COMMENTARY: Corona, economics and fear
By Dickson Igwe, Contributor
The US Stock exchange has dropped into bear market territory. There has been a sustained downturn in the US stock market for the first time since Donald Trump became President in 2016. Wall Street is the benchmark in global stock markets. Since the beginning of the Corona Crisis nearly $6 Trillion has been wiped off global stocks: this is worse than the 2008 financial crisis, and there is no end in sight.
Then, in the President’s address to his nation on March 12 2020, the intended effect of calming fraying nerves, backfired. The address, far from being a presidential calming of the nation, was Trump’s usual defense of a ‘’dubious’’ status quo, blaming outsiders for the Corona Virus.
The stock markets, instead of stabilizing, plunged further into bear territory, losing hundreds of billions of dollars. The President went as far as banning travel from Europe for 30 days. Interestingly there was no ban on Ireland or the UK where Trump owns resorts.
And a stimulus package that included proposed tax cuts, and market intervention by the Federal Reserve, creating $1.5 Trillion to strengthen a tanking financial system- much more than the injection of the $800 billion Obama asked the Feds to put into the banking system in 2008 failed to lift the market.
This injection of financial capital initially lifted markets. But by the end of the trading day, markets dropped back down into bear market territory. With Corona, stimulus will have no effect until worldwide fear dissipates. That is very unlikely at present.
Investors, who ultimately drive and control the markets, may be risk takers. However, there must be specific markers of stability and certainty in the marketplace. These are conditions that are specific and measurable allowing for the efficient operation of the trading floor; such as a stable banking system, political stability, sustainable economic growth, national security, which in turn drive consumer and business confidence, in the institutions that govern society.
Unpredictable investments
The problem with the Corona virus is that it has turned certainty upside down. Instead of certainty there is uncertainty. In other words, the markers that decide the sustainability of business and financial investment are as unpredictable as the spread of the virus. With every announcement on the spread of the virus investors get ”jumpy.”
For the past 11 years stocks have been in bull market territory. This is the longest rise in stocks in recent history. It practically guaranteed Donald Trump’s reelection. That Second Term is presently very much up in the air owing to the present pandemic and resulting economic crisis.
In bull markets, the prices of stocks rise year after year. This rise in stocks is a matter of investor confidence. Rising stocks are driven by investor confidence. Economics is first and foremost human behavior. Belief and faith are major components of economic theory and practice.
Expected falls
When that faith in the markets is destroyed, usually by some external shock to the system, a bear market is the result. A bear market is the direct opposite of the bull market. Instead of optimism, and a belief by Jack the Investor that stocks are perpetually rising there is pessimism.
The overall market index- a spread of stocks used as a measure of the value of the stock market- falls over a sustained period of time, historically up to 20% of the total market value of stocks.
That fall of over 20% of total stock market value is sustained and further falls are expected. A bear market foretells what will happen in the wider economy. In the supply sided economy a sustained fall in the share price is a traditional marker of failing business and consumer confidence. And that is what is taking place.
When investors get nervous, consumers follow suit. As investors pull back from spending on their supply chains, banks stop lending for fear of bad debt driven by layoffs and bankruptcies, and consumers zip their wallets in fear. Bad debts increase, and falling revenues impact cash flow, increasing financial leverage in the markets.
With every announcement by health officials of the spread of the Corona Virus, fear takes hold, and both market and business confidence take a hit.
Then, consumers- a critical component of markets- run scared. Consumers in the Age of Corona are being fed by the global press a diet of bad news, and more bad news. The result is a further fall in business and consumer confidence. This pessimism becomes a self-fulfilling prophecy. The result is Recession.
Consumers and business owners are fearful. People read in the news that cruise ships and aircraft are incubators of the virus. That kills travel plans and that in turn drives the cruise ship, airline, and hotel industry, into the ground, with job losses and bankruptcies.
In the wider market environment, announcements of school and college closures, and shut downs of institutions and organizations as a form of containment against the spread of the virus, further exacerbate falling public confidence.
The result of the preceding is permanent downturn in both the financial and business markets. The end result is recession.
The problem with a biological crisis like the present Corona Virus Pandemic is that it is not easily controlled by forces that are under the tutelage of governments, financiers, administrators, managers and investors. No one can tell how Corona will pan out until the virus works itself through. As the pandemic gets worse so does pessimism and fear.
The greater the fear and terror, the greater the bear market, and the greater the bear market the greater the likelihood of a prolonged recession.
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It is surprising given that this individual claims to have the answers to all of the worlds problems, he has a per hour menial job in the BVI. Surely he should take his racist student union politics to the world stage and save humanity!
This blowhard is as smart as a piece of wood. He criticizes Trump like a Monday morning quarterback yet he himself has nothing to offer for the here and now. His views would be best used if he would fart in the tank of his car. This way his words would for farther. He will be the first to blame the US and the UK when he gets the virus. It’s surely inevitable for him as he needs to visit the supermarket and eating establishments multiple times a day.
Go take some cyanide- and you would be doing the BVI a big favor
The strange thing is you hide up there in West End and think Igwe’s friends do not know who you are with your racist hatred of locals- you best be very careful
Racist Englishman- we know who you are Sir – so watch it
Every Saturday you come here religiously to hate on Igwe- can’t you see he is loved in the territory over your racist views-the more you hate on Igwe the greater he becomes in the BVI
What per hour menial job- you need to get your facts right- the man could probably buy you twice over – idiot
If this blowhard is a representation of what Black intelligence is, then the assumptions made are all true. This glob of humanity has obvious little education and only spouts racist views he regurgitates from other sources. In fact this man received some degree of higher education that gave him the ability to spout in a way that impresses the Black man of the Territory. How truly sad for a people trying to aspire to be brought out of the Third World.
