20180803-NATIXIS-Increased_interdependence_between_countries_has_made_the_world_more_fragile_6页_667kb

Flash Economics Summary

Core Content

The document titled "Flash Economics" discusses the increasing interdependence between countries and its implications for the global economy's fragility. It highlights three key areas of interdependence: financial, production, and export-driven growth models. These interdependencies have become more pronounced over time and make the global economy vulnerable to disruptions.

Main Points

1. Increased Interdependence Between Countries

• Countries have become more interdependent in finance, real economy, and growth models.
• Financial interdependence is driven by the cross-ownership of assets and debt between nations.
• Production interdependence arises from the segmentation of value chains, with production processes split across countries.
• Export-dependent growth models are common in countries like Germany, South Korea, Taiwan, and the Netherlands, where growth is heavily reliant on global trade.

2. Fragility of the Global Economy

• The current level of interdependence means that any disruption could have drastic effects on growth.
• Key risks include:
  • Capital mobility interruption: If lending countries stop holding bonds of borrowing countries, it could lead to massive asset sales and external debt reduction, resulting in recessions.
  • Protectionism: Tariffs on imports (e.g., U.S. steel taxes) disrupt value chains and reduce efficiency for domestic companies.
  • Shift in production: A trend towards local content and simplification of value chains is reducing the efficiency of export-dependent economies.

3. Cost of Reducing Interdependence

• Reducing interdependence through measures like protectionism or local production would come at a high cost to economic growth.
• The document concludes that global interdependence is costly to dismantle and that growth is likely to suffer from such actions.

Key Information

• Charts: The document references several charts (1A to F, 2, 3, 4A and B, 5, 6) that illustrate the data on interdependence, trade, and economic impacts.
• Examples:
  • The peripheral euro-zone countries experienced domestic demand declines when capital mobility was disrupted.
  • The U.S. steel tariffs in 2002 and 2018 had a negative impact on steel-consuming industries.
• Disclaimer:
  • The document is intended for professionals and qualified investors.
  • It is confidential and not a personalized investment recommendation.
  • No liability is accepted for the information provided, and it does not constitute a financial analysis.

Conclusion

The global economy is highly interconnected, and this interdependence has become a double-edged sword. While it has enabled growth and efficiency, it also makes the system fragile. Disruptions in any of the three key areas—finance, production, and export growth—could lead to significant economic consequences, particularly for export-dependent economies. Therefore, the cost of reducing interdependence is high, and maintaining global integration is crucial for sustained economic growth.

Regulatory Information

• The document is regulated and authorized in various jurisdictions, including France, Germany, Spain, Italy, Dubai, Canada, Australia, and Hong Kong.
• It is not intended for retail investors and is subject to regulatory restrictions in certain regions.
• Natixis is a supervised entity by the European Central Bank (ECB) and other financial regulators in different countries.