Here is another interesting article with a link to a really challenging paper from Robin Chater, who happens to the Secretary-General of the Federation of International Employers, an international Think Tank.
His article is not in any way comforting, but it is still a pragmatic attempt to picture how the Virus is a huge threat to life as we know. How much more damage can be self-inflicted before we “learn our lessons” again?
I am posting a link to this report – “Aftermath: Multinational Prospects in a Post-Pandemic World” – because I think you should see it. Officially, it is an early draft that is currently just being shared with a few academic and government contacts. However, I am not sure it will ever be released formally by the Federation as it outlines a stark future that none of us would want.
Basically, it is saying that governments outside China went too far in their lockdowns. That the emergence of such a virus had been foreseen by both the WHO and FedEE and that the World’s hostility to China left them alone to deal with its outbreak, and thus its eventual spread to other countries. It points out that there are a host of contagious diseases that already regularly kill more people than we have seen so far with COVID-19 – but with them there has been no lockdown.
Most startling of all, however, it points out that the extent of the lockdown (when the World was already on the verge of a recession) could well have tipped it over into an uncontrollable downward economic spiral. This has been a potential threat ever since the abandonment of the Bretton Woods System by the US on the 15th of August 1971. Soon after that, all major currencies became “fiat currencies” that had value purely based on a shared feeling of confidence, rather than backed by inherently precious holdings such as gold (or a currency, like the dollar, that was so based) – that gave them true value. What’s more, this opened the door to almost limitless government spending, based on borrowing and the free printing of currency (quantitative easing) to protect wealth and improve living standards. Thus, the US national debt alone now stands at US$25.3 Trillion.
This new affluence depended on one thing – that the World’s GDP would keep growing. If it did, then governments could afford to pay the interest on their borrowings and confidence would be maintained. The World came near to losing that security in 2007/8 – but manage narrowly to escape collapse. That is why it has desperately been trying to avoid a further downturn, as the fear of the last recession still reverberates amongst the few who know how close things came to a wild panic in markets last time – and a final demise.
Now governments have done what the last global financial crisis did not achieve – set the global economy on a course for a downturn of at least minus 20% GDP. As soon as the threshold of minus 15% is reached, things can easily get out of control and currencies tumble. We have already seen that in the stock markets, whilst the price of oil is now so low it cannot be given away. When the inherent value of currency consequently falls because confidence is shattered, however, prices will escalate, not tumble – in spite of low demand. For currency traders, getting out of a position will be more important than the whole panoply of currency value tumbling down around their ears and the post Bretton World will finally be having to settle its account with the hot air it is built on.
I have sent this to a few journalists who ought to be aware of it – but in our conventional press release format, as that is the only way we may communicate such matters. Maybe if it gets a bit of wider airing at this stage then people will wake up from their total preoccupation with the virus and realise what their governments have been doing to them and their futures. What’s more, perhaps too we should all be more sensitive to the numerous diseases that already cause millions of deaths each year – let alone the 3.1 million children (UNICEF figure) who die annually of malnutrition – ignored and unlamented by the World. For that avoidable tragedy, we are all mutually culpable.
Robin Chater is Secretary-General of the Federation of International Employers (FedEE),