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Posts Tagged ‘Covid-19’

Federal Reserve Chairman Jerome Powell Warns U.S. Economy May Contact By 30 Percent

May 18th, 2020 Comments off

In an interview with the CBS news magazine 60 Minutes, the Fed Chairman warned that the American economy could “easily” contract by 30 % in the current quarter. He also told the interviewer that the U.S. unemployment rate could peak at 25 %.Though the Fed chairman tried to put a positive spin on his message, using such rhetorical phrases as his “never bet against the American economy,” the reality Powell presented minus the spin was anything but rosy.

Even the Fed chairman’s prediction that economic growth would resume in the second half of 2020 was conditioned by developments on the health front, and that a full economic recovery required the development of an effective Covid-19 vaccine.

The Federal Reserve is clearly worried about a full-blown depression, a prospect that is increasingly likely. In fact, there is a growing consensus that a possible short-term recovery will be followed b y a sustained economic depression, transforming the global health crisis engendered by the coronavirus into the Global Economic Crisis of the 1920s.

 

Global Risk Expert Ian Bremmer States World Economic Crisis Has Reached Initial Stage of a Depression

May 12th, 2020 Comments off

Political scientist and noted global risk expert Ian Bremmer, who is president of the consultancy firm Eurasia Group, in a recent podcast indicated that in his view the world is now headed into a severe economic depression. He indicated in his podcast that while a uniform  formal definition  of an economic depression does not actually exist, the statistics of economic destruction emanating from the Covid-19 pandemic exceed the parameters of a recession.

Ian Bremmer pointed out in his podcast that a technical recession is defined as two quarters of consecutive negative economic growth. A depression would mirror the coronavirus  pandemic in that it has far greater depth and duration than a normal event. The global health emergency generated b y Covid-19  has resulted in a level of economic shutdown and contraction throughout  the world that far exceeds the formal definition  of a technical recession.

Though there is resistance at the early stages of this new Global Economic Crisis to label it a depression, Bremmer points out that there was also hesitation  towards labeling the coronavirus outbreak a pandemic in its early phases. The noted political scientist is convinced that we are entering the first  new economic depression in nearly one hundred years. Ian Bremmer also believes the world of the 21st century is stronger financially and economically than was the case with the Great Depression of the 1930s. This is the only positive insight he offered, in what was otherwise a prediction of economic doom and gloom.

U.S. Job Losses Top 33 Million In Just Seven Weeks

May 8th, 2020 Comments off

The just-released U.S. Labor Department report shows an addition 3.17 million American workers filed jobless claims in just the past week. This means that in a period of only seven weeks the U.S. shed 33.5 million jobs due to the Covid-19 pandemic. The employment picture in the United States is utterly dismal, with no end in sight to the contraction of employment numbers. Though there is wishful thinking on “reopening” the American economy, the reality on the ground shows freefall economic collapse engendered by a health crisis, with no short-term-term solution in sight, except continuation of the slowdown of economic activity.

The news from Europe is equally dire. The Bank of England is forecasting that the UK economy will contract in 2020 due to shutting down economic activity in response to  the coronavirus by  14 percent. According to the Bank of England, this is the nation’s worst economic contraction in three hundred years. In the Eurozone officials forecast a rate of quarterly economic contraction of 7.5 percent.

A global recession  is already underway, at an intensity far beyond that of the 2007-09 Global Financial Crisis. The current Global Economic Crisis created by Covid-19 suggests that a severe global depression is an increasingly likely prospect for the world.

International Monetary Fund (IMF)Warns Covid-19 Health Crisis Sending Global Economy Into Greatest Collapse Since the Great Depression

April 17th, 2020 Comments off

The IMF has issued a chilling forecast in its just released 2020 World Economic Outlook. According to the report, the world will experience its sharpest downturn in economic activity since the Great Depression of the 1930s. Though the report is projecting a modest recovery in 2021, this is sheer guesswork, as nobody has any idea of the future progression of the health crisis precipitated by the coronavirus.

Dire news emerged from the world’s largest economy in the wake of the sobering IMF report. The Census Bureau reported that retail sales in the United States fell by a staggering 8.7 % in March; this was the steepest decline since the Census Bureau began tracking this data in 1992.

On April 16 the U.S. Labor Department issued its weekly jobless claims report , more than 5.2 million American workers filed new unemployment claims. In a period of only 3-weeks, more than 22 million workers joined the ranks of the unemployed. This eliminates all the employment gains in the American economy over the past decade. And this all occurred in only three-weeks.

