A six-fold Giftmix for the world economy

Within two weeks, has clouded the picture of the world economy radically. Well-known Economists is now global recession possible. The looming crisis has six e

A six-fold Giftmix for the world economy

Within two weeks, has clouded the picture of the world economy radically. Well-known Economists is now global recession possible. The looming crisis has six elements of a Giftmixes, which distinguishes them from the earlier and is particularly dangerous power.

1. The Problem with the demand

The demand was in the world before the Corona-crisis weak, resulting in low investment costs and high savings-low. And because in this situation, exports in other countries to support the demand, is also one of the explanations for the trading disputes: Each country wants to sell more in other countries, and imports as the loss estimates. The spread of the Coronavirus threatens to make things worse: Out of fear, people save more, travel, and stay home. Visits to Restaurants, concerts and events, as well as many other services will be omitted. And all of these providers, therefore, also be less. Alone the multiplicative consequences of this slump in Demand is threatening to weaken the economy significantly.

2. Mechanisms of the 70s

The crisis of the 70s was not the product of a lack of demand, but rather to an impairment of the production, because the Oil was reduced as at that time, the main lubricant of the economy of the oil-producing countries, and drastically more expensive. The Oil today is in a historical comparison, dirt cheap. However, the Coronavirus is threatening to affect the global production processes. The pattern already evident in China, where economic production has been slowed down. In view of the importance of international value chains, which has sites in the past, to the closure of manufacturing and delivery delays worldwide led. Damaged the international value-added chains are already in the trade war. With the spread of the Virus that threatens to intensify once again.

3. The new inflation risk

Since the financial crisis is the danger of high Inflation from the table. Since then, the leading Central banks of the world try everything to bring you back to Climbing. The reason for the low level of inflation, the mentioned weak demand. The production is made more difficult now by the Virus or because such precursors are missing, will raise the cost of production. The Same applies for the Virus is further slowed globalisation. The associated allocation of production to the most efficient and best locations offered the previous price rise to a halt. The reversal of the globalization is more expensive, and therefore for the production. Whether Inflation will rise ultimately depends on which of the two effects predominates: that of the case demand or that the limited and more expensive production. Unfortunately, both emissions have the same effect on the Total of the economy: they reduce it.

4. Tensions on the financial and capital markets

The depths of negative interest rates around the world have not only the private and public debt has massively increased, the money flowed in ever-riskier uses, without that it would have fueled the creation of value. An example of this is the Boom of high-yield bonds, which have included companies with a high risk of default. It's hardly surprising, then, that with the growing Fears for the future course of the economy, these bonds hardly more can be sold and especially companies with high debt have found it increasingly difficult to get at all of money. In the United States, the term "Credit Crunch makes, therefore, already" in the round.

5. The missing medicine

It is not excluded that the situation stabilized in spite of the Giftmixes in the world economy. That would be a rapid retreat of the Virus, or if a quick remedy against him is found. However, unlike in previous crises, the cure for economic crises is a lack of time. The recent Speeches and statements by leading politicians and Central bankers worldwide are evidence of this. A lot of you talk about your willingness to do the Necessary, but hardly ever any concrete measures. That the Central banks have gone to the edge of your ability, meanwhile, is well known. So far, only the Fed of the USA approves, game room. The largely unpunished-at-heart shock interest-rate cut this week has shown that it is reaching the limits of its possibilities. The hopes are now higher expenditure by the state. But also how to go, remains open. Up investment programmes are implemented, it takes a lot of time, and you should also be useful. Tax cuts and cash infusions, the savings threaten to, instead of increasing the expenditure.

6. The dispute instead of cooperation

Whether monetary or fiscal policy, or securing of the financial system: measures are most useful if they are coordinated in April 2009, after the financial crisis international, because everyone else continues to benefit from the approach of the Next. But the past week has shown that an international coordination is nothing to see. To poisoned the climate between the countries. The G-7 countries have managed only to publish a virtually empty statement. Thus, any actions taken a measure device, whether it is the currency, interest rates or government spending, in the suspicion, to the detriment of others taken or to be taken advantage of. Instead of a cooperation of international animosities threaten only to increase.

Created: 06.03.2020, 16:46 PM

Updated Date: 06 March 2020, 16:02

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