This article aims to demonstrate that the global economic and financial crisis tends to get worse with: 1) the escalation of the global debt that threatens to put the world capitalist system in check in the face of the possibility of the explosion of the public debt bubble in the United States and the China; 2) the drastic downturn of the economy in the United States, China and the European Union, which could enter into recession in 2023; and, 3) the possibility of two giant global banks, Credit Suisse and Deutsche Bank, going bankrupt because they are on the verge of collapse triggering a new global economic and financial crisis similar to the Great Recession of 2008 and the Depression of 1929. This article raises, also, the need for President Lula's government to adopt an economic policy that makes Brazil less dependent on foreign markets in terms of export markets, international capital and foreign technology and that, consequently, prioritizes the development of the internal market.

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WORLD TOWARDS A NEW IRREVERSIBLE GLOBAL ECONOMIC AND
FINANCIAL CRISIS AND BRAZIL
Fernando Alcoforado*
This article aims to demonstrate that the global economic and financial crisis tends to get
worse with: 1) the escalation of the global debt that threatens to put the world capitalist
system in check in the face of the possibility of the explosion of the public debt bubble in
the United States and the China; 2) the drastic downturn of the economy in the United
States, China and the European Union, which could enter into recession in 2023; and, 3)
the possibility of two giant global banks, Credit Suisse and Deutsche Bank, going
bankrupt because they are on the verge of collapse triggering a new global economic and
financial crisis similar to the Great Recession of 2008 and the Depression of 1929. This
article raises, also, the need for President Lula's government to adopt an economic policy
that makes Brazil less dependent on foreign markets in terms of export markets,
international capital and foreign technology and that, consequently, prioritizes the
development of the internal market.
The global debt crisis results from the fact that the world has, in 2022, a record US$305
trillion in unpayable government, corporate and household debt, more than three times
the Global Gross Product (US$96.1 trillion). Figure 1 shows the evolution of global debt
from 2013 to 2020. Figure 2 shows the share of countries in global debt in 2020. The
United States and China are the largest debtors on the planet, accounting for 40% of the
total debt. Figure 3 presents in detail how the increasing debts of households, non-
financial companies, governments and the financial sector are distributed in the formation
of global debt from 2003 to 2018. All these debts show increasing amounts over time.
Figure 1- Global debt from 2013 to 2020
Source: https://www.intellinews.com/attack-of-the-debt-tsunami-global-debt-soars-to-a-new-all-time-
high-196972/

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Figure 2- Participation of countries in global debt (%)
Source: https://coinzodiac.com/get-rich-in-market-crash/how-much-world-debt/
Figure 3- Global debt from 2003 to 2018
Source: https://www.ecodebate.com.br/2018/08/03/a-divida-global-atinge-usdollar-247-trilhoes-uma-
bomba-prestes-a-explodir-artigo-de-jose-eustaquio-diniz-alves/

