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Global economy threatened with overdose of free money

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The greenback is not going down and most importantly, US interest rates are falling. STR / AFP

During the G20 that followed the great crisis of 2008, it was fashionable to mock these peaks that did not produce much. Pascal Lamy, then Director-General of the WTO, had then deceived us: the important thing in this kind of meeting is not the decisions that the we take, but the individual errors that we hurry. Like evaluating its own currency, increasing its customs duties, lowering interest rates alone, and entering a suicidal spiral worthy of the 1930s. This is the era when the plan had succeeded in cooperating and even making decisions (fight against tax havens, despite the anti-sarkozys, concerted budget stimulus, coordination of central banks, China's choice to finance the United States, etc.).

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Run the billboard

A decade later, these times seem to be a blessing as the planet launches into one for itself and reaches uncooperative and suboptimal equilibria: capitulating to Donald Trump, the Fed has lowered its interest rates to boost inflation and bring down the dollar. It was falsely forgetting that the rest of the world was not static. The rest of the world reacts by lowering the rent of the money: Wednesday, August 7, it is India, New Zealand and Thailand that lowered their key rates. Soon will come Europe, which will deepen the adventure of negative rates and run the billboard, as already announced the president of the ECB Mario Draghi while black news is accumulating: German industrial production fell by 1.5% in June, pointing to a possible recession in Europe, while the absence of an agreement on Brexit on 31st October is catastrophic.

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Finally, faced with the tariffs imposed by Trump, China reacted by letting slip its currency. Is it voluntary, as Donald Trump thinks, accusing Beijing of being a "currency manipulator" or a welcome market adjustment, when China is experiencing a severe slowdown? It does not really matter: the measure partly erases the ever-increasing customs duties imposed by Donald Trump and, above all, makes investors panicky all over the planet who fear a widespread recession provoked. e by the economic war: direction, the dollar currency refuge par excellence.

US interest rates plummet

Result, the greenback does not decline and most importantly, US interest rates collapse. It does not matter the low pay as long as you are safe. The 10-year US Treasuries 10-year yield fell sharply below 1.6% on Wednesday (down from 3.26 in the fall of 2018). Result, Donald Trump enrage, he who demanded a new rate cut on Wednesday.  € œOur problem isnâ € ™ t Chinaâ € | Our problem is the Federal Reserve, too proud to admit that it has made a mistake. They must lower their rates more sharply and faster ", demands Donald Trump who accuses the institution of "incompetent  © tence".