Great Recession of 2020

[Hrothbern]

Zambia, in the debt trap before Covid, to default on its debts.
And yes that will hit the ordinary people.

"All the ingredients were in place for trouble. A lot of countries, Zambia included, had behaved recklessly in the good times. As the managing director of the International Monetary Fund, Kristalina Georgieva, pointed out last week, they went into the crisis with levels of debt that were already uncomfortably high"

"The result has been entirely predictable. According to the World Bank, a steady decline in extreme poverty that has lasted two decades is now being reversed. Researchers at the Johns Hopkins university in the US estimated that there may have been half a million extra child deaths over the past six months as the result of the disruption to routine health services such as immunisation programmes".

From: https://www.theguardian.com/busines...fast-to-threat-of-emerging-market-debt-crisis

 

[Lexicus]

Zambia, in the debt trap before Covid, to default on its debts.
And yes that will hit the ordinary people.

COVID-19 has made it increasingly obvious that third world debt should largely be cancelled.

 

[Birdjaguar]

COVID-19 has made it increasingly obvious that third world debt should largely be cancelled.

But...that will hurt bank profits!

 

[Hrothbern]

COVID-19 has made it increasingly obvious that third world debt should largely be cancelled.

we need to do something yes

But how do you prevent that after a Covid debt cancellation some government borrows for the next vanity project ?
China joined the vulturing with a good business model there in Africa... good for ego's good for Chinese companies and not needed for the economy and the people.

 

[Birdjaguar]

we need to do something yes

But how do you prevent that after a Covid debt cancellation some government borrows for the next vanity project ?
China joined the vulturing with a good business model there in Africa... good for ego's good for Chinese companies and not needed for the economy and the people.

So the question becomes how do poorer nations build the infrastructure they need to improve prosperity? Where does the money come from? Where does the expertise come from? Can such things be divorced from political entanglement?

 

[Zkribbler]

Hrothbern's article sets out a bleak future.

A debt haircut is definitely needed, but it's going to be a herculean task to get the private creditors to agree. I don't know how Lexicus's proposed debt cancellation could be implemented.

1st world nation's need to bar creditors from their courts and to send litigious creditors to the courts of debtor nations. Creditors cannot be allowed to foreclose on Zambia's copper mines because losing its only asset would return Zambia to an era of colonialism.

Wiser minds than mine are needed to avoid the pending disaster.

 

[Hrothbern]

So the question becomes how do poorer nations build the infrastructure they need to improve prosperity? Where does the money come from? Where does the expertise come from? Can such things be divorced from political entanglement?

The cohesion fund of the EU is an attempt to handle such money

* the money is a subsidy
* It comes mainly from the richer countries
* the projects are infrastructural and the expertise is mostly coming from the rich but is implemented in a knowledge transfer way for local suppliers.
* risk of political entanglement from the receiving national governments is mitigated by bypassing them and deal with regional partners (whereby it can happen to some degree that regional partners are controlled by the top of the nepotism pyramid in the Capital)

All the conditions from the EU on those projects, guarded by civil servants in Brussels, make it often difficult to spend those cohesion funds for more advanced investments.
The low hanging fruit is roads, bridges, tunnels, sewage systems, clean drinking water systems, education (vocational and traditional up to R&D universities).
The ability of the weaker countries to generate sound projects is mostly very weak. Ideas enough ofc, but once you start writing them out and review them, most fail to pass.

One of the issues is

But how do you prevent that after a Covid debt cancellation some government borrows for the next vanity project ?

How do you prevent a government using foreign aid for the more solid investments, saving money from the normal budget, to spend their own budget money and freak borrowings on vanity projects ?
And I think the only way is to supply free aid like that cohesion fund ONLY when there is a cap on the national debt.
But then again
How do you prevent a government racing forward to that cap ?
Leaving the financially tight situation to a next government.
And when they go over the cap... what then ? Stop your cohesion fund ?

 

[Lexicus]

I don't know how Lexicus's proposed debt cancellation could be implemented.

The private creditors can agree, or be taken out back and shot. Their choice.

And before you start whining about how this would be Very Mean, you should realize that the world's poor already face the choice of paying or being shot (or, you know, having their countries destroyed by a US-sponsored invasion).

But how do you prevent that after a Covid debt cancellation some government borrows for the next vanity project ?

We need some kind of public global investment fund with the goal of actually reducing the gap between developing and developed world, so that developing countries don't need to be reliant on foreign currency debt.

