New global shocks

Global economists are warning that once-rare economic shocks may become more frequent, Axios Macro co-author Courtenay Brown writes.

• That was the worrisome undercurrent of conversations among attendees at this week’s meeting — where some of the world’s richest and most powerful people returned in droves for the first full-fledged Davos since 2020.
• Conference organizers dubbed this era the “turbulent twenties.”

Why it matters: As the world continues to grapple with fallout from the pandemic shock and Russia’s invasion of Ukraine, the global economy suddenly is facing massive new disruptions.

Here are some of the top risks discussed this week:

1. The cheap money that defined the last decade could remain permanently in the rearview.

• Central banks plan to raise interest rates to steep levels — and hold them there for an unknown period — to contain still-high inflation, which has created a crushing cost-of-living crisis around the world.

2. How nations should approach the green energy transition— and whether some policies are a pathway to protectionism — is the subject of new, heated debates.

• President Biden’s Inflation Reduction Act — praised by many CEOs in Davos for its incentives to speed the U.S. energy transition — is prompting concern among European allies who fear it’ll drain investment that would otherwise have gone to them.

3. Huge demographic shifts are among the reasons pandemic-era worker shortagesare expected to be the new normal.

• That’s why some CEOs at Davos say (for now) they plan to hang on to workers — even as they expect to slash costs elsewhere to adjust to a slowing global economy. That sets up what could be vastly different labor market outcomes around the world.
• One outlier is the battered tech sector. Microsoft this week announced it would lay off 10,000 employees— the same day CEO Satya Nadella took the stage in Davos.

4. Artificial intelligence is evolving much more quicklythan many — including some in the Davos crowd — anticipated.

• Conversations at cocktail parties and nightcaps were peppered with speculation about how AI will shake up our lives.

Reality check: Given all these risks, the mood among executives — inside the main conference hall and along the icy pathways — was more upbeat and optimistic than you might expect.

Read the full story.

Πηγή: axios.com