Fiscal & Monetary Sphere
Pandemic has accelerated many initiatives frowned upon as recent as 2019
- Many governments around the world will use the crisis as a Carte Blanche
- Fast tracking their fiscal experiments in guise of “emergency” and “force majeure”
- Private sector’s inability to deal with the crisis presents a blessing & a curse for governments
Keep an Eye On
The evaporation and haircut of many pension and retirement plans will be a rude reality, akin to “Who Moved My Cheese” for many investors and pensioners.
Governments in US and Europe (bar Nordic countries) will wobble between Rightward, Leftward policies of the past (many tried, many tested and majority fatigued), as they have to develop “Fair-ward” strategies. Most of the economies are however very ill equipped for such a tilt in time to overcome public needs and have a sustainable and scalable response to these crises.
Post crisis Gilet Jaunes will find many sympathisers and franchisees with various colours of vests in many capitals around the world. As a result the introduction and rollout of a universal income will take place much quicker than many anticipated. Universal Income will remain as a new norm and not just an emergency measure. The UI will be here in advance to pave the way and greet AI!
We live in a time that is a far cry from being a Golden economic era. Yet one of the few winners is gold and its rapid price increase. Gold mining and refining companies will do very well in this climate. The only major flights that are taking place now are commercial flights carrying gold to certain capitals that are hoarding the precious metal.
Many advocates for eradication of bank notes, ATMs and cash will find the Corona a fantastic champion and ambassador to lobby for “possibilities of transfer of virus and germ through cash”, in order to accelerate the demise of bank notes in the economy.
If continued with the same rate (10m people lost their jobs in matter of juts two weeks in U.S) a figure of twenty million unemployed in Q1 of 2021 would not be a farfetched forecast. Such a rate will be the ignition for the massive defaults of bad debt in the US economy.
Only needs to add auto loan debts est.$1.4tr+ student loans $1.7tr (with a bleak horizon for employment for new graduates) + consumer loans of $12.5tr + federal government debt of almost $23tr will add to almost $39tr not taking to account the credit card balances and other liabilities.
The massive avalanche of bad debt, and mortgage backed securities with different packaging ready to break. Post crises many countries will find it very hard to bank on FDIs (foreign direct investments). There will be a scramble to find solutions; many improvisations and many mistakes will take place building up to new crises. “Go East Young Man” may be the new norm.
The inability of governments to breath new life into economy will open new arbitrage opportunities for major global asset managers like BlackRock. 2008 was Goldman’s and 2020 is BlackRock’s with different twists and nuances. For the rest of us we have to find a Gold Rock to make the ends meet!
Ali Borhani is the Managing Director of 3Sixty Strategic Advisors Ltd. It is the readers’ responsibility to verify their own facts. The views and opinions expressed in this article/commentary are those of the author’s and do not necessarily reflect the official policy or position of any other individual, agency, organization, employer or company.