The 2008 economic crisis was a nightmare for everyone. However, the 2008 crisis was totally different than the corona crisis.
In 2008, every central bank and government interfered with the crisis in an instant to take precautions and the world's economy was still going on; export and import had never stopped. People were scared, but nobody stopped travailing. So the world economy was hit by the mortgage crisis, but the government immediately took economic measures.
Corona crisis is another story. Governments cannot focus on the economy, while coronavirus still threatens people's life. The governments recently shutdowns the cafes, cinemas, gyms, shopping malls, which are the consumption area. Those places constitute the backbone of the economy and pay taxes to the government and pay salaries to ordinary people.
Now those places are shutdown to slowdown the coronavirus, which is so contagious and deathly. No government or politicians know when life will return to normal. That is why no central bank or government can take a step to recover the economic recession.
People are in a panic, attacking the supermarkets to buy everything, spreading much fake news on social media platforms, and forgetting to be human beings. As regular people, investors are also in a panic, selling every asset they have, calling the bears to the stock markets, and keeping cash.
Investors now try to keep their assets in cash. They do not buy gold, silver, government bonds, virtual money; do not invest in the stock market. They save money, psychical money (generally in American dollar or Euro) for emergency time. They want to buy groceries and other needs. Investors do not care about investments.
Even if the Fed cuts interest rates to zero percent, people request more dollar or Euro. That means that Coronacrisis breaks taboos and invalidate economic theories.
The graph above is called VIX, or Fear Index. When Investors are afraid of something in markets, they start buying this stock certificate.
The last time when it was hit the bandwidth of 59 was the 2008 economic crisis. As I said earlier, the 2008 crisis was big.
VIX index today hit the bandwidth of 82, which is almost 1.5 times bigger than it was in 2008. Investors and others now bet for doomsday.
As I always say about Corona economic crisis, FASTEN SEAT BELT and Brace for impact.
Keep cash, and do not trust politicians fully.
There will be time to invest and earn money, but firstly consider your and your family's life.
Do not worry, capitalism does not have much time anymore.
Comments
Post a Comment