Economic and employment data from many other economies, developed and emerging, was equally dismal. This all validates the growing consensus among economists that the global economic crisis created by the unprecedented demand and employment destruction sparked by the covid-19 pandemic will be far worse than the global financial crisis of 2007-08, and may very well rival the Great Depression of the 1930s in its severity.

The New York Times Warns In Editorial That The Covid-19 Coronavirus Pandemic Will Get “Much Worse”

April 14th, 2020 Comments off

In its editorial of April 14, 2020, which The New York Times entitled “The Global Coronavirus Crisis Is Poised to Get Much, Much Worse,” it was pointed out that while Covid-19 is currently ravaging primarily the wealthier nations of the northern hemisphere, it will soon strike the impoverished nations of the Third World.

In its editorial, The New York Times states the following:

 

 

What probably lies ahead is the spread of the coronavirus through countries ravaged by conflict, through packed refugee camps  and detention centers in places like Syria or Bangladesh, through teeming cities like Mumbai, Rio de Janeiro or Monrovia, where social distancing is impossible and government is not trusted, through countries without the fiscal capacity or health services to mount a viable response.

That would be disastrous not only for them but also for the rest of the world as supplies of raw materials are disrupted, fragile economies collapse, strongmen grow stronger and the virus doubles back to reinfect northern regions.

 

 

 

This is a nightmare scenario, but one not only plausible, but actually highly probable. The form of the human misery that will afflict poorer nations in this next phase of the Covid-19 pandemic will worsen the global economic crisis that has been unleashed by the coronavirus.

Should the pandemic lead to a collapse of medical systems and economies throughout the Third World, a likely result will be an unprecedented wave of Covid-19 refugees seeking perceived safer havens of developed economies, which themselves will be ill-prepared for the consequences of such radical population movements. This will further exacerbate-and lengthen- the extent and severity of what is both a massive global health crisis and increasingly a devastating global economic tsunami.

U.S. Unemployment Rate Continues to Skyrocket As Economic Crisis Induced By Covid-19 Pandemic Devastates Global Economy

April 9th, 2020 Comments off

 

The U.S. Labor Department just released its weekly number of jobless claims, and in a mocking twist of painful irony, the figures were an exact match for the previous week: 6.6. million additional jobless applications. This means that over the past three weeks, 16 million Americans have filed unemployment claims, adding another 10 percent to the unemployment rate in the United States, which now stands at just under 14%.

Never in history, not even during the Great Depression of the 1930s, has there been such a rapid rise in unemployment. The collapse of the job market in the U.S. has been replicated in virtually every advanced economy. This means that the health crisis created by policy responses to the coronavirus pandemic has now unleashed a destructive global economic crisis of unparalleled dimensions. And this is only the beginning. In the weeks ahead, the economic news will only get worse.

Such a swift collapse in employment numbers mean two simultaneous tsunamis of economic doom have been unleashed: an unprecedented rate of demand destruction, combined with an implosion in governmental revenues across the globe. The latter trend, at a time of increasingly vast deficit spending by sovereigns, will in due course unleash another wave of economic calamity; a sovereign debt crisis.

Never before in human history has a public health crisis created in its wake such economic calamity, resulting in the Global Economic Crisis of 2020.

Henry Kissinger Writes in Wall Street Journal Piece That Coronavirus Pandemic Could Bring Global Economic Doom For Generations

April 5th, 2020 Comments off

In an opinion piece for the Wall Street Journal, the 96-year old former Secretary of State, Henry Kissing, issued a dire warning on the long-term ruinous impact of the global economic crisis unleashed by the covid-19 pandemic. There was an urgency in Kissinger’s message , in which he stressed the need for a rapid development of a vaccine for coronavirus, and that the monumental effort needed cannot be done by the United Sates alone; international cooperation will be essential.

The global economic crisis created by the pandemic must be dealt with or, in the words of Kissinger, “Failure could set the world on fire, ” condemning generations to economic doom. In addition, shortcomings revealed in governmental responses to the coronavirus pandemic have undermined public confidence in public institutions, and this must be urgently addressed to protect the liberal world order.

The tone of Kissinger’s piece in the Wall Street Journal was dire, being an urgent for far-reaching action to avoid a much greater human calamity.

