2020 Corona Crash is a (Recession or Depression) ???

2020 Corona Crash is not a "Recession" its a starting stage of "Depression''

Before entering into this blog,We remind you that we are not a certified professional economist but the data in the blog is analysied on behalf of traders view,in terms of Environmental analysis factor.

In layman's view,most of us comparing this Corona Financial Crisis with 2008 Recession,but we suggest you to compare this Crisis with 1929 (Great Depression) 

In this blog, We are going to discuss about the Business Cycle, Economic debt cycle, How we predict this depression & How we can safe guard ourself from this upcoming depression.

What is Business cycle ?

Business cycles are the types of fluctuations found in the aggregate economic activity of nations.Which includes 4 Phases

1. Depression - It is the crucial stage of cycle. 
2. Recovery - It is the expansion stage of cycle. 
3. Boom - It is the peak stage of the cycle.
4. Recession - It is the suppressed stage of the cycle.

These four phases also found in economic debt cycles.

What is Economic Debt Cycle ?

Economic debt cycle is a period of time that measures the total debts of a country & the overvaluation.

Economic debt cycle is usually measured in two terms.

• Short - Term Economic Debt Cycle
• Long - Term Economic Debt Cycle

What is Short Term Debt cycle ?

Short Term Debt Cycles is often found every 8 to 10 years in the economic cycle.Such us of 2008 - Sub Mortage Recession , 2001 - Dotcom Bubble Recession ,1991 - Breif Recession etc..

In these type of Short Term Debt Cycles, Economy face a Financial crisis which result in increase in high unemployment rate.These type of burst happens because of high debts and over valuation.

In this time period,government will cut interest rate,provide high taxes for business magnets and give stimulus package for needy.

These types of governments actions will help the economy to recover from that recession.

Long - Term Debt Cycle ?

Long Term Debt Cycles are rare to found by this current generation peoples,Because it usually happen (75 to 100 years) once in the economic cycle such as Great Depression - 1929 ,Panic of 1873 ,Post-Napoleonic depression etc.

In these type of crisis, Economy faces a huge financial crisis.Unemployment rate will be high,money value will fell down. over valuational assets will fell to its intsrinsic values.Such a crucial stage of economy.

In last Great depression 1929 crisis, Franklin D Roosevelt, President of united states. His actions at that time is notable in history.He surrendered most of governments work to private companies.He distributed governments surplus money to peoples for money circulation.It takes around 10 years for recovery stage.After the great depression recovery united states growth was potentially high.

How we relate this crisis to Depression stage?

Before gets into that analysis, Lets see how a economy works...An Economy works with the transcation between two people or two companies or two banks or even two countries.

 

Transcation is nothing but Spending for Products & Services. Spendings can be in both Cash & Credit,unpaid credits forms the Debt.

Here, One person's Spending is another persons income.

Its a cycle formed chain reaction.

When this cycle gets stuck?

If a person spending is reduced other persons income will get reduced.If the scenerio repeats,economy will get stuck in this cycle.

Why a person's spending will get reduced?

Usually, a person spending will reduced because of  Outstanding Debts or To be Debt Free.

What the Government will do that Scenerio?

Government will reduce the Interest rate.Then provide more credit. Then the above cycles will continue...

What will happen when spending is more?

If Spending was higher than the consume, its leads to Inflation.

So,Government will increase the interest rate.

Government's main duty is to maintain Economy from Inflation & Deflation by Increasing & Decreasing in interest rates

 

 

Above represented data's are applicable to People, Companies, Banks & Country.

Lets relate the above scenerio with our country. We got some data's from Tradingeconomics.com

Total Outstanding Debts in GDP?

Our Countries Outsanding Debts is increasing year by year.Currently our total debt is around 70% of Our GDP value.

GDP Growth of our country?

Annual Growth of GDP is coming down year by year

Unemployment Rate of Our Country?

Unemployment rate is surged to high due to this corona effect

Government Spending of our country?

Government spending is decreasing year by year.

 

Interest rate of our country?

Interest rates of our country is at overall low

Cash Reserve of Our country?

Cash Reserve of our country is at low.

Takeaways from above data !!!

• Outstanding Debts to GDP is at high.
• GDP growth rate is at low compare to previous years.
• Unemployment rate is at high.
• Spending is low.
• Interest rate is low.
• Cash reserve is  low.

These scenerios may also occur at recession stage means at (Short term Debt Cycle).If it was a recession it should get similar impact with previous recession.

But,Experts says this recession is worst than compare to 2008 - Recession.

  

According to our view, 2020 was the 90th year of the long term debt cycle from last depression 1929.

In 1929 US government distributed some government projects to private to strengthen the government to reculate economy,same scenerio is happening right now in india.

Main thing is Interest rate.Interest rate is already low in our country.So,it is not valid as a hedging tool in the crisis.Overall data represents the long term debt cycle peek stage. 

We suggest that 2020 - Corono Crash is not a Recession.We conclude it as the starting phase of Second Depression.

lets be prepare ourself to face it..if it happens.

How we can save us from that crisis?

• Avoid new credit and try to close your existing debts,if u have a source to close them.
• Get a skill oriented work, so that it might be help you to be self employed if uneploynment happens do that crisis.
• Make sure of  Medical Insurance policy for your family.
• Invest more in Gold & Silver, Because during these type of crisis commodities get perform well.
• If you are planning to buy a land wait for few more years,Real estate value will come down.
• Cut the liability expenses and spend for asset.
• If you find a stock price at low in the crash,try to accumulate in sip method.

Conclusion:

We  projects that depressions might not be happen in a single day like previous Great Depression 1929, Being countries are connected with the globalized, Effect of that depression may be high in impact,but not happen in a single stroke it take twice or thrice.

Remember that, Its a universal phenomenon,its applicable to all.In 1929 Great Depression, United states government and people performed well,that was the result of United states success today.

Many investors like Warren buffet,are orginated from the previous crisis..If we think and act wisely in this crisis.We also have chance to be a billionare in our next stage of cycle. 

Being in the way of gratitude, i will post my analysis about the stocks to buy long term,in upcoming blogs. Kindly subscribe my blog site,to get further updates about my blog.

Thank You !!!

With Regards,

K.S.MUTHURAMALINGAM,

NSE CERTIFIED CAPITAL MARKET PROFFESSIONAL

7639927298