the perverse effects scenario of the covid19 virus crisis    

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Here we are, health crises, confinement, almost complete breakdown of the country.

 

On the day 4 of confinement in France, this has not yet had any repercussions on the macroeconomic figures of the country and the world except that the VAT no longer comes in as usual for the state for lack of leaving only supermarket, banks, tobacco and open fuel store, it (the vat) would represent a shortfall of 419 million euros every day. Source Le journal du net

 

This article does not predict the future, but is a reflection on the scenario that the current situation could take on the background of covid19.

 

Credits are very present in businesses and households, it is planned for a given date during the month, the next installments will arrive in April by direct debit as usual. Only here the workers will have as income only half of the usual amount due to the 15 days of confinement imposed. (note we will move towards at least 1 month more)

 

Knowing that more than half of households find themselves overdrawn on the 15th of the month, to meet the basic needs, which are, to eat, I see no war other solution than to withdraw cash before being sucked up its capital by the current fixed charges, such as tax, electricity, water, and credit installments for both consumption and real estate.

 

One can imagine a state that limits withdrawals to 20 or 50 / days in the difficulty of banks to supply the population, this happened in Lebanon 4 months ago before declaring bankruptcy in early March. Lebanon was one of the richest Arab countries, Switzerland of Arab countries was said to be.

 

 

Businesses are relieved to freeze their rents, taxes, fees and charges related to water and energy. France announces that within the limit of 300 billion it will cover wages in the name of short-time working. 100% of the minimum wage or 84% of salaries up to 4,500 euros. The announcements are going well, however, one wonders about the time of application and how households will manage to level their consumption if the time takes, even if only 30 days to apply.

 

The majority of people in this country are paid the minimum wage 13.4% of employees, or 2.32 million people. Source lf24

The underground economy and other hidden works, although illegal are quite difficult to measure but needless to say that no announcement or measure is planned for the illegal workers will be on the front line for confront the perverse effects of this “corona virus” crisis

Employees wearing make-up in self-employed companies will be in the second line, due to the lack of uberization of the company developed in its last years in France. (Take them to justice to ask for the requalification of your work contract, whether it be concealed, you will win!)

 

Meanwhile, at the headquarters of the ECB have given orders to print 750 billion euros to "reassure" the markets. This seems to be working since the ACC posted a rebound of 5% on this spring day. (See tweet at the bottom of the page)

Tweet Christine lagarde 750 Milliards d euros

 

But let's not be mistaken I think that the first effects of the crisis will arrive in a minimum of 30 days and that it could last a few months, bankrun, massive unemployment, expulsions of people unable to repay the credits, numerous bankruptcies sme, dizzying tax hike to call the citizen to solidarity, global recession, for all that has just been described above. An article even mentions the possibility of soliciting the savings of individuals to save the country. In other words, this would be a seizure on the savings accounts to settle the debt that the country is sinking a little more every day.

 

 

In this scenario, liquidity is likely to be precious, and in this field prices are also likely to fall sharply. Household appliances, vehicles for example will no longer be able to sell at current prices, as the currency will be precious to satisfy primary needs (Eating).

 

In addition to all of this, one wonders about the new consumption patterns that containment will create. Are we going to be satisfied with what is necessary and make our products last longer or continue to make credits to renew products whose degeneration remains programmed. Will the tourism industry resume its market instantly and with it or will it take longer. The work that companies and individuals planned to do will resume immediately or be simply canceled or delayed. Will the vehicles on offer be bought new, used, or in turn postponed and canceled. You have to understand that all this will have a clear impact on the growth of the world economy.

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