In this article it talks about the global economy and how its heading into recession. A recession is likely due to to inflation-fighting efforts by central banks, the war between Russia and Ukraine, and China’s prioritization of political control over economic growth. Many central banks around the world are tightening monetary policy just like the Federal Reserve has been doing most of the 54 tracked banks by the GMPT Global Monetary Policy Tracker have been tightening up. Specifically, the European, British, canadian Australian, indian, and many others in Central American Central Banks have increased their policy rates and signaled more increases are likely in the coming months. the only majoring countries easing monetary policy are Russia and China. Europe’s additional challenges include tight energy as their dependence on Russian energy has increased in the past decade from 25% of total gas demand in 2009 to 32% in 2021. China’s economy is weakening and all the geopolitical events surrounding them right now will make everything even more unstable. Reacting to these scenarios The Russian and Chinese issues are leading companies around the world to shorten and simplify their supply chains, reshoring in their home countries when possible. Commodity prices are usually a good gauge of current sentiments about future global economic growth. As this article is written, oil prices have dropped recently despite the problems with Russian energy deliveries and a drop in OPEC production. Copper is another good indicator of expectations about economic growth, copper prices have dropped recently. In the positive side of the ledger, Canada and Mexico, both large export markets for the United States, are less sensitive to these global economic headwinds. The slump will probably be not as calamitous as the 2008-09 financial crisis, but certainly worse than the minor cycles we’ve seen. Business contingency plnning for a global slump must include the interest sensitive portion of the risk, as monetary policy tends to tighten new constructions. Companies trading with Europe should be worried as primary concerns would be sales of goods and services to energy-intensive businesses in Europe as they may need to pause operations to heat their homes or cannot continue typical operation with the lack of materials. For businesses selling to China they should and can expect lower growth, perhaps even a decline in some sectors such as building materials. Whereas the monetary policy impacts will be sharp but relatively brief, China’s economic slump will be gradual and long-term. Businesses with deals with China or Taiwan must also paln for conflict in their contingency planning as this is a very realistic possibility. Finally, every major change brings opportunities for growth for the few businesses that are creative, far-sighted and bold. Being open to growth opportunities in changing times will help greatly pay dividends in the eventual upturn.
Chapters in the economics book which connects with the article is chapter 3 how to anticipate recessions and downturns and chapter 5 planning for a downturn: vulnerability and flexibility. chapter 3 due to it talking about subjects relative to what was talked about in the article such as monetary policy and federal banks tightening monetary, The Federal Reserve Banks, Monetary policy, Recessions, and how there can supply shocks like Europe is having due to the war in Eastern Europe. Chapter 5 talks about matters pertaining to content in the article by highlighting contingency plans, bringing flexibility into the business, and the vulnerability assessment all which are great for helping to defend your business from coming economic trouble.