Will this health crisis turn into a full blown financial crisis?

[Logosone]

2 hours ago, Brunolem said:

You don't buy the dip, you buy the bottom...and it is still very far!

 

As for China, how do you know (for a fact) it is recovering?

 

It is very difficult to know what is really going on in China, even in normal times.

 

Videos posted by mainland Chinese, in Wuhan, seem to show that everything is still very far from normal.

 

On top of that, China has an export economy...who is going to buy Chinese stuff when the global economy has come to a halt?

Yes, the bottom is still a way off.

 

However, the signs are that there are no new infections for China. The oil war should keep oil prices low for some time, which will help a manufacturing nation like China.

 

Whilst it is true that China's export markets will be depressed for a while they will still buy some of the key products China produces. For instance almost all the world's electronics require Chinese components.

 

Moreover, we may well see the continued development of the internal Chinese market growing in consumption as manufacturers try to offset smaller growth abroad with growth inside the world's biggest market.

 

There is no way that things will be as bad as during the Great Depression, production in agriculture and manufacturing both have developed way beyond what was possible in 1929. It will however be service providers that will be suffering.

 

We have seen with the UK getting caught with its pants down as it had no manufacturers of respirators and had universities scrambling to produce prototypes that manufacturing will be more important than it was, and I suspect the biggest losses will be in the service sector.

[saengd]

23 minutes ago, pdtokyo said:

A pretty clear request for evidence is diverted ...

 

Aptly, the practice of avoiding a question now has a label ...  "whataboutism" ... see quite a lot of it here and elsewhere ... 

 

https://simplicable.com/new/whataboutism

How do you get through your day without having something to panic about or getting involved in some kind of conspiracy theory? 

 

Doctors in the medical profession have a very basic premise that they teach at nearly all medical schools and it goes like this: if that's what it appears to be, that's what it is, in which case don't waste a whole bunch of time, energy and resource looking for something different that's sexy that it isn't.

[Brunolem]

5 minutes ago, saengd said:

"and it is still very far!

how do you know (for a fact) it is recovering"?

 

Well, these two "it" refer to two different subjects. 

 

The first "it" refers to the "bottom", while the second one refers to "China" and is part of a question, which is not mine to answer. 

 

As far as the bottom is concerned, no one can "know" about it, one can only make an "educated guess". 

 

So why don't we revisit this issue, say, by the end of April, and see the numbers by then? 

 

 

[Logosone]

14 hours ago, IAMHERE said:

A world wide Depression, way past a recession. Probably even the end of consumerism as we've known it. Minimalism is going to be forced on most us all because of necessity. The worst is yet to come. 

The levels of production, the knowledge of consumer products will not go away. Consumers have a memory. They will still want the best consumer products they can afford.

 

Even with a depression consumerism will not go away. Many people will have less money to buy consumer products, but they will still want them, they will still be produced. 

[Brunolem]

7 minutes ago, Logosone said:

Yes, the bottom is still a way off.

 

There is no way that things will be as bad as during the Great Depression, production in agriculture and manufacturing both have developed way beyond what was possible in 1929. It will however be service providers that will be suffering.

 

 

Of course, we are not in the 1930s anymore, so different issues will lead to different results. 

 

The word "depression" today is used to give an idea of the proportion of the coming economic crisis, which is not going to be a run of the mill recession. 

 

Big banks (JPM, Goldman Sachs...) , usually bullish, are already busy doing calculations and the results are not pretty: US GDP is forecasted to shrink by 15 to 20%, annualized, during the second quarter! 

 

The SECOND quarter... not this quarter, which is also going to be awful. 

 

This is worse than what happened during the Great Depression, in terms of numbers. 

 

In terms of everyday life, we will have to wait and see... 

[elgenon]

It has. Ask any American with a 401 K. Especially a retired one. Stocks down 30%, many businesses soon to go under. Many people out of work. The Treasury Secretary saying 20% unemployment may happen. What is a full-blown crisis to you. Europe and Japan and, maybe soon, America have negative interest rates.

[Logosone]

48 minutes ago, Brunolem said:

Of course, we are not in the 1930s anymore, so different issues will lead to different results. 

 

The word "depression" today is used to give an idea of the proportion of the coming economic crisis, which is not going to be a run of the mill recession. 

 

Big banks (JPM, Goldman Sachs...) , usually bullish, are already busy doing calculations and the results are not pretty: US GDP is forecasted to shrink by 15 to 20%, annualized, during the second quarter! 

