As Trends Journal subscribers well know, Gerald Celente had forecast the
“Greatest Depression” a year ago to date.
Celente said central banks, including the U.S. Fed, would continue to lower interest rates to zero-to-negative percent. And, minus a “wild card,” the “Greatest Depression” would strike by March 2021.
“Donald Trump will be Herbert Hoover, 2021!” Celente exclaimed.
The unpredictable COVID-19 “wild card” has been dealt.
The “Greatest Depression” has begun.
On 25 March, Ben Bernanke, former chair of the U.S. Federal Reserve, likened the economic disruption incited by the coronavirus pandemic to that caused by a “major snowstorm” and dismissed any likelihood of a serious economic downturn.
On 26 March, current Federal Reserve chair Jerome Powell warned, “The U.S. economy may well be in a recession.”
On 27 March, Kristalina Georgieva, managing director of the IMF, said not only the U.S. but also the world’s other major economies have already entered a recession.
None of them dared to use the D-word.
A recession is defined as two consecutive quarters of economic contraction as a normal part of the business cycle.
A depression is a much longer contraction, marked by sizeable declines in incomes and employment.
And that’s what’s happening.
Over the last two weeks, the incomes of more than three million people have vanished, with 3.3 million filing claims for U.S. unemployment benefits, five times more than filed in the peak month of the Great Recession.
Economists predict that the global economy won’t stabilize for months, and many think it will take years to recover from the damage inflicted by the current panic.
Other signs this is far more than a recession:
- Germany expects 2.4 million people to sign up for its wage compensation plan, compared to 1.4 million during the Great Recession.
- Ireland came out of the Great Recession with 330,000 new jobs. It estimates the virus pandemic’s economic aftermath could wipe out all of them.
- In the U.S., UK, and Eurozone, the IHS Markit composite purchasing managers’ index, which measures the amount of inputs businesses are buying, has fallen to its lowest level since the index was established more than 20 years ago.
The three indices were near or above 50 in mid-February and now are below 40. The hardest-hit sectors are retail, travel, and hospitality.
IHS said the figures forecast a 5-percent decline in U.S. GDP and 8 percent in Europe this year.
- Factories in Bangladesh, India, and other countries in the region that make clothing sold in the West are seeing orders vanish. European fashion chains Primark, Peacocks Stores, and H&M acknowledge canceling orders and many factories are likely to close soon.
“The trade impact will be much larger” than during the Great Recession, said Sheng Lu, a professor of fashion at the University of Delaware. During that recession, most factories kept working but at reduced capacities. “This time is a business lockdown,” Lu said.
He estimates that a 10-percent reduction in Bangladesh’s exports could spark a 9-percent rise in unemployment there.
- Crashing oil prices have forced Norway’s central bank to buy krones, the national currency, with dollars to prop up the currency, which has been the worst performer among those of ten large industrial nations tracked by currency traders.
- Chinese factories are gradually returning to production but with little benefit: much of the rest of the world’s economies are still locked down and consumers in China are either reluctant or unable to spend.
China’s $43-trillion property market saw an 11-percent drop in sales from February to March and a 40-percent fall from March 2019. However, sales shrank 70 percent from January to February, indicating that the market might be firming.
China’s flabby rebound augurs poorly for any U.S. recovery; consumer spending accounts for two-thirds of U.S. GDP.
Lesser economies aren’t spared.
- Singapore, among the earliest nations the virus invaded, is bracing for what could be its deepest recession, the government there said. The island’s economy contracted 10.6 percent during the first three months of this year.
- Ecuador has acknowledged it will be late in making coupon payments on three bonds, one of which has fallen in value from 88 cents on the dollar to 24 cents over the last month. Oil, on which Ecuador depends for half its export revenue, has fallen in price this year to depression-level lows.
- Thailand’s central bank revised its 2020 economic forecast from 2.8 percent growth to a 5.3 percent contraction.
“We’re heading towards uncharted territory now,” said Irvin Seah, an economist with Singapore’s DBS Bank.
After speaking with each other in a conference call on 26 March, leaders of the G20 nations issued a collective public relations statement to boost spirits, vowing to “do whatever it takes” and “use all available policy tools” to minimize and reverse the economic catastrophe that the coronavirus has wrought.
The G20 nations promised to spend $5 trillion or more to accomplish the task but announced no other joint details.
If the crisis lingers, unemployment could reach 30 percent and national economies could contract by the same proportion, warned Swedish industrialist Jacob Wallenberg, whose family company owns interests across European economic sectors. In that case, “There will be no recovery. There will be social unrest… violence… unemployment… Citizens will suffer dramatically; others will die.”
“I am dead scared of the consequences,” he said, adding that he hopes to start a global debate about how to shape the post-pandemic economy.
He added that the European Round Table for Industry, a group of industrialists representing companies with $2 trillion in revenues, supports his call for an open forum on the post-pandemic world.
TREND FORECAST: Among the other industries that will crash in the “Greatest Depression” are print and broadcast media, which are dependent on advertising.
Well documented in previous Trends Journals, advertising agency profits were diving, as a result of slowing retail and auto sales, before the virus struck.
Now, with businesses deep in debt and struggling to survive, those that do bounce back in future months will spend less on advertising and more on trying to cut costs and boost profits.