Economic uncertainties and post-COVID recovery: This is the first in a series of four reflections from Saskatchewan businessman Herb Pinder.COVID-19 was in itself forgettable but as a group experience a human, emotional, physical, and financial experience never to be forgotten. Two years after the event, economic recovery is advancing.Yet, uncertainties abound. Global growthForecasts suggest the global rate of growth will be on either side of 3% in 2024. According to Macrotrends’ website, that is about average since 1960. As an indication of economic recovery, it roughly mirrors continuing inflation and higher prices, suggesting not much growth.Inflation however, remains an insidious erosion of our prosperity that will eventually be reflected in the value of our currency, and our collective net worth. Even worse is the prospect of entrenched inflation and low growth. Known as stagflation, there will be many who sadly remember Canada’s lengthy experience of it during the 1970s and '80s.Is it coming back? There is certainly a possibility of slower-than-anticipated interest rate reductions, and even increases this year or next in the US, and tepid growth. A recent report suggested central banks will hold rates at 3%, above the target range, until inflation subsides.Growing debt and interest ratesContinued deficits throughout the developed world contribute to sticky inflation; carrying the debt requires higher taxes, or more borrowing. Of growing concern is the unprecedented level of debt in the US, as President Biden, desperately seeking re-election, forgives billions of dollars of student debt and subsidizes his green agenda, among other gifts to the electorate.Is the electorate for sale? With ever more entrenched entitlements, maybe so. In any case, US government debt is now 125% of GDP. Prospects for a reduction are not much better, even if Trump regains the White House given his record as President. Labelled the “king of debt” during his volatile business career, the growth of debt trend is likely to worsen, regardless of who wins. The deteriorating balance sheet of the reserve currency country is unsettling. DemographicsThe ageing of baby boomers is putting pressure on health-care systems and slowing rates of growth in most Western countries, with Mexico a notable exception. China is suffering similar pressures aggravated by the unfortunate “one-child policy” instituted by the all-knowing dictator of the day.China is an example of the certainty that command-and-control countries invariably make poor decisions, thereby increasing economic uncertainty. On the other hand, favourable demographics advantage India, and most of Africa. The result will be economic outperformance, already evident in India, inevitably resulting in more geopolitical influence.Geopolitics, trade and frictionContinuing wars in Ukraine and Gaza will also impact the future, perhaps dramatically. Most NATO partners have increased military expenditures, putting additional pressure on strained budgets.Important elections this year in the US, Great Britain, the European Union, and elsewhere will also impact national and international outcomes. More importantly, increasingly divided electorates reflect the growing bifurcation of basic values. In times of dislocation, populists on both extremities of the political spectrum often get more attention and votes.Another “cold war” is upon us as Russia cozies up to China, and Iran supplies Russia with missiles. Iran is also encircling Israel through its proxy states — Palestine, Lebanon, Syria, and Yemen. It has destroyed the first three, will Yemen be overrun, then also succumb to the Shia machinations of Iran?Free trade, a significant influence in the dramatic growth of global prosperity since WWII, is enabled by the US Navy. Other American priorities and growing US nationalism (elsewhere as well) put global trade at risk. This is already evident in the Red Sea as Houthi missiles disrupt shipping with little pushback from the Western world.Will this get worse as Biden, like Obama, dodges any hint or threat of war; or if elected, Trump withdraws from international hostilities? We should remember how Ronald Reagan challenged the 200-mile claims of Gaddafi offshore Libya. The Libyan jets, sent up to enforce it, quickly splashed down into the Mediterranean Sea.The retribution was the blowing up of a German bar frequented by US soldiers. Avenging multiple deaths, Reagan sent fighter aircraft including a missile into Gaddafi’s tent. The bluff of the bully was called and the obstinance immediately ceased. Eventually, Gaddafi even became an ally. Bullies are cowards feeding on those they perceive as weaker. They only understand fear. President Reagan knew this, and by showing strength not only avoided war but also influenced the collapse of the Soviet Union.Today’s leadership watched Russia seize Crimea, withdrew suddenly from Afghanistan betraying local allies, and watched again as Russian troops gathered along the border of Ukraine, and recently sent nuclear ships to Cuba. The bully in Russia knows he has nothing to fear.Now the US provides both Ukraine and Israel with just enough military supplies to engage, but not win. The brazen Houthis illustrate a lack of fear, disrupting global trade as President Biden continues to appease Iran including the release of sanctioned funding. China is watching this display of weakness. Now with a larger navy, the consequences of blockading Taiwan and the loss of computer chips, would disrupt Western economies. And lead to war?The certainty of further military aggressiveness also creates economic uncertainty. Our lack of preparedness increases the likelihood of receiving another war. The decision will not be ours, but rather an outcome of persistent demonstrated weakness.If you think this is unnecessary fearmongering, read about Neville “peace in our time” Chamberlain, the former and discredited Prime Minister of Great Britain. Or imagine the feelings of those in Ukraine and Israel who lost loved ones.So, this forecast, as much a polemic, recognizes that current geopolitical friction has become the biggest risk to our economic future.And our freedom.This is the first of a series of articles from Saskatchewan businessman Herb Pinder. Tomorrow, he considers North American economic prospects.
