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Do you calculate how bad this COVID-19 for us in the long-term?

Updated: May 24, 2020

The pandemic coronavirus has caused a drop in revenue to all major market players, claimed 100000 + deaths globally and has become a health and an economic disaster for the entire world resulting in death, unemployment and poverty.

The economies at a global scale felt the threat in some way or the other; Banks, households, corporations and financial markets all are in the deep debt sinks. These situations are similar to those in 2008, Economies at large are at stake - hitting the biggest crisis of the decade.

The newly established corporate are the most exposed entities due to the sudden pause in their cash flows, especially those who were already struggling to pay their loans. These firms could barely pay the internet on their debt, and only survive by issuing new debt.

There is a serious crush of liquid since the usual global operations are put to halt. Deserted airports, empty trains, lonely fun-parks and barely engaged restaurants is hurting the economy really bad. More the pandemic lasts, greater the impact it will have, risking the sharp downtown morphs into a financial crisis with weak once starting to pull the chains of defaults similar to 2008 subprime mortgages.

The recessions over the past centuries generally started with the higher interest rate for a sustained period, but it was never a virus - this economic disruption is so contagious that inflicting economies around the globe seriously for about three months in a row saddled with a record level of debt.

Well assuming the possibility of the current low liquidity cash crunch scenario that can lead to a serious financial crisis, central banks, in order to take preventative measures are worldwide taking aggressive easing measures similar to those in the 2008 crisis

As the economic expansion continued, year after year, lenders grew increasingly lax, extending cheap loans to companies with questionable finances. Today the global debt burden is again at an all-time high. Eventhough the global financial debt is at an all-time high, it will be too early to predict the certainly of the economic downturn due to the coronavirus.

Although, a recession is inevitable and will hit the economies hard at a global scale. The manufacturing industry since 2019 was facing tremors of the financial quake and then shutting down globally leading economies for several months is making the situation worse.

Everything from school, colleges, restaurants, gyms, bars are closed. It has been predicted that up to a million people per month might lose their jobs, a much worse scenario than in the 2008-2009 recession.

Service sectors like the airline industry will have the worst effect among others. A ruthless price war will be unleashed among OPEC, Russia and shale producers with the rising prospect of the market contraction in the oil industry stressing the heavily indebted energy sector. If this price war spread, a calamitous cycle of debt-deflation will jeopardize the world corporate debt (double the size of 2008 debt pile) and international trade will sharply Contract.

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