The long shadows of the 2008 financial crisis have left the global economy uniquely ill prepared for the unfolding economic catastrophe. Sovereigns, corporates and individuals alike have been actively encouraged to gorge on cheap lending, prompting a decade of ever spiralling debt simultaneous to a collapse in cash reserves, to maintain the illusion of economic health.
As Covid 19 has no current cure, so too the financial carnage it has unleashed. Governments and central banks have responded with laudable alacrity and magnitude, in an attempt to protect citizens from the extremes of financial hardship, but the limitations of these interventions are becoming all too clear. The prodigious cost of attempting to mitigate disaster has seen national debt to GDP ratios rise with alarming rapidity across the globe, while central bank balance sheets have expanded to previously unimagined proportions, in part to provide much needed liquidity, but more controversially to fund quasi monetisation. Both are projected to escalate exponentially, as the length of the calamity remains indeterminate.
Then concept of lives vs livelihoods is a false dichotomy, as the two components are one and the same. A premature (pre-vaccine?) easing of restrictions risks undermining the hard won flattening of the hospital admissions curve, threatening a second spike in the death rate, while a protracted lockdown destroys the economy (and future economic capacity) with brutal and indiscriminate force, exemplifying the policy conundrum faced by governments around the world.
Stephen Cherry. 30th April 2020.
BROAD SPECTRUM 