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German Economy Suffers Worst Quarterly Contraction On Record

July 30th, 2020 Comments off

Official statistics just released indicated a worse than expected decline in Germany’s GDP. The Q2 of negative 10.1 % follows a less sharp contraction in Q1. This is the most severe quarterly decline in economic activity in Germany since then end of the Second World War and the establishment of the Federal Republic. Germany is Europe’s largest and most successful economy, and the decline reflects the widespread economic damage being inflicted by the Coronavirus pandemic.

Optimists will point to a likely strong rebound in Q3, as economic activity picks up with a reduction in Covid-19 lockdown measures. Such a rebound is likely to be temporary. The renewal of Covid-19 outbreaks in various hotspots throughout Europe, and forecasts of a second pandemic wave this Fall, are predictive of future bad economic news. In addition, the export-dependent German economy will likely be buffeted by Coronavirus infection rate  increases in many of its major export markets, in particular the United States.

The latest German economic data reinforces the growing consensus that the pandemic-driven global recession, already the worst since the Great Depression of the 1930s, will likely evolve into a full-blown economic depression lasting many years.

 

 

COVID-19 SECOND WAVE ACCELERATING GLOBAL ECONOMIC CRISIS

July 13th, 2020 Comments off

 

Coronavirus has already unleashed a severe worldwide recession that is far worse than the Global Financial Crisis of 2007-09. In the words of economist Nouriel Roubini, the emergence of the Covid-19 pandemic resembled an asteroid striking the global economy.

The response of governments was inconsistent, but basically followed the following pattern; shut down much of the economy, accumulate unprecedented levels of debt to subsidize investors, businesses and laid-off employees, while hoping for the miracle of a quickly-developed vaccine. Amid the sea of debt-induced liquidity, pundits and policymakers boasted of a quick V-shaped recovery.’

 

Now we are witnessing in many countries a second-wave of the pandemic, in many cases only weeks after government officials boasted that coronavirus had been contained and that the economy could begin reopening. This, despite warnings from those more knowledgeable about the dynamics of a great pandemic that premature reopening of economic activity would greatly worsen the impact of a second wave of Covid-19, leading to repeated false openings followed by swift shutdowns of normal economic activity. These false starts and rapid lockdowns will actually worsen the negative impacts of coronavirus on the overall economy.

Now we are witnessing evidence that the pandemics is close to being out-of-control and spreading like wildfire in a growing number of countries, while sovereign debt , only months into the pandemic, is already at unprecedented levels. These factors further exacerbate the Global Economic Crisis now underway in tandem with the health crisis,  with talk of a V-shaped recovery proving to be illusory, while a severe economic depression  on the scale of the 1930s looks increasingly likely.

Asia Economy Contracting for the First Time According to IMF

July 2nd, 2020 Comments off

For the first time in “living memory,” Asia’s economy overall will shrink by at least  1.6% this year, according to the International Monetary Fund. The last projection from the IMF  had a forecast of flat growth. The update shows that the IMF sees worsening data impacting all of Asia in the wake of the Covid-19 pandemic.

The IMF concedes that no region, including Asia, will be immune from the ruinous impact of the Coronavirus on the global economy.  Yet, though the IMF is predicting a global economic contraction of almost five percent in 2020, it is still forecasting  a V-shape recovery in 2021 in excess of positive five percent.

With Covid-19 running an unpredictable course, with signs of a second-wave already present, it is being excessively optimistic to hope for a speedy economic recovery. In fact, even the IMF states it will take years for the economies of Asia and other regions to fully  recover, in spite of rosy forecasts for 2021.

Leading Economist Warns That Riots In U.S. A Sign Of Unsustainable Economic Alienation

June 24th, 2020 Comments off

In an article  in  Project Syndicate, economist Nouriel Roubini analyzes the outbreak of mass riots  in  the United States, triggered by the police killing of George Floyd.  Roubini argues that the rioting stems from a reaction to police brutality and racism, but have grown to encompass masses of young workers of all races alienated by a failing economic model

Paraphrasing Marx, Roubini makes the case that that the old proletariat has been replaced by a new class-the Precariat- made up of of gig and contract workers, economically exploited and deprived of stable and sustainable wages and benefits. The precarious state of this new proletariat, combined with rising wealth inequality in the U.S., has made mass rioting inevtiable, states Roubini. In effect, his point is that masses of largely young people in America have reached the breaking point of despair, leading to what is emerging as a summer of urban explosions.

