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Posts Tagged ‘economic crisis’

TIME Magazine Columnist Predicts Global Economic Depression

August 6th, 2020 Comments off

Ian Bremmer, the highly regarded political scientist, has predicted a global depression in his most recent column in TIME. “The Next Global Depression  Is Coming and Optimism Won’t Slow It Down,” read the morbidly-stated headline of his column. He bases his forecast on the global nature of the evolving economic crisis, and the severe impact of Covid-19 on economies that far surpasses what occurred during the Global Financial Crisis of 2007-09.

The column by Bremmer follows last week’s release of Q2 economic data in the United States, which revealed that quarterly GDP had contracted by a staggering 33%. Unemployment rates in not only the U.S. but in all major economies are at double digit rates, as Coronavirus induced lockdowns continue to destroy consumer and industrial demand.

Meanwhile, stock markets worldwide are soaring, including the Dow Jones, as delusional investors continue to believe in the phantom of a V-shaped recovery. However, a spike in Covid-19 infection rates following a temporary receding after the initial lockdowns, reveals that such optimistic thinking is totally illusory. The likelihood of a second wave of infection in the Fall, coinciding with a likely divisive presidential election in the United States, makes Ian Bremmer’s dire economic forecast  the most likely future trajectory for the global economy.

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.

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.

Leading Economist Predicts Great Depression in the 1920s; COVID-19 Pandemic Exacerbates Negative Economic Forces, Unleashing Next Global Economic Crisis

April 29th, 2020 Comments off

In a startling forecast published in Project Syndicate entitled, “The Coming Greater Depression of the 1920s,” NYU economics professor Nouriel Roubini outlines ten negative trends that ensure the inevitability of a full-fledge economic depression sometime during the current decade. Professor Roubini achieved notoriety for predicting with uncanny accuracy the Global Financial Crisis of 2007-09.

Roubini points out that even prior to the coronavirus pandemic there were downside trends involving structural issues left over from the financial crisis of 2007-09, coupled with deglobalization and the balkanization of supply chains, decoupling between China and the United States and other geopolitical rivalries, and environmental factors  such as climate change. What the COVID-19 pandemic has done is accelerate and magnify those negative trends, which already  have created a perfect storm, leading to a “greater depression” later on in the present decade.

The current economic crisis created by the coronavirus will bring about a severe, U shaped recession, which moist economists now believe will exceed the 2007-09 Global Financial Crisis in  severity. There will be no V shaped recovery, in Roubini’s view. The most chilling aspect of Professor Roubini’s forecast is that even if the COVID-19 enabled recession eventually has a U-shaped recovery, it will only be temporary, with a 21st century Great Depression to follow in its wake, making the 1920s  a time of Global Economic Crisis, with prospects of recovery being differed until the 1930s, all predicated on new technologies and the emergence of more competent political leadership.

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.

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 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.

Coronavirus Pandemic Leading To Global Economic Crisis Due To Unprecedented Demand Destruction

March 12th, 2020 Comments off

Now that the World Health Organization has declared Covid-19 a pandemic, it seems inescapable that the world will be plunged into a massive economic crises. The initial steps by central banks to slow the bleeding occurring in global equity markets have been blown away by the scale of the cooronavirus outbreak, as the realization seeps in that the combined health and economic crisis will be of an undetermined but unquestionable prolonged duration.
In 2007 a contagion in the form of subprime mortgages froze the world’s credit markets, leading to the Global Financial Crisis of 2008.

This time it is an actual microbe, a virus, that is the contagion. The Covid-19 pandemic has led both sovereigns and consumers into policies and behaviors leading to massive and accelerating demand destruction. Ironically, this demand destruction will also freeze credit markets, perpetuating the character and scale of the unfolding global economic crisis.
It should be noted that the world is far more polarized than in 2008, and this will exacerbate the scale of the economic and financial collapse that is now upon us. As for the possibility that the cooronavirus pandemic will be of short duration, this is not a likely scenario. It will take at least t one and half to two years to perfect a vaccine, if that is even possible. In a worst case scenario, the health and economic emergency could linger for years.