Dr. Bahaa Helmy Writes: Fears of a Global Financial Crisis

[I am] not one of those who enjoy frightening people or delving into economic matters that require special studies and expertise. However, the increasing use of terms such as the slowdown of the global economy, fear of the deterioration or collapse of the economy, economic tensions and the unprecedented economic wars waged by the United States of America — as the world's number one economic giant — whether against China, which ranks second in the world, or against other countries, is a matter that calls for attention and study to determine whether or not there are warning signs of a possible new global financial crisis as a result of the effects of these policies. The announcement by American President Trump that he believes the global trading system is deeply flawed and harms American companies operating in the markets is a clear and evident move to break the established rules and frameworks of world trade and to withdraw from international agreements without any controls, in order to shed the legal and moral obligations arising from them as long as they do not fit the strategy of (America First). This has led to the marginalization of the role of the World Trade Organization and other international organizations and banks linked to the global economy; these policies have also widened the scope of economic sanctions against various countries and companies, relying on harnessing the world's foremost economic, military and technological power to reap profits and harvests without any other considerations, by imposing taxes and duties on goods, even from countries of the European Union, the historic ally. As a result, signs of a global economic recession have appeared, owing to the tightening of credit in China, the turmoil in the industrial sector in Germany, especially the car industry, the decline in the American manufacturing sector, macroeconomic pressures in many countries and the deterioration of the bond market worldwide. Add to this the unclear situation of Britain's exit (Brexit) and its effect on the European economy and output, the escalating sanctions against Iran, and the cost of dealing with the effects of the natural disasters striking regions of the world as a result of climate and environmental change caused by pollution, and the dire consequences this entails for human life. The decline in global economic growth, especially that of the American economy, during the current year has alarmed the International Monetary Fund, which announced the possibility of tensions in trade policy together with major disruptions in global supply chains, leading to higher levels of private debt worldwide, the decline of the major currencies and an increase in borrowing relative to GDP, which increases poverty rates. We see in this the possibility of a growing likelihood of conflict between states over natural resources in border areas as one of the by-products of recession and its direct effect on people with limited incomes. It seems that the rise in American debt has reached a catastrophic level in recent years, exceeding 21 trillion dollars for the previous year according to US Treasury data, which has led experts to warn that global debt reaching 184 trillion dollars could cause a global economic catastrophe — and perhaps this is also a pressure factor on American policy. Treating the dollar as a commodity traded internationally gives the United States an enormous advantage and ability to print money without limit — but also without backing — which threatens that its collapse would be resounding if the slowdown of the American economy continues in this way, especially in light of China, Russia and others resorting to building up large gold reserves. These are the indicators for predicting the possibility of a global financial crisis, which decision-makers in Egypt keep before their eyes, adopting constructive policies based on using loans to establish giant productive investment projects that absorb the largest possible amount of labor to tackle unemployment and increase the volume of manufacturing and production, leading to an improvement in living standards in the medium term, while repaying the loans and their interest from the profits of these projects. The future is full of hope and prosperity thanks to these sincere national efforts. Escaping from poverty comes only through work and production, and achieving prosperity and sustainable development comes only through holding fast to values and principles, developing awareness and national feeling, social cohesion and preserving security and stability.