Economic Free Fall

Economic Free Fall

The current pandemic has led to an economic free fall which is unparalleled in history. In the US alone, the unemployment rate plummeted at such a speed that more than 10 million have claimed unemployment insurance in a matter of three weeks.

With over 30 percent of the U.S. population expected to be unemployed by this summer, and the GDP shrinking at a faster rate that the Great Depression of the 1930s, the current situation is uncharted territory, even for the experts.

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The Normal Economy Is Never Coming Back

foreignpolicy.com

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  • In Europe, The north of Italy, which is the main tourist hub, is seeing a collapse in economic activity, along with Germany, which is falling at a steeper rate than the United States. Even countries like Japan, which are not hit that hard, are about to witness an apocalyptic fall.
  • In India, with the abrupt 21 days shutdown, which was recently extended by another 19 days, only a small percentage of the 1.3 billion population is covered by any social security, and millions of daily wage or migrant workers, have no hope, future or place to stay.

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Countries are opening up their purse strings and providing stimulus packages and concessions to boost the economy, but these measures will show results after months and may not be enough.

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The Pandemic Lockdown in the U.S. directly affects the livelihood of a shocking 80% of American workers who work in retail, real estate, education, entertainment and restaurants.
Many of these offices and stores are not going to open after that.

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Many banks are in effect printing money, something that is unprecedented and points towards the extremity of the problem. These measures will lead to complications and politics sooner rather than later.

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Falling consumption has resulted in 70 percent of Americans losing their income in March, and for many that loss can lead to long-term hardship and suffering.

There is an 88 percent decrease in petrol consumption in Europe, and automobiles sales are now zero.

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The World In Lockdown

A long period of Lockdown can lead to deep scarring of the economy with a slow recovery, but as there is a risk of a second wave of infections once this dies down, these movement restrictions will need to stay in place.

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The ongoing pandemic is more than just a gigantic health crisis. The global economic order, for the first time in several decades, is on the path to an imminent restructuring.
There are several questions that leaders around the world are grappling with, like how long this will last, and what will the new ‘normal’ look like. In this war-like situation, they need to act across five stages for leading their industries from crisis and into the new normal: Resolve, Resilience, Return, Reimagination, and Reform. 

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The path to the next normal

mckinsey.com

Recessions come and go
  • A recession is "good" or "bad," depending on who it impacts and how badly it affects them.
  • In the last thirty years, a recession has come and gone somewhere in the world every few years.
  • Globally, economies are in recession 10-12% of the time.
  • Economic booms are just as frequent.

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Is there such a thing as a ‘good’ or ‘bad’ recession?

bbc.com

The Great Depression

.. was a devastating economic collapse which started in the US in 1929, lasting a decade. Europe was already struggling post the WWI recession, while the US was thriving. As borrowings and stock purchase increased, Wall Street went into a meltdown as soon as the share prices nosedived. This led to the failure of all the major banks and 15 million people losing their jobs.

Sandwiched between two World Wars, The Great Depression affected the entire world in its 10-year run.

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In a nutshell: the Great Depression

historyextra.com