The crisis of 2020: why the crisis happened + will there be a crisis in Russia + summarize.
According to many economic and political analysts, 2020 will be the worst year for the global economy since the end of a similar crisis in 2008.
On the other hand, predicting the coming changes is a rather stupid idea, since no one is able to predict the collapse of the economy just in time, while having decades of financial research, as well as a dozen examples of similar crisis situations on a regional and global scale.
The best that the world s leading experts are capable of is a general assessment of economic vulnerability, a comparison of the imbalance in the resource or financial markets with the real economic situation in the country, therefore, the data indicated below in the article can be considered only preliminary analytics, guesswork, and a real assessment of the situation is possible only on the threshold of a real crisis.
Be that as it may, today we will compare the opinions of a dozen economists, financiers and managers, and try to understand whether there will be a global crisis in 2020, and if so, what will it mean for you and me?
How did we come to this: will there be a global crisis in 2020?
To understand the root causes of financial instability, it is necessary to examine previous experiences with economic recession. There is no need to look far for an example – in mid-2008, after more than a decade of economic growth, the whole world was faced with a global problem.
The world banking system responded to this crisis with an “experimental” method – the introduction of a new, monetary policy, which made it possible to halt, and in some cases even stabilize the fall of the markets. However, this decision did not give grounds for a rapid recovery in the post-crisis years.
What was the mistake? The biggest concern is the overly inflated funds of the world s leading banks and major companies.
Undeniable financial asset congestion: In 2019, the combined size of the US Federal Reserve, European Central Bank and Bank of Japan totaled $ 14.5 trillion, 3.6 times higher than at the beginning of 2008.
Having skimmed through the numbers and comparing the assets of the Central Bank with the economies of the respective countries, we can draw a similar conclusion: the volume of the BJ is 102% of Japan s nominal GDP, followed by the ECB – 39%, the US Federal Reserve closes with 17%.
Speaking of the US stock markets, it is impossible to ignore the fall in key indices. At the end of the trading session on the New York Stock Exchange, the median fall was -12.7% of the original value of the indices: as of 03/17/2020, the Dow Jones industrial index fell 12.93%, the S&P 500 stock index lost 11.98%, and the NASDAQ electronic exchange – 12.32%.
The weakness of global economies in the face of financial turmoil is also evidenced by the fact that at the end of 2019, the IMF lowered its estimate of the global growth rate to 3% annually, while the average growth rate between 1980 and 2020 was 3.5%, and for the global recession, the average rate should decrease by only 1%, that is, reach the threshold value of 2.5%.
However, in December 2019, the real GDP growth rate in the United States was 2%, and for Japan this number does not exceed 1% at all. Simply put, the world s first economies not only neglect to adequately assess their own markets, but also continue to rely on a flawed financial strategy adopted at the end of 2008.
Important: the main mistake was that central banks believed that the crisis measures that worked in 2008-2009 would work just as well in the post-crisis years, that trillions of injections into the liquidity of financial systems would “push” the growth of financial assets of many economies of the world for many years. Accordingly, the excessive build-up of assets made the entire economic system extremely vulnerable, and in a crisis the rigidity and the degree of shock from changes are important: a shake-up at the limit in an extremely vulnerable structure is the main recipe for a global crisis.
Will there be a crisis in Russia in 2020?
As you can see, the inflated financial bubble, designed to accelerate the economic growth of the post-recessive economy, played against itself. But what do we see in 2019? The global community has learned nothing from mistakes, with the overall decline in purchasing power accelerating thanks to the spread of COVID-19.
Thus, economists at JPMorgan expect that by June 2020, the US GDP will contract by 2.4%, and by September 2020 – by 3.8%. The eurozone, by the way, recognized as a new hotbed of the spread of infection, will lose 1.6% and 4.3% of its GDP over the same time periods. At the same time, the initial outbreak of infection, which was considered a short-term illness and was not considered a threat to economic activity, now plays an important role in reinforcing recessive sentiment in the international economy.
Assuming that no vaccine against the infection is found in the foreseeable future, the economic slowdown will accelerate. It is now believed that among many countries, in a few months, not only tourist, but also trade, and in some cases – political ties will be interrupted. In general, according to the analytical center Oxford Economics, due to the outbreak of infection, global GDP will lose $ 1.1 trillion in the second and third quarters of 2020.
