If it weren’t for the multitude of events flooding mainstream news agencies, Brazil’s rainforest fires would consistently occupy front and center stage. Worse yet, the news doesn’t seem to bother westerners and those removed from the region. Ecological disasters tend not to strike us deeply as say financial disasters.
But in this increasingly interlinked global economy, nothing occurs in a vacuum. Yes, Brazil’s rainforest fires primarily represent ecological and environmental hazards. However, if an effective and immediate solution for this raging inferno is not found, it could impart economic consequences.
During the G7 summit during this past weekend, French President Emmanuel Macron accused Brazilian President Jair Bolsonaro of instigating matters. Pointedly, Macron stated that Bolsonaro was lying about his commitment to fighting climate change. Further, Macron implied that his Brazilian counterpart wasn’t doing enough to stop the rainforest fires.
But in that heated exchange, Macron dropped a bombshell: he threatened to axe a significant trade deal between Europe and South America. According to The New York Times, this deal was years in the making.
I don’t think this is just the usual bluster from politicians. Macron and other international leaders have increasingly found themselves at odds with the Trump administration and conservative ideologies. And as a right-wing leader, Bolsonaro should not expect much favors from the French.
Rainforest Fires a Metaphor for the Global Fiat Economy
If this trade deal is scuttered, I would seriously consider extremely defensive actions. Worryingly, Germany has already admitted that they’re teetering toward a recession. Nothing but a miracle can rectify this circumstance.
Therefore, a disruption in any European deal involving a critical trading partner would tighten the noose. As Germany is Europe’s biggest economy – it ranks fourth in GDP overall behind the U.S., China, and Japan – a negative impact there could quickly cause a ripple effect.
And under this context, the war of words between Macron and Bolsonaro is disconcerting.
At the same time, the Brazilian fires represent a metaphor of the global fiat economy. For decades, we have collectively built empires out of paper promises. Now, those promises are burning away before our very eyes.
And just like the unraveling of the global economy, no one seems to have a viable solution for the inferno. At this point, the macro headwinds are coming to roost. The best we can do now is to prepare individually for the worst-case scenario.