Topic: History Reveals There Is No Going Back for the Economy (Read 343 times)

Surely, these are admirable sentiments, thanks.

My purpose here, rather than to predict if humanity will pull through in some sense (and BTW I think humanity will survive fine,) is to view the current crisis within the context of the nature of the modern Western system, which made its start in the Renaissance of the 1400s.

I would absolutely agree that change is natural and necessary.  But there is also the change and suffering that is due to the 'design' of this system, above and beyond that.

For example, if we had a truly free-market system as we are told to assume we basically live in, the economic dislocations due to a shutdown for a virus should be reversed when the virus problem is solved.  People would always need the same products and services, and demand and jobs would bounce back to pre-crisis conditions (and people would also have been incentivized to save enough to endure the crisis.)

But, alas, we live in a fundamentally different world, that is colored everywhere by the state control of money.  The nature of this system is to use state power to inflate bubbles that primarily benefit the rich and powerful, and to make sure the pain falls mostly on the public when the bubbles burst.  A key by-product of this system is economic distortion.  A lot of jobs are related to unnecessary but nice-to-have products and services for the lucky winners of this system.  When financial asset values go down, the lucky cut back spending, and everyone suffers.  The difference to the super-rich will be flying first class rather than private jets, but the difference to many will be loss of livelihood.  And these people will cut back and cause demand to shrink further.

That is the real, basic reason we're not going back to the old conditions any time soon.

Since the nature of the system is to use government power to blow bubbles that always burst or deflate, and both big and small bubbles as well as core vs peripheral bubbles are blown all the time, often simultaneously, I guess it's somewhat arbitrary as to which events we use to draw the line between two major phases.

That said, I have tried to draw the major lines around the life cycles of the big bubbles involving core financial assets.  The events around these tend to have the most lasting effect.  For example, the start of Great Depression saw the collapse of bank deposits, and the 1971-82 weak phase was primarily driven by the loss of confidence in dollars and Treasuries around the world.

I have made something of an exception for the weak phase starting in 2000.  The phase started only with the dot-com stock market bust, but it appears that some structural weakness was triggered at that point, because, ever since, the Fed has seemed to find it necessary to blow bubble after bubble to keep the system afloat, without the system finding time or strength to address the fundamental imbalances (e.g. long-term dependence by financial stability on central bank easing, ie money printing, which only furthered inequality and moral hazard, thus making the system even more unstable financially, politically, etc.)  This phase came in with a whimper rather than a roar, but can be identified by the basically continuous growth of imbalances, over the long years between 2000 and today.

While this is certainly true in the big-picture, I think that Hitler was objectively correct in saying that the Allies aimed to suppress German strength to the best of their ability during the 20s.

Before 1923, the mode of attack was to squeeze money from Germany using reparations.  After the head of the German central bank engineered a reset of the system via hyperinflation, the attack suddenly changed to lending money to Germany to inflate a bubble.  Either way, the result was economic and financial instability in Germany.  This bubble burst with the Great Depression by 1931, and that was when the fringe Nazi party won a significant share of the vote for the first time.

My theory for the reason to squeeze Germany is that, similar to fighting World War I, the UK and US were on a mission to ensure the safe transfer of the global money bubble from the UK to the US, by ensuring that Germany was decidedly out of the running for global hegemony.  History has shown this plan to be a success.

Yes, I totally agree that we need to take a positive attitude and do our best for our fellow humans.  Also, we'll probably survive this.

That said, while change is always happening in nature and society, the point I was trying to make is that state-controlled money systems will make the cycle more extreme.  This is because the system pretends to be a free market system, and uses deception to make people think everything is OK and continue to buy and borrow.  When the imbalances eventually prove too much, this causes the crash to be harder.  This is just objectively what we have today.

Today, the economic situation in every country is very difficult, and I also believe and hope in the right decisions of our governments And that people will be able to survive all the difficulties associated with the crisis and the problems of the coronavirus pandemic.  But statistics show that the world economy today is in worse condition than even during the time of the great depression.  Today, the main problem is the development of the coronavirus and in order to restrain the spread of the virus, it is necessary to maintain strict quarantine, but hard quarantine will not allow the economy to develop or at least maintain it in working order anyway.  We are in a stalemate.

