Coronavirus is the expected black swan event

in Project HOPE2 years ago

I was going around this topic for a long time. I don't like to comment on anything, what is not clear and what could be taken as pure speculation. But nowadays, there are facts, which are impossible to hide. And those facts have many consequences. So let's get started.

obrazek.png

10-year economic megacycle

It is already a few years I hear from many economists and financial experts words of the next financial crisis. Or let's call this another depression or long term correction.

The macro view says to us that there are 10-year megacycles of the world economy. In other words, once in 10 years, there is some or another financial collapse. In 2008, we were facing a housing crisis, which then moved towards all sectors of the economy.

Two years ago, I listened to an interview with Peter Schiff. The one Peter Schiff, which predicted the financial crisis in 2008. Okay, he is not a very positive person in the crypto space, but he is a well-respected economist and he likes to use gold as the store of value.

I fully agree with Peter Schiff, that a deflection from the golden standard in 1973 was not a good move. Before this year, in US the dollar was backed by gold. From that moment, the inflation of the currency rose significantly, because there were no obstruction in creating new money just from the thin air.

Some economists were sure, that another crisis will come immediately in 2018. Some said, that it will come in 2019. And the others told us, that in 2020. But the world economy seemed to be vital and when not, pumping of new money to the system led to the new all-time-highs of the stocks indexes such as S&P500. Why? Because the "new money" was used to purchase stocks. So, everything looked great again.

obrazek.png

Black swan event

I heard many opinions, that the next big crisis will be even bigger than the one in 2008. And that it will be pushed by some black swan event. This event is always something unexpected.

Investopedia.com defines a black swan event like this:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

There were several thoughts of what this event will be. Some pointed out BREXIT, some the TRADE WARS between the US and the rest of the world and predominantly China. But those events, like Brexit, were pretty predictable, almost like a Bitcoin halvening.

obrazek.png

Coronavirus spread

But then Coronavirus spread around China and then, thanx to airplanes and other mass transport, to the rest of the world. We have now first infected people in Italy, Austria, Croatia and also Egypt, so Europe and Afrika are "in the game". That is not a good sign.

If it would be just a local problem of China potentially south-east Asia, that could be horrible for the Chinese economy indeed and as for the world's economy. Surely for the suffering infected people and even more for those, who tragically passed away. But this analysis is more an economic overview so let me stay on this.

The spread of contagious coronavirus in mainland China has a negative impact on industry and trade. Companies such as Apple, Airbus, and Fiat Chrysler, which are directly dependent on supplies from China, are currently addressing production outages.

China is such a big economy, one of the largest and its supply of goods is dependent on many other chain links so it is not just consumer goods produced directly by China.

Conclusion

Coronavirus is a serious problem. If it will become a global pandemic or not is almost irrelevant. Well, it is relevant, but the global recession just started, believe it or not. Capital protection against the recession or even insolvency of some large companies that could trigger a domino effect has already been ensured.

US government will allocate $1,25 billion into new emergency funds to bolster the coronavirus response. Chinese central bank has already pumped $ 174 billion into the market to avoid unnecessary panic. These are certainly important and necessary steps. But look at the rest of the world. Japan's economy is on the brink of recession. Global growth will probably not be positive this year due to those causalities.

The steps from the US and Chinese central banks might lead to helping the economy short-term, but that great increase in money in circulation will lead to higher inflation and lower purchasing power of the population. Well, not the richest class, but the middle and lower class for sure. And they are the majority.

Decentralized cryptocurrencies with limited supply such as bitcoin are in a big need nowadays. One can simply protect own finances from inflation and depreciation. But surely, money is not the first thing you should be thinking of these days. But also not the last!

The purpose of this article is not to spread fear, but to remain vigilance and precaution.

Project Hope Venezuela is an initiative created to grow. For more info click the logo of Project Hope:

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Photos used in this article are from Pixabay - CC0 license

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Hi @ritxi

Unfortunately, it is already considered a worldwide pandemic. more and more there are cases all over the world.
the economic problems that this will bring will be terrible for the economy and for society, all over the world.

Saludos

This is true and sad at the same time. Let's hope it will turn to better as quick as possible.

But WHO won't admit or use that word. Don't trust WHO any more than you will trust Chinese State propaganda.

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Scary times ahead of us @ritxi

Resteemed and upvoted already.

This is an excellent read! I love how you weaved your facts together. Maybe Corona virus is the black swan of 2020, only time will tell. Cheers!

Thank you @gandhibaba, I know it is more pesimistic reading, but seems to be true.

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I think that in the next crisis, or rather, the one that is already beginning to be noticed, all the conditions you mention (Brexit, economic warfare, geostrategic and political tensions) have joined to give a very worrying result.

