martedì 17 marzo 2020

The ghost of the 1929 crisis, of the great depression over 2020 that could overwhelm Europe and the whole world to implement wrong economic and financial policies from the ECB to the Fed

At the end of the 1920s, the world seemed to have started to overcome the traumas of the Great War, also because the relations between the world powers were going through a phase of relaxation and even the "German problem" seemed to have started a balanced solution, especially following the Locarno Pact from 1925.

But in this context of apparent political and social stability, in 1929 an economic crisis as unexpected as catastrophic destined to change the fate of the twentieth century broke down, first in the United States and then in the whole world.

What would be called the Great Depression made its effects felt both on politics and on the culture of the time thus influencing the historical development of western societies.

It upset the old arrangements, accelerated the transformations already underway and set in motion a chain of events that would soon lead to a new world conflict.

As historian Eric Hobsbawm wrote in The Short Century, the history of the world economy since the Industrial Revolution had been a history of accelerated historical progress, of continuous economic growth and, although cyclical curves and physiological, in 1929 for the first time in the history of capitalism this negative fluctuation brought the entire world economic system to its knees.

In the early 1920s, when the First World War was over, the US dollar was the new strong currency of the world economy and for the Americans a period of great prosperity began which took the name of the Jazz Age (1918-1929). .

On October 29, however, in what is remembered as the "black Tuesday" there was the definitive collapse of the Wall Street Stock Exchange.

To see some improvement it took another four long years and the advent of President Franklin Delano Roosevelt who, especially after 1933, started the productive and industrial revival through the famous New Deal. But on the horizon the black clouds of an incurable political crisis were gathering which, in six years, would have dragged the whole world back into the abyss of a Second World War.

The crisis originating from Covid-19, on the other hand, finds its focal point in an extraordinarily large number of countries, diversified and with very different economic, political and social characteristics: China, Korea, Italy, Japan, Iran and soon also France, the United States and dozens of other countries. In a similar context, instead of compensating for deflationary shocks, they tend to overlap, with a much stronger (economic) contagion effect.

Secondly, previous crises tended to be configured as supply (think of the oil crises of 1973 and 1979) or demand (such as that of 1929). In the case of the coronavirus epidemic, the aspects concerning supply constraints (impossibility of producing and breaking the supply chain) add up to those of demand (collapse of travel and tourism and more generally fear of consumers).

To all this is added the fact that the world economy was already in a slowdown before the onset of infection: world income in 2019 had grown by only 2.9 percent, the lowest rate since 2008-2009 and only 0 , 4 percentage points above the threshold which typically identifies a global recession, while countries such as Germany, France, Italy and Japan in recent months all showed signs of conspicuous slowdowns.

That's why the ECB and LAGARGE (incompetent) have to be careful what to say and what poles

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