high interest rates themselves, there is not a word in his speech in favor of lowering interest rates. Both the Bretton Woods institutions, in other words, are long on commiserations but short on concrete measures to help the world’s poor.
This is not just a symptom of timidity. It points to something deeper, namely the genuine impasse in which world capitalism finds itself today. If the structure of Western imperialism as it has evolved over the years is to be kept intact, then the metropolitan countries have to keep the Ukraine war going, in which case inflation at the current pace becomes unavoidable in the absence of an engineered recession, and the consequent unemployment. World capitalism’s taking this route, therefore, should not cause any surprise; the point is to resist it.
Source: Peoples Democracy
https://www.struggle-la-lucha.org/2023/ ... recession/
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All Quiet (Panic) On the Western Front
JANUARY 20, 2023
By Pepe Escobar – Jan 16, 2023
Shadows are falling / And I’ve been here all day / It’s too hot to sleep / And time is running away / Feel like my soul / has turned into steel /I’ve still got the scars / That the sun didn’t heal / There’s not even room enough / To be anywhere / Lord it’s not dark yet, / but it’s getting there
Bob Dylan, Not Dark Yet
Lights! Action! Reset!
The World Economic Forum (WEF)’s Davos Freak Show is back in business on Monday.
The mainstream media of the collective West, in unison, will be spinning non-stop, for a week, all the “news” that are fit to print to extol new declinations of The Great Reset, re-baptized The Great Narrative, but actually framed as a benign offer by “stakeholder capitalism”. These are the main planks of the shady platform of a shady NGO registered in Cologny, a tony Geneva suburb.
The list of Davos attendees was duly leaked. Proverbially, it’s an Anglo-American Exceptionalist fun fest, complete with intel honchos such as the US Director of National Intelligence, Avril “Madam Torture” Haines; the head of MI6 Richard Moore; and FBI director Christopher Wray.
Remixed Diderot and D’Alembert Encyclopedias could be written about the Davos pathology – where a hefty list of multibillionaires, heads of state and corporate darlings (owned by BlackRock, Vanguard, State Street and co.) “engage” in selling Demented Dystopia packages to the unsuspecting masses.
But let’s cut to the chase and focus on a few panels next week – which could easily be mistaken for Straight to Hell sessions.
The Tuesday, January 17 list is particularly engaging. It features a “De-Globalization or Re-Globalization?” panel with speakers Ian Bremmer, Adam Tooze, Niall Ferguson, Péter Szijjártó and Ngaire Woods. Three Atlanticists/Exceptionalists stand out, especially the ultra-toxic Ferguson.
After “In Defense of Europe”, featuring a bunch of nullities including Poland’s Andrjez Duda, attendees will be greeted with a Special Season in Hell (sorry, Rimbaud) featuring none other than EC dominatrix Ursula von der Leyen, known by a vast majority of Germans as Ursula von der Leichen (“Ursula of Cadavers”) in a tag team with WEF mastermind, Third Reich emulator Klaus “Nosferatu” Schwab.
Rumors are that Lucifer, in his privileged underground abode, is green with envy.
There’s also “Ukraine: What Next?” with another bunch of nullities, and “War in Europe: Year 2” featuring Moldova woke chick Maia Sandu and Finnish party girl Sanna Marin.
In the War Criminal section, pride of place goes to “A Conversation with Henry Kissinger: Historical Perspectives on War”, where Dr. K. will sell all his trademark Divide and Rule permutations. Added sulphur will be provided by Thucydides strangler Graham Allison.
In his Special Address, “Liver Sausage” Chancellor Olaf Scholz will be side by side with Nosferatu, hoping he won’t be – literally – grilled.
Then, on Wednesday, January 18, comes the apotheosis: “Restoring Security and Peace” with speakers Fareed Zakaria – the US establishment’s pet brown man; NATO’s Jens “War is Peace” Stoltenberg; Andrzej Duda – again; and Canadian warmonger Chrystia Freeland – widely rumored to become the next NATO Secretary-General.
And it gets juicier: the coke comedian posing as warlord may join via zoom from Kiev.
The notion that this panel is entitled to emit judgments about “peace” deserves nothing less than its own Nobel Peace Prize.
How to monetize the whole world
Cynics of all persuasions may be excused for lamenting Mr. Zircon – currently on oceanic patrol encompassing the Atlantic, the Indian Ocean and of course “Mare Nostrum” Mediterranean – won’t be presenting his business card at Davos.
Analyst Peter Koenig has developed a convincing thesis that the WEF, the WHO and NATO may be running some sort of sophisticated death cult. The Great Reset does mingle merrily with NATO’s agenda as agent provocateur, financer and weaponizer of the proxy Empire vs. Russia war in black hole Ukraine. NAKO – an acronym for North Atlantic Killing Organization – would be more appropriate in this case.
