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Archive for October, 2020

Double Dip Recession Imminent As Covid-19 Induced Economic Lockdowns Reintroduced

October 26th, 2020 Comments off

With Europe and North America experiencing a virulent second wave of the coronavirus pandemic, lockdowns of the economy are being reintroduced by sovereigns on  an increasingly stringent basis. As an example, many regions in Spain are imposing enforced curfews.

The first wave of economic shutdowns  sparked the worst economic contraction in many developed countries since the Great Depression of the 1930s, greatly surpassing the Global Financial Crisis of 2007-2009 in severity. A return to at least semi-normal economic activity facilitated a sharp statistical bump in economic growth. Now, another major contraction looms on the horizon.

Depending on the duration of the current wave of Covid-19 induced shutdowns, a double dip recession  looks increasingly likely for many economies, both advanced and developing. A double-dip recession also raises the possibility that a global economic depression, already a strong possibility, becomes a virtual certainty.

 

Coronavirus (Covid-19 ) Second Wave Inflicts Further Destruction on the Global Economy

October 5th, 2020 Comments off

A resurgence, in effect the predicted second wave of the Covid-19 pandemic, is in full motion, striking at both advanced economies as well as large developed economies, such as India and Brazil. The confirmed worldwide death toll has now passed one million, a number both large and yet most probably a severe undercount of the actual number of fatalities generated by the coronavirus pandemic.

The toll in human misery is staggering. More than 35 million persons have been infected with Covid-19. It spares no one; the commoner and the elite are all at risk, as the recent news of President Trump contracting coronavirus  indicates. However, the damage inflicted on the world’s economy  is as severe as that incurred on public health.

The enforced lockdowns imposed by sovereigns as the only currently available means of halting the spread of coronavirus resulted in unprecedented demand destruction in Q2 of 2020. Optimists predicted a V-shaped recovery as a quick end to lockdowns would lead to a rapid “snap-back” in economic demand. That, and unprecedented deficit spending by governments and money-printing by central banks, temporarily reversed the massive fall in equity prices  and induced unwarranted optimism. Now that governments are again imposing draconian lockdowns throughout the world, the evidence mounts that the severe recession created by the pandemic will eventually morph into a full-blown economic depression.

Even once buoyant economists are grasping at straws, praying that quick development and production of an effective vaccine will save the global economy as well as preserve lives. However, even in a best case scenario, a safe and effective vaccine is unlikely to be widely available until the latter half of 2021. The likelihood is that the world will experience, along with the public health consequences, another 6-months of demand destruction and self-imposed economic suicide. Yet, governments, politicians and economists have yet to grasp the full measure of the Global Economic Crisis that is now upon us.