Yesterday was the fourth-worst day in US stock market history since 1928:
I think we need to stop thinking this is a blip what will go away and from which we will quickly recover, as Rushi Sunak described it in the budget on Wednesday. Instead we are now living in the middle of a full-blown economic meltdown. And what is worrying is that unlike 1929, 1987 and 2008, there is a strong and immediate underlying fundamental economic cause rather than a malfunctioning of the financial system, to which those crises can, in the first instance, be attributed.
We are, quite simply, now living in unprecedented times, and nothing will ever be the same again, because that is always the consequence of events like this.
Rishi Sunak's budget looks increasingly ill-conceived in such circumstances.
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In China the Disney theme park has reopened as have all Apple stores and only a handful of reported cases overnight…so maybe a shock then “business as usual”?
We have not done what China did
There is often a second peak, after the restrictions are removed. We’ll see in about 2 weeks.
And then I wonder if China will be entirely successful at stopping the infection coming back from elsewhere. The scale of the challenge is somewhat different to a small city state such as Singapore or Hong Kong.
Phil Mills,
You may be missing the point somewhat. While the virus and its attending panics may be the cause of small business troubles in the real economy it is not the cause of of the crisis in financial markets. For them the virus is merely a trigger that sets off events that were already waiting to happen.
The real problem for financial markets are their massively overvalued assets funded by the biggest corporate debt bubble ever. Long-story-short, this has been building up for years. The will be no ‘business as usual’, not for a long time.
Just type “corporate debt bubble 2020” (or “share buy back bubble”) into Google and you’ll see what I mean
BTW does anyone remember the recent inverted bond yield curves ? Looks like they were right again.
The first half hour’s trading responded well to the promise of one and a half trillion dollar Fed injection.
Early exuberance (or relief) seems to be waning already.
The trolls are quiet this week.
Andy,
Quieter trolls are a small consolation.
We thought that nothing would be the same again in 2008.
But that was about money.
This is about money and everything else. My preference would be to spend less into firms and corporations/banks and more into people through local authorities. Private firms are sitting on wads of cash after 10 years of austerity – they can take it.
The only way we might be able to get real change is to reduce the private sector’s role in dealing with it and also profiting from it from whatever cash injections Johnson’s Government produces.
I wish we had that National Bank!
Yes PSR.
A national bank creating and then spending money where society deems fit. Not private banks creating it and pumping it into assets and property.
I think a huge amount of lateral thinking is required here.
We are faced with unprecedented multiple crisis:
Covid – 19
Climate heating
Economic/financial collapse
Social care
Housing
Extreme nationalism/racism
Ecological/natural systems breakdown
All are occurring and reaching breaking point at the same time after 40 years of uncontrolled “free market ” policies and corporate unchecked social and ecological abuse in the private sector plus 10 years of draconian austerity cuts in the public sector. All these crisis are related and need a massive international cooperative effort to avert the worst of disasters and any hope for a future that is at all tolerable.
I rather wonder if part of the Government’s approach is that Social Care will be partially sorted, or at least given a breathing space with the number of elderly that will die.
Of course more Care Homes might well go bust with the sudden cessation of fees, but alternatively it will enable hospitals to discharge hundreds of patients.
A bright ?? side to everything.
“Rishi Sunak’s budget looks increasingly ill-conceived in such circumstances.” As does his appointment. We have the problem to deal with too of all the supply shortages from China which we’ve yet to feel the effect of. Big economic downturn coming from that, I imagine.
Agreed, this time could be more serious than many could possibly imagine…
The past decade has been an exercise of papering over the cracks in the economy with an increasing amount of financial stimulus, in the hope that some kind of Keynsian recovery will eventually kick in and rescue the system.
Instead, there has been a gross misallocation of resources and a magnification of inequality on a grand scale. As much of the newly created capital desperately floods out of the stock markets in the hope of finding a safe home it is creating new bubbles and distortions with consequences that are impossible to determine.
The coronavirus has caused a simultaneous supply side and demand side shock that could escalate for quite some time (when it properly takes hold in the US); the amount of stimulus required to counter this effect could dwarf the existing level of debt and cause an eventual collapse in the bond market.
This could be considered a multicoloured rainbow swan rather than the ‘black swan’ that economists were looking for!
Real social change only comes after a big upheaval. It’s usually a war. Universal suffrage after WW1. Welfare State/NHS after WW2.
Let’s hope there is a silver lining to this dark cloud. After 2008 things just reverted back to “normal”.
Vinnie,
That reversion “back to normal” after 2008 was never quite normal. The constant near-zero interest rates and sub-target inflation weren’t normal. “Austerity” wasn’t normal. A lot of things weren’t. Its just that some of us forgot what real normal was and others were too young to remember.
Marco.
Granted.
But there wasn’t a fundamental change in the structure.
On zero interest rates, how have pension pot forcasts faired over the last 12 years?