Global "Polycrisis" Economic Complexity Persists

The current global economic situation is marked by a complex "polycrisis," characterized by a series of interconnected and interdependent crises. Europe finds itself at the center of various events, such as the war in Ukraine, inflation, and the consequences of the pandemic, while an American version of the polycrisis is also in the making. This intricate situation presents significant economic challenges that require in-depth analysis and appropriate interventions.

The banking crisis in the United States is not yet over. Major banks have adopted a more cautious approach, while regional banks have increased their lending. Tightening lending conditions and the debate over the U.S. debt ceiling are escalating risks, including the possibility of a default on Treasury bonds. This situation raises concerns about the stability of the U.S. financial system and its potential repercussions on a global scale.

Financial Crisis in the United States

The American crisis originates from artificially low interest rates that persisted for several years. On one hand, these low rates enabled Americans to secure mortgages at extremely low rates. On the other hand, in a scenario where interest rates would rise, as is the case with actions taken by the Fed, these loans would have eroded the value of collateral for banks. The SVK case is a relevant example.

European Economic Moderation

In Europe, the eurozone's growth is moderate, with stagnation in private consumption and industrial production. Despite this, the European Central Bank is considering raising its rates, but this decision could be questioned given weak growth prospects and ongoing events in the United States. The European economic situation remains fragile, with persistent challenges such as inflation and debt management.

The brief contagion effect between SVK and Credit Suisse once again reveals the interdependence between different financial institutions across the Atlantic, which could influence European Central Bank economic policy decisions

China's Rebound and Persistent Challenges

China is rebounding, but with persistent challenges. The situation in China shows signs of rebound due to significant domestic tourism, but exports remain weak and could be impacted by global economic slowdown. China faces complex challenges such as trade tensions and internal economic imbalances, which could influence global financial stability.

It is therefore strategic to keep an eye on the launch of CBDCs by the People's Bank of China and the strong interest of European banks like BNP Paribas.

Interdependence and Contagion Effects

Exchange rate instability and associated risks. Exchange rates are subject to instability and risks. The U.S. dollar has stabilized after a period of decline, but banking tensions in the U.S. could lead to larger reductions from the Federal Reserve, which could support EUR/USD in the long term. Exchange rate fluctuations can have a significant impact on international trade and capital flows, thereby creating additional challenges for global economic stability.

Macroeconomic analysis and intervention

In the face of this persistent economic complexity, it is crucial to integrate collateral assessment and risk management into the DSGE (Dynamic Stochastic General Equilibrium) model to better understand the interactions between banks, borrowers, and investment decisions. This model can incorporate components related to secured loans, such as borrowers' decisions regarding secured loan demand (Lt) and banks' collateral valuation (Vt). These elements allow for the consideration of risk assessment and the impact of collateral on business investment decisions.

These multiple economic crises persist with complex challenges in different countries and regions. Banks, interest rates, and growth prospects remain major areas of concern. By integrating collateral assessment and risk management into macroeconomic models, it is possible to gain a better understanding of economic interactions and develop appropriate interventions.

Therefore, it is essential to closely monitor the evolution of the global economic situation, identify risk factors, and implement tailored measures to promote financial stability and support long-term economic growth. International cooperation and coordination of economic policies are also crucial to address this complex situation, in order to mitigate its negative impacts on the global economy.