I talked about the social consequences of the current coronavirus crisis, but there won’t be anything that will hit us harder than an economic crisis. Will there be an economic crisis? Everything tends to point YES.
As I said before, I am no economist, but I can understand simple facts about how the global economy works. And we all should understand how the economy works so that we won’t act so surprised next time it hits us.
To put it in simple terms, an economic crisis means there is not enough money. Which, there aren’t. The Federal Reserve Bank of New York just printed $1.5 billion last week and it seems that it isn’t enough.
To keep things simple, we must understand that we live in a connected world. We are not living on our own, having our own separate economy, although most countries have their own currency.
There are connections between the most powerful central banks and they help each other balance any imbalance they might have in their countries. But not all countries’ economies are so powerful to have the Feds on a swap line. And they can only buy so much. How many dollars can they print before everything is worth zero? *Wink wink Venezuela*
The coronavirus pandemic started a global crisis which is most felt by the stock markets. While nothing has changed, investors are still human and seem to take irrational decisions. And most of them lost hope in the riskier market of stocks, bonds and loans, and want to cash out.
That’s how stock market crash, companies lose value, loans aren’t as valuable as they were when they were issued and everyone wants out.
Then think about companies which have taken loans to buy the raw materials carry on with production. The moment the global economy had stopped due to the invisible enemy, there is almost nobody buying that product, because we are all trapped at home, fearing to breathe.
This only leads to bankruptcy and unemployment. And it’s continuing the economic slowdown.
Most of us are sitting on our asses. At home. Those planes aren’t going to fly empty. And the shops aren’t going to stay open if there are no customers. And we will not get pay if the company isn’t making a profit. And most will not.
That’s why I was left jobless.
My take is that most businesses don’t have a strong business model and don’t produce something of value. I talked about what brings value to our lives before.
And big companies are built and expanded on loans. But what will happen when the bubble bursts? I think we will find out this year.
I wonder why they never bothered to teach us anything about how the economy works when I was in school. I’m pretty sure they know that the economy isn’t perfect and it occasionally fails. I also believe they did it on purpose, to not give too many people ideas on how the world works.
The facts are that everything revolves around money. And the global financial system is based on the US dollar. Why? I don’t know, because they never told us anything. We are just disposable pieces in a huge factory. Created to produce and consume. And when I look at the current crisis like this, I am almost glad that things suck. Because we are all in this together, right?