Any possible political/economical explanation & current Corona-Virus situation?

[kristina]

Hello,

Unfortunately most countries are in total Corona-Virus lock-down right now, most people do not work and/or self-isolate themselves at home, many others have suddenly become unemployed and are therefore unable to work, because they cannot find another work-place, even if they would take the risk to go out to many places and try. Prestigious family businesses and shops etc. have suddenly gone bankrupt and almost everything seems to "stand still" in sudden "ghost-towns".

I have been wondering if there is an explanation for the question where all the money is supposed to come from to build "everything" up again in the future to have a chance and get "back to normal" again?

Is there any way that this sort of money so urgently needed by countries all over the world can be borrowed and if, from where? Or are governments just ordering their "Bank of ..." to print money ... and if that is going on, what would the future bring in such a case?

I am asking these questions, because this current world-wide situation almost seems to be too huge to explain, let alone comprehend ...

What do you think? 

[iolaire]

Thank you that is a good question kristina.  Here is the US we are printing money and for those with money 2020 was not a financially hard year - and health wise because we are more able to shelter in place.  Yet a huge swath of our citizens are feeling serious pain both financially and in their health.  I'm always a stock market/economic pessimist but I believe even more than normal that we are looking at another serious downturn.  They say 20+ percent of home loans face foreclosure in the US, and huge swaths of the population will face eviction once the moratoriums run out.  Although the new US admiration will try to calm the market and provide assistance to people I worry that we will see a very significant downturn as the stimulus are delayed.

[MooseMom]

This may help explain things (although it addresses the stimulus package from the spring, AND it applies to the US only), especially the part near the end about the current low cost of debt.

https://www.cbsnews.com/news/coronavirus-stimulus-package-pay-united-states/

[cassandra]

Yes I wonder that sometimes too. And  “a short explanation about the capitalist system” from Yanus Varouvlakis” explains it quite well too. Including why the victims of these situations (like natural disasters, pandemics, wars etc) will always be there, under investment in public services is not a coïncidence, but theworld keeps churning.

[kristina]

Hello again and many thanks for your kind replies and thoughts. I am still wondering about this question because if a country is forced to print too much money, is such an action not resulting in some sort of inflation which hits the population, as necessities like food etc, are becoming extremely expensive?

What do you think ? Many thanks again from Kristina.

[Hereware]

When the government started printing money, inflation happens. And if it is not balanced it would lead to hyperinflation where the buying behavior of customers will change. Hoarding happens especially of perishable goods that will lead to scarcity and the economy will fall. The value of money will reduce too.

[Michael Murphy]

In 2008 the US economy collapsed as Obama took office a large amount of money was spent on patching the economy.  In particular Obama bailed out GM the largest US car manufacturer.  He did this against the strenuous objections of the republicans.  In the end 80000 jobs were saved, the stock GM issued the government for the bailout was bought back by GM at a tidy profit for the government. 

[kristina]

Thank you Michael Murphy for your input, it certainly gives great hope ... 

[plugger]

In a world relying more and more on automation and outsourcing (which I have mixed feelings about) I see inflation as less and less a concern.

The current spike in inflation looks like much of it is due to things like covid supply chain disruptions than an actual scarcity.  People like the fed chief Jerome Powell and the stock market guru Jim Cramer have said much of the current inflation spike should resolve itself, and it looks like that is already happening.

[Simon Dog]

In a world relying more and more on automation and outsourcing (which I have mixed feelings about) I see inflation as less and less a concern.

The current spike in inflation looks like much of it is due to things like covid supply chain disruptions than an actual scarcity.  People like the fed chief Jerome Powell and the stock market guru Jim Cramer have said much of the current inflation spike should resolve itself, and it looks like that is already happening.

Prices tend to be sticky.  Once suppliers get used to higher prices, they are reluctant to lower them and do so only when others do so.  Prices eventually fall when the shortage dissipates, but generally do not go to the same pre-shortage price but rather a "new normal".   Raw commodities seem to be the exception - steel may fall to pre-shortage prices, but manufacturers are not going to take all of their price increase off the table.

Look at Orange Juice prices - they rose when the raw material went up, so the industry standardized on the 59 ounce half gallon to hid the magnitude of the price increase.   Now that things are back to normal, we are at roughly the old half gallon price for 5 ounces less (though the 55 ounce half gallon is starting to rear its ugly heads).

Vendors take advantage of shortages, and raise prices WAY more than the amount of their cost when they can convince buyers "it's the shortage".   I know for example that when manufacturers increased ammo by 8% (yes, 8%) the wholesale price charged by distributors increased by way more (generally about double) and it doubled again at the retail level - leading that 8% increase to show up to the buyer as a 400% jump.

There have been numerous medium term (over one year) shortages of small arms primers.  Prices spike (what was $40 pre-shortage is selling for $200 - $250 in the secondary market these days) and in each case settled back to a "new, higher normal" after the shortage subsided.

And houses - when there is even a rumor that someone down the street set a new market high, new listing prices go up within the hour.   When prices come down it take the owners months to accept that values have really declined, it is not simply "harder to find a buyer".

[plugger]

And houses - when there is even a rumor that someone down the street set a new market high, new listing prices go up within the hour.   When prices come down it take the owners months to accept that values have really declined, it is not simply "harder to find a buyer".

I hear you about houses!  I live in Colorado and the market here has been nutso!  I can remember back during the financial crisis they were plowing houses under in the Midwest where I'm originally from - it is still relatively cheap back there.  When I went back there for a wedding things were looking awfully cool, green, and cheaper - along with highways that didn't turn into parking lots at rush hour!  If I had a young family and was a remote worker I might consider moving back!  I'm wondering if things like climate change and high housing prices will eventually cause a reverse exodus out of places like Colorado and California.

As for ammo going up, I'm ok with that!  I'm with the comedian Chris Rock that there ought to be bullet control, each bullet should cost $5000 dollars!  He said something to the effect if somebody wanted to shoot somebody they would have to get a job, work hard and save, then plug the victim of their ire.

But getting back to your point, I agree we probably can not look forward to prices coming back down as fast as they went up!


Chris Rock skit

[Simon Dog]

As for ammo going up, I'm ok with that!  I'm with the comedian Chris Rock that there ought to be bullet control, each bullet should cost $5000 dollars!  He said something to the effect if somebody wanted to shoot somebody they would have to get a job, work hard and save, then plug the victim of their ire.

I prefer Colin Noir as a role model to Chris Rock, but to each their own.

[plugger]

I had to google Noir - interesting.  But getting back to Chris Rock, I do enjoy his humor at times but my all time favorite comedian still has to be John Oliver for obvious reasons.