Now, as things were already tense, just one drop was enough to spill the glass and the coronavirus seems to fit very well in that role of being a new and unexpected disturbance factor (although the theorists of the cospirations already come out to say that it is a biological weapon developed by the USA). This virus necessarily decreases the activity of the second market in the world and affects the country that is one of the most prominent technological equipment production centers in the world, if stopping the long-term production would be an unsuspected economic catastrophe.

Let us also add the spread of the virus and the way in which cases are being found on different continents, this leads to intensification of the control of goods and the movement of people, I do not see it as a bad thing, but if it lasts too long it will not Being healthy for freight costs and people's quarantine time does not help their productivity.

Thanks for your thoughts, surely one day or another, the cure will be invented (and tested). But this seems to take quite a long time. Now we can only watch how deep it will go (the despair/crisis or whatever we call it). Just check stock indexes of yesterday...

Stock markets are afraid and have reason to have it.
I hope that the vaccine and the treatment will develop fast enough so that the effects of the epidemic are controlled a little, if work is not accelerated in this sense, I think it will do a strong damage to the global economy.

Yes it is most probable that it will...

if you slightly alter the point of view you might see it like "the global economy", whoever represents that behind the screens in hi towers, is always looking for potential black-swan events (as you call it here) , for the simple reason that you can't make money with money if it stays up or it stays down , sideways is nice for HFT-algorithms but big money likes big chunks ... you can't really manipulate a trillions market like your proverbial dollar there (which for some reason seems to be 'the world currency' in a way and manner of speaking) but you can play the masses mind , and everything below you if you are the one on top.

In that aspect it works a lot like smallcap like lets say all of planet Crypton (lol) - you exagerrate here, and remove a bit there and before you know it ...

i think it was warren buffet who wrote a book on real estate or maybe wait no

(its all one soup in my head) comes down to something like

*Invest in property NOW!* *(or forever live with your regrets)*

Invest when fear, doubt and uncertainty grip the mind of the crowd
Sell when wild hopes and speculative fever burn away reason

and then some, it says to be accredited to Warren Buffet (one of mister Suns good friends i hear hahah) but i cant be sure of that , fact is it is fact

black swan events are huge money makers, you can't have trade if you cant buy low :)

Warren Buffett is in fiat for quite a time - maybe he saw this possible opportunity also as the peak of the equity market. He is quite experienced to use those abilities to make him some good profits. As always, he trades long term, which seems to be a great overlook.

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Dear @ritxi

It's hard to disagree with you. Coronavirus is surely a black swan. However I would argue if it has been expected or not. My impression was that majority of people and investors were still very bullish at the beginning of the year. And many did not expect such a downturn. Anyway that's just my own little impression.

The macro view says to us that there are 10-year megacycles of the world economy.

Indeed. However one thing we need to remember that all previous cycles were very different from current ones. Never in the history central banks were as active as they are now. So hatever we've learned from the past - may not apply to current situation.

Why? Because the "new money" was used to purchase stocks. So, everything looked great again.

Indeed. Most of those newly printed cheap money ended up on stock markets (via REPO market). Hardly any of it will end up in real economy, where lack of liquidity is also becoming a problem.

Upvoted already,
Yours, Piotr

Hi @crypto.piotr,
thanx for stopping by. I am concerned about the central banks doing. Surely, their short-term help might avert the disaster, but where are the limits of the new money supply? Probably there are no limits. But their game can be played again and again for a few more decades I am sure of it. But then what...

I just realized that I never actually thanked you for your comment. Big thx.
Cheers, Piotr

Yeah I was talking about the shipping and manufacturing impacts. The economic development is going to take a massive hit. Today proved that.

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True, thanx for stopping by.

Already this virus made presence in South America: a case confirmed in Brazil, three suspects in Peru and Chile are monitoring 260 people.

The effects of this virus in South America may not significantly affect the world economy, but it will change the lives of many people. Borders will be closed, flights will be suspended.

In Venezuela the consequences can be of great magnitude since the health system is the most precarious of the entire continent.

In the words of the Chinese president:
"The world is not prepared to face the Coronavirus."

That is a sad truth, let us hope it will not be so much damaging.

That is a sad truth,
Let us hope it will not be
So much damaging.

                 - ritxi


I'm a bot. I detect haiku.

let us hope... time will tell.

hi @ritxi

Well at this point it is already considered a pandemic and we are definitely all affected in one way or another by this problem. This will lead us to reflect on the uses we give to resources and the way in which we must protect ourselves and care for the planet. I wish it wasn't all greed and ambition.

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I agree with your view, but thus who leads have such big egos that ambitions and greed will sadly remain the top goals. I hope that will change one day, but it seems to be in a distant future.

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Definitely a way to force the world to come together.

Yep good point there!

 2 years ago Reveal Comment

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