US recession on the way as de-globalisation bites

Dambisa Moyo, a global economist, has stated that a combination of falling global trade, decreasing cross-border capital flows and tightening immigration will form the backdrop to the upcoming recessionary environment that will confront the US in 2018 along with rising inflation.
Speaking at the Investing in African Mining Indaba, South Africa, Moyo said even before President Donald Trump took office, the de-globalisation trend was under way, noting that trade growth had been on the decline for some time, worsened by the introduction of as many as 644 new constraining measures introduced around the world.
As countries reset public policy towards re-hiking tariffs, questions were being posed on how governments would be able to fund infrastructure, especially in emerging markets around the world hit by the most significant withdrawal of capital since 1988.
There was a real question, Moyo said, of how African mining would be funded in these circumstances in a world where the 65-million refugees around the world was the highest since World War Two and still disorderly in the absence of a global organisation to deal with it.
According to Moyo, “I strongly believe the immigration issue in the US will intensify, which will present aspects on how businesses are stacked.”
By the end of 2018, there is a 35 percent chance of a recession in the US, which will have knock-on effects, she noted.
The benefit of the US government’s plan for a $1-trillion fiscal stimulus through infrastructure development may be overstated given that the benefit of Japan’s $3.6-trillion expenditure was negligible, “which is why I’m quite bearish on the US,” she said.
The projected US interest rate hikes of 75 basis points would have significant implications for the countries in Africa that have onerous sovereign debt.
“It means we will start to see interest rates rise related to a strong dollar, which in theory should help African exporters. But the problem of border taxes and the threats of protection means high interest rates could be at a time when export revenue is down,” Moyo summed up.
While a strong dollar would normally be positive for emerging markets, border taxes and protectionism as well as interest rates could see these countries ending up in a very precarious situation.
The country’s more protectionist stance would result in far more inflation in the US and more deflation in Africa and countries around the US.
An extension of the US’s aggressive stance on Mexico to China would mean a “China slowdown” in Africa, where there will be consolidation opportunities.
Given inflation prospects and concerns around a weakening global economy, Moyo’s advice is that people should be buying gold.