Various indicators show that the global economy is declining at an unexpected rate and may be entering an unprecedented "super recession cycle". The "super" here means that the recession situation is extremely complex, with inflation and economic downturn (stagflation), supply disorder and insufficient demand occurring at the same time, leading to the dilemma of easing policies commonly used in various countries in the past. Second, the duration will be super long, which may be longer than that after the last round of subprime mortgage crisis. It is difficult to see a significant recovery in 3-5 years - if countries have been keen on conflict and war, how can the economy be repaired quickly?

In the United States, although the employment rate remains high, there is a serious structural employment gap, resulting in a sharp rise in wages; The most serious is that the consumer confidence index has fallen to the lowest point of the subprime mortgage crisis. If the Fed cannot smoothly raise interest rates and shrink the table, the inflation spiral may be difficult to be substantially eased; If the supply system shrinks abruptly without rapid repair, it is almost inevitable that the US economy will enter a stagflation state. In Europe, persistently high prices are hitting consumer confidence, and investment activities have also begun to enter a downturn. Data show that the growth rate of the euro zone in the first quarter of this year slowed significantly compared with last year, which is still on the premise that the European Central Bank continues to maintain its loose policy. In Japan, the real GDP growth rate in the first quarter was -1.0%, while the core CPI exceeded 2%, hitting a ten-year high, showing a long-awaited trend of stagflation, and the yen exchange rate also surprisingly fell to a 20-year low in less than a month. All this shows that the developed countries have not withdrawn from the abnormal monetary policy, but the economy has entered the eve of recession ahead of schedule. 

In emerging economies, China's economy is suffering from the impact of the second epidemic comparable to 2020, which will be a huge drag on the global economy. From the perspective of the operation of the economic system, the harm caused by the epidemic itself is far lower than the epidemic prevention and control. The clearance measures have ensured the safety of people's lives, but at the same time, they have paid a huge price for people's livelihood and economic development. In this case, although China's economy remained stable in the first quarter, the second quarter is likely to usher in a new low for many years. Competitors from emerging economies such as Southeast Asia and India, although they received some new orders during the Chinese epidemic, are likely to be short-lived. The transfer of the industrial chain and the reconstruction of the supply chain cannot be achieved overnight. Just like China's status as the world's factory, it will not be achieved in a year or two. It requires the efforts of hundreds of millions of industrial workers and entrepreneurs for decades. Therefore, if China, a huge economy, turns around, even if Southeast Asia, India and other countries get a short-term prosperity due to the relocation of orders from China, it may not help on the whole, not to mention that Russia, another emerging country, is currently mired in war. Our pessimistic finding is that some of the damage caused by the epidemic to China may be long-term, such as the collapse of the birth rate and population growth rate, the instability of social expectations for the market economy, and the sharp reduction of confidence in private enterprises. Obviously, if China's economy was the new engine of world economic growth in the past, it is likely to have a negative effect in the next few years - factor dividends will turn into factor liabilities, and the world needs to pay for it. 

We make such a pessimistic judgment, of course, not only on the basis of the above phenomenon, but also on the basis of deeper changes - international conflicts, wars, and the huge debt foam. In other words, the global economy stands at the top of the superposition of international political conflicts or war cycles, and the global super currency or debt cycles. The direct consequence of international political, ideological and military conflicts is de globalization. At present, it is exactly "de Sinicization" and "de russiazation" (here, let's put aside political and ideological rights and wrongs for the time being, and just talk about the consequences of doing so). The "de Chinalization" of the world is bringing global economic growth into a new paradigm. The supply chain system that has relied on China's low labor costs or demographic dividends in the past three decades and the new demand or market dividends that have relied on China's huge consumer market in the past decade are becoming a thing of the past. Western countries hope to get rid of their dependence on China's supply chain system through automated technology, and seek industrial space that is more in line with their geopolitical strategies, such as transferring to Southeast Asia and India, but the difficulty of this transformation is greatly underestimated, because the manufacturing industry chain is an ecosystem, and the most needed variable for ecological evolution is time. Moreover, there is no such huge capacity and market as China in other regions, which will inevitably still lead to supply shortages and structural surpluses. The outcome of de Russification is the same. Looking at the status of Russia's energy exports in the world (Russia exported 289 million tons of crude oil in 2021, ranking second in the world; exported 238 billion cubic meters of natural gas, ranking first in the world), and Europe's high dependence on Russia, we know how high the cost of de Russification will bring to the global supply system, Even if the energy supply of the United States can be gradually replaced, the rising replacement cost in the short term will also hit the global supply system. This can be seen from the rapid recovery of the ruble exchange rate and the improved financial situation of Russia during the war. More seriously, if Europe's energy needs just changed from relying on Russia to relying on the United States, who knows what new international political consequences will be brought to Europe and the euro in the future?Obviously, European countries, especially continental countries, should be well aware that they have lost their voice in the current situation of moral kidnapping and group justice in the Russian Ukrainian conflict. 

