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Has the next stock market crash already been programmed? Thoughts on the corona crisis and the current lockdown! From The Motley Fool

Has the next stock market crash already been programmed? Thoughts on the corona crisis and the current lockdown!

I don’t know how you look at it, but I think this year is absolutely tough. In any case, I can’t remember when a single topic was constantly present for so long. Because since January everything in the media has only been about the corona pandemic and the first or currently also the second lockdown. It almost seems like all other problems just vanished into thin air.

And it’s not just the news either. No matter where you go and whoever you speak to, the coronavirus is the subject of almost every conversation to this day. Of course, this is understandable to a certain extent. After all, the measures taken to contain the pandemic have changed our lives significantly.

One circumstance that slowly led to problems even before Corona is the excessive debt of states around the world. But in the course of the corona crisis, the printing press was started everywhere. Namely, to get clear aid packages on the way, which should serve to support the economy. But as a result, the national debt continues to rise and an end to this development is far from in sight.

What is brewing up there? Something really big, I would say. If you believe the head of the Ifo Institute, Clemens Fuest, then the economic upheavals caused by the corona pandemic are already clearly dwarfing those of the 2008 financial crisis. He says that part of the economy is so badly damaged that it simply no longer works. But at the same time he also warns that an exit from financial aid must be planned now.

But hasn’t the child fallen into the well here long ago? Because in the spring, Germany launched the largest aid package in the history of the Federal Republic of Germany with almost 354 billion euros. For this alone, new loans amounting to around 156 billion euros had to be taken out. And Finance Minister Olaf Scholz is also planning new debts of more than 160 billion euros for 2021.

But the EU has also put together a Corona aid package. Here it is an impressive 750 billion euros that are being made available to cushion the unprecedented economic decline in the European Union. However, in order to fill the planned rescue fund with money, the EU member states have to take on joint debts for the first time. This is the only way for highly indebted countries such as Italy or Spain to obtain aid.

The consequences are not foreseeable. Europe is currently in the grip of a second lockdown. And this could possibly be with us until spring. But I think this would be a real horror scenario. In my opinion, it is by no means certain whether the aid funds planned by our and the European finance ministers would be sufficient in such a case.

What is certain, however, is that the longer the current lockdown lasts, the more serious the economic damage will be. In my opinion, the consequences cannot yet be foreseen. Much will depend on how quickly politicians are able to implement a change of strategy. The opposition parties in particular have made various proposals. For example, it is suggested that the risk groups should be protected in order to make a cultural and economic life possible again.

There are certainly many options here. But at the moment it doesn’t look like a rethink. And the question that arises now is therefore: How long can the stock exchanges actually decouple from real economic development? So it could well be possible that the stock markets will be put to the test again in the near future. Of course, there does not necessarily have to be another stock market crash, but given the current situation, such a scenario should always be kept in mind.

The post Has the next stock market crash already been programmed? Thoughts on the corona crisis and the current lockdown! appeared first on The Motley Fool Deutschland.

Motley Fool Deutschland 2020

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