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There is the possibility of an explosion of the public debt bubble in the United States,
which corresponded to US$ 30.01 trillion, a value higher than the country's GDP (US$
23 trillion) in 2021, a historic record, which could reach 140% of the GDP by 2024. Total
state and consumer/household corporate debt has been rising and state and local
governments are nearly bankrupt. The US government spends and buys beyond its
capacity by issuing dollars and Treasury bills. The risk of major catastrophes has not
disappeared, but has spread over time, at the price of increasing in proportion and
exploding when it does. It should be noted that the public debt of the United States is
strongly related to military spending. This monstrous debt is unpayable.
In turn, China's global government, corporate and household debt reached 285% of its
Gross Domestic Product (GDP) in 2020. This debt approached 310% of its GDP in 2021,
one of the highest levels of indebtedness among emerging economies, which is an
unsustainable rate for their economy. The global financial crisis has forced China into
debt. China's global debt is largely unsustainable if it continues to manage its economy at
these debt levels in the future. United States and China are the main drivers for the
increase in global debt. Both accounted for nearly 40% of global debt in 2020. The world's
largest economies are therefore giants with feet of clay. Like the United States, China and
the vast majority of countries in the world have debts that far exceed their respective
GDPs.
The world is currently heading towards a more severe crisis than the one recorded in 2008
with a similar magnitude or worse than the 1929 depression. The countries' debt is so
large that interest rates need to be artificially negative, otherwise debt service would be
very burdensome for governments. Even with negative interest rates, or close to zero, this
debt has a very high probability of never being paid off. If interest rates become positive,
there will be no way to pay them. It is a bubble about to burst. This situation is not
sustainable in the medium and long term. The current crisis in the world economy is an
indicator that all this dynamic is coming to an end.
All over the world, governments have little room for fiscal maneuver to overcome the
economic and financial crisis they are facing due to the current situation of the public
debt, given that a large part of their budgets are destined to the payment of the public
debt. In Brazil, for example, almost 40% of the government's budget is used to pay interest
and amortize the public debt. Due to the absence of these traditional Keynesian stabilizers
(increased public spending, tax cuts and interest rate cuts), the ongoing recession in most
indebted countries tends to get worse than on previous occasions. There are several signs
pointing to a prolonged economic downturn. The world's financial markets are predicting
what appears to be the “Armageddon" of the global recession. What can be done to reduce
global debt levels?
Promote the economic growth of countries would be the main strategy to reduce debt,
which is difficult to implement in an environment of global recession. Economic growth
would be the main strategy to reduce the debt. The improvement in economic activity
should happen with the proactive role of governments in carrying out investments,
especially in infrastructure in each of the indebted countries, which is quite difficult to
occur under current conditions because almost all countries adopt the neoliberal model of
non-intervention of the government in the economy. Another basic recipe is for the
government not to spend more than it collects in taxes, which is difficult to do in the
current conditions of increased social demands in all countries of the world. If
governments reduced their spending and deficits, there would be less need to issue
government bonds that generate new debt. It is very difficult to put this type of solution

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into practice for the debt problem in view of the populations' growing social demands.
Budgetary balance is considered crucial in order not to increase the debt.
Another important measure to reduce the amount of debt would be to generate inflation.
Most loans would be made on nominal terms. Therefore, an increase in prices would help
reduce debt. In this case, however, there are several problems. A runaway escalation in
prices could force interest rate hikes faster than desirable. Higher inflation would only be
useful if it resulted from an increase in wages, which is difficult to happen today. If that
were the case, there would be greater demand and both nominal GDP and tax revenue
would grow. All these measures for the solution of the global debt crisis are, however,
palliative.
The real solutions to problems related to the global debt crisis would be difficult to
implement because governments would have to implement the following measures all
over the world: 1) cancellation of a good part of the sovereign debt, considered
illegitimate, as well as a good part of the debt domestic; 2) establishment of a stable
international financial system not subordinated to finance capital; 3) adoption of correct
taxation for finance and capital income; 4) re-establishment of true public control of the
credit system; 5) carrying out strict control of capital flows; 6) the end of tax havens; and,
7) constitution of a world government aiming at economic and financial ordering and
stability at world level.
The World Bank says that the global economy could enter a recession in 2023 in the face
of the drastic retraction of the economy in the United States, China and the European
Union. In a new study, the World Bank warns of the risk of a global recession in 2023
that could cause lasting damage, not only to core capitalist countries, but also to peripheral
and semi-peripheral capitalist countries, and that the global economy will suffer the most
pronounced slowdown since the 1970s. In 2022, central banks across the globe are raising
interest rates in unheard of synchrony in the last five decades in order to respond to rising
inflation, which was driven by the Covid-19 pandemic and the war of Russia against
Ukraine, especially in the energy and food sectors. Interest rate increases could push the
global inflation rate to reach 5% in 2023, nearly double the five-year average before the
pandemic.
The economy is heading towards a stormy environment around the world. To reduce
global inflation to a rate corresponding to their targets, banks have to raise interest rates,
aggravating the process of recession. Countries will have to adopt restrictive fiscal
policies in 2023, which should reach a level greater than that registered since the
beginning of the 1990s. The drop in global economic growth tends to worsen the levels
of poverty, hunger, cost of living and food insecurity and energetic. Governments will
have to establish public policies and adopt workable plans to provide targeted help to
vulnerable families, bring the unemployed back into the labor market, increase the global
supply of basic commodities, reduce and strengthen global trade networks in order to
resume economic growth worldwide.
To make worse the serious situation represented by the possible explosion of the global
debt and the deep recession of the world economy, two giant global banks, like Credit
Suisse and Deutsche Bank are on the verge of collapse that could trigger a new economic
and financial crisis similar to the Great Recession of 2008 and the Depression of 1929.
As for Credit Suisse, the second largest bank in Switzerland and one of the largest in the
world, its share price has dropped by around 75% since February 2021, which could have
more disastrous consequences than the bankruptcy of Lehman Brothers that triggered the

