The year 2023 will bring hard times for the world, the Washington Examiner reported.
China's COVID-19 policy is a perpetual disaster. People are dying and supply chains are broken again. Even worse, several emerging market countries are on the verge of collapse. COVID-19, inflation, rising interest rates, unsustainable debt burdens, corruption and ineffective macroeconomic policies are hurting emerging economies. South Africa is a model of corruption and bad policies. International financial agencies such as the IMF and World Bank are feverishly working on debt stabilization and restructuring programs. Wealthy countries are postponing more financial and technical assistance.
The first shots are fired in the global trade war between Japan, South Korea, the European Union and the United States. The green energy provisions of the Buy American inflation-reduction Act are protectionist in nature. The provisions are contrary to the rules of the World Trade Organization. Buy American lowers the standard of living for most Americans. Even prominent economists affiliated with the Democratic Party criticize the project.
Of course, politicians in the European Union are not blameless in the doomed game of "an eye for an eye" protectionism. European Union parliamentarians are pushing a carbon border adjustment mechanism, or CBAM, to tax EU imports based on their carbon intensity. They are also pushing blatantly protectionist measures on technology and taxation.
European carbon taxes significantly increase the cost of doing business for industries with a high proportion of carbon energy as part of the cost of production. Aluminum, iron, steel, cement, chemicals, and fertilizer industries will suffer. Jobs will be sacrificed. Inflation will be higher.
To offset the economic and social costs of carbon taxes, more generous welfare spending will be undertaken. Budget deficits will be higher. A negative economic feedback loop is inevitable.
A cold economic winter is descending on America as well. A recession is coming. Interest rates are rising. Rates will remain high for a long time. Scarce capital is being destroyed in the pursuit of a green economy, which is a fool's journey for the next decade and almost certainly longer.
President Joe Biden's protectionism and favoritism for unions is exacerbating inflationary pressures and destroying jobs. And if all this bad news isn't enough, sometime in the summer of 2023, the United States will begin to flirt with a federal default when Congress decides on the debt ceiling.
The rich countries of the world must cooperate. But conflict, not compromise, will be preferred. Politicians will turn other nations and peoples into ghosts. Political elites in the U.S., Europe, and Asia will prefer destructive populist policies to the hard work of building the consensus necessary for both national and global prosperity.
Hard times are coming.