I recommend reading Roubini’s article in  full; the link is  https://www.project-syndicate.org/commentary/main-street-manifesto-for-covid19-crisis-by-nouriel-roubini-2020-06?

Global Economic Crisis Evolving Into Full-Blown Depression

June 19th, 2020 Comments off

There are two conflicting versions of reality emerging  regarding  long-term economic trends generated by the global health crisis. On the one hand, enforced lockdowns of key economic activity in response to the Covid-19 pandemic has already led to a worldwide recession that is by all measures far worse than the Global Financial Crisis of 2007-09. On the other hand, central banks, multinational economic forums and leading investment bankers are predicting  a V-shaped recovery; a sharp rise in economic activity following the steep decline due to the coronavirus.

A lesson from 2007-09 is that reality and data trump optimism. It must  be recalled that at the onset of the Global Financial Crisis, well into 2008, the U.S. Federal Reserve predicted that there would be no recession. Only months later, Lehman Brothers collapsed.

In the Global Economic Crisis created by the Covid-19  pandemic, the collapse of key industries such as tourism and airlines, the energy sector and manufacturing, the implosion of retail trade  and decline of exports and imports already rival the level of contraction that occurred during the Great Depression of the 1930s. This implosion in economic activity has occurred in 2020 in a matter of months, not years as with the Great Depression. Furthermore, the massive deficit spending by sovereigns, combined with the collapse in tax revenue, points to a staggering debt crisis globally in the near future.

Health experts warn of a second or even third wave of the coronavirus, thwarting attempts at restarting the global economy. A vaccine, in the most optimistic scenarios, is at least a year away. And even if a vaccine is developed and widely distributed,  the cumulative damage to the global economy will linger for years.

The most realistic scenario is that the 2020s will be a decade of unprecedented economic depression.

Coronavirus Health Crisis Now An Economic Depression in the United States and Globally

May 28th, 2020 Comments off

 

A milestone of misery has just been reached in the United States. The Covid-19 pandemic has now claimed more than 100,000 lives in the U.S., and the country’s Labor Department has issued a weekly jobs report showing another 2.1 million Americans have filed jobless claims. This means that in the last 10 weeks, more than 40 million American workers have lost their jobs.

In addition to the above grim statistics, the U.S. Q1 economic report has been revised, showing a higher level of economic contraction of negative 5%. However, this is a mere harbinger of what is to come. The Q2 economic report is forecast by several experts to reveal a contraction of between 20 and 40 percent.

The bad economic news in America is being replicated globally. Virtually every major economy has witnessed an economic shutdown based  on combating the coronavirus. The result has been economic suicide in numerous countries. We are clearly already in a severe recession, far worse than the Global Financial Crisis of 2007-09. Increasingly, we are entering a global economic depression, the Global  Economic Crisis of the 2020s.

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.

U.S. Economy in Freefall As Jobless Claims Exceed 30 Million and GDP Plummets

April 30th, 2020 Comments off

The U.S. Bureau of Economic Analysis released its report on GDP growth for Q 1 of 2020. The numbers were dismal, negative 4.8 percent. Though this was the worst decline experienced by the American economy since 2008, at the height of the Global Financial crisis, it was merely a harbinger of much worse to come. It must be recognized that the impact of the demand destruction inflicted by the Covid-19 pandemic only began to emerge in the last two weeks of Q1.

A more telling pointer of whist to expect in Q2 was the latest jobless claims report issued by the U.S. Labor Department. According  to the report, an additional  3.8 million American workers filed unemployment claims. Cumulatively, this means that during the past 6-weeks more than  30 million U.S. workers have filed jobless claims. In other words, over a period of only six weeks, the U.S. unemployment rate has skyrocketed from 3.5 percent to more than 18 percent. This is an unprecedented rate of accelerated employment contraction. Not even during the Great Depression has the American economy witnessed such appalling statistics.

The collapse of the job market in the United States brings with it a radical contraction in aggregate demand. This would point to the Q2 report showing that, at a minimum, the nation’s GDP will  shrink by more than 20 percent, and possibly as high as 40 percent.

The collapse of the world’s largest economy at unprecedented velocity is only a reflection of a global economic implosion. The Global Economic Crisis will linger after the health crisis  created by the coronavirus has receded. This is indeed the Great Depression of the 21st century.