The Financial Crisis Of The Century
Right now the world is in the middle of fighting a deadly virus pandemic known as COVID-19 or coronavirus. The coronavirus pandemic is proving to be a huge challenge for the modern healthcare system and economy. This has resulted in business closure, school cancellations, and a stock market meltdown similar to that of the 2008 financial crisis.
This pandemic is unprecedented and could leave the world economy in shambles. But now what is going to happen? The people who’ve been forced to stay home still have bills to pay. How is the economy going to survive when all business operations have been postponed until further notice?
Well, this is a complicated issue. Society hasn’t gone through anything like this since antiquity. Staying home until this blows over can’t last forever, but there are a few clues as to how bad this will damage the economy.
This Financial Crisis Is Not a Repeat Of 2008
The great recession was triggered by the U.S housing market collapse. Today, the markets aren’t the problem, it’s the coronavirus. If the virus just magically faded away tomorrow, the stock market would soar immediately. This financial crisis is unique and separates itself from anything we’ve ever seen before. Millions of people lost their jobs in 2008, but those same people won’t lose their jobs right now.
The industries hit hardest by the coronavirus pandemic are hospitality, retail, restaurants, travel, and airlines. Each of these sectors are vital to the overall health of the American economy. Closing all of these businesses puts everyone’s job at risk, not just those in certain industries. Even if you can work from home right now, you are still vulnerable to the changes taking place in the economy.
In 2008, workers from these industries weren’t affected as much as they are now. Back then, most retailers were still doing well, and even most restaurants and hotels still had business. Yet, what’s happening right now with the coronavirus has pushed these businesses off a cliff.
This Financial Crisis Will Need Massive Bail Outs
For the businesses that are suffering throughout this crisis, a bailout may be what they need to survive. The government has already discussed bailing out certain industries like the airlines and even certain large restaurant chains. Individual states will have to help small businesses in each of their counties. Rent and other expenses will also have to be paused for the duration of the pandemic.
Workers are also vulnerable right now. Restaurants, hotels, and bars employ millions of people around the country. These employees will need some kind of financial aid from the government if they are going to survive this. The president is already asking for at least $1 trillion to be put back into the pockets of Americans. That’s $300 billion more than what Obama used to bail out the banks in 2008. There are a few problems with this that Americans should be concerned about.
The National Debt Will Rise
One of the biggest issues with a stimulus package is the effect it will have on the national debt. The United States national debt is currently at $23.3 trillion and rising. It has surpassed the nation’s GDP, which is about $19 trillion. With a stimulus package of this size, the national debt is going to skyrocket.
Numbers are starting to come back from China that shows just how bad their lockdown has affected their economy. With the challenges we are facing ahead, there’s no telling how much money the government will need to spend on stimulus packages.
People Will Still Lose Jobs
Even with all of the bailout packages that the government is proposing, some jobs will inevitably be lost as a result of this. Not every business is going to recover from this financial crisis. If consumer spending continues to lag, employers may be forced to lay off workers. For most businesses, especially restaurants and retail; business was already hurting before this pandemic happened.
The coronavirus has only made things much worse for them, and it is why some might not recover from this financial crisis. The government can help by offering stimulus checks to business owners. I can imagine some business owners giving up over the frustration. Most of them dedicate their lives to their jobs, only to have it destroyed out of nowhere. One thing that I know for sure is that remote work has been given a green light. Businesses and employees will seek drastic alternatives to hiring soon.
A Push for Universal Healthcare?
The coronavirus is making people realize how fragile the economy is and especially our healthcare system can be. This pandemic may cause people to start supporting medicare for all, even if they didn’t before this.
All of that really depends on how this all plays out. A vaccine might solve the problem if it’s made free for the public. However, if things start getting out of control people may begin questioning the legitimacy of our healthcare system.
Never before in our history has a pandemic caused such a strain on the healthcare system. For now, we will see how the health system reacts, which will determine its future.
Affect On The World Economy
The world economy was already starting to slow down by July of 2019. The yield curve inverted back then, and it meant that investors began to recognize slowdowns in the economy. The Chinese economy has been hit hardest by the pandemic. Their factories were almost all shut down and production came to a halt for the past two months.
What affects China also affects the United States. China produces a large sum of the products that American consumers rely on. This is why companies like Apple are so vulnerable to something like this due to their reliance on Chinese manufacturing.
Europe will also feel the burden of this financial crisis. The European economies have not exactly been strong in recent years, but now they remain especially vulnerable. Even countries like Germany, the richest nation in the EU, will have a hard time recovering from this.
The coronavirus pandemic is something that has caught world leaders and activists off guard. The response has been slow and our modern economies are not suited to withstand something like this. Governments will have to step in and take help with the businesses and workers that have been affected by this. This will require big stimulus packages that could add to the growing debt of many developed economies. This pandemic will definitely serve as a lesson to world leaders and business people; and will determine how we react to something similar in the future.