Are we now staring down at a depression no one living has ever experienced!
We are at the precipice of the fall, it’s not about “if”, it’s about “when”. That the world economies are free falling is now certain, what is not certain is how far will they fall.
The makings of a disaster were evident through the terms of the current far-right governments across the world. The trade wars, the finger pointing, and the testosterone driven gesturing was leading us downhill no matter which way we tried to analyze it. The COVID-19 fiasco has just made things a million times worse.
To understand the real impact of this, let me take you through a journey on how our world was built and I am not going to stoke controversy by discussing or debating existentialism, but I will talk about the basis of the functioning of the human world. The world we built, and took centuries doing started with us as primates, then Neanderthals and there after homo sapiens but from the very first step of the evolutionary ladder we were and continue to be herd animals. Psychology today describes humans as “We survive only in highly coordinated groups. Individually, we are designed to pick up social cues, coordinate and align our behavior with those around us.” If we were to look at the journey of civilization, we will realize that almost all economic activity is dependent on us herding together. There is barely any sector that is not dependent on the need for humans to be in “physical” contact. Now you would wonder what this has to do with the depression I so speak of, well the answer lies in our coordinated response to apparently the worst pandemic that we have ever faced (and I say apparently but that is a debate for another time). Our response to arrest the spread of COVID-19 has been to strike at the very foundation of human survival – social contact.
Let’s now address the elephant in the room – Economic Depression, and just like mental depression there is no one definition of it. In fact, the human spirit of optimism and hope does not allow to fully define it. The reason why I feel that this is going to be a lot worse than any we recession we have seen before is that we are faced with a double whammy – economic non-function and political dysfunction across the board. Additionally, this is the first ever “Global” slowdown – synchronized across all countries. The slowdown in all three giants – US, China and Europe will without doubt have impact across the globe. Most systems – even the fundamental ones such as healthcare – will break. However, the most defining characteristic of this depression is how deep it will run and how long will it last. The expected waves of the pandemic tell us that recovery will not begin till there is seemingly a cure or a vaccine. Even when we reach that point, bringing the world back to normal will require more effort than we have ever had to make. By then, a lot will be lost, and recovery will be a very long and arduous road.
Though you will always here the optimist in the room say, “What about the stock markets? Aren’t they an indicator of the economy? And if they are, aren’t they signaling a bumper recovery?”. Well yes, the stock market indices are defying gravity, yes global bond yields are at lows that make us wonder if this depression is all just talk but, honestly, the financial markets have long been out of sync with reality. Currently the inefficiency in the markets is alarming and a few big stack bullies are running the markets waiting for the right time to pull the rug from under us all.
I think now, I have convinced you well enough that the soothing light at the end of the tunnel is just a freight train coming our way (Credit – James Hetfield/Lars Ulrich). So, what is the way out? For one, the governments around the world need to wake up, take stock and start taking responsibility. And no, the solution is not going to be to print more cash as one of our great leaders has suggested since that is going to come with its own set of repercussions none of us are ready to face. The solution is going to be to come out and transparently aid the sectors that need it, and honestly represent the truth to people instead of glossing it over and hoping to stay in power.
Finally, the one thing that I can say is that no matter what is thrown at us, we, The People, will find a way.