The Coming Greater Depression of the 2020s

ARTICLE : THE COMING DEPRESSION OF THE 2020s

LINK OF THE ARTICLE : https://www.project-syndicate.org/commentary/greater-depression-covid19-headwinds-by-nouriel-roubini-2020-04

I choose an opinion article published the 28th of April 2020 by Project Syndicate "The World's opinion page". It was written by Nouriel Roubini, Professor of Economics at New York University's Stern School of Business.  First and foremost, the purpose of the article is to propound a rather more detailed hypothesis or analysis of the economical consequences that the current health crisis is about to bring. As we all know the spread of the coronavirus in the entire world, has caused almost a worldwide recession of all non activities. As a consequence, the economic activity has known a big downturn since the beginning of the quarantines although telecommuting has been a convenient solution for some lines of business. Additionally, in this article, Nouriel Roubini explains that this crisis came at a particular bad moment since the world has been drifting into major financial crisis since the illusion of a " risk-less risk" has driven the financial world into a financial instability. The case in point are the economic consequences that this double crisis may cause later on this decade. Hence, we will try to summarize them. 

1- The first one concerns debt and default, since the last crisis the defaults were already high and even unsustainable for some countries but the COVID-19 crisis may cause a massive increase of fiscal deficits and of the public debt. The loss of income during the quarantine may cause the bankruptcy of many firms and the increase of the private debt, that will become unsustainable. Furthermore this will slow down the public debt recovery. 

2- A long lasting problem in rich countries is the demographic time bomb, these countries have aging societies, which means that later on the current unfunded debt of health-care and and social-security systems will grown larger. 

3- The third issue is the risk of deflation, which is caused by the recession of activity. Mass unemployment as well as the price collapse of the oil and industrial metals increase the probabilities of debt deflation and insolvency. 

4- A related issue is the currency debasement which will oblige governments to lead with fiscals deficits to avoid depression and deflation. 

5- Well, as we may know wealth gaps will widen further. Additionally to avoid new financial shocks, some firms will re-shore their production lines. We may think that this could be synonym of decrease of unemployment but this trend will accelerate the pace of automation and reduce wages. 

6- This pandemic may lead to a renewed protectionism and to de-globalization. In which case all type of exchanges will be reduced as it is already happening currently with medical equipment and and food sectors. 

7- Mass unemployment, financial weakness and growing inequality is about to favor populist leaders that take profit of the situation to reduce migration and trade basing their theories on hate and xenophobic theories. 

8- Of course, as we already noticing the Sino-American decoupling is imminent. As the US President is trying to blame the Chinese government of the pandemic. 

9- This decoupling will divide the world into a complex network of international diplomatic relationships. Most of the clashes between this two superpowers will be through technological and military progress. 

10- Finally and for me the most important question, the environmental disruption let us think that with the defrost of the permafrost we will be exposed to new major pandemics will be more frequent and severe in the following years. 

All the points presented explain why this crisis is a double crisis which main consequence will be the coming greater depression of the 2020s. 


On my point of view I think that the link to the notion spaces and exchanges is pretty clear. First of all, the spread of the COVID-19 is due to the multiple human exchanges due to the mobilities of people between countries and continents but also merchandising, because a lot of products travel the world.These exchanges have caused the spread of the virus in the whole World. Secondly, it is also linked to the notion because the downfall of exchanges between places, has caused a worldwide financial recession and an upcoming depression. Which show us that our whole financial system functions within one single space, the world. And last but not least, the main consequence of this crisis will be a mass reduce of exchanges and a comeback to protectionism, which means that the spaces and exchanges will be reduced to smaller scales like the EU or even smaller distances.