D Abdul Hafeez Abdul Rahim Mehboob
One of the most important lessons learned from the past seven decades with regard to US monetary and economic policy is that there has been no linear evolution, and very little progress, with respect to how modern economies manage to maintain macroeconomic stability, especially In relation to monetary limit versus monetary limit in form. Financial limitation, frequent fluctuations of trends. Keynesians, who predicted in 1936 that both fiscal and monetary policy were needed for macroeconomic stability and were likely to solve two major problems, namely unemployment and income distribution, and even solve a problem The economy is more vulnerable in some aspects, although it is not possible to make policy without flaws.
The United States, as the largest global economy, which dominates nearly a quarter of the global economy, does not recognize that the world is in recession and sustained inflation, and it is not satisfied with the tightening of monetary policies. which he subsequently adopted. For global liquidity to flow towards it, even European Commission President Ursula von der Leyen warned and said that we must maintain the EU’s position as a high-quality investment destination.
China overtook the United States for the first time in 2020 and moved into the first spot held by the US for decades as investment fell by 49 per cent and Europe by 71 per cent, according to UNCTAD, while the UK and In Italy it dropped to zero, and global companies turned east to Asia instead of the United States and Europe.
Which means shifting the global economic center of gravity towards Asia, and means foreign investment in the real economy and not in stocks, bonds and currencies. In 2016, investment flows into the United States totaled $472 billion, while in China it did not exceed $134 billion, and foreign investment is not limited to American, European, German, French, Japanese, and Korean companies in China. are not affected, and neither real investment nor the US economy is affected by these trade sanctions. dollars, while inflows to the United States were $93 billion, while Saudi Arabia’s share in 2021 was $19.3 billion, and total foreign investment in Saudi Arabia doubled from $270 billion in 2015 to $610 billion in 2015. billion dollars in 2021.
China became Europe’s first partner in 2020, amounting to $586 billion, about $31 billion more than the United States. For the year 2020, imports from China increased by 5.6 percent, while European exports to China increased by 2.2 percent, in addition to European sales of cars in Chinese markets.
That is, China will reduce the volume of international exchange from trade between Europe and the United States, which accounts for 30 percent and about 40 percent of global trade in services, and American investment in Europe is 3 times greater than its investment in Asia and European . Investment in the United States is 8 times that of European investment in China and India. Therefore, Europe was worried about the outbreak of conflict in Taiwan, and in light of the Ukraine war, it would negatively affect Europe, and China would favor Russia. The impact of sanctions on the Lega and Russia would be diminished, while Europe’s relations with China and Russia would deteriorate, one of the United States’ most important targets from those conflicts.
The United States was not satisfied with these struggles to reduce the trade gap between itself and China, which increased from $310 billion in 2020 to $506.4 billion in 2021, and its trade with Africa, which declined from its peak in 2008. Went, fell from. $142 billion to $64 billion in 2021. In its place is China. Not only did the United States tighten monetary policy raising domestic lending rates, it also turned to other methods, mitigating the effect of monetary policy tightening by providing the Biden administration with a A series of massive subsidies for the new climate plan, which included all companies operating on American soil, with $420 million in aid. A billion dollars on the pretext of fighting climate change. Just as monetary policy withdrew global liquidity, aid withdrew European investment.
Biden’s plan, which brought the US back into the climate accord, is no different from Trump’s plan to withdraw from the climate accord. Rather, Biden’s plan is more dangerous because it undermines competition between the American and European electric car industry, which gets in the way. With the high energy costs of this industry in Europe, especially after the crisis in Ukraine.
Macron’s backing after his meeting with Biden triggered calls in Europe for a European sovereign fund to be set up to support industrial projects to counter the US threat, meaning the start of a trade war between the allies.
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Former Professor of Economic and Political Geography at Umm Al-Qura University