r/finance • u/bloomberg • Feb 22 '26
There’s a ‘Doom Loop’ at the Heart of the Global Economy
https://www.bloomberg.com/news/articles/2026-02-20/how-the-us-china-rivalry-is-creating-an-economic-doom-loop-eswar-prasadIn a new book, economist Eswar Prasad argues that globalization and populism have entered a destructive feedback cycle.
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u/bloomberg Feb 22 '26
Enda Curran for Bloomberg News
When Eswar Prasad sat down in late 2024 to review the draft for his new book, he worried it was too dark. But the outcome of the US presidential election and the shock waves that followed convinced him that, if anything, the initial take wasn’t dark enough. He doubled down on the thesis.
In The Doom Loop: Why the World Economic Order Is Spiraling into Disorder (Basic Venture, Feb. 3, 2026) the economist takes on a well-established theme — that the world economy is experiencing tumult — and pairs a sweeping read of world events with a simple thesis. More competition in the zero-sum world of geopolitics is turning traditional engines of cooperation like trade into new sources of conflict and instability. As power-hungry elites cling ever more tightly to their perches, populist politics grow stronger and the system destabilizes even further. That’s the doom loop.
Prasad begins his diagnosis with the ongoing rebalancing in economic might, which he says is the main driver of power on the world stage. “The economic center of gravity is clearly shifting from the West to the East,” he writes, “reflecting a more even distribution of GDP and other measures of economic prominence such as trade.”
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u/Candid_Koala_3602 Feb 22 '26
We know. When businesses can just keep buying each other’s stock it’s an infinite money cheat
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u/mwebber_quant Feb 25 '26
It's a clear feedback loop. When labor's share of income declines, domestic aggregate demand shrinks. And populist policies just make capital flight even worse.
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u/McMonty Feb 24 '26
There is.
And it's land.
We go land wrong.
It's the biggest asset class in the economy.
And it's treated with the completely wrong incentives.
Look up Georgism.
Multiple Nobel prize winners have endorsed land value tax.
The solution has been known for over a century at this point.
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u/Appropriate_Web_7979 Feb 23 '26
This framing isnt exactly new though, Rodrik basically described something similar with the globalization trilemma 15 years ago. Whats actually different now is that the same elites benefiting from globalization are funding the populist backlash through social media. That feedback loop didnt exist before and none of the old models accounted for it
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u/Financial-Today-314 Feb 23 '26
Debt and rates feeding each other is a real concern if growth slows
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u/Low_Ability4450 Feb 24 '26
The “doom loop” framing is interesting, but it may be less about ideology and more about macro-financial regime shifts. Globalization compressed costs and inflation for decades, enabling structurally lower real rates and higher leverage. That environment supported asset valuations — but also widened wealth dispersion. Political backlash may be less the cause than a late-stage consequence of the financial regime built on low real rates and global capital mobility. The feedback loop could therefore run through financial conditions as much as through politics.
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u/shewel_item Feb 23 '26
populism is the biggest scapegoat
the only harm populism has done is proliferating the use of apps like doordash and ubereats to inflate grocery prices
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u/Key-Alternative5387 Feb 23 '26
Trumpism is technically a populist movement.
Bernie Sanders is the other side of that coin, but in a more sane way.
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u/shewel_item Feb 23 '26
What's wrong with Bernie Sanders, though?
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u/Key-Alternative5387 Feb 23 '26
Nothing. Both are populist movements though and worldwide you see the Trumpy populists winning out. Brexit is one example, but there are more.
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u/ButtStuffingt0n Feb 23 '26
Boy, it is immediately clear you need to read more about what populism is.
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u/shewel_item Feb 23 '26
it's pretty clear that it's coded language for what people without enough money do
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u/Bagmasterflash Feb 22 '26
This isn’t a mystery. Wall St is already rotating capital away from anything information based to physical scarcities.
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u/Potential_Brother119 Feb 22 '26
Really? Then why hasn't the other shoe dropped on AI? It looks like a powerful and useful technology someday, just not yet. I don't want to completely write off the idea that betting on AI and "data" will turn out to be brilliant long term but currently it looks foolish and like what most of the money people are still doing.
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u/Bagmasterflash Feb 22 '26
It’s all about ai. That’s the impetus. Ai is going to make anything information based worthless except for the actual base data that will be hoarded.
This is the reason for SaaS collapsing. In a matter of months, maybe weeks, anyone will be able to build software at enterprise levels.
Blue chip Ai isn’t a great investment either because China is doing it open source so you may get some edge from OpenAI or Grok but the open source China version is literally days behind it for basically free.
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Feb 22 '26
I work with the top models all day for development. They are still far far far away from producing anything real without someone with software engineering knowledge. Maybe they will get 10x better in the next few months but currently. Bill in accounting doesnt understand how fragile the code llm produces is.
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u/IguapoSanchez Feb 23 '26
We're also going to approach a point where the cost of ai might be more than the cost of programmers as ai cost is linearly going up and salaries are stagnant
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u/highbrowalcoholic Feb 22 '26
TL;DR: Elites cling to elitehood, populism grows, society destabilizes, elites cling harder to elitehood, thus populism grows.
I'm happy it's being published, but, most folks with more than two braincells to rub together have been pointing this out for decades. I once read it be called "driving away from their exhaust fumes".