Various United Nations agencies (UNCTAD, IMF, World Bank) are unanimously forecasting a global economic recession and big problems for emerging and developing countries.

It is certainly true that the unfolding cyclical contraction in the United States and in the European Union could set back economic development in Africa and Latin America. Chronic difficulties with poverty and high unemployment on those continents will be further aggravated by U.S. and E.U. trade limitations affecting global supplies of energy, food and fertilizers. Parts of Global South will also experience growing political instabilities as they get sideswept by violent proxy and hybrid clashes for dominance of the new world order.

That is a big tragedy. And that’s something the U.N. agencies should not be glossing over in their widely publicized discussions of “global” recession.

The “global” recession they are talking about is a self-inflicted political, economic and social calamity affecting the U.S. and the E.U. -- areas accounting for 31% of global GDP and for slightly less than 10% of world population.

Indeed, with two consecutive quarters of negative (quarterly) economic growth, the U.S. is already in what is euphemistically called “only a technical recession” -- although that is a widely accepted definition of a business cycle contraction characterized by a significant, widespread and prolonged decline of economic activity.

U.S. and E.U. recessions are inevitable

We are now at the beginning of that process where the only instrument to stop, and reverse, accelerating inflation are rising interest rates.

To get an idea of America’s current cyclical position, keep in mind that the U.S. policy interest rate now is 3.3%, while the consumer price inflation last month stood at 8.3%.

That gives a negative real policy interest rate of -5% -- representing the Federal Reserve’s hugely expansionary monetary stance.

The U.S., therefore, has a long way to go to return to positive real policy interest rates that could reinstate price stability by bringing inflation down to 2%.

But the way to get there is not only long. It is also very painful because jobs and incomes will be lost in an economy where 100 million of Americans are out of the labor force, i.e., virtually unemployable. In spite of that, rising credit costs must depress aggregate demand that exceeds available supplies in labor and product markets.

That’s called a growth recession of ex ante unknowable amplitude and duration. In plain English: nobody knows how bad and how long that cyclical downturn will be.

But there is something the U.S. and the E.U. could do to reduce the pain in terms of job losses and rising poverty rates. That miraculous “something” is called energy and food prices. If they sufficiently increased those supplies, they could relatively quickly slash their respective inflation rates by 2 (U.S.) and 4 (E.U.) percentage points.

East Asia’s sound economic policies

Normally, the U.S. should be in a much better position to do that. Being the world’s largest producer of natural gas and petroleum, the U.S. could easily cut energy prices by releasing additional supplies from reserve holdings.

The problem apparently is that the U.S. oil reserves are at their lowest level since 1984. Washington also could not get OPEC Plus to raise their output. The cartel refused to cooperate and reduced its supplies by 2 million barrels per day. 

What’s left is Iran and Venezuela – where dialog is precluded by hostile relationships.

A recession bound E.U. is in an even more precarious position. The Europeans have shut themselves out of their large and cheap energy and food supplies with a total economic and political war with Russia. As a result, their energy and unprocessed food prices were rising last month at respective annual rates of 40.8% and 12.7%.

So, the U.S. and the E.U. now only have rising interest rates, and a preordained economic recession, to fight soaring inflation rates created by extraordinarily loose monetary and fiscal policies, and a wide range of unwise and capriciously hostile trade limitations imposed on their main energy and food suppliers.

East Asia is a totally different story. In spite of Japan’s illogically unfriendly view of China, major east Asian nations want peace and economic development. Their generally sound economic fundamentals offer enough space for supporting domestic demand, and their world’s largest free trade area allows additional growth stimuli from booming trades in goods and services. Most importantly, all those countries – the sluggish Japan included – are expected to have positive economic growth this year and next.

And we are talking here about an area accounting for 53% of global GDP and for nearly half of world population.

Don’t be surprised, therefore, if, following Indian diplomats, you hear other Asians bristling about a biased “Eurocentric world view.” That, in fact, is quite possible in the run-up to next month’s G20 meeting on Indonesia’s enchanting island of Bali.