Recession 2020 and Why It Looks like 1929 All Over Again !!

The epidemic is bringing China to its knees. And it spreads along the supply chains. In Europe, the most affected will be Germany and Italy. The Coronavirus is way more grave then they make it seem. Millions of Chinese are stuck in cities in complete lockdown. By now, it is spreading across the States and Europe. There are cases in France, Spain, and the UK coming in. It is spreading in the USA as well. Amazon and others have pulled their attendance from the big event in Barcelona. The hotels are empty. Airlines are canceling flights en masse.

The Chinese GDP will contract by more than 5% in the first quarter of 2020. Its tourist industry has collapsed .Tourism is 10% of Chinese GDP. Sixty million people will not be visiting China this year. The global supply chain has collapsed. Delivery of consumption goods, etc. to the world and USA is cratering. China Is Disintegrating. The virus is bad enough, but the economy is shutting down. We won’t be able to get the things we need to survive. For instance, America grows a lot of food as long as there is chemical fertilizer. The unfortunate thing is that we don’t make fertilizer here or at least not enough to support our population.

The whole planet is going to shut down due to the virus or as a ripple effect of other countries shutting down due to the virus. Meanwhile, most stocks are hovering around their all-time highs. Remember that after the SARS breakout, we went down to -40 percent in some sectors. And SARS was NOTHING compared to this one. It seems simplistic to think that China can register a positive growth rate this year. Just the loss of 3 weeks in total would be enough to wipe out 6% of Chinese GDP this year. Too pessimistic? If anyone thinks that China will return to work soon as if nothing had happened, he deludes himself big time. All this reminds me of 1929 all over again. Only the star of the show has been replaced. In 1929 the USA was the world’s cheapest producer of goods and agriculture. Totally first in the mechanization of production… i.e., Railroads, tractor Combines, Auto assembly. And a new way to play the market.

Then it broke. China produces but kept 1800’s sanitation and food supply; their downfall But will it spread. Four hundred million people quarantined, and the second-largest economy grinds to a halt. It’s like a thermonuclear weapon hits China. The blame lies with primarily Bill Clinton. He gave China “most favored nation” trade status. That cooked our goose because China cheats like it’s no one’s business. For a starter, We MUST bring back our pharmaceutical industry from China.

They are going the way of a big Civil War.

The broad policy direction for many of the world’s central banks and governments now hinges on one question: how will the Chinese government respond to the economic shock caused by the coronavirus. The impact of the current coronavirus epidemic has already been felt in the automotive sector, which represents the heart of industrial manufacturing not only in China but, for example, also in Germany. Automotive plants throughout China have been ordered by the Beijing government to remain closed after the Lunar New Year holidays. Volkswagen, FCA, Toyota, Daimler, General Motors, Renault, Honda, and Hyundai have stopped production in what is the world’s largest automotive market. According to S&P analysts, auto production in China dropped by 15% in the first quarter of 2020 compared to the same period in 2019. But the repercussions go back along the entire supply chain.

FCA has announced that one of its European plants may have to stop production in two to four weeks due to supply problems from four Chinese suppliers due to the blockage caused by the epidemic and that it is looking for alternative solutions to avoid this situation. In the last few days, the same fate had happened in Hyundai for its plants in South Korea, while Volvo had to change the supplier of batteries for hybrid vehicles in order not to stop production due to the stop of imports from China.

And not only. The global supply lines that are in crisis due to the stop caused by the epidemic to their Chinese suppliers are not limited to the auto sector. Qualcomm, the world’s largest smartphone chip maker, warned that the epidemic was causing significant uncertainty about smartphone demand and supplies. Luxury goods producers are also under fire. The British brand Burberry has closed 24 of its 64 stores in mainland China. At least 60 airlines have reduced or stopped flights to and from China. Australia’s tourism industry is losing an estimated $1 billion a month from the Chinese tourist ban.

China is Australia’s number one tourism market, delivering 1.4 million visitors a year and contributing about $12 billion annually to the economy. Mohamed El-Erian, chief economist of Allianz, told CNN Business that the potential cascading economic effects are extremely worrying.They first paralyzed the region of the virus epidemic – said El-Erian – So they gradually spread to the national level, undermining internal trade, consumption, production, and the movement of people. If the process spread further, even on a continental and international level, trade, supply chains, and tourism would stop. Asian central banks cut rates. In response to the crisis, the People’s Bank of China cut the base interest rate and injected huge amounts of liquidity into the markets to help reduce pressure on banks and borrowers.

