Pas de Deux of the black Swan

What awaits the world economy in 2020?

After a fantastic 2019, which will definitely go down in history and will be remembered for great growth, investors are already starting the next race, looking for new opportunities for earnings. And the ordinary man in the street in between toast “for good luck in the new year” no-no, and look at the dollar in your smartphone, pomyanuv cool word family financial power, the Ministry of Finance Yes the NBU, which has made the past year in his unforgettable, powerfully hit by a revaluation of the industry, budget and, ultimately, the economic future of the country.

Although the past year was a lot of records, as we know, past performance is no guarantee of future. And after almost eleven years of continuous growth I’d like to understand, whether hatched from the eggs of the Swan, which is black with a swipe of his wing, will end the longest period of growth in history, and send the whole world, including you and me, to hell of a new economic and financial crises.

If we talk about the global economy, the latter an island of economic prosperity in the developed world is the United States. Although the ocean is not all drawn in pink: members of the National Association of business economists predict the U.S. GDP growth to slow from 2.3% last year, to 1.8% in 2020. the Probability of a crisis, according to respondents, increased from 5% in 2019 to 43% at the end of 2020. Of the key factors influencing the markets, called, of course, the presidential election, a trade war and the rise of corporate debt.

Does this mean that investors planning to lay low and wait for the crisis? It’s not like! However, exactly what happens at the end of each cycle, greed overcomes fear, and the fundamental factors fade into the background, giving place to fear to miss the opportunity to earn when the market is flying ahead at full steam. Remember 2000, when investors are affected with the virus of cheap money, went crazy for Internet companies, or 2008, the infamous crisis of mortgage bonds. The same thing is happening now. Well, pray tell, what fundamental reasons to justify the growth of Apple by almost 90% per year or Tesla by 70% in two months? Just imagine — the brainchild of Elon musk is already two times more than Ford, despite the fact that the prospects of earning profits continue to remain very vague.

As you know, the basis of all “bubbles” are the problems with debt. The abundance of cheap money is fueling investors ‘ appetite for risk and it is no secret that the growth of recent years was primarily due to the unprecedented monetary policy easing by the world’s leading Central Banks. And while they generously hand out money, the growth of financial markets is likely to continue. In this connection it is interesting to look at the plans the main Central banks of the world, which recently concluded Bloomberg:

Neither the fed nor the European Central Bank, none of the Central banks of developed countries and territories no plans to raise the cost of money in 2020, Australia is planning the reduction, and in Europe and Japan, where the economy has long been not increasing, rates will remain negative. Moreover, the Central Banks of USA, Europe and Japan will continue to actively buy government bonds, further softening of monetary policy. Large emerging markets or plan to lower interest rates, as China, India, Indonesia, Russia and South Africa, or write at the same level as, for example, Brazil.

In short, neither in developed nor in developing countries, even the question of whether to tighten monetary policy. Central banks are planning either to leave things as they are now or continue to decline. So, most likely, financial investors, receiving a fresh dose of “financial doping” will be ready to continue the race for risk in the coming year.

On the other hand, the liberal monetary policy of all major Central Banks once again confirms the fact that no one in the world expects an increase in economic growth and, conversely, thinking about how to revive it. The situation in the global economy is very shaky, and although no one predicts the onset of the crisis, any unexpected event can easily swing the balance in the direction of the fall. What might this event? Yes, anything — Elizabeth Warren as the new President of the United States, the failure of the talks with China, a surprise rate hike by the fed. Unfortunately, the black swans is impossible to predict. By the way, at the end of 2007, the fed, using all his intellectual power and resources, forecast another good year of economic growth. So what happened, you know.

How all this will affect the situation in Ukraine? With a multiplier… Not a secret that if the Americans sneeze, as many emerging markets begin to choke on a cough. Agree that it is unlikely we will be able to achieve something constructive, if the entire civilized world collapses in a crisis. Have to suffer with all. If everything in the world will remain as it is, and the injection of cheap money will save lives the longest growth period in history, then our task will be simplified and reduced to the tracking of the local incubator “black swans”, where there are birds with black feathers for almost every taste: the planned sale of land, relations with neighbors, the fall in industrial production rates, the revaluation, the Brownian motion of a technocratic government, the outflow of labour resources and invincible corruption and many other things. There is only one goal, plan to achieve it and, consequently, confidence in the future for millions of Ukrainians.

Ivan KOMPAN, the “New age”