Western economies seem to be in a period of restructuring and everyone hopes that it will bring a new period of growth in the future, but today, the real, visible effects paint a picture of a deep crisis.
The effects of wars on the cost of living and the sufficiency of energy and products, the measures taken by mainly European governments to deal with environmental problems, the changes taking place internationally in the labor market, the increase in interest rates, the number of business bankruptcies and the course of the public debt of all countries, are the main parameters of concern for the course of these economies.
None of these sectors are currently doing well in Europe and many are doing poorly in the US as well.
If one wants to identify the most important negative components of these crises, one can only highlight the increase in interest rates as their main cause.
The increase in central bank interest rates was done to counter inflationary pressures in Europe and because the FED raised US interest rates. But raising these rates increases the cost of money for all businesses and households, and that means it causes a drop in demand, recession, business bankruptcies and eventually – as governments pursue expansionary fiscal policy and make up for lost household income with increases wages and benefits – also makes it difficult to reduce inflation.
This week it was announced that both in England and Germany and also in the USA business bankruptcies for October increased. Always after a continuous upward trend in interest rates, a wave of bankruptcies follows, something that is expected even now in Europe and that we must prepare for it. As much as some people think that bankruptcies are good for the economy because “problem and zombie businesses are burned”, that is, weak businesses are closed and new ones will be created in their place, it is not at all certain that this works in a sanitary way. Bad loans are already increasing from companies that are closing and banks are selling new packages of bad loans to funds that will increase even more the already many auctions of houses and assets in general.
In fact, given that technologies are currently replacing a large number of workers, that workers – according to surveys – are not happy with low wages and are asking for more, that they refuse to work in the office more than one day a week instead of the four that many ask for employers, that suddenly many of the promising start-up companies are asking for new funds because things did not turn out as they expected or they are abandoning their brilliant ideas, the perspective of creating new companies with prospects of success is limited.
European economies have entered a recessionary phase and are preparing to experience a second sovereign debt crisis, at a time when too expensive investments are required for the transition to green energy. These investments will cause waves of increases in energy costs and consequently much greater inflationary pressures than what spooked Europeans a few months ago and led them to raise interest rates.
And while the European Union is supposed to be an economic union, (it is actually a monetary union only) it cannot deal with the complex problems of economies. The Brussels bureaucracy and the local bureaucracies that run it insist on decisions and policies that only benefit the bureaucracies themselves and cause problems for both citizens and businesses.
In order to deal with these complex problems, strong political leaderships are needed which do not exist today in any European country. And if there are strong political leaderships, they will clash with each other, because their countries and economies have opposite interests, so the disagreements and the gap between European countries will increase.
Under these conditions, everyone is trying to survive repeated crises and just hope for a better future, even though it is not currently on the horizon.
