Dickson Igwe, Senior political contributor
The world economy is in the process of abysmal collapse: a major contraction in consumer demand and supply.
In the USA, the current President, Donald Trump, is in denial, and states that he expects the economy to begin to return to normal this month. Donald Trump believes economic growth precedes national health. And he insists he will have the country open for business next month. He will find that the Corona Virus will prevent him from doing so. The Corona Virus drives national agendas today, not any politician, and no matter how powerful.
And like his counterpart, Boris Johnson in the UK, who only began to smell the coffee late in the day, Trump has already bungled the Corona Virus response through his own dismantling of the national health infrastructure designed to fight this type of security threat to the country. This was another attempt to kick President Barack Obama in the teeth that is now costing lives.
As the USA economy collapses, the two men who appear to have their heads screwed on are New York Governor Andrew Cuomo, and the man leading the fight against the virus Dr. Anthony Fauci.
On the other side of ‘’common sense, ‘’ is Donald Trump and his white evangelical base that see the pandemic as some type of conspiracy against the President who continues to hold the support of 90% of the Republican base. This pandemic was created to stop the US President getting a Second Term, many of these Evangelicals assert: Corona is a hoax.
But tell that to the thousands dying around the world. And the hundreds of thousands infected by the virus.
New York Governor Andrew Cuomo. Photo courtesy https://variety.com/
Now, the west is already in recession. The simple reason is there has been a massive shock to both global demand and global supply. Putting it simply, economics is about exchange. I buy my toothpaste and soap in exchange for cash I earn at work, from a business, or investments I own and manage.
When I am hindered from going out to make purchases, because of a national lock down or curfew, and when the supplier is unable to meet the demands of his customers because of a cut in the link of his supply chain from some unforeseen event, the wheels of commerce come to a grinding halt.
Then when these economic wheels driven by exchange fall off their axle everything else in terms of economics collapses. And that is what is taking place the length and breadth of the world today.
The one well tested panacea is STIMULUS. The USA has adopted a policy where it will pump $2 trillion into the economy to prevent a total collapse: fiscal stimulus. In total it is estimated that $7 trillion of stimulus is being pumped into the global economy worldwide. Fiscal stimulus means using debt instruments to bail out businesses large and small, and putting cash borrowed from investors, directly into the pockets of consumers in an attempt to jump start consumer demand.
Already hundreds of thousands of jobs have been lost and the ‘’bloodbath in the US economy continues in spite of these unprecedented attempts at stimulus.
Stimulus cash is borrowed from global investors who ultimately underwrite global finance in a marketplace – in terms of global GDP- worth $87 Trillion.
The dire nature of the crisis in the UK has also meant unprecedented stimulus. As the UK economy flat lines, UK Chancellor Rishi Sunak is stating that all workers in the economy, public and private, employed and self-employed, can expect to receive most of their monthly income from government coffers, up to $4000 a month until further notice.
The same attempts at stimulus, and saving the global economy from collapse, is taking place elsewhere, in countries with multi trillion dollar GDPs. These are economies driven by central banks that hold the confidence of global investors: financial institutions that have the ability to create near unlimited cash by borrowing from global investors, who ultimately own all debt.
The key question is this one: will these historically unmatched attempts at stimulus prevent a long global recession?
The next article in this series will attempt to answer that question.
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Dickson Igwe is an education official in the Virgin Islands. He is also a national sea safety instructor. He writes a national column across media and has authored a story book on the Caribbean: 'The Adventures of a West Indian Villager'. Dickson is focused on economics articles, and he believes economics holds the answer to the full economic and social development of the Caribbean. He is of both West African and Caribbean heritage. Dickson is married with one son.
