The novel coronavirus has just significantly affected the worldwide economy, which will exacerbate if the flare-up and the shutdowns intended to contain it proceed for an exceptionally long period of time. In any case, it’s just a quickening agent: If not Covid-19, as the ailment brought about by the infection, something different would have begun the blaze, which would have caused the economy to take a big hit. Deficiencies in revenues and cash-flows, brought about by the shutdowns, have basically uncovered the vulnerabilities of a fundamentally unsound monetary and money related framework.
The fall in revenue is dangerous however reasonable without obligation. Shockingly, in the fallout of the 2008 crash, levels of debts were increasing as opposed to diminishing, energized to some extent by the low policy rates and the inexhaustible liquidity built by national banks all around the world. “Global debt as a percentage of GDP rose from around 250% in 2007 to 325% in 2019. Current debt levels are triple what they were in 1999”(“If the Virus Hadn’t Caused the Crash, Something Else Would Have”, Das). With declining or no income and high levels of borrowing amongst the market, businesses, and households all around the world now face the struggles to meet large financial commitments.
A subsequent issue is that, in the “everything bubble,” asset prices were valued for perfection. Policymakers helped the estimations of budgetary resources to increase activity in the economy through the wealth effect, and to help obtain money from related foundations and businesses.”High asset prices reflected high leverage, in the form of leveraged loans for private equity or structured investments such as collateralized loan obligations. Debt-financed share buybacks and distributions to shareholders inflated equity values by increasing earnings per share but simultaneously raised corporate leverage”(“If the Virus Hadn’t Caused the Crash, Something Else Would Have”, Das). Due to this, layers and layers of toxic debt were very much exposed to significant revenue downturns.
There are so many more reasons as to why the economy is basically collapsing under the effects of the coronavirus, but we will eventually recover, and learn from our mistakes. This entire situation is a learning curve, and an array of countries will come back stronger than ever before.