The New Deflation: From Great Recession to Global Pandemic

Robert Guttmann

Chapter Chapter 4 in Multi-Polar Capitalism, 2022, pp 117-167 from Springer

Abstract: Abstract A systemic financial crisis, like the one in 2007/08, is bound to leave the world economy in a dangerously deflationary post-crisis context, characterized by excess capacities in key industries, deleveraging pressures, savings gluts, and liquidity traps. At the same time finance has been reined in by a globally coordinated re-regulation effort, thereby taming the engine of finance-led capitalism. While extreme monetary policy measures by the world’s leading central banks have prevented this “new deflation” from spinning out of control, those “unorthodox” policies have also shaped the rhythm of competitive currency devaluations so typical for downswing phases of long waves. Between 2009 and 2015 “currency wars” spread crisis-induced deflation pressures from the United States to Europe, China, and commodity exporters. After 2016, not least in the aftermath of isolationist Donald Trump becoming US president, monetary protectionism gives way to actual trade wars. Other de-globalization trends also gain speed, notably declines in cross-border investment activity and compression of global supply chains, in favor of regional consolidation. Globalization is thus in full retreat when a global pandemic hits the world economy with a double shock in early 2020.

Date: 2022
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DOI: 10.1007/978-3-030-88247-1_4

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