A growing consensus among economists is that the second wave of Covid-19 has induced a repeat of the lockdowns of economic activity that sent Q2 metrics into a tailspin. Though the lockdowns currently underway may not exactly match the draconian character of the earlier shutdowns, they are becoming increasingly severe as the coronavirus infection rate in many European countries threatens to overwhelm their medical systems.
Though several viable vaccines are on the horizon, it will likely not be until mid to late 2021 that they succeed in terminating the current pandemic. The current reality in terms of economic activity and Covid-19 makes it increasingly clear that the Eurozone, for the most part, will return to recession after the recovery in Q3. This means at least 2 consecutive quarters of negative growth from the Eurozone, in Q4 2020 and Q1 2021.
Inevitably, a double dip recession throughout the Eurozone will have a significant negative impact on the region’s primary trading and economic partners, notably China and the United States. In addition, the projected double dip recession will further strain sovereign balance sheets, already burdened with unprecedented levels of debt for addressing the recession that occurred in Q2. Adding trillions of euros in public debt, and trillions more, to the balance sheet of the European Central Bank, points to a growing sovereign debt crisis likely to impact just as the pandemic has receded.
The corporate media and social media complex, America’s new power center, has declared that former Vice President Biden is now President-elect Biden. Though Trump is pursuing a last ditch, scorched-earth policy of legal challenges, with no concession in sight, the odds are virtually certain that Biden will be inaugurated as the 46th president of the United States. What are the global economic implications of this?
The Covid-19 pandemic has unshed in the worst economic downturn since the Great Depression of the 1930s.The Q3 uptick is now likely to be followed by a double dip recession, as a second wave of coronavirus ravages a advanced economies, including the United States. Though the Biden policy team is committed to a more aggressive stance on combating Covid-19 and offering large fiscal stimulus packages. the economic prognosis is not bright.
Biden will enter the presidency with a divided electorate, including 70 million Trump voters, who are largely convinced that the election was a fraud, meaning the incoming presidency is illegitimate. Instead of the expected Blue Wave, the Democratic majority in the House of Representatives is reduced, and the GOP may very well retain control of the Senate. Divided government, and a divided people will create instability in what is still the world’s largest economy, possessing the strongest military power. That does not portend well towards an economic recovery.
Continued economic shutdowns due to the pandemic, ineffective fiscal stimulus programs combined with growing sovereign debt along with the political and social instability in the U.S. lead to the conclusion that the trajectory towards an economic depression, already baked into the cake, will accelerate. It is likely to happen during the incoming administration’s four-year term.