18th March 2019 - a quick look at the current economic paralysis

Walid Salah Eldin

Active member
214 1
The Covid-19 virus can keep putting the countries between choosing the illness or the economic paralysis.

All governments are still asking people to stay at home regardless shutting down the economy by this way which cannot last for months or even weeks but the economic impact can threat their life too later, if the virus to hold longer.

Most of the governments adopted reflation measurements on their capacities to fight the virus negative economic impacts and prop up the economy as soon as possible.

As it became clear that the recession is ahead, despite taking excessive easing steps by several central banks but not all countries can withstand the cost of these reflation plans or even to be closed for months before deploying such plans.

Other countries cannot afford supply chains or even salaries without active economy and others cannot import their needs and may be others cannot give the required medical support, while they are importing most of their needs.

Living in this economic stance can cause severe damage to many countries currencies and may lead to bankruptcies to some countries, actually at the edge of failure to fulfill their financial obligations.

The high hope currently is in the summer which can cap the virus existence outside the bodies and limit the infection to the minimal level.

But that can be also a tale we cannot believe in easily, as the virus is still spreading by the same scale outside China which can have it back from other countries after it could nearly contain it, while the southern half of the earth is waiting where the winter is to come next to host this virus.

While all who have problems in their immunity system or respiratory system should hide as long as this crisis is holding!

The Fed lowered the interest rate to Zero and decided to increase its holdings of Treasury securities by at least $500b and its holdings of government mortgage-backed securities by at least $200b billion in the coming months.

The Fed encouraged banks to keep their discount window opened as wide as it possible by removing the RRR to provides financing access using all of their available capital and liquidity to lend the household sector and spur business investment.

But when can all of that put in place, while the people are asked to hold home choosing the economic paralysis, even if they are to have this promised $1k directly to be spent during this holding period but what is next, if the virus is to hold longer.

Actually most of the economy sectors are down and we may find US non-farm payrolls figures next referring to losing of more than a million in a month, while the virus is still holding alive among us and the monetary policy is running out of effective tools to stimulate that stagnant economy.

Even who were liquidating their reserve positions causing excessive gold movement to the downside can run out options to sustain their financial situations and avoid closing of stocks exchange markets.

FOMC members said that they will continue to monitor closely the market conditions and the committee is prepared to adjust its plans as appropriate.

This message tells that there can be rising back of the interest rate again, if the current critical situation to end but what it can tell if it is to exacerbate further!

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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