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Great Recession worldwide of 2008. Credit Suisse posted losses of around four billion
Swiss francs in the last three quarters. Deutsche Bank, Germany's biggest bank, is going
through its biggest crisis in 149 years. In 2021, Deutsche Bank had a drop of 35.37% of
its shares traded on the New York Stock Exchange and runs the risk of "breaking", too.
Deutsche Bank belongs to the top echelon of G-SIBs (global systemically important
banks), according to the Financial Stability Board (FSB). In 2018, Deutsche Bank was
second only to JP Morgan Chase. The ruin of this bank could cause a real “domino effect”,
ruining first Deutsche Bank, then Germany, and consecutively the European Union with
the bankruptcy of Italy, France and Spain (because their main banks are linked to
Deutsche Bank). As both banks are “too big to fail”, the Swiss and German governments
will save them from bankruptcy, probably by paying their bailouts, respectively, with
Swiss and German taxpayer money, while distribute bonuses to their shareholders and
members of their board of directors.
This catastrophic scenario for the global economy should serve as a warning for the future
Lula government from Brazil to adopt an economic policy that makes Brazil less
dependent on foreign markets in terms of export markets, international capital and foreign
technology and that, consequently, prioritizes the development of the internal market.
This would be the smartest decision to be implemented in the current situation pelo
governo Lula because it would be harmful for Brazil to strongly link the Brazilian
economy to the global economy as has been happening since 1990. For Brazil not to suffer
the consequences of the global debt explosion, not to be contaminated by the world
recession and not to be impacted by the failure of two gigantic global banks, Credit Suisse
and Deutsche Bank, the Lula government should adopt the developmentalist national
economic model of selective opening of the Brazilian economy that would allow Brazil
to assume the course of its destiny, contrary to the neoliberal economic model that makes
the country's future dictated by market forces, all of which are committed to international
capital.
It can be concluded, based on the above, that the global economic and financial crisis is
irreversible, which is why peripheral and semi-peripheral countries, such as Brazil, which
are heavily dependent on global markets for the export of their products and capital and
foreign technology, should adopt strategies of development that contribute to reducing
these dependencies in order to minimize the impact of the global crisis on their
economies. The future Brazilian government of President Lula will have to promote
national development, seeking not only to overcome the economic recession that has
shaken the country since 2014, but also to provide Brazil with strategies that make the
irreversible global economic and financial crisis bring disastrous consequences for Brazil
from a political, economic and social point of view.
In order to gain governability, meet the social demands of the entire Brazilian population
and avoid the return to power of neo-fascism in Brazil, the Lula government will have to
promote the country's development with the reactivation of the Brazilian economy on
bases diametrically opposed to those that have prevailed in the past Brazil since 1990
when it adopted the neoliberal economic model that economically and socially devastated
the country. To reactivate the Brazilian economy as soon as possible aiming to overcome
the recession, the Lula government must carry out 7,000 public works that have stopped,
build a large number of new public works, with emphasis on economic infrastructure
(energy, transport and communications) and social infrastructure (education , health,
housing and basic sanitation), adopt the import substitution policy and use the idle