As Koenig summarizes it, “NATO enters any territory where the ‘conventional’ media lie-machine, and social engineering are failing or not completing their people-ordaining goals fast enough.”
In parallel, very few people are aware that on June 13, 2019 in New York, a secret deal was clinched between the UN, the WEF, an array of oligarch-weaponized NGOs – with the WHO in the front line – and last but not least, the world’s top corporations, which are all owned by an interlinked maze with Vanguard and BlackRock at the center.
The practical result of the deal is the UN Agenda 2030.
Virtually every government in the NATOstan area and the “Western Hemisphere” (US establishment definition) has been hijacked by Agenda 2030 – which translates, essentially, as hoarding, privatizing and financializing all the earth’s assets, under the pretext of “protecting” them.
Translation: the marketization and monetization of the entire natural world (see, for instance, here, here and here.)
Davos superstar shills such as insufferable bore Niall Ferguson are just well rewarded vassals: western intellectuals of the Harvard, Yale and Princeton mould that would never dare bite the hand that feeds them.
Ferguson just wrote a column on Bloomberg titled “All is Not Quiet on the Eastern Front” – basically to peddle the risk of WWIII, on behalf of his masters, blaming of course “China as the arsenal of autocracy”.
Among serial high-handed inanities, this one stands out. Ferguson writes, “There are two obvious problems with US strategy (…) The first is that if algorithmic weapons systems are the equivalent of tactical nuclear weapons, Putin may eventually be driven to using the latter, as he clearly lacks the former.”
Cluelessness here is a euphemism. Ferguson clearly has no idea “algorithmic weapons” mean; if he’s referring to electronic warfare, the US may have been able to maintain superiority for a while in Ukraine, but that’s over.
Well, that’s typical Ferguson – who wrote a whole Rothschild hagiography just like his column, drinking from the Rothschild archives that appeared to have been sanitized as he knows next to nothing meaningful about their history.
Ferguson has “deduced” that Russia is weak and China is strong. Nonsense. Both are strong – and Russia is more advanced technologically than China in their advanced offensive and defensive missile development, and can beat the US in a nuclear war as Russian air space is sealed by layered defenses such as the S-400 all the way to the already tested S-500s and designed S-600s.
As far as semiconductor chips, the advantage that Taiwan has in chip manufacture is in mass production of the most advanced chips; but China and Russia can fabricate the chips necessary for military use, though not engage in mass commercial production. The US has an important advantage here commercially with Taiwan, but that’s not a military advantage.
Ferguson gives away his game when he carps about the need to “deter a nascent Axis-like combination of Russia, Iran and China from risking simultaneous conflict in three theaters: Eastern Europe, the Middle East and the Far East.”
Here we have trademark Atlanticist demonization of the top three vectors of Eurasia integration mixed with a toxic cocktail of ignorance and arrogance: it’s NATO that is stoking “conflict” in Eastern Europe; and it’s the Empire that is being expelled from the “Far East” (oh, that’s so colonial) and soon from the Middle East (actually West Asia).
An AMGOT tale
Nobody with an IQ over room temperature will expect Davos next week to discuss any aspect of the NATO vs. Eurasia existential war seriously – not to mention propose diplomacy. So I’ll leave you with yet another typical tawdry story about how the Empire – who rules over Davos – deals in practice with its vassals.
While in Sicily earlier this year I learned that an ultra high-value Pentagon asset had landed in Rome, in haste, as part of an unscheduled visit. A few days later the reason for the visit was printed in La Repubblica, one of the papers of the toxic Agnelli clan.
That was a Mafia scam: a face-to-face “suggestion” for the Meloni government to imperatively provide Kiev, as soon as possible, with the costly anti-Samp-T missile system, developed by an European consortium, Eurosam, uniting MBDA Italy, MBDA France and Thales.
Italy possesses only 5 batteries of this system, not exactly brilliant against ballistic missiles but efficient against cruise missiles.
National Security Adviser Jake Sullivan had already called Palazzo Chigi to announce the “offer you can’t refuse”. Apparently that was not enough, thus the hasty envoy trip. Rome will have to toe the line. Or else. After all, never forget the terminology employed by US generals to designate Sicily, and Italy as a whole: AMGOT.
American government occupied territory.
Have fun with the Davos freak show.
https://orinocotribune.com/all-quiet-pa ... ern-front/
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Global South: Gold-Backed Currencies to Replace the US Dollar
Posted by INTERNATIONALIST 360° on JANUARY 19, 2023
Pepe Escobar
The adoption of commodity-backed currencies by the Global South could upend the US dollar’s dominance and level the playing field in international trade.
