Abdul Hafiz Abdul Rahim Mehboob
After World War II, the world was under the influence of Federal Reserve policy, but as a result of the Korean War 1950–1953 and then the Vietnam War that began in 1955, President Richard Nixon made a sudden and shocking decision in 1971. The commitment of the United States to exchange the US dollar for gold when demand through the Federal Reserve on a $35 per ounce basis, after the gold stock was depleted as a result of those wars, and today Henry Kissinger warned the United States and the European Union that sanctions against Russia are a double-edged sword that will further weaken the dollar and euro trading range, which now exists.
As is known, in 2009, with the intensification of the global financial crisis as a result of the mortgage crisis emanating from the United States, banks around the world lowered their interest rates to near-zero levels to encourage banks to help them in their recovery. be enabled. Lending ability to counter deflation and stimulate the economy.
There is a consensus among world experts that the most important outcome of the Russian war in Ukraine will be the end of unipolarity. China, which followed a policy of credit and market conquest, would particularly benefit from this war. It is true that the stages of change throughout history have usually been dangerous and frightening, as major countries use them to reaffirm their strength in their quest for the biggest share in the next cake, although decision makers in the United States Consider the story of the end of history. 1990 to be from the past, and the era of the end of Ukrainian war history 2022, ie the end of the legitimacy of the unipolar system, has become a shining reality, which Saudi Arabia realizes its future and formulates policies within a multipolar world order are based on this fact.
World Bank President David Maltas has said it is difficult for countries to avoid economic stagnation, as it is a difficult task to manage inflation without economic collapse, regardless of political choices. The seventies, when the oil shock, which was followed by high interest rates, led to a stalemate with an alarming mix of high prices and low growth, so the world registered a growth of 5.7 percent in 2021, but after the Russian war in Ukraine It slowed to 2.9 percent, which is below expectations set at a rate of 2.9 percent. The International Monetary Fund expects growth to remain weak through 2023, to 3.6 percent in April, and to slow to 2.5 percent in the United States and Europe, and to 4.3 percent in China from 8.1 percent in 2021. In 2022, and the growth rate in Saudi Arabia is the highest in the world, reaching 9.6 percent.
The World Bank also expects global growth to be 2.9 percent in the 2022 report, compared to 4.1 in January 2022, and growth could swing around that pace during the 2023 to 2024 period when the war in Ukraine dented economic activity. Investment and trading in the near term. Demand weakens, as well as the cessation of accommodative fiscal and monetary policies.
In the face of inflation, which has been rising in the United States until it becomes an economic priority for President Biden, the Fed slashed interest rates to zero in March 2020 as a result of the coronavirus pandemic to support the economy , which lasted two years, and interest rates ranged between zero and 0.25 percent before raising a quarter point in March 2022 and then half a point in May 2022, but the US Central Bank is set to raise key interest rates for the third time. doing. /15/2022, which could take the incentive up to half a percentage point or 50 basis points.
These increases since 1994 as a result of market turmoil and inflation would be a precedent as, after inflation hitting a record high of 8.4 percent on an annualized basis in 40 years, by raising key interest rates, the Federal Reserve encouraged banks. does. To give more expensive loans to its customers, who will therefore be less willing to consume, so that the Fed can engage in the delicate process of slowing inflation without weighing too much economic growth.
A forced slowdown in consumption is likely to weigh on the US economy, raising fears of a deflationary or stagflation, that is, a prolonged period of weak growth and high inflation, and the unemployment rate likely to rise again.