An estimated 61 countries are currently in debt distress or at risk of it, which is almost one third of the membership of the IMF [32% of 190].  The G20’s Common Framework for Debt Treatment is supposed to facilitate debt restructuring for low-income countries.  But it has made only slow progress.

Many of these countries are in Africa.  Chad restructured its debt in 2021, the first to do so under the Common Framework. Zambia defaulted on its foreign debt in 2020, but has so far been unsuccessful in getting its creditors to agree on how to restructure its debt.  Reluctance of China to participate with other creditors in the traditional Paris Club process is a particular problem in the Zambian case.  Ghana, which defaulted on its external debt in December 2022, has apparently been better able to move forward with restructuring.  Rescheduling of the terms of Ethiopia’s debt was delayed by civil war, but may move forward now.  Angola received 3-year debt relief in September 2020, but remains in trouble.

This month marks the 50th anniversary of the date, in March 1973, when the dollar, yen, deutschemark, pound, and other major currencies went untethered, their relative values to be determined thenceforth by foreign exchange markets rather than by governments.  The abandonment of the Bretton Woods system of fixed exchange rates was generally viewed as a policy failure. The movement from fixed to flexible exchange rates, however, was better viewed as part of a natural long-term process.

The popular ESG movement advocates judging firms, not just by what they generate for shareholders in short-term profits, but by their emphasis on environmental, social, and governance goals.  The movement has its detractors, particularly in the United States.  A counter-movement is gathering steam. It would prohibit some financial institutions from investing in firms that follow ESG practices.

To be sure, ESG does warrant some skepticism.  Often, corporate commitments are essentially mere exercises in public relations.  But those who, in the name of economic freedom, would ban private investors from pursuing ESG goals are logically confused.

The US federal debt hit its legal limit, $31.4 trillion, on Thursday, January 19, 2023.  Everyone feels that they have seen this movie before: there is no need for alarm because the politicians will strike a deal at the last moment.  But this time, the movie could well end tragically, as a result of the intransigence of Republicans in Congress.  It is likely that they will refuse to raise the debt ceiling until after they have driven the car over the cliff.  This could mean a once unthinkable default by the US government.  Unfortunately, letting them do that may be the best strategy available to President Joe Biden when the time comes.

Economists spent most of 2022 convincing themselves that the global economy was about to fall into recession, if it wasn’t already in one.  With the year over, the global recession has now been postponed to 2023.

1. Tour d’horizon

In the US, reports that a recession had begun in the first half of the year clearly were premature, especially given how tight the labor market was.  It still is. The chances of a downturn in the coming year are well below 100%, despite the confidence with which many say it is certain.  It is foolish to think we can predict a recession with certainty. But the chances are indeed far above the usual 15 %.  I would put the odds at perhaps 50-50 in 2023 and 75% at some point during the next two years.  The main reason is the rapid raising of interest rates by the Fed (and other central banks), of course, which in turn is attributable to high inflation.

The most important task in confronting global climate change is the need to enforce serious quantitative limits on Greenhouse Gas emissions, such as the Nationally Defined Contributions which were originally negotiated in the 2015 Paris Agreement.  The 27th Conference of Parties to the UNFCCC,  which concluded in Sharm-el-Sheikh November 20, did not tackle this task.  Carbon border equalization measures, including tariffs against carbon-intensive imports from lax countries, might supply the teeth that have been missing from such agreements.  But they also risk advancing protectionism, which would ultimately slow the needed global energy transition.  Adjudicating the fairness of carbon tariffs would be a good job for a reinvigorated WTO.

 Americans will go to the polls November 8.  It appears probable that they will give the Republican party majority control of the House of Representatives, and possibly the Senate as well.  The same for Secretaries of State and other statewide offices.  The consequences could be enormous. Especially worrying is the future of US electoral democracy, if the result is further distortions of voter eligibility rules, congressional redistricting, the electoral college, and other structural features.  How could such an outcome of the mid-term elections be explained, seeing as how the Republican party is now dominated by its extremist MAGA faction?

The dollar is sky-high.  Since May 2021, it has risen 19% against Europe’s euro, even reaching 1-to-1 parity in recent weeks. The dollar has appreciated 20% against Britain’s pound.  And it is up 28% against Japan’s yen, provoking the Bank of Japan to sell dollars on September 22, essentially the first foreign exchange intervention by a G-7 country since 2011 and the first in the direction of supporting a currency’s value against the dollar since the euro in 2000.

Project Syndicate asked, “Is a Global Recession Inevitable?”   Steven Roach says, “yes”;  Anne Krueger says, “Depends…Certainly not inevitable”; & Jim O’Neill says, “Quite possible.”

My answer to the question, Is a global recession inevitable:

No. A global recession is entirely “evitable.”

True, the odds of a downturn are high in Europe, hard-hit by the need to manage winter without Russian natural gas; China, where Covid shutdowns already turned growth negative last quarter; and Emerging Market and Developing Economies, many of which have debt troubles.

Among the most salient of economic developments in the last two years have been big movements in the prices of oil, minerals, and agricultural commodities.  It was hard to miss the big rise in commodity prices.  The Brent oil price increased from a low $20 a barrel in April 2020, during the first Covid-19 wave, to a peak of $122, in March 2022, after Russia invaded Ukraine.  But it was not just oil. The price of copper doubled over this period.  Wheat more than doubled. And so on. Global indices of commodity prices almost tripled from April 2020 to March 2022.