The impact of COVID-19 on economic recession is a foregone conclusion, how to preserve your wealth?

By: MR. Knight Apr. 10,2020

On March 23, the President of the International Monetary Fund, Kristalina Georgieva, stated the fact that everyone did not want to break through but knew that it had begun to happen: the global economic recession in 2020 was a nail-down, and this time it will definitely compare with In 2008, the financial enterprise crisis became more serious.

Countries have taken unprecedented policy measures to protect their respective economies, and the International Monetary Fund will also provide member states with $ 1 trillion to cope with.


Viruses wreak havoc

Judging from the situation in the past three months, this is the unfortunate beginning. COVID-19 is spreading all over the world, and waves of problems and troubles are coming: countries will face a series of major challenges such as health crisis, capital liquidity crisis, and falling commodity prices. Kristalina Georgieva said: We believe that economic activity will gradually recover in 2021. The premise is that every country needs to take strong and coordinated policy actions before we can get out of this crisis.

Kristalina Georgieva used to be a management scholar at the London School of Economics and Economics. Even if she omitted the conjunction, she could still see the rigorous logic behind this sentence: To get the conclusion that the economy will start to recover in 2021, we have to meet the requirements of countries around the world. The necessary prerequisites for a strong and consistent policy.

But do we currently have? Judging from the respective attitudes and policies of China, the United States, the European Union, Russia and the Middle East of several major economies in the world, the situation is not optimistic.

Although there are some positive signs. For many health systems in low-income countries that have access to loan support. But in the face of the epidemic, they also need to have enough beds, enough medical staff and enough supplies, and these all require money.

The US Congress said on March 27 that it would speed up approvals and promise to double the special drawing rights to the IMF from 182.4 billion U.S. dollars to $ 364.7 billion. This means that the International Market Monetary Fund can lend itself more money and can provide support to countries in need as soon as possible.

As for China's attitude towards the epidemic, there is no need to say more. It can be said that we have shown full sincerity to countries in need: as long as you want, as long as I have, do what I can and do everything I have.

But are we really in harmony? Political disputes have not decreased these days. China and the United States are still talking at the diplomatic level; European countries are intercepting other countries' medical supplies and panic hoarding medical supplies. More and more countries are implementing restrictions on medical products and following the expansion of food export restrictions.

These behaviors will eventually seriously hit trade, making people think that in times of crisis, international economic and trade are not credible, so it is more important to close the country.

Once the confidence in international trade and international cooperation is lost. Countries with weak industrial capacity will soon become the cannon fodder of the virus, while the rich countries will lose the trust and human resource supply of the weak countries in the future, and will also fall into an irreversible recession.

In this sense, the 2008 economic crisis is really a piece of cake compared to today.

Tens of millions of people, unprepared for unemployment

In fact, "economic crisis" is a vocabulary chosen carefully by the academic community, the government, and even the media that has never been too serious. Once recognized by the public because of the "economic crisis", only pessimism can lead to financial disaster. But this year, organizations and governments around the world have clearly used "economic crisis" to describe the recent and future economic conditions.

In the coming years, will the world get better? The answer is yes, no.

This year's employment environment will make almost all countries in the world feel collapsed.

In early March, the United Nations International Labour Organization estimated that the world may increase 25 million unemployed people due to the impact of the epidemic, which is calculated based on the 2019 global 188 million unemployed population benchmark. But according to the latest data from the United States, the number of unemployed people in the United States has reached ten times that of 2008, and the unemployment rate in the United States is likely to soar to 20%, reaching approximately 32 million.

In the United States alone, the number of unemployed persons is expected to far exceed the expectations of the United Nations.

The US Federal Reserve Commission stated that the unemployment problem may be worse than the unemployment rate during the Great Depression of 1930, and a total of 47 million Americans are expected to lose their jobs.

Although the Chinese government has responded quickly to the rate of control, the current data analysis shows that the unemployment rate in China has soared to 6.2% in January and February, 10 million more unemployed than last year.

Tour guides, drama workers, small restaurant owners, foreign trade enterprises ... Thousands of people can only sleep and eat at home.

The third world is even more tragic

In some parts of the world, the situation is even worse. In some places, the economic situation is already very poor, food shortages, the sudden explosion of the local people is more difficult to deal with.