 

[Hrothbern]

We need some kind of public global investment fund with the goal of actually reducing the gap between developing and developed world, so that developing countries don't need to be reliant on foreign currency debt.

yes
And by grants or cheap loans a lot can be done

But how do we prevent the national government adding the national debt trap as well ?
without severely infringing national sovereignty and pride

You know... it is like helping a family member who is tight to lessen the interest burden on a debt and the next thing is he borrows more money and he goes on a foreign holiday you yourself find too expensive.
I had long time ago a colleague who did not adapt his spending pattern when he moved from his mom to his own social housing... and being "independent adult" he bought a car as well not needed in bicycle Amsterdam.
But now the debt and interest and rent were all there.
It took 15 years before he had learned how to adapt his spending during which time my, by now, ex-wife gave him the pocket money first every week, later every month, later he got his access again and asked "permission" for bigger or structural spending.
"permission": It was all informal and not the scenario of professional care workers. Our boss at that company we worked both had asked us. He supplied money at zero interest to get some nasty borrowings out with high interest.

 

[Hrothbern]

But how do we prevent the national government adding the national debt trap as well ?
without severely infringing national sovereignty and pride

here some concerns on financial aid getting where intended and needed.

And as remark first: the Italian government is imo doing a lot to attack the Mafia
How well would that go in weaker countries ?

Mafia is licking his lips at EU support money
Very nice, the solidarity that the EU government leaders demonstrated in July in their agreement on the Next Generation EU support package (€ 750 billion!). But the mafia is also happy with it, Europol boss Catherine De Bolle warned last week at a conference of police chiefs in Rome.

According to De Bolle, the infiltration of the mafia (in all its forms, De Bolle made clear) into the economy of the EU, and the criminals have set their sights on European support money. So EU member states have to pay even more attention to who receives funding and whether they are spending the euros well.

At the meeting with De Bolle, police chief Vittorio Rizzi said he saw 'a sad parallel' between the virus and the mafia: they are 'just as evasive. And no one is immune. '

Europol already warned at the end of March that criminals are trying to take advantage of the corona virus. In this regard, Italy reported fewer robberies in the first quarter compared to a year earlier, but the number of usurious cases increased by 9.1%. Criminals are happy to lend money to companies and citizens who are in danger of going bankrupt and who can no longer go to the bank.

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In the meantime, there are also reports that the 'Ndrangheta, the crime organization from Calabria, is actively buying up uncollectible loans from companies affected by the corona crisis with banks. In this way she launder money and can take over the economic activities of the entrepreneurs. The Italian central bank has also warned about this.

A police report on criminal trends published last week shows that the number of usury cases decreased somewhat in the second quarter - but that could also mean that victims are less likely to file a complaint out of fear, the police say. Cyber crime - corona-safe because no direct contact - is increasing.
Earlier it appeared that the Camorra in Naples is using the corona crisis to work on its PR. The organization did this by handing out food parcels or € 50 notes to the poor.
https://fd.nl/economie-politiek/1357904/maffia-kijkt-likkebaardend-naar-eu-steungeld

How do we from the position of rich countries "far away" control such negative processes in the third world ?

Only give aid when all laws and insitutions are upgraded to have at least on paper the tools to sue the bad guys ?
And have some international court for appealing to verdicts in country courts ?

Would that not be considered as neo-colonialism ?

 

[Birdjaguar]

And remember that not all third world leaders are above reproach. Corruption happens at both ends of the pipeline of money.

What might work better is a politically independent pot of money that manages infrastructure programs in developing countries but does so outside of the national government funding process. Treat the project similar to emergency health aid for disease outbreaks. I don't believe any nation would agree though.

 

[Hrothbern]

What might work better is a politically independent pot of money that manages infrastructure programs in developing countries but does so outside of the national government funding process. Treat the project similar to emergency health aid for disease outbreaks. I don't believe any nation would agree though.

This is basically what the EU does with its cohesion fund.
And that pot is politically independent enough.
on top there is flowing money to farmers to dampen somewhat the rural-urban gap in prosperity.
(besides the geo-strategical food security reason and the compensation for higher production cost from the drive to increase food and environmental standards)

Most people (ideological) against the "power" of the EU are negative of those financial aids because it "apparently" is not effective, is the cause of corruption...
the pot is not needed....
until you threaten to stop it and then the tune becomes "solidarity" and threats with veto's for other decisions.

I think it can work very well in third world countries (for a while) because the ordinary people are there just too deprived of essentials.


One of the projects that works very well in third world countries is to empower the women with financing !

