/ world today news/ A year ago, the WHO announced that a “pandemic” was beginning in the world. Since that moment, restrictive measures have been urgently introduced in most countries of the world, which affect the lives of billions of people on the planet. An economic crisis was provoked – the deepest in post-war history. According to IMF calculations, the drop in world GDP last year was 3.5%. The economies of the G-7 countries fell by 5.9% (the USA – by 3.4%), the countries of the European Union – by 7.2%. Only China at the end of the year showed economic growth (according to the IMF, 2.3%). The past year has erased all the gains made by the global economy over a decade. The “lost decade” cliché reappeared.
In total, the G20 countries spent more than $13 trillion to support their economies. The United States stands out in particular, where the total budgetary costs of combating the viral economic crisis reach 5 trillion dollars per year. Leading central banks injected about $10 trillion into the economy last year. Central bank key interest rates were the lowest. In the US Federal Reserve, it remains at the level of 0-0.25%; in the European Central Bank – at zero. M The Central Bank of Japan – at a level of minus 0.10%; from the Swiss National Bank – minus 0.75%. Central banks increased the money supply mainly by buying government debt. The total public debt in the world last year increased by 10 trillion. dollars, or 15%.
Last year, central banks also began actively buying corporate bonds and even stocks (which used to be exotic). The central banks of the US, EU, Japan and the UK conducted unprecedented “quantitative easing” in 2020, buying $7.8 trillion worth of government and corporate securities from the market.
Around the world last year, the real economy was falling, but financial markets were growing. The total capitalization of the corporate securities market reached 100 trillion by the end of the year. dollar, which is a third more than the capitalization at the beginning of 2020. The stock indices of many leading corporations have grown exponentially during the year; thus, the shares of Elon Musk’s Tesla Corporation have increased in price by 9 times.
However, this “plague time feast” is not free. It will have to be paid.
First, skyrocketing debts must be serviced.
Second, stock market bubbles cannot be inflated indefinitely. Theoretically, they can be supported by the growth of profits of “inflated” companies, but it is unlikely that the same “Tesla” will be able to increase its profits nine times (in proportion to the growth of its capitalization). The bubbles will deflate, and a second series of recessions is not out of the question in 2021.
Third, there is a risk of a serious rise in inflation. The billions and trillions of dollars that poured into the financial markets last year may begin to flow from there into the markets of a wide variety of goods – raw and finished goods, investment goods, consumer goods. Stock indices and stock prices of individual corporations are already sinking. There are already visible signs of rising prices for raw materials, energy resources, food and many types of industrial products.
Central banks, which have been running ultra-loose monetary policy, have been strained. The emerging signs of inflation are a signal that it is time to end the soft policy and move to a sharp one, which involves a reduction in the money supply and an increase in the key interest rate. However, this is fraught with a number of problems. One of them is the increase in interest payments on the public debt. With key interest rates even at the 2-3 percent level, public debt service costs threaten to become a major item in budget spending, overtaking defense, economic support and other government programs.
Today, governments and central banks are painfully looking for a way out of the economic impasse provoked by the “pandemic”, but they are looking beyond the competence of economists and financiers – in medicine and health care. A strange belief began to spread that a way out of the economic impasse could be found with the help of population vaccination. Forecasts of recent months see vaccination as the most important prerequisite for solving economic problems. There will be mass vaccination – there will be recovery and growth. If it fails, there will be a new business quarantine and a continuation of the financial and economic crisis.
The IMF predicts that mass vaccination will take place on a planetary scale, and outlines promising prospects: in the European Union in 2021, GDP growth could reach 4.2%, and in the United States – even 5.1%. The economic departments of governments and central banks are watching not so much the economy as how the COVID-19 situation is changing and how vaccinations are progressing. And it seems to be going well. As of 16 March 2021, it covers 40% of the UK population, 33% of the US population, 12% of the EU countries’ population.
In the latest forecasts of foreign government organizations and private corporations, I see increasingly optimistic notes. In March, Bank of America conducted a survey of Wall Street bank executives, and here are the results: 91% of respondents expect economic growth to accelerate, 89% expect profits to increase. Both indicators are a record since polls have been conducted.
Optimism is also visible in the markets. Thus, in March, metal prices rose to a level not seen in the last 7 years; on the food market – prices are the highest in 6 years. Oil prices are now averaging $60 a barrel, and someone is reading them back to a record $100.
A few words about Russia. The virus and the economic crisis did not bypass it. According to IMF calculations, in 2020 the decline in GDP in the Russian Federation was 3.1%. This is slightly less than the global average for autumn. Probably because in most Western countries there were two lockdowns last year, and in Russia – one. The total volume of anti-crisis measures in Russia in 2020 is estimated at 65 billion dollars, or approximately 4.5% of GDP. The growth of the money supply was not as great as in the West. The growth of the budget deficit and government debt of the Russian Federation was also more moderate. The key interest rate of the Bank of Russia was noticeably higher than in the economically developed countries of the West (in Russia last year it was maintained at the level of 4.25%), but at the same time it was incomparably lower than in previous years in December 2014 the Central Bank raised the interest rate to 17%).
This year, however, inflation in the Russian Federation began to rise. Apparently, the money supply created by the Bank of Russia last year eventually began to flow into the commodity markets, pushing up the prices of both consumer goods and industrial goods. At the beginning of the year, the Central Bank published its inflation forecast for 2021: 3.7-4.2%. As of March 9, however, on an annual basis, the value of this indicator reached 5.8%. It turns out that the real main interest rate of the Bank of Russia (taking into account inflation) already has a negative value. Financial analysts say in one voice that this year the Central Bank of the Russian Federation will be forced to raise the main interest rate, taking into account rising inflation. And this, according to many experts, will lead to an increase in the cost of loans, to the emergence of problems for the Ministry of Finance with the placement of new tranches of federal loan bonds, to an increase in budget costs for servicing the state debt.
The IMF gives a forecast for Russia for 2021: its GDP will have to grow by 3.1%, but with a warning: with mass vaccination of the population. According to the latest data (as of March 14), the number of vaccinated people in Russia is 5.45 million, including fully vaccinated – 2.15 million people. It turns out that the number of fully vaccinated is only 1.5%, which cannot be compared with the “achievements” of the West.
If we follow the logic of economists from the IMF, without accelerating the vaccination, Russia has no chance to get out of the negative zone, as it was last year. But the US, EU, UK with their high vaccination rates will outstrip everyone else in economic terms.
This is how another myth is born. It replaces the myth that the world’s economic crisis was caused by an invisible virus. I have written more than once that the “pandemic” is a cover for the real causes of the crisis – imbalances have been building up for decades in the world economy and international finance, but for the deepest recession in 2020 they blamed the coronavirus and made people believe it.
Now they want to make people believe that with full vaccination the economy will boom. I’m not a doctor, and I won’t get into epidemiology, but as an economist, I say responsibly: linking economic recovery to vaccinations is either a hoax or a complete lack of professionalism. The real causes of the crisis lie in the capitalist model of the economy, which, since 1825, has entered crises with surprising frequency. And if we are talking about medicine, I will allow myself an analogy: the wrong diagnosis made by a doctor can delay the treatment of the patient and even lead to death. It’s the same in economics.
Translation: V. Sergeev
#decided #treat #economy #vaccines
