When Will Recovery Start?

  • Trump signed executive order pertaining to the Coronavirus relief.
  • The dollar and Euro are getting more expensive against the background of sagging of most other currencies.
  • This fall is expected large number of defaults of both corporate and government debt obligations around the world

There is a recession around the globe due to the Coronavirus pandemic. China essentially put this hardship on everyone due to its careless actions. Some, including French Nobel Prize winner and virologist Luc Montagnier, believe the coronavirus originated in a Chinese lab.  Most others, however, do not.

The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing pandemic of coronavirus disease 2019 (COVID‑19), caused by severe acute respiratory syndrome coronavirus 2 (SARS‑CoV‑2). As of 10 August 2020, more than 20 million cases of COVID‑19 have been reported in more than 188 countries and territories, resulting in more than 734,000 deaths; more than 12.9 million people have recovered.

Currently, there close to 20 million infected and over 730,000 dead around the globe. As of this weekend, the US surpassed 5 million infected. The virus continues to spread with no end in sight.

Furthermore, the second quarter brought an unprecedented drop in the economies of most countries of the world. Almost every nation showed a drop. The US economy showed a 33% drop, the EU countries contracted by 18%.

However, there is no reason to panic at this time. This is only a consequence of the economic problems that occurred in previous periods. Meanwhile, they are worth looking at more closely.

The indicators of the world’s economies in the second quarter of 2020 were determined. The result, as was predicted by many economists, was characterized by a record drop from 15 to 40% of GDP.

At present, most financial regulators are reluctantly beginning to recognize that there will be no recovery period when a sharp downturn would be followed by a sharp recovery in the economy. This was actually obvious earlier, but in world practice, it is customary to present options for the development of the situation with an emphasis on optimism.

In the US, the only honorable action US President Donald Trump did is signing an executive order related to the Coronavirus relief. It is highly likely this was due to his dropping ratings coming into the fall presidential election. Previously, he was against stimulus. The breakdown of the Trump order is available here.

It should be noted that the Canadian government acted immediately, providing CERB for six months. Anyone who was employed and lost a job due to the Coronavirus was getting a $2,000 per month stimulus payment.

One of the factors in the economic drop is the conditionally-defeated coronavirus appeared with the second wave of the pandemic. Only after getting burned at the first stage, and receiving huge indicators of economic decline, most countries of the world “wisely” decided not to take serious restrictive measures this time, which will probably lead to an even larger scale of the problem.

Truthfully, there is not much hope for “suddenly successful” vaccines. Their presentation by most firms is an attempt to keep up with the competition for contracts. Mass production of vaccines, sufficient to curb the epidemiological danger, is not fast and expensive enough. Thus, Russia’s grandiose statements of approving the new Coronavirus vaccine is pure grandstanding. It did help certain Russian stocks to rise because of such news.

The Central Banks of most countries of the world have already made titanic efforts to extinguish the crisis. It didn’t help. The number of bankruptcies is growing, unemployment has stabilized, but it is ready to peak once again, and real consumer demand is low.

The coronavirus recession, also known as the Great Lockdown or the Great Shutdown, is a severe and ongoing global recession. IMF projects suggest that the coronavirus recession will be the most severe global economic downturn since the Great Depression, and that it will be “far worse” than the Great Recession of 2009.

This is against the background of huge financial injections into the economy, an equally huge increase in the public debt of many countries, and, consequently, the obvious problem of the sovereign debt crisis. This crisis will affect not only the expected list of third-world countries, with the indispensable participation of Argentina, but also a fairly solid list of economically-developed countries.

There are also serious problems associated with the growth of individual currencies. Gold, bitcoin, and a number of other positions are growing at a record pace. The Dollar and Euro are getting more expensive against the background of sagging of most other currencies. This means a drop in the congruence of goods from the EU and the US, which means new attempts at uncompetitive pressure on the markets.

The first swallows in the form of anti-dumping investigations in the US have already gone. However, it is impossible to preserve the American economy by such means, and it is irrational to weaken it in the context of fighting the recession.

This trap is related to the growth of the exchange rate, while the growth of debt and the recession may become the basis for the emergence of the phenomenon of the deflationary funnel with which to contend probably have quite too revolutionary methods, until the nationalization of the economy.

Overall, this fall is expected large number of defaults, of both corporate and government debt obligations around the world. It his highly likely the economic recovery will only start in forth quarter, or the first quarter of 2021.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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