How the Global Economy Is Experiencing a Pandemic

The consequences of Covid-19 will determine how we work, spend, travel and more for many years to come. Really.

Economic shocks, such as the 2020 coronavirus pandemic, happen only once every few generations and lead to permanent and far-reaching changes.

Judging by the volume of production, the world economy is on the road to recovery after a recession that hardly any of the 7.7 billion people have seen. Vaccination should accelerate economic recovery in 2021. But other consequences of Covid-19 will determine global economic growth for many years to come.

Some of these effects are already noticeable. Factories will become more and more robotic, and people will stay at home. Inequality between and within countries will grow. Governments will play a more important role in citizens’ lives by spending more and building up debt. If you want to get rid of your debts, play at the लाइव डीलर ऑनलाइन कैसिनो. Below we describe the changes that are taking place.

Leviathan

The big government returned when the social contract between society and the state was rewritten on the fly. It has become commonplace for the authorities to track where people went and who they met, to decide how to pay them wages when employers could not do it. In countries where free-market ideas have reigned for decades, it was necessary to create social protection systems on the move.

According to McKinsey & Co., these interventions cost the world’s governments $11 trillion in budget deficits. There are already debates about how long such expenses can last, and when taxpayers will have to pay the bills. At least in developed countries, ultra-low interest rates and stable financial markets do not indicate a short-term crisis.

In the long term, a serious rethinking of economic theory is changing the perception of public debt. According to the new consensus, governments have more spending power in a world with low inflation, and they should use fiscal policy more actively to stimulate the economy.

Even easier money

Central banks have started printing money again. Interest rates have reached a new record low. The policy of quantitative easing is intensifying, the Central Bank is buying corporate and government debts.

Such monetary interventions led to the emergence of the softest financial conditions in history and provoked insane speculative investments. Central bank policies will be difficult to change, especially if labor markets remain disrupted and companies continue to accumulate savings.

Debts and zombies

During the pandemic, governments offered loans as a rescue measure, and businesses jumped at it. One of the results was the growth of corporate debt throughout the developed world. According to the Bank for International Settlements, non-financial companies borrowed a net $3.36 trillion in the first half of 2020.

According to the Group of thirty website, due to falling incomes in many industries due to lockdowns or consumer caution, as well as due to losses that negatively affect the balance sheets of enterprises, conditions are being created for a “serious crisis of corporate solvency.”

There may also be a certain danger that companies receive too much support. This may be a sure recipe for creating “zombie firms” that could not survive in a free market and are supported only by state aid, which makes the economy as a whole less productive.