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capacity in the national industry to bring an immediate end to the existing unemployment
in Brazil.
In addition to reactivating the economy to eliminate unemployment, the Brazilian
government should encourage the development of the Social and Solidarity Economy,
which is an important alternative for the inclusion of workers in the labor market, giving
them a new opportunity to work in a new way. of production in which profit is no longer
the main objective, but the creation of jobs, and the development of the Creative
Economy, which is one of the most effective ways of generating new jobs linked to the
knowledge economy by stimulating work based on cultural traditions of each region and
credit to creative sectors of the economy such as Fashion, Art, Digital Media, Advertising,
Journalism, Photography and Architecture. To eliminate poverty in Brazil, the first action
to be implemented consists of eliminating unemployment with the strategies described
above, complemented by the adoption of the basic income transfer strategy or universal
minimum income for the poor population through the restructured Bolsa Família
program. There will be no social peace in Brazil if unemployment is not eliminated and
a basic income policy for the poor population is not adopted.
In order to eliminate inflation in Brazil, strategies must be adopted to eliminate demand
inflation and production cost inflation, which are present in the Brazilian economy.
Demand inflation results from the insufficiency of national production to supply domestic
demand and production cost inflation results from the vertiginous increase in the costs of
its components such as wages, raw materials, inputs and taxes. To eliminate demand
inflation, the Lula government should annually plan the national economy with the
participation of the productive sector so that national production has the capacity to meet
the internal demand for goods and services. The priority of national production is to meet
domestic demand. Only when there are production surpluses would they be exported. In
order to eliminate production cost inflation, the Brazilian government should monitor the
evolution of wages, raw materials and input prices, as well as federal, state and municipal
taxes, in order to adopt measures that contribute to prevent their growth with the adoption
of incentives to increase productivity.
To finance all the actions necessary for the execution of the Lula government's plan, it is
necessary to adopt two strategies; 1) suspend for a period of 4 years the payment of
interest and amortization of the internal public debt that corresponded to 39.8% of the
federal government budget in 2020 or renegotiate with its creditors in order to extend its
payment to reduce the costs with the payment of the public debt so that the government
has the necessary resources for the public investments necessary for the resumption of
development and the fight against unemployment and poverty; and, alternatively, 2) use
the international reserves of US$ 296.40 billion available in 2022, if necessary, to
complement the resources allocated to public investments aimed at reactivating the
economy and combating unemployment and poverty. Without the adoption of these
strategies, Brazil will not resume its development, will suffer the consequences of the
global economic and financial crisis and will inevitably be led to political, economic and
social ruin.
* Fernando Alcoforado, awarded the medal of Engineering Merit of the CONFEA / CREA System, member
of the Bahia Academy of Education, of the SBPC- Brazilian Society for the Progress of Science and of
IPB- Polytechnic Institute of Bahia, engineer and doctor in Territorial Planning and Regional Development
from the University of Barcelona, university professor and consultant in the areas of strategic planning,
business planning, regional planning, urban planning and energy systems, was Advisor to the Vice
President of Engineering and Technology at LIGHT S.A. Electric power distribution company from Rio de
Janeiro, Strategic Planning Coordinator of CEPED- Bahia Research and Development Center,

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Undersecretary of Energy of the State of Bahia, Secretary of Planning of Salvador, is the author of the
books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem
Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os
condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de
Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora
Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos
na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social
Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG,
Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica,
Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate
ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores
Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no
Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba,
2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV,
Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua
convergência (Associação Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o
mundo (Editora CRV, Curitiba, 2019), A humanidade ameaçada e as estratégias para sua sobrevivência
(Editora Dialética, São Paulo, 2021), A escalada da ciência e da tecnologia e sua contribuição ao progresso
e à sobrevivência da humanidade (Editora CRV, Curitiba, 2022) and a chapter in the book Flood Handbook
(CRC Press, Boca Raton, Florida, United States, 2022).