 

The SECOND quarter... not this quarter, which is also going to be awful. 

 

This is worse than what happened during the Great Depression, in terms of numbers. 

 

In terms of everyday life, we will have to wait and see... 

Yes, I saw those numbers. 

 

Maybe worst case scenario 'how bad could it get', figures. Doesn't mean they won't happen, but not all forecasts by Goldman Sachs come true.

 

Even if the GDP of the US would shrink by 20%, the economy could live with that and would surive.

 

 

[talahtnut]

When 20 people have half the worth of the

world.

The current systemic crisis offers a Ctrl-Alt-Del

opportunity before they take everything from us.

The gold standard must be reinstated worldwide.

 

[Logosone]

That's a real danger the ruling class will be aware of.

 

If the population at large does not have enough of a standard of living that they are happy they could overthrow whatever stands in their way and just take whatever they want.

 

The super-generous handouts by the UK need to be seen in that light.

Edited March 22, 2020 by Logosone

[Brunolem]

2 hours ago, Logosone said:

That's a real danger the ruling class will be aware of.

 

If the population at large does not have enough of a standard of living that they are happy they could overthrow whatever stands in their way and just take whatever they want.

 

The super-generous handouts by the UK need to be seen in that light.

The problem is that this generous handout will end on the country's balance sheet, increasing its already massive debt, which is owed by the same people who receive the handouts (the super rich always manage to escape taxes, at least significant ones).

[Brunolem]

2 hours ago, Logosone said:

Yes, I saw those numbers. 

 

Maybe worst case scenario 'how bad could it get', figures. Doesn't mean they won't happen, but not all forecasts by Goldman Sachs come true.

 

Even if the GDP of the US would shrink by 20%, the economy could live with that and would surive.

 

 

Today's economy cannot survive without growth, because the ever growing debts need to be paid back or rolled over, and the interests paid.

 

There is always someone on the other side of a debt, and in this case it is mostly financial institutions that will go bust if there are too many failures.

 

The shale industry, for example, is massively indebted, and today nobody is going to lend to these companies...to pay back their former debts, which is what they were doing until now.

 

The amounts are so big that the crisis of 2008 and its 700 billion rescue plan seem ridiculously small today.

 

One way or another, a full reset of the system is needed.

 

 

[rumak]

On 3/20/2020 at 12:07 PM, BillStrangeOgre said:

 Old adage; money doesn't grow on trees!

Not so sure about that.   Step 1.   Cut down tree   Step 2.  Make paper   Step 3.  Print dollar bills

Step 4.   Load helicopter      Step 5.   Fly over big mansions first    Step 6.   Buy up all things

that are on fire sale    Step 7.   Have a martini with the "boys" and laugh it up  

Rinse and repeat as needed ...............

Note:  as George Carlin said " its all one big country club.  and YOU ain't in it   ????

[rumak]

2 hours ago, Logosone said:

That's a real danger the ruling class will be aware of.

 

If the population at large does not have enough of a standard of living that they are happy they could overthrow whatever stands in their way and just take whatever they want.

 

The super-generous handouts by the UK need to be seen in that light.

Is there some new (secret)  weapon that someone has that will enable this "overthrow" to happen?     If so,  have them contact Rumak because i can make the world right again !

We will start with compulsory birth control for 95 percent of the world.  (starting with all govt.

employees).  

When we get back to 1960 population then a critical thinking test will be given .  The small percentage that can pass will be allowed to procreate.   Sure !

[DaRoadrunner]

11 hours ago, Brunolem said:

You don't buy the dip, you buy the bottom...and it is still very far!

How does anyone know? If the Saudis and the Russians come to an agreement on oil the market will rise and you have missed the bottom already.

 

If the Govt comes through with a stimulus for airlines and Boeing, then likewise you have missed your chance.

 

Roadrunner may be wrong but is already buying on the drip, at these prices, long term I cannot go wrong.

[Brunolem]

1 hour ago, DaRoadrunner said:

How does anyone know? If the Saudis and the Russians come to an agreement on oil the market will rise and you have missed the bottom already.

 

If the Govt comes through with a stimulus for airlines and Boeing, then likewise you have missed your chance.

 

Roadrunner may be wrong but is already buying on the drip, at these prices, long term I cannot go wrong.

The Russians don't want an agreement, they wait for the US shale industry to collapse...and maybe so does Saudi Arabia. 

