Trump leaves and an EU without Hungary: Saxo Bank presents its forecasts for 2020

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The victory of a Democratic president in the US presidential elections, the possible exit of Hungary from the EU and the launch of the so-called Asian drawing rights are just some of the forecasts that analysts at the Saxo Bank investment bank have regarding 2020 .

The famous investment bank Saxo Bank published its annual report entitled Outstanding Predictions 2020, in which it tried to predict the main trends in the global economy for next year.

USA

In the report, they say that Donald Trump was able to win the presidential elections in the United States because he had the support of a large part of the white and retired electorate. Now, this part of the population is decreasing, while the percentage of people between the ages of 20 and 40 grows. These individuals share more liberal approaches.

"Millennials and older people of the Z generation in the US have become intensely motivated by injustices and inequality, driven by the inflation of the asset market by central banks," said the analysts of the entity.

These problems add to fears about climate change, which will offer Democratic politicians a huge advantage over Trump, who denies implementing radical changes in his policy to follow the environmental agenda. As a result, a Democratic politician can win the presidential elections while the Democratic Party will consolidate its control in the House of Representatives and will almost control the Senate.

Trump's possible defeat will be observed in public opinion polls. The Trump Administration will have no choice but to resort to the so-called First American Tax (America First Tax), intended to rebuild the entire tax system of the United States to serve internal production.

Trump's efforts may also include the suspension of all existing taxes and the introduction of a fixed 25% value-added tax on all gross revenues that reach the US market from foreign production.
The reduction in the extraction of shale oil from the US and the increase in demand in Asia will coincide with a greater cut in crude oil production by OPEC members.
In these circumstances, the price of oil is expected to increase. At the same time, the US currency will run the risk of devaluing after the market understands that the Federal Reserve will keep its interest rates at a low level. This will cause unemployment to rise and economic growth to stagnate, while inflation will reach maximum levels not seen since the 1980s.

A new asset

The Asian Infrastructure Investment Bank (AIIB), based in Beijing and proposed by the Chinese Government, may launch a new reserve asset, the so-called Asian drawing rights or ADR, similar to the special drawing rights that in its day They were created by the International Monetary Fund.
The AIIB will put them into circulation with the objective of facing the growing commercial rivalry and other vulnerabilities caused by the US attempts to militarize its dollar and strengthen its control over global finances. Once launched, 1 ADR will be equivalent to 2 US dollars and will become the largest currency in the world, forecast at Saxo Bank.
This movement, aimed at de-dollarizing regional trade, will lead to Asian economies moving to trade with oil exporters, such as Russia and OPEC countries, only in ADR.

The European Union

After introducing negative interest rates for deposits in the Eurozone, the EU's objective was to boost investments in production that should theoretically strengthen economic growth. However, the sad reality was that negative interest rates contributed to the increase in exports due to depreciation and resulted in the weakening of the EU's financial and banking institutions.
Under these circumstances, at the beginning of January 2020, the new president of the European Central Bank, Christine Lagarde – who had previously supported negative rates – may declare that the current monetary policy has exceeded its limits. In particular, Lagarde will point out that its future maintenance could seriously damage the strength of the European banking sector.
In order to encourage EU governments and especially Germany to use their fiscal policy to stimulate their economies, the European Central Bank will increase its interest rates on January 23, 2020.

Hungary vs. Sweden, with different approaches to migration

Budapest has achieved impressive economic success since joining the EU in 2004. But this marriage now seems to have become problematic for both of them after Brussels initiated a legal proceeding against Hungary, based on Article 7 of the EU Treaty, with the objective of sanctioning him for restricting the activities of media, judges, academics and minorities.

In the European bloc they believe that these restrictions are contrary to the rule of law, weaken democracy and do not match their democratic values.

"A divorce is increasingly likely and we could see Hungary following in the footsteps of the United Kingdom and leaving the EU at the end of 2020," the bank analysts write.

The Hungarian authorities will justify this step with the country's need to protect themselves and their culture: for the most part against mass immigration.
Sweden will be an opposite example to Hungary in 2020. With its very low rates and the huge budget surplus, this country is better equipped than any other EU state to be able to rehabilitate its model and increase expenses in education, learning, social housing and Efforts undertaken to integrate migrants into Swedish society.

This fiscal expenditure will cause the euro to depreciate against the Swedish crown in 2020 and Sweden will again become a leader and a role model.



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