Global Economic Crisis

Official data just released reveals that the United Kingdom has experienced its worst recession since quarterly economic output reports were first tabulated in1955. In Q2 of 2020 the UK’s GDP contracted by negative 20.4%. This rate of economic contraction was driven by enforced lockdowns of much of the British economy in the wake of Covid-19, which has stricken the nation  more than other European economies.

The calamitous Q2 economic data means that the UK is experiencing the worst degree of economic  collapse of any major developed economy. As bad as the economic news is, there is reason to believe it will get worse. Even the UK government admits that unemployment, already at record levels, will significantly increase in the months ahead. The government has warned of hundreds of thousands of additional jobs that will cease to exists as the coronavirus pandemic continues to paralyze the economy, leading to an unprecedented level of demand destruction.

The dire economic news from  the UK is reflective of what is transpiring throughout the world. Despite continued talk by many pundits and government officials in leading economies about the likely V-shaped recovery  of economic growth, based on  optimistic forecasts of early vaccine development and improved Covid-19 therapeutics, the hard data offers  increasing evidence of a Global Economic Crisis, in effect the Great Depression of the 21st century.

Ian Bremmer, the highly regarded political scientist, has predicted a global depression in his most recent column in TIME. “The Next Global Depression  Is Coming and Optimism Won’t Slow It Down,” read the morbidly-stated headline of his column. He bases his forecast on the global nature of the evolving economic crisis, and the severe impact of Covid-19 on economies that far surpasses what occurred during the Global Financial Crisis of 2007-09.

The column by Bremmer follows last week’s release of Q2 economic data in the United States, which revealed that quarterly GDP had contracted by a staggering 33%. Unemployment rates in not only the U.S. but in all major economies are at double digit rates, as Coronavirus induced lockdowns continue to destroy consumer and industrial demand.

Meanwhile, stock markets worldwide are soaring, including the Dow Jones, as delusional investors continue to believe in the phantom of a V-shaped recovery. However, a spike in Covid-19 infection rates following a temporary receding after the initial lockdowns, reveals that such optimistic thinking is totally illusory. The likelihood of a second wave of infection in the Fall, coinciding with a likely divisive presidential election in the United States, makes Ian Bremmer’s dire economic forecast  the most likely future trajectory for the global economy.