There's really a big difference of its value in the past compared to the current as inflation hits us.
But today, the government have already spend a lot of money but still no idea how to stop this pandemic, and like us printed trillions of money, we don't know if it would be enough to combat this battle.

We have been into different calamity that government has to spend money but we were able to rise, the world will be back to normal, it might not happen instantly but it will happen as the time passes, with this, it teaches us a lesson not to focus on strengthening our military based only but also on our doctors and scientist so by next time if another virus will distract the world, it will be find a vaccine on a timely manner.

I am not an economist but I truly believe we can get pass through this as long as we have a good government.

Apparently the world population has not been into negative growth forever it means people needed to work hard to satisfy their day-to-day needs which means there are more workers than the past always and obviously more efforts to produce more things which is always referred as continuous growth of economy. In simple words: going back of economy may not happen when there are enough people to survive.

If you take per capita kind of things for calculations then we will observe big ups and downs in the history of human economy. I believe that current corona outbreak is not a big threat for human life as the death rate is calculated around 2% and we have seen bigger disasters in the past with death rate more than 25%. So, we can assume world economy may resume its progress in very near future regardless of vaccine for corona will be invented or not.

Looking at the 1987 crash numbers, wikipedia says that it was around 1.7 trillion dollars lost just the October month when it first happened, and that is the money that was lost, plus considering 1987 was 33 years ago, 1.7 trillion was MUCH bigger than today's 1.7 trillion dollars as well.

I am not saying it didn't recovered fast but at the same time we are talking about movement stopping as well, so as well as looking at money lost, you should also try to look at money unearned as well.

The 1987 crash was an anomaly. It wasn't associated with an economic recession at all. It's still not 100% known what even triggered it, but it's generally accepted that computerized/algorithmic trading caused some sort of black swan event.

It definitely did not take years to recover from. It was one of the fastest stock market recoveries in history.

Exactly, it will be a global reset, geo-political, geo-economics. So it will be different when this whole pandemic crisis end. But what history tells us is that it will be repeat itself. And after the pandemic, we might enter a new state of weak-phase. Everyone is trying to recover but we really don't know how long this recovery or how long the weak-phase will go. I think it will be a decade and in 2030 we will see a new economic world order, but it will still be the same player, i.e. US and China, UK.

How the hell can you name 1982 to 2000 as the strong phase when we had the huge 1987 crisis? I mean that was one of the worst ones that really screwed everyone over and economy took years to recover even to a normal phase let alone get better, from 1987 to 1992 was a huge trouble all around the world and only got back to normal and started to be good again after 1992 so that is not really a strong phase. You can divide it into two with 1982 to 1987 strong, 1987 to 1992 weak and 1992 to 2000 as strong again.

Also, what you consider strong is not really clear, I would say between 2010 to 2017 or so we were quite strong all over the world, those were some good years, the 2000 to 2010 was the bad weak part, and 2017 to 2020 was a bit muddy, not awesome and not like today, and now we are in weak again. So you can reshuffle those years to showcase that if you want.

Exactly it is going to change a lot and probably worse place for us to live because the unemployment will be the biggest problem the human race to face even after corona ends, Many companies are going to get closed down, inflation will get increases, and huge shock in supply and demand which will affect every economy in the world.

This "weak phase" is going to be the longest one. And it will cause some noticeable changes. I suppose the world will be different when the pandemic and global crisis end.

History also reveals that , people will always survive the catastrophic situation they are in no matter what , it might happen that there will be few bumps on the way and inflation might create a problem for everyone but at the same time , a great scientist once said that
Change is the nature of Nature and key to evolution

Well it was a famous botanist but I do think it applies everywhere , therefore what we should look forward to is making our contribution and caring about the things we do take for granted .

Survival can never be done alone , Therefore if we work with each other erasing the boundaries , we might just rewrite a few Chapters for upcoming generation to read.

Also China might be emerging as a superpower but at the same time we cannot disregard the fact that people I'm Wuhan are not taking things seriously when they know for a fact that the virus infact can hide within the body and reemerge , therefore the country will be right from where it started off from if they do not take appropriate measures.

I think the right word here is 'cycle'?

