When we talk about how the world will look like post corona times, we are faced with multiple questions at once. Will the world order change in the post corona world? Will the economic region shift in the post-COVID-19 world? Will the new alliances come into play? Will the world resist to the inflictions of Covid-19? Will America suffer more than others? Will the new currencies dominate? The questions are too long and one becomes baffled by them. In this article, we will make an effort to answer a few questions related to the sufferance of American economy and its impact on the world based on the facts.
How COVID-19 is Different 2008 Financial Crisis?
It is very important to analyze somberly the severity of the corona crisis. This havoc will not affect the world economy much if it ends sooner than six months but the economies would succumb to its pressure if this crisis prolongs to more than 6 months from now. A group of people is comparing the 2008 financial crisis with the current crisis. They are mistaken because the 2008 crisis was a car accident but this current pandemic will be multiple accidents in the bottlenecks. This is because the 2008 crisis was because of high-risk mortgage securities but this crisis is much more than that. The whole world market was not closed. Tourism was not affected, the petrol demand did not fall, airlines were not severely hit, people were not affected by the disease, and all the industries were not closed. This is why I predicted that this pandemic would be much more than a car accident.
The global GDP is approximately $90 trillion which has lost over $5 trillion by now. The world’s giant businesses have suffered the most and the exact calculations are not clear because of this evolving situation. However, once this is over, a crystal clear picture will show the worst marks of this pandemic.
Is the $2 Trillion Stimuli Enough for the US Economy?
Being the global leader, the US will affect as many countries of the world as one can imagine. By today, more than 26 million people have lost their jobs to this pandemic. The technology giant iPhone suffers $1 billion every day because of the closure of the markets around the world. Though Trump administration has eased the lockdown by opening a few sectors that may help the hindrances in global trade will not help much in easing the tensions. Every day, multiple companies are going bankrupt and the US being the largest market will suffer the most. However, the situation will only get out of control once this pandemic prolongs for more than six months from now.
The US has already realized that the $2 trillion stimuli are not enough for its giant market. This stimulus has already raised the American debt to the highest point. The Trump administration is opening the industries which might also catalyze the pandemic growth in America, and already the numbers are unstoppable. The US needs at least a package of $6 to $10 trillion to resist the jerks of this pandemic which might not be feasible.
The highest amount of debt in America is in the form of mortgage debt. The amount of total mortgage debt is over $15.8 trillion. When over 26 million people are unemployed, how they would pay the mortgage loans? The closure of tourism, railways, roads, sea cargo, airlines, and technology industries means no jobs, no money, and no payments for the residents. America has to be careful in deciding the future of its country in this time of crisis.
One thing must be kept in mind that the crisis or economic breakdown in the US will not let the world go unattended. It will leave its impact from the Northern pole of the world to the Southern pole and almost every country will be affected from it.