Currency

All countries in the world have adopted monetary and fiscal and economic means to protect the vulnerable groups of the unemployed, and some national policies have almost never happened in history. For example, in order to ensure employment, the Australian government announced that it will directly help the company to pay its employees. Each employee can receive a salary of AUD 110 per day. The company has only two conditions to meet: the first proves that the epidemic does damage the turnover; The second is to ensure that employees are not fired. The United Kingdom not only sells you a year ’s business tax, but also individuals and businesses can postpone loan repayment. German Ze initiative to provide subsidies to small and micro enterprises, the main beneficiaries are barbecue stalls, beer restaurants and other vulnerable service industries.

Each country's central bank also directly cut interest rates without hesitation.

This epidemic is different from any economic crisis in modern history. Because of the isolation order, people have to hide at home, production and consumption activities are stopped directly, and it is useless how much money the government sends. People today can barely pay rent, but what should they do in a few months?

It took 4 months from the beginning of the development of the epidemic to the gradual resumption of work in China, but until now many of our small, medium and micro enterprises have not been able to relax. And in the four months of forced or closed cities, everyone came wearing a mask, even if those masks and basic isolation cannot be the state of the country, these situations have grown to more than 50,000. The popular sight of the country cannot be released However, it is still unknown how long the epidemic will be.

How many people will lose their livelihoods? Probably because no one can count.

Globalization, advantages become disadvantages

When China's epidemic was the worst, there were many problems in the world's supply chain. Now that the epidemic has spread to various countries, the side effects of globalization have become apparent.

Before the globalization of the supply chain, parts of an industrial finished product may be purchased from multiple countries. Now there is a supply problem in any country, and the finished product cannot be completed.

Is more typical of the automotive industry.

Ministry of Commerce's Foreign Trade Department said that the epidemic has impacted China's auto trade and supply chain operations. This direction was reversed in February. At that time, Hubei was the hometown of the second auto, and it was one of China's most important auto parts production areas. Production stagnation forced many overseas auto companies that imported parts from China. Today, China resumes work and some imported accessories cannot come back. Suppliers of large international and domestic companies such as Michelin, Bosch, Pirelli, etc. have closed their factories in Europe and the United States, and the auto companies are facing severe supply cuts.

Economic recession is a foregone conclusion

The United Nations Department of Economic and Social Affairs issued a briefing in April on "World Economic Forms and World Economic Forms and Prospects", which pointed out that if the epidemic is contained in the second quarter, then this year's global GDP will fall from 2.5% 1.6%, the worst case may be -0.9%.

See this number, maybe many people will feel more relaxed-this is not worse than in 2009. But as Kristalina Georgieva said, this estimated result is premised: the world epidemic situation should be effectively controlled in the second quarter of China. But when does the epidemic worldwide end? No one can make an accurate estimate.

Do three things right to save wealth

Economic recession is inevitable, you should do three things to keep your wealth!

1. Cash is king, please check your emergency funds

The so-called cash is king, mainly from the perspective of security, not from the perspective of value preservation and appreciation. When the economic crisis occurs, the value of some assets is underestimated by subspecies, and it is difficult to realize cash. Because cash has better liquidity.

You need to prepare basic living expenses for several months, preferably in cash. Of course, when there is no sign of problems in mobile payment, it is not bad to put this money in a mobile wallet. In this way, if income is affected, you can be guaranteed that you have money available, without having to resort to a loan platform. In order to provide more protection during the economic downturn, adding more funds to the account is to obtain a more solid buffer.

2. Reassess your asset portfolio

High-risk and high-return varieties are replaced as soon as possible. The economic recession will make the risk and return no longer proportional.

Increase financial assets with high liquidity to cope with possible changes. At the same time, financial products that can take into account security, flexibility and certain value-added attributes are ideal choices.

When the social economy has become depressed and conventional safe-haven assets are generally recognized as gold, but the current gold standard has long been invalidated, gold is also hard to say as a high-quality safe-haven asset. It is inseparable from clothing, food, housing and transportation, so public utility assets such as water, electricity, heating and coal often have the function of hedging.

3. Adjust your investment strategy

You need a more conservative investment strategy, refer to Buffett's suggestions: first protect the principal; second refer to Article 1. Taking the stock market as an example, index fund fixed investment methods that do not rely on trend to obtain returns can be used with caution.

Coping with the economic crisis requires a development perspective and a scientific method. Everyone has different specific situations, different views on reality, and different expectations for the future.

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