2020: A repeat of 2008?
With huge economic strain given the impact of pandemic, it's time we question the leaders, the economists on whether it's a repeat of the history of the great recession of 2008?
A decade after the Great Recession of 2008, the global economy indicates the resurgence of economic complacency and unpredictability of markets as we dwell within close proximity of yet another global economic crisis.
Now: Main Street has collapsed
The current recession is not caused by a broken link within the system, but from an external threat, a worldwide pandemic. In order to keep the disease from spreading, many governments forced non-essential businesses to close and brought in lockdown orders, bringing many industries to a grinding halt.
But luckily, the overall financial system is in much better shape this time around - in part because of some of the policy changes made in response to the 2008 the recession.
Who's to be blamed?
USA, the hegemon seems to be the reason for such escalated international tensions.
Indices of major stock markets have been on a gradual decline in the financial year. Some even hint at the possibility of a “global debt bubble” which would inevitably cause another global recession.
A bubble is an economic cycle which includes the rapid escalation of asset prices followed by contraction of the asset prices due to exuberant market behavior. With USA being the superpower, dollar's strength is incredible. Slight ramifications and the world pays off.
The ramifications of the dollar's strength are witnessed via the trade war between the USA and China. This trade war has not only impacted their relation but also other countries especially south Asian countries who were caught between the crossfire.
The USA should not be held solely responsible for an imminent global economic crisis. The global market faces stiff uncertainty in the midst of rising tautness in the European Union, with reference to Brexit, leading to Britain opting out of EU.
Three major economic similarities between 2020 and 2008 recession
1. Uncertainty: Both crises share uncertainty as a key factor once they emerged in one of the two leading economies (the United States in 2008 and China end of 2019) and spread globally.
To put it simply and following Frank Knight (1921), “uncertainty” can be defined as a non-quantifiable risk. It is a risk that cannot easily be traced so that its probability of occurrence and its impact can hardly be predicted. This applies both to the new non-visible coronavirus and to the ‘‘subprime’’ virus.
2. Collapse: The initial drops in the stock exchanges of major countries (up to one-fourth of their valuation) have been analogous between both crises. And both global recessions have been successively qualified as the largest since the Great Depression.
Warnings but 'No Measures'.
Even with clear warning signs of an imminent global financial crisis, world leaders fail to take corrective measures and seek only benefit without realizing the damage.
Ironically, the recession of 2020 will produce well-educated unemployed labour force. Isn't that great ?