Nice to see how deep Igwe has drilled under your skin. Long may he continue.
Just for your information, having a per hour and what you call a menial job, has nothing to do with one’s intelligence. From the article and the explanations provided, he clearly has some training in economics! what say you for yourself?
You are fast, forward, and out of place!! interpret that!!
All newspapers have opinion writers. You can choose to agree or disagree. It is not ok to insult and demean. This opinion piece is right on target in my estimation. And I do read opinion pieces at the New York Tines, Washington Post, Guardisn UK etc.
I have never heard of the first or last opinion pieces, but your views are more refective of the rubbish printed in the New York Times and the UK Guardian! Need I say more?
News services printing commentary’s is common however not from the same source of garbage on a weekly basis. However I can certainly understand printing his garbage since there obviously is no one else capable of putting words together in the Territory than this useless source of verbal diarrhea. By the way try reading real news not the fake Obama sources you do read.
The truth is never racist, it’s just the truth. Racist was a term invented by communists to shut people up.
Calling someone a racist is no argument at all, refuting their statement with facts is an argument.
Igwe’s hater two failings: (1) They have a very serious pproblem with Black male intelligence and (2) they are totally incompetent to respond to this opinion piece with a counter argument.
Poor liitle minds they are. Their life awakens every Saturday. They must live a pretty boring existence otherwise in their segregated living and twisted mentals.
This article is LAUGHABLE! If only the facts could actually be reported correctly! Geazzz
Stop the jealousy- and read another article – we don’t need your stupid ignorant comments
Incidences of black male intelligence in the BVI are Gerry Farara, Natalio Wheatley, Kedrick Malone and Janice Pereira – Dickson Igwe has no real intelligence and is a big uneducated mouth with student union left wing racist views looking for an audience.
Your rant shows us Igwe is Boss of the intelligentsia – when you have to compare you show you are a true loser
WE know who you are and you are so predictable- you had to use other people to make a point- petty English turd – Igwe is confident in his abilities and does not need any comparisons
Please note that Janice Pereira is NOT an incidence (example) of “black male intelligence in the BVI”
For the record, she is female.
who hate on every word that Igwe writes are just jealous racist pigs.Y’all time is running out fast.
I have never heard of the first or last opinion pieces, but your views are more refective of the rubbish printed in the New York Times and the UK Guardian! Need I say more?
You make no point at all. Probably another unintelligent and stupid expat white. It looks like the sea, sun, and sand, really affects your brains – add a beer or two and you become insane
That racist in West End once did what Igwe is doing now – informing the public- no one stopped him from doing what he did. So now Igwe is doing the job he sits back with green jealousy and hatred? Idiotic Imbecile
Igwe throw out chick feed but didn’t hear him say chip, chip…..etc. Nonetheless, people voluntarily show up to feed. He is just exercising freedom of expression, freedom of speech, which is his right as guaranteed within the boundaries of the constitution. I have not observed any libel or slander in his commentaries. It seems as if Igwe critics anxiously spends all week planning for , preparing and sharpening their attacks on his weekly commentary. They are proud and eager to exercise their opinions, freedom of expression and freedom of speech but vehemently detest Igwe exercising his. Hypocrites! They disagree with Igwe’s opinion(s) but failed miserably to counter his opinions with facts. Instead they resort to hatred and ill wishes.
The behaviour of the haters clearly explain now if there were doubts about fears they had/have of persons of African descent learning to read, write(rite) and do rithmetic. Many haters consider themselves superior and see persons of African descent as subhuman yet they fear their getting an education. Why? They know that their superiority complex was hogwash. Despite their all out effort to keep Blacks down and illiterate, their fear has peak to frightening levels, for Blacks demonstrated intellect is disproving their erroneous theory. The haters are of all stripes, including many self haters. Let’s keep the each one teach one philosophy alive and striving. If the haters are uncomfortable living among people of African descent in the VI, they should retreat from whence they came.
Spot on. There is nothing racist about economics. Uncertainty breeds fear and fear rattles markets. Love Trump or hate Trump, belonger or not it just doesn’t matter.
Its not complicated. You may not agree with the man, but do not doubt what he is saying. The markets speak for themselves. Everything else here is just dribble.
With the outbreak of the Novel Covid-19 Coronavirus pandemic, the VI/BVI is facing a medical emergency, a health crisis. This is a Saul at Damascus moment for the VI in regards to the weakness of its economy, the capacity and capability of the health system………etc. Though there are no confirmed cases of the Coronavirus as yet, it is highly likely that it is on the horizon. The VI can control who comes through its designated ports of entry, ie, Road Town, West End and TBLIA but the VI has a vast open border. To improve its control of who comes into the territory, it must expand its surveillance farther out in the territorial sea and the exclusive economic zone.
This crisis exposes the weakness of a two legs on a four legged stool economy, ie, tourism and financial services. For example, the restriction of cruise ships calls for the next 30 days will exact some financial hardships on residents whose income depend heavily on tourism. The lesson from this experience spells the need for a diversified economy.
Further, there is uncertainty that if the VI were to experience a surge in Coronavirus infections that the hospital /health system will have the beds, ventilators, respirators, nurses, doctors and other support equipment and personnel to meet the increase in demand. Would a triage system that is typical in war have to be employed? The VI must take this crisis seriously and make every effort to dampen the wave or flatten the curve to reduce the stress/strain and demand on the health system. For starters, it (VI) must adhere to the social distancing and avoid large gatherings recommendations.
So what is Trump saying?