To say that the future crisis of 2020 will only slightly touch Russia is to say nothing. At the same time, do not forget about the common economic market of the CIS countries: despite the sluggish “trade” blockade, almost all the currencies of the post-Soviet space are tightly pegged to the ruble. This means that with the depreciation of the ruble, the value of other fiat funds, not only of the Commonwealth, but also of neighboring, economically connected countries, will also fall.
When speaking about Russia, it is impossible to ignore some topics, especially when a large share of government profits depends on this topic.
After the collapse of the OPEC + negotiations, oil prices plummeted, and the “brutal oil war”, as it was dubbed by The Business Insider, began between the countries of the Arabian Peninsula, led by the Saudis on the one hand, and Russia on the other. In general, the fall in oil prices will cause serious damage to both sides of the conflict, but since we are talking about the impact of the crisis on the Russian Federation, we can say with confidence that such a turn is critical for it.
The sharp drop in prices, as well as the impossibility of stabilizing the current situation in the shortest possible time, once again confirmed that 25 years of statements about the need to get off the “oil needle” turned out to be a simple matter, and the Russian government cannot or, most likely, does not want to get rid of the flow of money generated by the sale of natural resources.
If the economies of the Eurozone countries and the United States are extremely vulnerable due to an excessively inflated financial structure, then our country continues to be haunted by the resource curse. In its reports for January, Rosstat noted the following changes: in the structure of industrial production, the share of mining enterprises increased from 34.3% in 2010 to 39.8% in 2019. At the same time, the manufacturing industry decreased its share from 54.8% to 50.1% over the same period of time.
Of course, COVID-19 did not play a direct role in the fall in prices, but with the spread of infection, the demand for cruise liners and air travel fell, the number of sea and air trade communications decreased, the world economy is in decline – what is the demand for petroleum products.
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Another problem for Russia is the main trade partners. This should not be forgotten, but no one is going to lift economic sanctions against the Russian Federation in the next 2-3 years, and China remains our key market for buying and selling: in 2019, the Celestial Empire s share in the entire foreign trade turnover of Russia amounted to 16.8%. At the same time, for comparison, the share of the Netherlands is 10.6%, Germany – 6.7%, and Turkey – 5.1%.
As for China, in January-February 2020, its industrial production decreased by 13.7% compared to the same period in 2019. Of course, the situation with the Chinese industry will sooner or later affect all trading partners, and in monetary terms, the same USA will incur much greater losses than Russia, but in the long term, the crisis of 2020 is likely to cause us even more damage than a similar situation in 2008- 2009 year.
Business in crisis
According to the Chinese authorities, the 2019-nCoV virus epidemic shows a positive trend of decline, at the same time, the WHO claims that foci of infection can easily move to other, unexpected regions, as happened with southern Europe, and according to preliminary estimates of the head Robert-Koch-Institut, Lotara Wheeler, a similar situation with the virus will continue for another 12-16 months, simultaneously affecting countries in which 85% of the world s population lives.
And if every state in which the epidemiological situation reaches a red dot loses at least 1/10 of its real GDP, while being forced to take strict quarantine measures that can harm the economy no worse than the global crisis, then what level of global recession can we talk about?
Characteristics of the economic crisis in 2020):
And what is the bottom line?
It turns out that the combination of all negative factors caused the recession. Will there be a crisis in 2020? Definitely will. So far, it is impossible to assess the scale of the impending disaster – it is likely that a general, in fact, causeless panic will do much more harm than the spread of COVID-19 infection, lower oil prices, as well as the tenseness of the political situation with refugees and the war in the Middle East.
Will there be a crisis in Russia in 2020? The answer is obvious to everyone. No matter how hard the authorities try to hide the real state of affairs, the RF gold and foreign exchange reserves will not be enough to dampen economic changes associated with the fall in crude oil prices, and they will not be enough to smooth out the decline in purchasing power.
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Yes, one can not expect total unemployment, as it was at the end of 2008, at the same time, the population will experience difficulties associated with the collapse of the national currencies. Therefore, the crisis of 2020 will relatively equally affect all countries of Eastern Europe, however, it is likely that due to a more developed economy, as well as a larger number of financial assets, Russia will survive the consequences of the economic downturn much easier than, say, Ukraine, Kazakhstan. or the states of Central Asia.
The main question is this: can the 2020 crisis be expected to last for several months, and oil prices will bounce back and bounce back to $ 60 per barrel? Definitely not. If we take into account the assessments of experts, the economic crisis in Russia will last, at best, until mid-2021-2022.
But, in any case, even if the crisis lasts longer, people will survive it. The most important thing is that in the wake of the massive spread of infection, people survive it in the truest sense of the word. Take care of yourself!