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05.04.2022 12:26 PM
End of globalization!

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The geopolitical situation is not weakening, but there are already serious consequences. According to some economists, this is the end of globalization. They said this because even if the conflict in Eastern Europe ends, there will be a relationship between current allies and adversaries that will not be easily reversed. Also, global commodity markets are in turmoil already because many countries seek to create their own domestic supply chains. The biggest impact is felt in the energy sector, particularly in Europe, as it seeks to cut its dependency on Russia regarding oil and gas supplies. But if Russia really slash its supplies, some economists say Europe, already teetering on the brink, could fall into a full-blown recession. Agriculture and non-ferrous metals have also been affected by the growing geopolitical tensions.

Many economists and market analysts also see a growing trend, where countries wary of the US, as well as its Western allies, begin to reduce their reliance on the US dollar. But USD accounts for about 60% of all world reserve assets right now, so it is likely that decades will pass before the US will lose its reserve currency status. This, though, will not stop governments and central banks from diversifying their assets now.

Not only are countries trying to isolate themselves through diversification, but it is likely that the development of domestic supply chains will lead to higher consumer prices.

Irina Yanina,
Analytical expert of InstaForex
© 2007-2025
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