ONNo sooner did the world's major economic Doomayers warn of an imminent collapse, possibly as early as 2020, when policymakers got out of the blocks to avert the worst effects.
The New Year's message from the International Monetary Fund (IMF) and a number of equally bleak commentators came at first sight. They had apparently been alerted within a few weeks that a global recession and possibly a credit crunch were on their way for the 2008 competition.
First, the US Federal Reserve recognized the danger that was hindering the ever stricter monetary policy. No interest rate hikes this year, and possibly a review of the US $ 3.7 billion divestment of assets, the relief they have helped so much over the last 18 months, has soared long-term interest rates demanded by US banks and other lenders to drive commercial borrowers.
The People & # 39; s Bank of China created a similar mood among investors after it relaxed the credit rules to give small and medium-sized enterprises the opportunity to go into debt unhindered. Almost overnight, an economy that dramatically slowed and brought Germany, the US and much of Asia back on a solid growth path.
Politicians played their role. Donald Trump's advisers recognized that his customs war with China seriously undermined US trade.
Suddenly, the aggressive dispute between Trump and Chinese Prime Minister Xi Jinping, who settled the trade talks last year, calmed noticeably. Last week, China's chief negotiator, Vice Premier Liu He, said he would travel to the US "to work together to further implement the important consensus of the two heads of state."
Beijing also pledged to lower taxes "on a larger scale" to increase business. Against the background of disappointing industrial production figures and the first drop in car sales for almost three decades, the Council of State followed a nearly Trumpian path to boost growth. City analysts brought the news together.
Since the Christmas break, the S & P 500, the largest stock index for major US corporations, climbed from a low of 2018 at 2416 to 2610. Even the Brexit uncertainties plagued the FTSE 100 rebounding 300 points.
Other disputes in the risk register of the IMF. The dispute between Rome and Brussels over the Italian budget deficit and the associated risk of the stagnant recovery of the euro area was one. There was also the potential for a no-deal Brexit to spread chaos on the financial markets.
With the Italian government finding a way to reach a compromise and the UK Parliament clarifying that it was unwilling to engage in a no-deal Brexit, these two risks faded, or at least in the eyes of investors.
The Cassandras do not give up yet. One reason for this is that the cost of the US-China trade war, due to the loss of economic activity and declining business confidence, has almost completely nullified the benefits of Trump's $ 1.2 trillion tax cuts. The recalibration of his rhetoric on China's presidential trade is too late and not far enough advanced.
The US must also deal with a colossal policy error of the Fed, which raised interest rates four times in 2018 and has already outsourced hundreds of billions of dollars in assets. Despite the recent disruption, the additional funding costs that the Fed has already imposed will continue to hurt businesses and consumers. A third political mistake is the closure of the federal government.
In China, the improving effects of Xi's tax cuts and credit easing are likely to be short-lived, with knock-on effects in the US and Europe.
Diana Choyleva, China expert at Enodo Economics, said last week that 2019 has become a more challenging year than the last: "The US trade war is turning into a tech war and Beijing is trying to keep China's balance on track to maintain much weaker growth and increasing debt ".
Fathom Consulting doomsayers are sticking to their forecast of a global recession in 2020. At the consulting firm TS Lombard, they see a move from JP Morgan as a canary, alerting them to the problems ahead.
The US bank, which has played an important role in the credit bonanza in recent years, has increased its reserves to cover loan defaults. It has also tightened its credit criteria.
Could it be that America's largest bank in the financial disco does not dance anymore, even though the music continues to play? That's a big call when money still needs to be made when cheap credit is poured out. Sure, that means there is trouble.