The novel coronavirus epidemic hit a global economy which is already in a recession in terms of manufacturing, industry, and trade. The international financial system is threatened at any moment with a blowout of unpayable corporate debt and derivatives contracts, which could bring down the global banking system. In the fourth quarter of 2019 alone, 40 central banks cut interest rates 71 times and increased their bond-buying schemes, in a desperate campaign to support stock and bond markets. At this point, the U.S. Federal Reserve does not know how to escape from “quantitative easing” and from huge daily liquidity injections into the interbank lending markets. Since last October, the Fed has been pumping between US$ 70 billion and 100 billion on a weekly basis, as noted by mainstream financial media sources.
In that context, comes the impact of the two-week shutdown of business and work in 24 provinces in China, which affects in one way or another about 75% of its industrial economy. The shock is being felt worldwide. In fact, the severe problem of the epidemic only underlines the absolute necessity of ending the 45 year era of a trans-Atlantic monetary system plagued by “floating exchange rates”, financial speculation, and austerity against industries and households. What the elites of that same system now propose are various “green new deals”, that will lead to massive deindustrialization.
What is urgently needed, on the contrary, in the trans-Atlantic world, is a focus on growth of the physical economy, through scientific and technological progress and constant increases in the productivity of labor. The best example of such an approach today is the Belt and Road Initiative (BRI) launched by China, involving great projects of transportation and power infrastructure which aim to become worldwide.
Interestingly, the RAND Corporation has just recently reversed its previous stance on BRI in a study published Jan. 30 by the think tank. Noting that the developing countries need tens of trillions of dollars in new infrastructure investments, the study notes that the BRI investments across Eurasia not only increase trade in that region, but also “in areas outside of the initiative, such as the EU.” Therefore, it would appear to present a win-win scenario in terms of the impact on trade among many countries. The West, the RAND Corporation concludes, “could also consider the initiative’s potential to deliver sustained economic, social and environmental benefits for all, and find ways to support infrastructure improvements in the countries involved.”
The BRI is not merely an opportunity for China or Africa, but for the U.S. and the EU themselves to deal with one of the worst economic and social crises in their recent history. These crises are not the result of Chinese policies or a flu epidemic. The crises that have hit the U.S. and the EU are all of their own making.
Courtesy of EIR Strategic Alert.