Let’s start with three interconnected multipolar-driven facts.
First: One of the key take aways from the World Economic Forum annual shindig in Davos, Switzerland is when Saudi Finance Minister Mohammed al-Jadaan, on a panel on “Saudi Arabia’s Transformation,” made it clear that Riyadh “will consider trading in currencies other than the US dollar.”
So is the petroyuan finally at hand? Possibly, but Al-Jadaan wisely opted for careful hedging: “We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries.”
Second: The Central Banks of Iran and Russia are studying the adoption of a “stable coin” for foreign trade settlements, replacing the US dollar, the ruble and the rial. The crypto crowd is already up in arms, mulling the pros and cons of a gold-backed central bank digital currency (CBDC) for trade that will be in fact impervious to the weaponized US dollar.
A gold-backed digital currency
The really attractive issue here is that this gold-backed digital currency would be particularly effective in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea.
Astrakhan is the key Russian port participating in the International North South Transportation Corridor (INTSC), with Russia processing cargo travelling across Iran in merchant ships all the way to West Asia, Africa, the Indian Ocean and South Asia.
The success of the INSTC – progressively tied to a gold-backed CBDC – will largely hinge on whether scores of Asian, West Asian and African nations refuse to apply US-dictated sanctions on both Russia and Iran.
As it stands, exports are mostly energy and agricultural products; Iranian companies are the third largest importer of Russian grain. Next will be turbines, polymers, medical equipment, and car parts. Only the Russia-Iran section of the INSTC represents a $25 billion business.
And then there’s the crucial energy angle of INSTC – whose main players are the Russia-Iran-India triad.
India’s purchases of Russian crude have increased year-by-year by a whopping factor of 33. India is the world’s third largest importer of oil; in December, it received 1.2 million barrels from Russia, which for several months now is positioned ahead of Iraq and Saudi Arabia as Delhi’s top supplier.
‘A fairer payment system’
Third: South Africa holds this year’s rotating BRICS presidency. And this year will mark the start of BRICS+ expansion, with candidates ranging from Algeria, Iran and Argentina to Turkey, Saudi Arabia and the UAE.
South African Foreign Minister Naledi Pandor has just confirmed that the BRICS do want to find a way to bypass the US dollar and thus create “a fairer payment system not skewed toward wealthier countries.”
For years now, Yaroslav Lissovolik, head of the analytical department of Russian Sberbank’s corporate and investment business has been a proponent of closer BRICS integration and the adoption of a BRICS reserve currency.
Lissovolik reminds us that the first proposal “to create a new reserve currency based on a basket of currencies of BRICS countries was formulated by the Valdai Club back in 2018.”
Are you ready for the R5?
The original idea revolved around a currency basket similar to the Special Drawing Rights (SDR) model, composed of the national currencies of BRICS members – and then, further on down the road, other currencies of the expanded BRICS+ circle.
Lissovolik explains that choosing BRICS national currencies made sense because “these were among the most liquid currencies across emerging markets. The name for the new reserve currency — R5 or R5+ — was based on the first letters of the BRICS currencies all of which begin with the letter R (real, ruble, rupee, renminbi, rand).”
So BRICS already have a platform for their in-depth deliberations in 2023. As Lissovolik notes, “in the longer run, the R5 BRICS currency could start to perform the role of settlements/payments as well as the store of value/reserves for the central banks of emerging market economies.”
It is virtually certain that the Chinese yuan will be prominent right from the start, taking advantage of its “already advanced reserve status.”
Potential candidates that could become part of the R5+ currency basket include the Singapore dollar and the UAE’s dirham.
Quite diplomatically, Lissovolik maintains that, “the R5 project can thus become one of the most important contributions of emerging markets to building a more secure international financial system.”
The R5, or R5+ project does intersect with what is being designed at the Eurasia Economic Union (EAEU), led by the Macro-Economics Minister of the Eurasia Economic Commission, Sergey Glazyev.
A new gold standard
In Golden Ruble 3.0 , his most recent paper, Glazyev makes a direct reference to two by now notorious reports by Credit Suisse strategist Zoltan Pozsar, formerly of the IMF, US Department of Treasury, and New York Federal Reserve: War and Commodity Encumbrance (December 27) and War and Currency Statecraft (December 29).
Pozsar is a staunch supporter of a Bretton Woods III – an idea that has been getting enormous traction among the Fed-skeptical crowd.
What’s quite intriguing is that the American Pozsar now directly quotes Russia’s Glazyev, and vice-versa, implying a fascinating convergence of their ideas.
Let’s start with Glazyev’s emphasis on the importance of gold. He notes the current accumulation of multibillion-dollar cash balances on the accounts of Russian exporters in “soft” currencies in the banks of Russia’s main foreign economic partners: EAEU nations, China, India, Iran, Turkey, and the UAE.