6.6.Million Americans Workers File Unemployment Claims As U.S. Faces Economic Collapse Due To Covid-19 Pandemic

April 2nd, 2020 Comments off

The U.S. Labor Department released this morning its weekly report on jobless claims. The data shows last week’s record-setting 3.3 million claims has doubled this week to more than 6.6. million. This number exceeds not only the global financial crisis of 2007-09, but even the Great Depression of the 1930s, in the rapidity of job destruction.

The coronavirus pandemic has now unleashed a severe global economic crisis of catastrophic proportions. Unfortunately, this is only the beginning. With a vaccine at least a year, and more likely 18 months , away from development and production, the entire planet is the grips of not only a massive health crisis, but a virtual meltdown of economic activity.

As the pace of jobs destruction accelerates, demand is also being annihilated, compounding the depth and pace of economic contraction. Undoubtedly, this will also generate a severe financial shock globally, as equities collapse, bond spreads widen and sovereign and corporate debt insolvency rampages with destructive ferocity.

 

Global Economic Crisis Worsens As Covid-19 Pandemic Unleashes Massive Debt Crisis – U.S. Budget Deficit Will Likely Exceed 20 Percent of GDP

April 2nd, 2020 Comments off

As the coronavirus ravages our planet, decimating economies large and small in its wake, it distinguishes itself from the 2007-09 global financial crisis in this way: it is an economic disaster brought on by a health crisis, as opposed to the GFC, where economies were harmed by a major financial crisis. However, this distinction will soon vanish, for the following reasons.

The enforced shutdown of the global economy created by the health response to the Covid-19 panic has led to massive spikes in unemployment, at a faster pace than even during the Great Depression of the 1930s, while businesses large and small are shuttered, severely constricting activity, while households are on the verge of insolvency. To prevent complete economic and societal collapse, sovereigns have launched emergency stimulus measures, at unprecedented levels of deficit spending, typically in the range of 10 to 15 % of GDP, as in the United States with Congress recently passing a 2 trillion dollar stimulus bill (representing ten percent of pre-crisis GDP).

However, with millions of workers now jobless and corporate activity at a near standstill, tax revenue from personal and corporate income, as well as capital gains, will shrink precipitously.

Before the onset of the coronavirus crisis, the U.S. economy, supposedly operating at its best level of performance, and with unemployment at a record low, was still requiring an annual budget deficit of one trillion dollars to fund federal government operating costs. Factoring everything we now know, the actual U.S. government deficit for the current fiscal year will be substantially higher than 20 %.

Should large developed economies such as the United States run annual deficits in the range of 20 percent of a shrinking GDP, notwithstanding debt monetization by the Federal Reserve and other central banks, a sovereign debt crisis of unparalleled dimensions will complement the Covid-19 pandemic in its negative impact on the global economy, and endure long after a vaccine is developed for coronavirus.

The increasingly likely sovereign debt crisis makes it more certain that the global economic crisis will not only be long-lasting, but will manifest the characteristics of an economic depression as opposed to a less virulent recession. Furthermore, long-term monetary measures a sovereign debt crisis will compel policymakers to implement will heighten the risk of severe global inflation, leading to a period of prolonged stagflation.

 

Global Economic Crisis Unleashed by Coronavirus Covid-19 Pandemic Sends Oil Prices Into Free Fall Collapse

March 28th, 2020 Comments off

The quarantines and shutdown of economic life precipitated by the Covid-19 pandemic has devastated the global oil industry. This is due to demand destruction occurring in the wake of panic responses to the coronavirus outbreak. Since the beginning of the year, oil prices have plunged from one half to around two thirds from their peak. On March 27, West Texas intermediate fell nearly 5 % from the previous day, to $21.51 per barrel, while Brent Crude was priced at $27.95. Lower grades of crude have plummeted to below $20.00 per barrel.

The collapse in oil prices has accelerated a price war between Saudi Arabia and Russia for market share amid declining demand, further exacerbating downward price pressures.

A global economic crisis that seems increasingly likely to become another great depression spells doom for the oil industry. However, there is one wild card; a war breaking out between Iran and the United States, which economist Nouriel Roubini sees as a high-probability event. This would create a supply shock to complement the demand shock to the global economy that has already occurred, reversing the decline in oil prices and sending them to record highs, at least temporarily before plummeting again. This would unleash a wave of inflation, leading to stagflation: negative growth combined with high inflation. That in turn would further depress economic activity, and impede a recovery in the global economy even after an effective Covid-19 vaccine has become widely available.