26.03.2020

How long will the economic crisis last?

If you look at the stock indexes of different countries, the picture is presented in red – red indicates the fall of stock indexes. A fall means a decrease in the value of securities in circulation on these exchanges. This is one of the signs of an economic crisis.

Companies decrease in value, and investments become unprofitable. There are fewer profitable niches for investment. Wherever you put it, there will be no exhaust. At the same time, we see how the value of money is decreasing in the world. Central banks in various countries have been lowering the refinancing rate over the past years in order to revive consumption through lending to the population and business itself. But as we can see, this does not help much.

The world community has not yet unanimously declared a global crisis,but it has arrived. It has several reasons. There are obvious and not very.

The obvious causes of the crisis are two factors-the decline in oil prices and the threat of coronavirus. The so – called bubbles-spheres artificially inflated by money-are not obvious to most, but understandable to economists. There are dozens of such bubbles.

The global bubble is the Chinese credit bubble. The Chinese famously lent to their own businesses, using both their own resources and external borrowing. Huge loan funds were used to Finance infrastructure projects. As a result, the economic logic of financing was violated and the issue of refund was raised. And then the Chinese sneezed coronavirus. The economy began to collapse. The coronavirus was the trigger for the crisis, which caused a decline in consumption in China and beyond.

The coronavirus is not as scary as it is painted, but it has already caused damage in high-value-added industries, including tourism, air transportation, services, and trade. It is noteworthy that the world has already overcome the threat of overestimated danger of diseases-Ebola, atypical pneumonia. But this time the scale of the threat in the economic sense is somewhat larger. Because other factors have also overlapped.

Oil factor. Oil prices collapsed. This was already the case in the 1980s. The peak of oil decline was in 1986. Then, too, the oil-producing countries did not agree. This was preceded by the fact that at one time OPEC countries refused to supply oil to countries that supported Israel. Oil first rose to a record high. But the Soviet Union, Venezuela, and a number of other countries increased their oil production and increased their market share. OPEC is tired of this and its members (including under pressure from the US) decided to simply pour oil all over the world. And in 1986, prices hit rock bottom. This reminds me of the current situation. Then the consequences for the USSR were deplorable – the country broke down and as a result, the Union collapsed. Oil is also essentially a bubble. Its price is unlikely to return to its previous positions, since alternative energy is developing at a very brisk pace.

Let's move on to the other bubbles. They also include the real estate market in Europe and Southeast Asia, the stock market of a number of countries, including the United States, the cryptocurrency market, and so on. The classic bubble crisis was the 2008 crisis, when it all started with an overheated real estate market in the United States, as well as the lending market. Non-payments simply collapsed the US economy, and then the entire world. Recovery began two years later.

How long will the emerging global crisis last?
In my opinion, the coronavirus and its consequences will be defeated within 12-18 months. By may 2021, the problem as a whole should be resolved. But the negative factor will work.

Oil crisis. The economy is adapting, and a number of countries will get a boost for development, including India with its expanding car fleet. The automotive industry, which has been going through hard times in recent years, will revive again in the same year and a half.

Financial bubbles, real estate bubbles. Not yet burst, but within a few months the leading economic powers (not all) will survive this. It will take two years to eliminate the consequences as it was in 2008.

If we add up all the factors, the economic crisis will be overcome by the world community not earlier than in two and a half to three years. But there may be global turns that will shorten this period. For example, a large-scale local conflict involving the use of military force. A tool that has been tested many times. The US economy grew in both world war I and world war II. The conflicts in Yugoslavia, Iraq, and Libya have also clearly demonstrated this.

So, my dears, take care of yourself, your health and money. Live within your means. Put a class and subscribe to my channel.

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