 

They struck when their main competitor was vulnerable, and are waiting for the kill. 

 

Boeing and the airlines may get a bailout, but they won't buy their own stock back anytime soon, and it is these buybacks which had pushed their share prices so high in the first place. 

 

So there may be a rebound, but don't expect the prices to go anywhere close to where they stood at their peak. 

[Pedrogaz]

AMSWER: yes it will turn into a fill blown financial crisis. People kept at home with no pay will buy nothing. Businesses with loans to service that are shut down will cause the banks to have ever increasing bad loans. It is only a matter of time before a bank goes dodgy and depositors queue up outside to get their funds back....a good old bank run. 

[Pedrogaz]

39 minutes ago, Brunolem said:

The Russians don't want an agreement, they wait for the US shale industry to collapse...and maybe so does Saudi Arabia. 

 

They struck when their main competitor was vulnerable, and are waiting for the kill. 

 

Boeing and the airlines may get a bailout, but they won't buy their own stock back anytime soon, and it is these buybacks which had pushed their share prices so high in the first place. 

 

So there may be a rebound, but don't expect the prices to go anywhere close to where they stood at their peak. 

Russia struck at a good time, right after US tried to sanction North Stream 2. The Saudi Russia move in my mind is coordinated. They won't kill shale and the US (free market economy bull<deleted>ters will bale the shale industry out), but SA and Russia will negotiate something good for themselves. SA likely wish to not invest all their surplus in US TBonds and Russia want sanctions relief. Simples.

Have you any idea of the debt that the shale "industry" is carrying....it will kill of many regional banks and maybe a few big ones without free money for the government.....why isn't this free government money called socialism? I guess it is because it is capitalism for the poor and socialism for the rich. 

[talahtnut]

2 hours ago, DaRoadrunner said:

How does anyone know? If the Saudis and the Russians come to an agreement on oil the market will rise and you have missed the bottom already.

 

If the Govt comes through with a stimulus for airlines and Boeing, then likewise you have missed your chance.

 

Roadrunner may be wrong but is already buying on the drip, at these prices, long term I cannot go wrong.

Well sounds simple enough, but I would not

trust it, too much manipulation by big players

and those in the know, maths and logic can

be your worst enemy.

Yep, I lost a bit of dough, now I prefer physical

assets, no maths or science involved, and not

even a gamble.

 

[swissie]

If you don't like the current crisis, you are not going to like the economic recovery after that.

The world will find itself burdened with additional "bad dept" on top of all the already existing mountain of dept.
- Unthinkable for Central-Banks to raise interest rates, should it become necessary to counter-act emerging inflationary pressure at some point.
By doing this, a huge number of companies could not live with "normal" interest-rates. Neighter could Italy, for example.
The Central-Banks will find themselfes between a rock and a hard place.

[Logosone]

9 hours ago, Brunolem said:

The problem is that this generous handout will end on the country's balance sheet, increasing its already massive debt, which is owed by the same people who receive the handouts (the super rich always manage to escape taxes, at least significant ones).

Oh I couldn't agree more, it's a real, massive problem for the UK, a country that has been downgraded by Moodys for a long period in succession now.

 

48 billion in interest payments just got a lot more expensive.

 

The UK does have a bit more leeway due to its assets, but it's heading in the wrong direction for sure.

[Logosone]

9 hours ago, Brunolem said:

Today's economy cannot survive without growth, because the ever growing debts need to be paid back or rolled over, and the interests paid.

 

There is always someone on the other side of a debt, and in this case it is mostly financial institutions that will go bust if there are too many failures.

 

The shale industry, for example, is massively indebted, and today nobody is going to lend to these companies...to pay back their former debts, which is what they were doing until now.

 

The amounts are so big that the crisis of 2008 and its 700 billion rescue plan seem ridiculously small today.

 

One way or another, a full reset of the system is needed.

 

 

I quite agree, obviously I parted from the assumption that the depression is temporary and growth follows thereafter. 

 

We have already seen this before, it wouldn't be the first time.

[Logosone]

8 hours ago, rumak said:

Is there some new (secret)  weapon that someone has that will enable this "overthrow" to happen?     If so,  have them contact Rumak because i can make the world right again !

We will start with compulsory birth control for 95 percent of the world.  (starting with all govt.

employees).  

When we get back to 1960 population then a critical thinking test will be given .  The small percentage that can pass will be allowed to procreate.   Sure !

