Macroscope | Busy with coronavirus bailouts, the world has taken its eyes off the looming debt crash

Name: Global Covid-19 death toll hits 500,000 as coronavirus infections surge past 10 million
Uploaded: 2020-07-12T13:00:20.000Z
Duration: 2 min 45 s
Description: Global Covid-19 death toll hits 500,000 as coronavirus infections surge past 10 million

The global debt crisis racked up in the decade before the pandemic has not gone away and, together with the added burden from bailouts, could crush banks and leave many companies without a financial lifeline

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The pandemic has wiped millions off the portfolio of Soho landlord Shaftesbury Plc and many other companies across the world. In the rush to cushion the economic downturn, many have downplayed the consequences of the coming debt burden. Photo: Bloomberg

Anthony Rowley

Published: 9:00pm, 12 Jul 2020Updated: 12:08pm, 13 Jul 2020

Awful though Covid-19 has been for its victims and damaging as lockdowns and social distancing have been for commerce and industry, the economic and financial fallout has not yet seemed as bad as feared. The impact has been softened by official aid but is there still a crash coming?

We had the global financial crisis in 2008, the Asian financial crisis in 1997, the Latin American debt crisis in the 1980s and others too many to mention. But this time is different; there are (as yet) few collapsing banks or bankrupt corporations, and the stock market has not crashed.

It appears at first sight that the seemingly bottomless purses and pockets of governments and central banks can go on bailing out banks, companies and even financial markets ad infinitum while the world focuses on battling the Covid-19 virus. But this is an illusion.

A disaster on the scale of Covid-19 clearly cannot be shrugged off in the way that stock markets, gorged as they are on central bank liquidity, seem to believe. The notion that all will be well once lockdowns end, or even when remedies and vaccines are discovered, is a comfortable fiction.

02:45

Global Covid-19 death toll hits 500,000 as coronavirus infections surge past 10 million

As noted in this column, well before the pandemic struck, global debt (in corporate, household and government sectors) has piled up massively in the past decade, leaving these sectors highly vulnerable to any economic downturn. And now that it has come, that downturn or slump is proving to be dramatic.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | Busy with coronavirus bailouts, the world has taken its eyes off the looming debt crash

Macroscope | Busy with coronavirus bailouts, the world has taken its eyes off the looming debt crash