Technology can power a global economy to produce more at a lower cost. So is it really recession we are talking of?
There is a cloud on world economies. None of them seem to be doing exceptionally well, and most are in a slowdown. But what this really means is that the financial markets are facing an inverted yield curve. From a financial perspective, it indicates an impending recession. This is deduced from historical precedence, since the recession of 1950, which was preceded by an inverted yield curve.
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While past indicators may not always be accurate for the future as well, it is certainly time to ascertain whether this phenomenon is actually different from earlier instances – and in reality, if the technology is playing a decisive role in this change. It is also prudent to understand if this role has been largely underappreciated!
While technologists are rarely economists, there is a line of thought that makes one wonder. What if the suppression of interest is not an outcome of expectations of hostilities in the face of US-China trade standoff? What if the interest rates are actually plunging because technology has decreased prices by lowering the costs of manufacturing? Many products are thus becoming cheaper. If tech lead practices and processes are pushing down costs of all products, maybe the expenditure for buying those products (without any government intervention in pricing policy- so at the normal market adjustments rate) is coming down too. This means less inflation, but not actually slowing down of the economy. People spend less not because they can afford less, but because the same product now costs less.
In essence, is technology actually ‘optimizing’ economic activity? With no precedence of this kind of phenomenon, maybe we are not heading for a recession, but merely an optimal level of financial growth?