Days of our lives
Istarted my journalistic career in my early 20s, during the hot summer in 1991. In those days, the most significant issues in the economic landscape were connected to globalization: The fate of European Monetary Union (after the collapse of Sterling), the increasing pace of expansion in the EU, upcoming trade blocs such as NAFTA. But one thing remained constant in those days: the roller-coaster nature of the financial markets. Business magazines that I worked for wrote extensively about the markets and fortunes made and lost in a few months.
To put things in order, I’ll try to make a list of the crises that I re- member: 1991 EMU, 1994 Turkish economic crisis 1997-1998 Asian financial crisis, the 2000-2001 Turkish financial turmoil, the 2008 global economic crisis. In all those crises, the market’s underlying assumption was that the U.S. would try to be helpful during periods of extreme volatility. The market can no longer assume that, Shahab Jalinoos, head of global currency strategy at Credit Suisse, told the Wall Street Journal recently. Currency collapses can be extremely dangerous for emerging markets, mainly when they have borrowed heavily in major currencies and find it harder to repay those debts with depreciating local currencies.
During all those years, the attitude toward globalization and free markets was stable and it was unthinkable to talk about an alternative. Today, the fate of trade blocs, strategic alliances such as NATO, the European Union, surging populism in established democracies and the ‘special relationship’ between the UK and U.S. are all on the table. In short, the world may need to find a reset button to return to factory defaults. As Timothy Ash, from Bluebay Asset Management, clearly pointed out, the UK may undertake a mediator role to ease the escalation between Ankara and Washington. “The United Kingdom is the only country that still has the trust, somewhat, of the Turks. And hopefully some special relationship with the US,” he said in a note to clients.
Now back to square one. We come to an era of borders and tariffs, like it used to be centuries ago all around the world. Hopefully President Donald Trump will realize that globalisation was broadly in line with the U.S.’s self-interest. Arm-twisting style politics will not result in any good outcome for the U.S.