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Posts Tagged ‘Coronavirus Pandemic’

Global Economy On The Abyss of a Greater Depression Says Leading Economist Nouriel Roubini

March 25th, 2020 Comments off

In a chilling yet cogently delivered live Twitter lecture on likely economic trends stemming from the Covid-19 pandemic, NYU professor and economist Nouriel Roubini gave a harsh yet realistic overview on the unfolding crisis. Professor Roubini was one of the few economists to predict the global financial crisis that occurred more than a decade ago.

The views Roubini relayed in his Twitter presentation can be summed up as follows:

  1. The health policy response will determine whether or not the world faces a severe recession or a greater depression. A global recession worse than the 2007-09 global financial crisis is already baked into the cake. However, perusing a mitigation strategy to contain the coronavirus pandemic will ensure the global economy heads into a severe depression. Only a suppression strategy as implemented by China initially and now Italy can prevent the worst economic damage. Though a suppression strategy that shuts down the economy for 2 or 3 months is very painful, a mitigation strategy will ensure that Covid-19 spreads like wildfire, leading to a temporary reopening of the economy followed by further and deeper shutdowns. Roubini urges policymakers to adapt draconian suppression measures as the only alternative to far more calamitous economic collapse.
  2. The right policy responses will be crucial to preventing a greater depression. The current wave of unprecedented monetary and fiscal measures, adapted in a very short timeframe, are correct. In particular , very large fiscal deficits equivalent to ten percent of GDP, which in turn are fully monetized by the central banks, are necessary in the short-term. However, such extraordinary measures are unsustainable in the long-term, and will lead to stagflation.
  3. The health emergency crippling the global economy is not the only shock confronting it. Roubini identified a geopolitical depression exacerbated by revisionist powers (China, Russia, Iran and North Korea) seeking to further destabilize the United States through cyber warfare. In particular, the emerging cold war between China and the U.S. is leading to decoupling of supply chains and de-globalization, which will increase costs of production and hence inflation.
  4. Professor Roubini sees a great risk that Iran’s regime will initiate a full-scale war with the United States as the only means of preserving itself from being overthrown, if Trump is reelected and the economic sanctions lead to its collapse. Such conflict will close the straits of Hormuz, leading to a massive spike in oil prices.

In summary, a sobering and harshly realistic analysis of the global economic crisis now underway.

Economist Nouriel Roubini Warns Emerging Global Economic Crisis Will Be Possibly Worse Than Great Depression

March 24th, 2020 Comments off

Perhaps the most insightful economist to watch as the Global Economic Crisis unleashed by the Covid-19 pandemic rages is Nouriel Roubini, economics professor at New York University. In the months leading up to the 2008 global financial crisis , his predictions were eerily accurate. Now he has published an essay on what is unfolding regarding the Coronavirus pandemic induced economic disaster on the Project Syndicate website, entitled ominously “A Greater Depression?”

I urge ever sensible person to read it; the link is: https://www.project-syndicate.org/commentary/coronavirus-greater-great-depression-by-nouriel-roubini-2020-03?

 

Among the points Professor Roubini makes is that the collapse in stock markets has greatly exceed in velocity not only what occurred during the global financial crisis of 2008, but also during the Great Depression during the 1930s. While other prognosticators are predicting a U or L or worst case V trajectory and recovery, Roubini views such happy talk as delusional. He sees every indicator as pointing to a global economy in unrestrained free fall. The hope for an eventual recovery lies in a host of unconventional monetary and fiscal measures. However, as he observes, there are a host of probable white swan events and negative political realities that will likely obstruct the unprecedented policymaking the now full-fledged Global Economic Crisis requires.

 

It Will Take Years To Recover From Global Recession Caused By Coronavirus Covid-19 Pandemic According To OECD

March 23rd, 2020 Comments off

The secretary general of the Organization for Economic Cooperation and Development (OECD), Angel Gurria, has warned that the global recession unleashed by the coronavirus pandemic will take years to recover from. He stated that the shock to the global economy created by the Covid-19 outbreak had already exceeded the damage created by the 2008 global financial crisis.

The head of the OECD told the BBC that claims by some political leaders that the world will quickly bounce back from the Global Economic Crisis now underway was “wishful thinking.”

There is growing consensus that the world is heading into a full-blown economic depression.

Global Unemployment Rate Skyrocketing Due To Covid-19 Coronavirus Pandemic

March 22nd, 2020 Comments off

The coronavirus pandemic is not only a public health emergency of massive proportions; the response by governments worldwide has created staggering economic contraction, leading to unprecedented growth in unemployment. Initial data indicates that countries that previously had low single digit unemployment rates are now, within a period of a few weeks, seeing double-digit unemployment statistics, with no end in sight to further hemorrhaging of jobs.

Policymakers have concluded that sever measures are necessary to contain the coronavirus pandemic; shutting down all but the most essential industries , stay-at-home directives and social distancing. This has all led to unprecedented demand destruction, resulting in massive growth in the ranks of the jobless.

The world is increasingly stuck between a rock and hard place. The Covid-19 outbreak is proving so virulent, the absence of desperate measures enacted by policymakers will result in overwhelming and collapsing the public health system, resulting in massive death. What is occurring in Italy reflects this.

On the other hand, demand destruction on the scale we are witnessing will exacerbate the Global Economic Crisis now unfolding, rivaling the Great Depression in its intensity. This will implode tax revenues, ironically also leading to underfunding and ultimately collapsing public health institutions. The short-term fiscal response by governments will undoubtedly bring on the largest public debt crisis in economic history. In other words, the sovereign cannot indefinitely write checks to the hordes of unemployed , whose number will grow along with the victims of the pandemic.

There is a real possibility of mass death due to the impact of covid-19. It also must be recognized that long-term double-digit unemployment risks undermining social and political order, also leading to mass death through social disorder and massive violence by an increasingly desperate population.