Markets

Corona economy

Virologists give the all-clear: the disease is increasingly under control. Economists, on the other hand, see black: as a result of the Corona measures, the global economy is in free fall, far more than in the financial crisis in 2009. Not only the economic downturn, but also the increase in government debt resulting from the rescue of the economy is historical – comparable to that only in the Great Depression of 1930 or World War II. But who will repay the rescue debt in the trillions? And what does this mean for investors in the long term? Since we are dealing with a historical crisis, a look at precisely this history can help in assessing the consequences: As early as 1918, Germany faced huge mountains of debt as the loser of the First World War. In addition, reparation payments depressed the victorious powers. Even then, the question arose: How should this money ever be paid back? Politicians answered this by reaching for the music press. With fatal consequences: As the money supply grew much faster than the range of goods and services it offers, money lost increasing value. From 1920 to 1923 there was hyperinflation. Investors in real assets such as gold, real estate and shares were not affected by the loss in value of the money. Finally, inflation caused the prices of real assets to rise accordingly. At the height of inflation in November 1923 alone, share prices rose by over 10,000%. In contrast, monetary values ​​such as cash, bank and insurance balances became worthless. Since most Germans already kept their savings in these facilities, large sections of the population became impoverished. Because of this traumatic experience, coping with the crisis with the banknote press was a taboo in D-Mark times for decades. However, since the euro and financial crisis in 2009, politicians in the euro area have been relentlessly turning to the music press. And to cope with the Corona crisis, it is doing it all the more recently. Many experts are therefore afraid of raising inflation again. But what is the alternative? A look back in time also answers this: Coping with the crisis with the banknote press was also a taboo in the wake of the global economic crisis that broke out in the United States in 1930. After all, the Americans had only observed the catastrophic result of the German experiment only a few years earlier and in no way wanted to make the same mistake. Instead of countering the economic downturn with freshly printed bailout money, the heaped mountains of debt were countered by a rigid austerity policy. Unfortunately, this also has devastating consequences: Because there was no money to stabilize the economy, the economy got increasingly deep into the downward vortex. More and more companies could no longer pay their debts and went bankrupt. Unemployment rose to a record high of almost 30%. The Dow Jones experienced the worst slump in its history between 1929 and 1932, with a loss of almost 90%. A true Armageddon. And a crisis that contributed to the rise of the National Socialists and thus to the Second World War in Germany due to the resulting high level of discontent among the population. But is there no way to cope with the accumulating corona debt between uninhibited bailout policies with the printing press including hyperinflation and total economic crisis due to rigid austerity measures? Yes, there is! You can find out what he looks like, which countries have already successfully walked him in history and why he will split capital investors into winners and losers even more than in the past decade in our detailed analysis of the corona economy at www. iac.de/shz

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