Great Depression 2030: Will history repeat itself when COVID is Over?

In this VUCA world, we have already seen economic disappointments in the first two decades of the 21st century: The bursting of the dotcom (Y2K) bubble in 2001 and The Great Recession (Global Financial Crisis) in 2008–09. Economists across the Globe are predicting that history will repeat itself and Global economy will follow the same trend of post Spanish Flu ‘Great Depression’ cycle in 2030.

Current Global Economic scenarios:

A Decoupled Global Economy:

US: Recovery with a mass reopening with a vaccinated population is on track in US. By doing a quick summation of all the various Covid relief packages passed under two POTUS, the US has already pumped more than $5 trillion into the economy.

The figure below shows the share of total COVID-19 cases over time for each quintile of financial distress, starting on March 9, 2020, the date when total cases reached 1 in 100,000 people in the U.S.

Source: Federal Reserve Bank of St. Louis (Jan 21)

“Today marks a milestone in our fight against COVID. Vaccinated people no longer need to wear masks in most settings and most capacity restrictions will be lifted. This year has been a challenge, but New Yorkers were #NewYorkTough. Today's major reopening is all thanks to you.

-        Andrew Cuomo, 56th Governor of New York State, 19th May 21

EU: Recently Eurozone falls into double-dip recession amid pandemic. Post fully vaccination, EU needs visionary leaders (long-sighted politicians) who can drive mega-stimulus (Billion Dollar relief packages) to restore full employment and prosperity across the continent. High level snapshot how Eurozone is performing currently:

·       Eurozone shrank 0.6% in January-March, implies double-dip recession

·       Germany shrank 1.7% in Q1

·       Italian GDP down 0.4%

·       Spain’s GDP fell 0.5% in January-March

·       French GDP grew 0.4% in first quarter of 2021

How World Market is behaving:

Source: Financial Times

Vaccination: Reopening World when more than 50% of population is vaccinated. Current infographic:

Source: Our World in Data

Bottom line: ‘The Great Reset’ button already launched by COVID

“Covid has acted like a time machine: it brought 2030 to 2020,” said Loren Padelford, vice president at Shopify Inc. in the last year.

Possible reasons with avoided risk factors of Global recession:

1) Check on Public/Private/Government Fiscal deficits (debts and defaults): With the increase in domestic demand, optimum production, good employment numbers added by sustainable debt levels can rectify the circumstances of mass defaults and bankruptcies.

2) Correction in demographic timebomb in advanced countries: Since data is available from Pre-Covid & during COVID, predictions can be made on budget (% estimated spend) on Public Healthcare systems. Relaxation on immigration laws can be done to overcome the demographic crisis in developed economies.

3) Inflation and deflation: Due to constant Full/Partial Country/state wide ‘Lockdown’, inventory levels (Goods) are balanced in the manufacturing sector however price downfall in commodities such as oil and industrial metals which may create the situation of ‘Deflation’ and can increase the risk of insolvency.

4) World is not Flat anymore – De-Globalization: COVID had already impacted the synergy and created more fragmentation within various regions such as NA, EU & Asia. It is a good sign for India and China where more than 1 Billion population (Domestic demand) is already available with a disposable income. Some analysts have already stated the beginning of ‘New Cold war’ which may continue for several decades owing to BREXIT, US-China (diplomatic breakup) etc.

5) Global Environment Disaster: Recent COVID to Ebola in 2014, Mers in 2011, H1N1 Influenza in 2009, SARS in 2003 to HIV since the 1980s, Nature’s check & balance can not be ignored, which is a bigger threat than Global Financial risk.

You can't use an old map to explore a new world. — Albert Einstein

Amid the euphoria, so what has been triggered by COVID. Let’s understand below:

·       Future of work (Job/Job skills), workforce & Next Employer (Global/Local)

·       Digitalization and Globalization (work from anywhere) have flashed radical shifts in how we earn, spend, save, live, and work. COVID-19 crisis has accelerated these beyond anything we could have imagined.

·       New Employment opportunities when ‘Lockdown’ is Over.

·       Zero Sum Game: For some industries (commodities driven) recovery is still on track, however some industries (IT, Pharma, Healthcare etc.) are performing better than ever.

·       More Spending Power due to 14 months of Lockdown.

-Work from Home means no expense on Car/Bike Fuel

-No International/Domestic Travel

-No Festival celebrations, personal/professional outings, Weekend parties, movies, shopping etc.

-Drive for a healthy lifestyle

All above factors had already pushed for a higher saving rate and when things will be ‘Normal’, Consumers will do an emotional spending which can boost the economy.

So Great Depression 2030 -- 'Bella Ciao' …'Bella Ciao'….!