Deutsche Bank Predicts GDP Plunge of 10% to 20%, But China Says Not as Bad as 2008 – Trustnodes

Deutsche Bank Predicts GDP Plunge of 10% to 20%, But China Says Not as Bad as 2008


Deutsche Bank estimates Spain’s economy to be worst hit with a fall of 20% in GDP for the first quarter of 2020.

All major economies are expected to contract as pictured above, but as the situation improves in Italy, expectations are this is all temporary.

The situation has began improving in France too, while London is probably continuing to decline in ‘real’ new cases, but as there is a lag, officially that’s not quite the case.

New York should be starting to come out of the peak now, with the big question of course being just what exactly is causing the improved situation?

Officially we’ll probably have some triumphant claims the lockdowns worked, but there’s evidence they actually made the situation worse at least initially as this spreads quicker indoors where everyone has to stay now.

There seems to be a correlation between the weather and the peak, but of course correlation is not causation.

Our hope is that it’s herd immunity causing an end to it. There’s obviously only so many people that catch it and of those around 14% of the very elderly need hospitalization, with 1% departing.

So from that you can calculate how many did actually catch it, although it would still be an estimate, but it is probably around 50% of the population.

At that point this stops spreading, or stops spreading very fast, so things return back to normal.

“The pandemic’s impact has not exceeded that of the 2008 global financial crisis, but measures need to be released quickly to offset its fallout. Monetary policy should prevent liquidity shortages and a surge in inflation,” said Liu Guoqiang, vice-governor of the People’s Bank of China.

There’s of course a question mark as to whether the 2008 financial crisis did ever end with the ECB interest rate at 0% before all this.

That shows just how systemic that was and a lot more fundamental than this new flu which seems to be behaving like ordinary flu during the peak winter season.

So the current situation is more very temporary and something we hopefully forget about in a couple of months.

Meaning that although there will be serious impact for a quarter, thereafter it shouldn’t impact any further especially if herd immunity has indeed developed.

On the other hand although all this money has been promised, it’s not very clear just how quickly it will make its way through the bureaucracy.

A slow roll out may lead to cascading effects which could compound the problem as the struggle of the airline industry for example feeds on to the ad rates for publishers which then feeds on to the coffee shop and so on.

That could potentially be addressed by a mass cancellation of liabilities where for example no one has to pay any bills for a month or two, except for bread but that’s very cheap.

That’s what the bailouts are trying to do so if they are timely then activity should bounce back with some proper enquiries hopefully to follow in addition to the need for economic reforms where automation brings back manufacturing and innovation either to America and Europe itself or its neighbors like Mexico, Latin America, the Balkans, North Africa.

Wages in China are now apparently even higher than in Poland, so maybe we need to update the mantra of China being cheap which was true two decades ago, but clearly no longer applies.

Finally there’s the question of whether this will return next flu season in a worse way. As it has spread everywhere, and was allowed to spread by pretty much all governments until presumably they thought they had herd immunity, it is probably unlikely to return in a worse way.

Almost exactly a century ago, their new flu did return and worse because it had not spread to the general population in the first wave, with it back then being limited to just the army.

This time it has spread to… well let’s do the maths. 60,000 departed, that’s 1%, making it 6 million at 100%, and that’s the very elderly.

There’s obviously a lag in reported numbers and there’s a lag in the progression of the new flu, but half of the reported individuals that have gone are 85 or older.

They make up about 1% of the population. So about half a billion got this worldwide, maybe a billion due to lagging data, under reporting, and so on.

Meaning there should be a general level of herd immunity which should then translate to a far lesser economic impact than might have been expected.


Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>