I made lots of money during the dot com bubble, eventually lost it recovers. Really hard lessons to me then, but when the whole economic collapse started in 2008-2009, was also affected. So history really tell us something. And then looking at today's situation, it's just a repeat but with different actors, specially China rising in the last 10 years or so. Or maybe we can see some nations spring out of this chaos and became an influencing factors in terms of geopolitics and finance. Yes, it will be very interesting what path are we going to take in 10 years, will US still dominates? Or China taking over? Or maybe India or even Brazil showing strong in the next decade?

economic despair leads to xenophobia and right wing nationalism. people are struggling economically, so they desperately seek out leaders (nationalistic demagogues) who tell them what they want to hear: they incessantly blame foreign devils like china for causing all of their economic misery. these demagogues channel this economic despair into patriotism and racism. this prevents any sort of national revolution to mitigate the economic suffering and ensures the state maintains firm control over the population.

it's the same exact path taken by post-WWI germany.

the recovery from the 2008 recession was incredibly unequal in its distribution. silicon valley and the coasts boomed while the rust belt eroded. this is what ultimately led to the election of donald trump on an utterly right wing nationalist platform, which greatly contrasted to the neo-conservatism of george w bush and his father. the trump election (and brexit) were obvious indications that we were already on the same path as post-WWI germany.

we are simply continuing that path now. it'll be interesting to see where we are in 10 years. lots of people seem to be predicting that china will emerge as the global hegemon. i dunno, maybe. it really depends how protectionist and nationalistic other countries become, because that will act as a ceiling on china's export-based growth model.

china's cheap labor and manufacturing costs? those can become very expensive under heavy tariffs and trade restrictions.

True, China is the 2nd biggest economy in the world and has a lot of influence.  But what I meant by 'the superpower' is a country that dominates the global reserves and the geopolitical and trade agendas of most countries.  Also, the superpower has the skills to make these different elements work together in concert (i.e. use monetary power to enhance geopolitical power, and vice versa.)

If you look at history, there is a 'winner take all' property to this title.  A country is either on or not on the throne.  And this has been the case at least since Britain defeated France for global dominance in the early 1800s.

It is a terrible system, really, especially the winner-take-all part, but it's what we have.

I wouldn't say country won't have eye in globalization: without globalization, all the countries will have hard times to maintain the economic balance. You can't produce an 'X' in US what can be produced in India & vice versa. If anyone wants not to following the comparative advantage method and want to focus on increasing internal production, they will have to spend a few times more cost than the country with comparative advantage. It's true that the pandemic may force country to think more and more self dependency but at the end of the day, they can't. It's all about atmosphere, lifestyle, cost etc.

China has already been the number one country in the world in terms of export way before this pandemic even came out. The export value of China is much larger than the US, which comes second. Moreover, the world's supply of raw materials is largely coming from China. If there is some drastic change that would happen post this pandemic, it would be that the countries around the world would try to be less dependent on China. As a matter of fact, this pandemic itself is a good reason for a more massive exodus of factories from China. Well, it has already been happening for quite some time, albeit in a much slower pace.  

The mobile industry is part of such exodus. As a matter of fact, the big trend of technological products following this pandemic would be not made in China.^[1] And rightly so, not just in terms of tech products but also of health products. This might take standards a notch higher. We have seen how some countries such as Spain, Netherlands, Slovakia, Czech Republic, and more are rushing to China for medical supplies in the face of the deadly COVID-19 but only to end up putting more risk to their people's health by receiving sub-standard, non-functioning, and faulty health supplies.^[2][3]

The Chinese superpower is already existing in a way but this current crisis is more of a reminder of its negative consequences. And this will certainly bring countries to ponder profoundly and start weaning themselves off from China's breasts.

[1] https://www.bloomberg.com/news/articles/2020-03-31/supply-chains-latest-not-made-in-china-is-tech-s-next-move?utm_content=business&utm_source=twitter&cmpid=socialflow-twitter-business&utm_campaign=socialflow-organic&utm_medium=social
[2] https://www.aljazeera.com/news/2020/04/china-support-coronavirus-hit-europe-stirs-controversy-200404160742616.html
[3] https://www.lifesitenews.com/news/faulty-chinese-medical-supplies-will-kill-people-during-covid-19-pandemic-expert-tells-fox-news

I sorta agree with this. I think mainly countries will try to bounce themselves back as many see themselves as world leaders. Maybe this is off-topic, but I feel like countries have started to become more nationalistic than before. It almost feels like so many countries think they are the best and building up arms like before WW1. Of course I could be totally wrong and over analyzing.