The  Gaza conflict poses  a major risk

Even  Nostradamus would  have been confused.  

In addition to the  human  toll, disturbing  developments in the Middle East(Gaza) pose risks  to the  already  depressed  global economy.

The Bible’s Book of Revelation  (the source of Armageddon)  identifies the Four Horsemen of the Apocalypse.  Interpretations  have  changed over  time,  but  today they  include  disease  (COVID-19),  famine  (lack of  food,  water,  and energy  due to extreme weather),  war (Ukraine and now Gaza),  social and political problems. It can embody anxiety  (everywhere).

 Hindu tracts believe that this is  his  fourth and worst of  his four eras of  the  world, Kali Yuga,  full of conflict,  suffering,  and  disaster.  The  prediction  may  come true.  

  In addition to the  human  cost, the  depressing  development poses  a  risk of  global  economic downturn.

• The  IMF’s  latest  report predicts that  growth  will slow  from  3.5%  in 2022 to  3%  in 2023 and  2.9%  in  2024,  below the  historical average of  3.8% from 2000 to 2019. Expect. Developed countries are  expected to  see the sharpest slowdown, falling  from  2.6%  to  1.4%  in 2024.  In contrast, growth in emerging  and developing  countries  is expected to decline  slightly,  from  4.1%  to  4%.  The underlying reasons include a weak recovery from the pandemic,  depleted  savings, China’s  real estate problems,  unsustainable global debt, banking problems, inequality,  deglobalization,  and political paralysis. 

 Even if  localized,  the  conflict in  Gaza  will exacerbate existing tensions, combining  religion, ethnicity, territorial claims,  genocide,  and  unequal use of weapons.  Asymmetric warfare, such as  “lone wolf” and “sleeper cell”  attacks,  can spread  this conflict  around the world and have consequences,  as 9/11  highlighted. The possibility of  a  military  conflict between regions or between major powers  cannot be  denied, and  the  impact would be many times greater.

As the  history of  World Wars  I and II shows, once a war begins,  no one is  the  master of  anything,  but  rather  everyone is  a  slave to  unpredictable  and uncontrollable events.  The  exact  order  is  unknown, but  several  potential  forces will be  at the forefront.  Political  influence influences  financial  influence. 

 As with Ukraine, the Gaza conflict will divide the world as countries take sides.  While this  reflects historical  loyalties, there is also  often  a misunderstanding  of  the  national interest and  the  desire to  maximize  electoral  advantage at home.  Such events expose deep-seated  hypocrisies  and double  standards on  issues  such as arms supplies,  war  crimes,  and humanitarian concerns,  exacerbating  divisions.

America may  become weaker. Unwavering  support for Israel undermines its ability to play a role in the Arab Middle East. Qatar,  the United Arab Emirates,  Saudi Arabia,  Jordan,  and Egypt, which have sought to  de-escalate  tensions in the region, will find it difficult to  work  with a United States  that quickly becomes thoughtlessly partisan  at the first  provocation. .

 The  Middle  East’s  rulers  remain  concerned about  the existential threat (Gaza)  posed  to their regimes  by the U.S.-sponsored color  revolutions and the ill-fated Arab  Spring.  The  transfer  of resources to  Israel and the possible abandonment of Ukraine raise  questions about  US  capabilities. Countries  that rely  on  U.S.  military protection (Europe, Japan, South Korea, Taiwan,  Australia,  Gulf states) as well as competitors (China and Russia) will  likely be watching.

These political factors  affect economies  through  multiple  channels, primarily  through  trade and commerce  disruption, but  relative  geopolitical  stability  is necessary for economic prosperity.  First,  trade is  already  slowing and could slow  further.  Countries will be conscious  of avoiding critical strategic  dependencies and  will  seek  greater self-sufficiency  and  new arrangements with like-minded  travelers. Sanctions  such as those  imposed  by the  United States  on China for  dual-use civilian (Gaza ) and  military purposes and  advanced  technologies  will accelerate  this  process.  Long  supply chains  need  to be  overhauled, which is  a long, thankless, expensive and  possibly  impossible task.  Trade-dependent emerging markets  may find themselves in  trouble.  Second, inflationary pressures may return.

  The  recent  improvement is  mainly  due to  lower energy prices,  and the combination of  the Gaza conflict  and Russia’s continued  restrictions  could lead  to  higher  energy  costs.  In the  worst-case scenario, the  oil embargo  around 1974 and the blockage  of the  Strait  of Hormuz and  Suez Canal would  dramatically  change price  trends.

Other commodity prices  (wars use large amounts  of oil and  metals) can create other pressures, along  with demand for  raw materials  needed for the energy transition. When labor is used to wage war, labor  costs  rise. The movement of talent needed by  the  defense industry, particularly  in science and  technology,  will slow,  leading to  skills shortages.  All this, in addition to  the  push for deglobalization,  will  lead  to inflation.  Rising prices  and  the associated rise in  interest rates threaten a financial crisis.  Excessive  debtors face  difficulties in  refinancing and  repaying their debts.  Asset prices must adjust to  the rising cost  of capital. Emerging markets face a toxic combination of  rising  energy prices,  rising  US interest  rates,  and a  strong  dollar.  

Third,  the financial situation  may deteriorate. The post-1989 economy  benefited from a “peace dividend” as defense spending fell from about 5.5%  of  gross domestic product  (“GDP”) in 1989 to  2.6%  of GDP in 2000.  This, in turn, is reversed to the detriment of  more productive sectors of the economy.  If  government revenues  stagnate,  countries will  continue to have deficits  and  debts.

Even Nostradamus,  with his undocumented  political and  policy-making abilities,  would  have difficulty navigating  such  an environment.  Leon Trotsky was right when he  asserted, “You  may not be interested in  war,  but war  is.”  Satyajit Das is a former banker and  the  author of numerous works on  derivatives, including “Traders,  Guns & Money:  Known,”  and  “Traders, Guns & Money: Known,” as well as several popular titles. .  Unknowns in the Dazzling World of Derivatives (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011), A Banquet of Consequences RELOADED  (2021),  and  Fortune’s  Fool:  Australia’s  Choices  ( 2022).  His columns have appeared in  publications such as  the Financial Times,  Bloomberg, WSJ MarketWatch,  The Guardian, The  Independent  and  Nikkei Asia.

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Source: www.indianexpress.com