If I must choose one word to define the current global situation, it will indubitably be “tumultuous”. There is commotion, agitation, emotional outbursts, upheaval, chaos, distraughtness, indecision and haphazardness in almost all spheres of life – be it economics, finance, governance, politics, or geopolitics. As the trust deficit deepens and widens further, the leaderships are dissipating fast.
USA and UK which have provided political leadership to the world in most of the past hundred years, no longer enjoy wide acceptability. In fact both the countries are struggling to manage even their own internal conflicts. The trends elsewhere also suggest that people are choosing perceptibly stronger and decisive leaders to lead in these tough times. Some examples are Brazil, Israel, Sweden, Italy, and China.
Geopolitically, the hegemony of NATO is facing serious challenges from the new alliance of Russia, China, and North Korea, who have not shown much respect for the extant global order. The largest energy supplier to the world, OPEC also appears inclined to move away from the present system of petrodollars and dominance of western developed economies.
Despite the pandemic; severely inclement weather conditions prevailing for the past couple of years over the most parts of the world (especially the developed world) and extremely painful energy crisis in Europe; the global leaders gathered in Sharm-el-Sheikh (Egypt) for COP27 conference are least likely to come to an equitable and effective agreement over climate change.
The global markets are in turmoil. The illusion of stability created by central bankers of developed economies post the global financial crisis is fading fast. Most of the money printed by the central bankers to keep the wheel of markets moving has been used to fuel prices of financial assets and boost bank reserves. Very little went into building new productive capacities. The unscrupulous politicians were happy to unleash a regime of blunderous fiscal profligacy using the abundant and cheap money.
The deceptive wealth effect created by artificially inflated asset prices, especially financial assets, has been crushed by the shortages of food, energy, and workers unwilling to work etc. The business models built on “dreams” are crashing down. The stock prices manipulated through leveraged buybacks using zero interest borrowings are correcting to their realistic valuations. The gullible investors who ran ahead of time and mistook crypto (a medium of exchange) for valuable assets are also facing a reality check. They are also realizing that all NFTs may not be as valuable as a work of Picasso.
As things stand today, we may soon find ourselves standing at the same crossroad where we stood in autumn of 2008. The markets may implode. The inflated asset prices may burst. The headlines might again be dominated by scary jargon like PIGS. Many Lehman-like castles may come crashing down. Globalization may take several steps back, before a new world order emerges.
Many may find these thoughts unnecessarily provocative and scandalous. There could be strong arguments in favor of India as an oasis of stability and growth amidst all this global chaos. But I am not a great admirer of Ms. TINA. I shall not live under any illusion of the Indian economy and markets escaping a global Tsunami; though I am confident that India shall survive it and soon get back on her feet. The key however is to “survive”.
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