Economic uncertainties and post-COVID recovery: This is the first in a series of four reflections from Saskatchewan businessman Herb Pinder.COVID-19 was in itself forgettable but as a group experience a human, emotional, physical, and financial experience never to be forgotten. Two years after the event, economic recovery is advancing.Yet, uncertainties abound. Global growthForecasts suggest the global rate of growth will be on either side of 3% in 2024. According to Macrotrends’ website, that is about average since 1960. As an indication of economic recovery, it roughly mirrors continuing inflation and higher prices, suggesting not much growth.Inflation however, remains an insidious erosion of our prosperity that will eventually be reflected in the value of our currency, and our collective net worth. Even worse is the prospect of entrenched inflation and low growth. Known as stagflation, there will be many who sadly remember Canada’s lengthy experience of it during the 1970s and '80s.Is it coming back? There is certainly a possibility of slower-than-anticipated interest rate reductions, and even increases this year or next in the US, and tepid growth. A recent report suggested central banks will hold rates at 3%, above the target range, until inflation subsides.Growing debt and interest ratesContinued deficits throughout the developed world contribute to sticky inflation; carrying the debt requires higher taxes, or more borrowing. Of growing concern is the unprecedented level of debt in the US, as President Biden, desperately seeking re-election, forgives billions of dollars of student debt and subsidizes his green agenda, among other gifts to the electorate.Is the electorate for sale? With ever more entrenched entitlements, maybe so. In any case, US government debt is now 125% of GDP. Prospects for a reduction are not much better, even if Trump regains the White House given his record as President. Labelled the “king of debt” during his volatile business career, the growth of debt trend is likely to worsen, regardless of who wins. The deteriorating balance sheet of the reserve currency country is unsettling. DemographicsThe ageing of baby boomers is putting pressure on health-care systems and slowing rates of growth in most Western countries, with Mexico a notable exception. China is suffering similar pressures aggravated by the unfortunate “one-child policy” instituted by the all-knowing dictator of the day.China is an example of the certainty that command-and-control countries invariably make poor decisions, thereby increasing economic uncertainty. On the other hand, favourable demographics advantage India, and most of Africa. The result will be economic outperformance, already evident in India, inevitably resulting in more geopolitical influence.Geopolitics, trade and frictionContinuing wars in Ukraine and Gaza will also impact the future, perhaps dramatically. Most NATO partners have increased military expenditures, putting additional pressure on strained budgets.Important elections this year in the US, Great Britain, the European Union, and elsewhere will also impact national and international outcomes. More importantly, increasingly divided electorates reflect the growing bifurcation of basic values. In times of dislocation, populists on both extremities of the political spectrum often get more attention and votes.Another “cold war” is upon us as Russia cozies up to China, and Iran supplies Russia with missiles. Iran is also encircling Israel through its proxy states — Palestine, Lebanon, Syria, and Yemen. It has destroyed the first three, will Yemen be overrun, then also succumb to the Shia machinations of Iran?Free trade, a significant influence in the dramatic growth of global prosperity since WWII, is enabled by the US Navy. Other American priorities and growing US nationalism (elsewhere as well) put global trade at risk. This is already evident in the Red Sea as Houthi missiles disrupt shipping with little pushback from the Western world.Will this get worse as Biden, like Obama, dodges any hint or threat of war; or if elected, Trump withdraws from international hostilities? We should remember how Ronald Reagan challenged the 200-mile claims of Gaddafi offshore Libya. The Libyan jets, sent up to enforce it, quickly splashed down into the Mediterranean Sea.The retribution was the blowing up of a German bar frequented by US soldiers. Avenging multiple deaths, Reagan sent fighter aircraft including a missile into Gaddafi’s tent. The bluff of the bully was called and the obstinance immediately ceased. Eventually, Gaddafi even became an ally. Bullies are cowards feeding on those they perceive as weaker. They only understand fear. President Reagan knew this, and by showing strength not only avoided war but also influenced the collapse of the Soviet Union.Today’s leadership watched Russia seize Crimea, withdrew suddenly from Afghanistan betraying local allies, and watched again as Russian troops gathered along the border of Ukraine, and recently sent nuclear ships to Cuba. The bully in Russia knows he has nothing to fear.Now the US provides both Ukraine and Israel with just enough military supplies to engage, but not win. The brazen Houthis illustrate a lack of fear, disrupting global trade as President Biden continues to appease Iran including the release of sanctioned funding. China is watching this display of weakness. Now with a larger navy, the consequences of blockading Taiwan and the loss of computer chips, would disrupt Western economies. And lead to war?The certainty of further military aggressiveness also creates economic uncertainty. Our lack of preparedness increases the likelihood of receiving another war. The decision will not be ours, but rather an outcome of persistent demonstrated weakness.If you think this is unnecessary fearmongering, read about Neville “peace in our time” Chamberlain, the former and discredited Prime Minister of Great Britain. Or imagine the feelings of those in Ukraine and Israel who lost loved ones.So, this forecast, as much a polemic, recognizes that current geopolitical friction has become the biggest risk to our economic future.And our freedom.This is the first of a series of articles from Saskatchewan businessman Herb Pinder. Tomorrow, he considers North American economic prospects.