The Beijing government also announced new tax breaks and subsidies to support internal consumption. The central banks of Sri Lanka, Malaysia, Thailand, and the Philippines have also cut interest rates in recent weeks, while South Korea and Taiwan may follow shortly. The problem, however, is that since 2014 the European Central Bank has already had negative rates, a situation similar to that of the Bank of Japan, while the US Federal Reserve has already cut interest rates three times last year and is closely monitoring the situation. It is unlikely that a response to the global crisis triggered by the Chinese epidemic could instead come from fiscal stimuli in the European Union. On the other hand, the economic situation in the Old Continent was not the best, even before the outbreak of the epidemic.

In December Germany saw a dramatic contraction in industrial production, with -3.5% on an annual basis, which is the worst figure since the 2008-2009 recession. In Italy, however, the experience of citizenship income so far does not seem to have generated significant results in terms of an increase in domestic consumption and gross domestic product, which in the fourth quarter of last year fell by 0.3%, with the worst figure being 2013. With the two main EU manufacturing countries and two of China’s main production and commercial partners already in difficulty, 2020 does not bode well for the European economy at all. China as the new Chernobyl of Globalism. If you visit, you die. Leave your relocated business behind and RUN! to the safety of anywhere, the US had an approved trade agreement. Or back to the US. You decide. Toyota: factories still closed.

The Chinese economy has actually been stopping for a month, between a New Year’s Eve break and the stop imposed by the authorities on businesses to avoid spreading the infection. Factories and offices must remain closed until the end of February, inclusive, but several companies will extend the closure.

The Japanese automaker Toyota, for example, announced a one-week delay in resuming production from its factories in China. “We have decided to keep the suspension of all Toyota factories in China ” a group spokesman told the AFP agency. Clash at Opec on cutting oil production. Meanwhile, the consequences of the Chinese slowdown, starting with the sharp stop to the purchase of crude oil, are causing divisions among the oil-producing countries. Russia will take a position on a possible further reduction in oil production “in the next few days,” said Russian Energy Minister Aleksandr Novak. On Thursday, Russia opposed the recommendation of the Opec + technical committee – at the extraordinary meeting in Vienna – to cut production by an additional 600,000 barrels a day to stop the price drop caused by the coronavirus epidemic in China. “We will see how the situation develops in the coming days,” said the minister to Russian agencies, without specifying how Russia will make its position known.

According to rumors, Saudi Arabia would push for a further reduction from 800,000 to 1 million barrels per day and had proposed a compromise solution of 600,000 barrels. Since the consent of all the participants is required within Opec +, the meeting ended without results. “We want to continue consultations to determine the optimal measures acceptable to all exporters to regulate the market without sudden changes that would be harmful to producers and consumers,” explained Russian diplomat Sergey Lavrov.

China purchases more than two-thirds of its crude oil from OPEC member countries and their allies, primarily the cartel leader Saudi Arabia, followed by Russia. After losing almost 15% since the beginning of the year, oil prices had slightly recovered pending OPEC + decisions. According to some analysts, Russia is reluctant to cut production further mainly because its oil companies and the government need revenue.

The Russian budget remains heavily dependent on oil revenues. But the new government is mobilizing huge resources for an important investment plan to revive the ailing economy and achieve President Putin’s goals before the end of his term in 2024. The good thing about this is the U.S. companies who fired their workers then hired China to make their products may very well bite the turf rather soon. Maybe once the deadwood is cleared out, America can get back to making its own products and looking after its own people. The loss of a week of work for all of China, due to the extension of the holidays for the Chinese New Year, is an already acquired fact.

For the future, it is necessary to understand when the isolation of the Hubei Province (60 million inhabitants) will end, when public buildings, shopping centers, and large exhibition areas reopen, when the large multinationals (Chinese and international) will trust to reopen factories, …

To understand a week of quarantine is equivalent to a loss of GDP for the current year of 2%. Two weeks equals a 4% loss, and so on. Sixty-five million apartments that are empty there in China. 65,000,000. Ghost cities everywhere. And now all commerce is stopping. This is just the beginning for them. Another few months of this, and that is it. Then phase 2 begins. China is toast.

This is what happened to them for thousands of years. They are all but done at this point. No way out for them now. They went for the bucks but forgot to take appropriate measures to secure their own safety measures. When you cut corners, you end up like this. They moved too far, too fast. Now they are in the worst possible place you can be. Slave labor, ebola pork, chemicals, world’s worst smog, crashing economy, the revolution in Hong Kong, you name it. It is just like that Tom Cruise movie War of the Worlds. “It was the littlest of things that got them in the end….” Greed got China. Now they are paying for it. World War 3 could be next folks.





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