One layer of the economy is the male layer wotking in crops for cash farms, plantations, working in companies, working as small entrepreneurs like shops etc
One layer is small industrious activities (sell homework to customer) which can be done from home: not home-office but home-shopfloor. This layer is mostly done by women, combining with family care and needing very small "investments" like that sewing machine, etc.
They need micro-financing.
The normal banks don't do that, too small not worth bothering too labour intensive and have bureaucratic procedures leading to impossible guarantees against the loan.
The micro financing project are satisfied with a small village or a broader family all giving some guarantee against the loan. The women receiving the money for the "sewing machine" in fact bound by the normal social structure to make a succes out of the loan.
A kinds of "crowd borrowing".
And that needs foreign aid "banks" willing to do that.

 

[innonimatu]

Zambia, in the debt trap before Covid, to default on its debts.
And yes that will hit the ordinary people.

Hey look the countries " had behaved recklessly". The lenders who lent to these "reckless" countries are, of course, are an example of probity, better not even mention them. Especially if one's job is to bail them out.

we need to do something yes

But how do you prevent that after a Covid debt cancellation some government borrows for the next vanity project ?

Default on them again. And again if necessary. And again.

What hits the ordinary people is not the default, it's the non-default organized under the ever-so-helpful IMF.

 

[hobbsyoyo]

Regal Cinemas and another cinema line are closing back down now that James Bond is delayed again. I think I read that's 15,000 jobs gone.

Disney has laid off a ton of their theme park employees but I'm not sure if they're outright closing the parks. I believe that was another 20,000 jobs.

The airline bailout package ran out and they are throwing out I believe 40,000.

We can't fix the economy without fixing the virus!

 

[innonimatu]

* the money is a subsidy
* It comes mainly from the richer countries
* the projects are infrastructural and the expertise is mostly coming from the rich but is implemented in a knowledge transfer way for local suppliers.
* risk of political entanglement from the receiving national governments is mitigated by bypassing them and deal with regional partners (whereby it can happen to some degree that regional partners are controlled by the top of the nepotism pyramid in the Capital)

Go to hell with your insufferable patronizing, will you? No country in the EU needs "the expertise" of "the rich" countries in the EU to do infrastructure projects.

Countries are able to "generate" projects. What they have are political classes that have settled on being rentiers protected by the bureaucrats in Brussels. Hence the projects are for rent-seekers only. And indeed serious development projects would be classified by the EU as "state aid" of some sort, as "competition distortions", and formally forbidden. Which while in fact unenforceable does provide cover for these rentier interests to channel funds to their preferred kind of project.

It's always the countries that are "fined", not the individuals, have you noticed? Because the whole charade is done for the benefit of those individuals. The EU is a giant corruption machine. Not in its role of dispensing funds, where it doesn't actually handle that much. But in its role of providing cover and incentive for corruption and suppressing democratic decision-making and accountability.

 

[Arwon]

Regardless of Covid restrictions, if people are dying in large numbers your economy is stuffed

 

[Samson]

Trump abruptly scraps stimulus talks, punting on economic relief until after Election Day

President Donald Trump has ordered his negotiators to halt talks over a new stimulus package, after the two sides have struggled for months to reach a deal, a stunning move that puts an end to last-ditch efforts for a major economic relief package as millions are reeling from the coronavirus crisis.
"I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business," Trump wrote in a series of tweets Tuesday afternoon.
Trump's message stunned lawmakers -- especially since Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi had been trading proposals and negotiating for days in the hopes of narrowing their differences, though they were still far apart in their talks.
The decision to pull the plug on the talks is a major blow to Americans still struggling with the fallout from the once-in-a century pandemic and endangers an economic recovery that for months was driven by the initial $2.2 trillion stimulus passed by Congress in the spring. With that money largely spent and gone, economists -- including Federal Reserve Chairman Jerome Powell in a renewed plea for action Tuesday -- have warned more support is imperative in the months ahead.​

Dow swings 600 points after Trump rejects stimulus plan

Stocks took a dive Tuesday afternoon after President Donald Trump said he ordered an end to stimulus negotiations until after the November election.
The Dow (INDU) swung more than 600 points following the announcement and closed down 1.3%, or 376 points. The S&P 500 (SPX) tumbled 1.4%, and the Nasdaq Composite (COMP) finished down 1.6%.​

What does he think he is doing? I cannot think of a better way to stop people voting for him?

 

[El_Machinae]

Sure handy to know that the Executive now controls the purse strings

 

[Zkribbler]

Disney has laid off a ton of their theme park employees but I'm not sure if they're outright closing the parks. I believe that was another 20,000 jobs.

Says the Disney website:
Disneyland Park and Disney California Adventure Park remain closed and will reopen at a later date, pending state and local government approvals. Upon reopening, certain parks, hotels, restaurants, attractions, experiences and other offerings will be modified or unavailable, will have limited capacity and will be subject to limited availability or even closure, and park admission and offerings ...

 

[Birdjaguar]

But Trump is high on steroids and feeling good!