Conflicts at the international political level will make the recovery of this economic recession hopeless in the short term, and even exacerbate the economic recession. If the global environment changes from the past "peace and development as the first theme" to deeper national security anxiety and actions taken to safeguard this sense of security that may have been an anxiety illusion, the policy objectives of economic growth of all countries will lose importance, or they will serve other more important goals, such as war, In this case, the economic recession will only be more serious. Because countries in the circle of civilizations will establish a higher-level mission to protect the interests of their people under the call of politicians in various countries. In such a bad international political environment, peace will become an extravagant hope, not to mention sustained economic growth. Even if the economy enters recession, countries will also change from working together to get out of difficulties through cooperation in the past to throwing pots at each other and shifting contradictions, creating more serious conflicts that are not conducive to economic recovery. 

The second deep-seated basis for judging that the world is about to enter the super recession cycle is that the super debt or currency cycle of 100 years has been at the top of the danger. Since the subprime mortgage crisis in the United States, the precedent of large-scale monetary lending has reached its peak after the epidemic crisis. The balance sheet of the Federal Reserve has soared nearly three times in more than a year!It led to a flood of global debt and currency, triggered a super asset foam in which everything soared under the condition of limited supply system, and then quickly transmitted to the commodity and consumer goods markets, resulting in great inflation for nearly half a century. Unlike before, under the influence of conflicts and wars among big countries in the global supply chain system, high inflation has not brought sustained profits and economic recovery. Although there is a huge job gap in the United States, lower and lower willingness to work can only bring higher output gap and price rise. This is undoubtedly an inflation spiral and stagflation. In this case, the Federal Reserve is in an extremely difficult dilemma: on the one hand, to control inflation, it has to raise interest rates and shrink its table; On the other hand, to prevent recession and the bursting of asset foam, we have to continue to maintain huge debt and currency. This dilemma almost brought the helicopter style quantitative easing of the past decade to an end. 

The plight of the Federal Reserve is also the plight of governments and central banks around the world. I don't know since when, the government has been used to buying economic recovery through cheap money printing. "The central bank's money printing machine has become the core engine of global economic growth in the post crisis era". MMT has also entered the house from heresy and become the theoretical standard of central bank science. However, today, the currency omnipotence theory of the money printer is gradually being falsified, and the real economic growth cannot be printed out of thin air. When people begin to feel the pain caused by inflation, the iceberg of debt also begins to melt (debt deflation), and the currency illusion will enter the "wake up time". When the global debt cycle begins to fall after reaching the peak of a century, who can expect to pull the economy back to the track of recovery by printing money?An era is coming to an end. When it comes to the end, money will not only be unable to redeem the economic recovery, but may also pay for the illusory growth of the past. Because continuous high inflation will plunge the willful national legal currency into a serious "legitimacy crisis". 

The general aging of the population and the worsening polarization between the rich and the poor have been chronic diseases of global economic growth. Today, with the accelerated fermentation of the epidemic crisis, they will also become the catalyst for the super recession cycle. Even in a country like the United States that maintains employment vitality through an open immigration policy, the labor market is also facing the dilemma of lying flat and Buddhism, not to mention Japan and Europe, where absolute population growth is shrinking. China's aging population has entered an accelerated stage, and its drag on global economic growth must not be underestimated. What is more serious is the polarization between the rich and the poor and the increasingly solidified interest structure, which will seriously inhibit the enthusiasm of young people for employment, innovation and consumption. What is particularly serious is that people's doubts and worries about the market economy, private capital and enterprises will greatly strangle the economic mobilization ability of the world's most populous country. Once the dual role of human being as a factor of production and the main body of demand loses vitality at the same time, modern economic growth will lose the most fundamental micro foundation. There is nothing more sad than the death of heart, not to mention the death of heart of young people, which is undoubtedly another kind of "aging". In this case, it will be natural for the world to slide into an unprecedented super recession cycle. During this period, every crisis relief policy of governments was just a recession relay and temporary resistance, but it could not resist the fate of cycles and major crises until a real new cycle was born. This new cycle is likely to be no longer the Kant radyev cycle at the technical level, but the Coase North cycle at the institutional level, or a universal value awakening cycle dominated by Chinese people. 

Transferred from: Professor Zhao Jian of Heqiao finance and Economics