He then proceeds to explain how gold can be a unique tool to fight western sanctions if prices of oil and gas, food and fertilizers, metals and solid minerals are recalculated:
“Fixing the price of oil in gold at the level of 2 barrels per 1g will give a second increase in the price of gold in dollars, calculated Credit Suisse strategist Zoltan Pozsar. This would be an adequate response to the ‘price ceilings’ introduced by the west – a kind of ‘floor,’ a solid foundation. And India and China can take the place of global commodity traders instead of Glencore or Trafigura.”
So here we see Glazyev and Pozsar converging. Quite a few major players in New York will be amazed.
Glazyev then lays down the road toward Gold Ruble 3.0. The first gold standard was lobbied by the Rothschilds in the 19th century, which “gave them the opportunity to subordinate continental Europe to the British financial system through gold loans.” Golden Ruble 1.0, writes Glazyev, “provided the process of capitalist accumulation.”
Golden Ruble 2.0, after Bretton Woods, “ensured a rapid economic recovery after the war.” But then the “reformer Khrushchev canceled the peg of the ruble to gold, carrying out monetary reform in 1961 with the actual devaluation of the ruble by 2.5 times, forming conditions for the subsequent transformation of the country [Russia] into a “raw material appendage of the Western financial system.”
What Glazyev proposes now is for Russia to boost gold mining to as much as 3 percent of GDP: the basis for fast growth of the entire commodity sector (30 percent of Russian GDP). With the country becoming a world leader in gold production, it gets “a strong ruble, a strong budget and a strong economy.”
All Global South eggs in one basket
Meanwhile, at the heart of the EAEU discussions, Glazyev seems to be designing a new currency not only based on gold, but partly based on the oil and natural gas reserves of participating countries.
Pozsar seems to consider this potentially inflationary: it could be if it results in some excesses, considering the new currency would be linked to such a large base.
Off the record, New York banking sources admit the US dollar would be “wiped out, since it is a valueless fiat currency, should Sergey Glazyev link the new currency to gold. The reason is that the Bretton Woods system no longer has a gold base and has no intrinsic value, like the FTX crypto currency. Sergey’s plan also linking the currency to oil and natural gas seems to be a winner.”
So in fact Glazyev may be creating the whole currency structure for what Pozsar called, half in jest, the “G7 of the East”: the current 5 BRICS plus the next 2 which will be the first new members of BRICS+.
Both Glazyev and Pozsar know better than anyone that when Bretton Woods was created the US possessed most of Central Bank gold and controlled half the world’s GDP. This was the basis for the US to take over the whole global financial system.
Now vast swathes of the non-western world are paying close attention to Glazyev and the drive towards a new non-US dollar currency, complete with a new gold standard which would in time totally replace the US dollar.
Pozsar completely understood how Glazyev is pursuing a formula featuring a basket of currencies (as Lissovolik suggested). As much as he understood the groundbreaking drive towards the petroyuan. He describes the industrial ramifications thus:
“Since as we have just said Russia, Iran, and Venezuela account for about 40 percent of the world’s proven oil reserves, and each of them are currently selling oil to China for renminbi at a steep discount, we find BASF’s decision to permanently downsize its operations at its main plant in Ludwigshafen and instead shift its chemical operations to China was motivated by the fact that China is securing energy at discounts, not markups like Europe.”
The race to replace the dollar
One key takeaway is that energy-intensive major industries are going to be moving to China. Beijing has become a big exporter of Russian liquified natural gas (LNG) to Europe, while India has become a big exporter of Russian oil and refined products such as diesel – also to Europe. Both China and India – BRICS members – buy below market price from fellow BRICS member Russia and resell to Europe with a hefty profit. Sanctions? What sanctions?
Meanwhile, the race to constitute the new currency basket for a new monetary unit is on. This long-distance dialogue between Glazyev and Pozsar will become even more fascinating, as Glazyev will be trying to find a solution to what Pozsar has stated: tapping of natural resources for the creation of the new currency could be inflationary if money supply is increased too quickly.
All that is happening as Ukraine – a huge chasm at a critical junction of the New Silk Road blocking off Europe from Russia/China – slowly but surely disappears into a black void. The Empire may have gobbled up Europe for now, but what really matters geoeconomically, is how the absolute majority of the Global South is deciding to commit to the Russia/China-led block.
Economic dominance of BRICS+ may be no more than 7 years away – whatever toxicities may be concocted by that large, dysfunctional nuclear rogue state on the other side of the Atlantic. But first, let’s get that new currency going.
https://libya360.wordpress.com/2023/01/ ... us-dollar/