It's a fair point, the government has the best guns.

 

But then so did the East German government in 1989.

[swissie]

3 minutes ago, Logosone said:

It's a fair point, the government has the best guns.

 

But then so did the East German government in 1989.

"The Government" consists of taxpayers that eventually pay for the "rescue-measures".

One way or the other.

[saengd]

5 hours ago, Logosone said:

Oh I couldn't agree more, it's a real, massive problem for the UK, a country that has been downgraded by Moodys for a long period in succession now.

 

48 billion in interest payments just got a lot more expensive.

 

The UK does have a bit more leeway due to its assets, but it's heading in the wrong direction for sure.

Not strictly correct, Moody's downgraded the UK from Prime in 2013 and then to the second tier grade in 2017, Moody's Aa2 is still regarded as high grade credit.

[Logosone]

12 hours ago, Brunolem said:

The Russians don't want an agreement, they wait for the US shale industry to collapse...and maybe so does Saudi Arabia. 

 

They struck when their main competitor was vulnerable, and are waiting for the kill. 

 

Boeing and the airlines may get a bailout, but they won't buy their own stock back anytime soon, and it is these buybacks which had pushed their share prices so high in the first place. 

 

So there may be a rebound, but don't expect the prices to go anywhere close to where they stood at their peak. 

That's been tried before though, in 2014 and the shale industry did not collapse.

 

I don't think the Russians will stand by forever with a depressed oil price. They just can't afford it. At some point they will come to the table with the Saudis again.

 

[Brunolem]

11 hours ago, Pedrogaz said:

 

Have you any idea of the debt that the shale "industry" is carrying....it will kill of many regional banks and maybe a few big ones without free money for the government.....why isn't this free government money called socialism? I guess it is because it is capitalism for the poor and socialism for the rich. 

The last numbers I had were about 250 billion dollars.

 

Mostly all in junk bonds that nobody wants now.

 

It will be difficult to bail out the shale industry because its needs are constant, since it is a money losing business, even at 60 dollars a barrel.

 

Thus if the government hand them a hundred billions today, they will need more next week, and more and more...

 

Until now it has worked because investors in search of return were willing to inject money in these money losing companies, but these investors won't return anytime soon.

 

The only way for the government to maintain this industry long term would be to nationalize it...which could well happen now that the US has become a full blown socialist paradise...

 

[Brunolem]

27 minutes ago, Logosone said:

That's been tried before though, in 2014 and the shale industry did not collapse.

 

I don't think the Russians will stand by forever with a depressed oil price. They just can't afford it. At some point they will come to the table with the Saudis again.

 

In 2014 the party was in full swing and investors were throwing money anywhere providing a modest return, without bothering to look at the balance sheet.

 

Today is completely different, nobody is going to invest in shale, especially with its junk bonds collapsing.

 

Russia can wait a few years, but Saudi Arabia can't, and the shale industry even less.

 

Yet, it wouldn't be surprising to see the oil aficionado in the White House nationalize the whole industry, because, you know, energy independence...

[Logosone]

1 hour ago, Brunolem said:

In 2014 the party was in full swing and investors were throwing money anywhere providing a modest return, without bothering to look at the balance sheet.

 

Today is completely different, nobody is going to invest in shale, especially with its junk bonds collapsing.

 

Russia can wait a few years, but Saudi Arabia can't, and the shale industry even less.

 

Yet, it wouldn't be surprising to see the oil aficionado in the White House nationalize the whole industry, because, you know, energy independence...

Granted, obviously there is risk-off attitude now. But there is also guaranteed cheap financing for years to come.

 

From what I gather shale oil production is very nimble, you can stop and start it again very easily.

 

According to the International Monetary Fund, Russia needs an oil price of roughly $40 a barrel to balance its budget, while Saudi Arabia needs over $80 a barrel to balance its books. 

 

Since it is in both countries interest you would think they would come together and thrash out a deal at some point.

 

Good point about US nationalisations, could happen.

[mike787]

Ah, YES...it has.

[Brunolem]

3 hours ago, Logosone said:

 

According to the International Monetary Fund, Russia needs an oil price of roughly $40 a barrel to balance its budget, while Saudi Arabia needs over $80 a barrel to balance its books. 

 

 

One could wonder what the oil price should be for the US to balance its budget...

 

Balancing the budget is a notion that applies only to other nations...and the US may well run a budget deficit of 3 trillion dollars, or more, this year...the sky's the limit...