Wuhan Coronavirus: An Engine of Economic Destruction

The two videos below discuss the economic effects of the COVID-19 crisis from two very different points of view. Many thanks to Hellequin GB for the translation, and to Vlad Tepes for the subtitling.

In the first video, an unidentified German pundit on RT gives an outline of the economic effects of the coronavirus from an establishment perspective. What I find creepy is the footage of Merkel, Macron, and other political leaders mingling with each other in their masks, doing elbow-touches:

The second video is a rant by Gerald Grosz, an Austrian politician for the BZÖ (Bündnis Zukunft Österreich, Alliance for the Future of Austria) and the FPÖ (Freiheitliche Partei Österreichs, Austrian Freedom Party). Mr. Grosz has a decidedly Coronadissident perspective:

Video transcript #1:

00:03   So, first of all you have to say that this is the worst economic crisis since the Second World War,
00:09   and the forecasts — assume that Germany will still come out relatively well,
00:16   but the risks are huge ones, we don’t know if a second wave is coming,
00:21   but that can come still to a head,
00:24   and there are some arguments about the fact that
00:28   things are going upwards very slowly in Europe as a whole.
00:33   What speaks to the fact that it is developing very slowly in Europe?
00:37   So, in my opinion there are three factors that play a central role.
00:43   Firstly, fiscal policies, and they have reacted pretty well now,
00:49   in the short term, both at the national level and at the European level,
00:55   so that was very positive. It just remains open to see what happens if the stagnation continues,
01:02   whether the fiscal policy that would be necessary then would be carried out.
01:07   That is the first point. The second point:
01:11   I actually see Europe facing the risk of deflation,
01:15   of an actual Japanese scenario.
01:18   the inflation rate is actually nil — now — um, 2020,
01:24   and the big problem is — um — wage development is too weak,
01:30   and the danger is now very, very high, due to rising unemployment,
01:34   that wages are coming under pressure —
01:38   um — that wages do not rise enough, that the unit labor costs then decrease,
01:43   and then you have the big problem that you’ve had in Japan for decades:
01:49   wage developments lead to deflationary developments.
01:53   And finally the third point, which is actually connected with it: Europe has in fact
01:59   not yet recovered from the big financial market crisis.
02:04   This is best seen in monetary policy, which is that interest rates
02:09   were ZERO before the corona crisis started,
02:14   um, so monetary policy can no longer use the interest rate as an instrument.
02:20   Investment activity remained weak throughout the phase
02:25   from the financial market crisis to the corona crisis,
02:29   and what’s connected with that is that the private sector’s debt is very, very high,
02:36   and Europe has no proper arrangements
02:41   on how to deal with bad loans that will develop.
02:46   The banking union that was created to strengthen banking supervision
02:53   also did it well, made it central,
03:00   but the mechanism to process bad loans, process banks, stabilize banks, is unfinished.
03:07   Not to mention the deposit insurance that has not yet been created.
03:11   So if I summarize, fiscal policy looks good. How it will be the medium term is questionable.
03:19   Secondly, I believe that Europe faces a risk of deflation,
03:24   which we would actually have to fight.
03:28   Thirdly, high debt and a possible buildup of bad loans will become a medium-term problem.
03:36   The EU’s aid package with the 750 billion euros has probably been addressed now.
03:41   That fiscal policy is doing something.
03:45   Is that enough, or does a lot more have to happen?
03:48   Well, right now, as a short-term policy, that’s very good.
03:53   This makes up four to five percent of the BIPS, the European BIPS (basis points).
03:59   Well, that’s something, but this program, this 57 billion
04:05   development program, comes with a negative link,
04:10   and the negative link is that the next seven years the EU budget
04:16   will be relatively thin, relatively small, and not growing,
04:22   which is actually catastrophic. It has been cut back massively
04:28   in the areas of research, culture and student exchanges.
04:33   So in areas that are supposed to bring progress,
04:37   one has cut back and that is, so to speak, a negative signal.
04:42   In your view, what would be the right step now, right steps?
04:48   Absolutely a fiscal union; one would have to increase the European budget
04:54   by 2-3-4-5-6 percent as quickly as possible.
04:59   The center would have to take on more functions.
05:02   The common debt should not only happen once now, but permanently.
05:11   The center should enforce active fiscal policy, that is the first point.
05:17   The second point, urgently and necessary, would be wage coordination.
05:24   It is an absurdity in a currency union that one has no coordination of wages,
05:30   and ultimately one would have to complete the banking union, of course.
05:34   Germany has been criticized again and again in recent years
05:37   for its low wages and massive export surpluses,
05:40   by the USA, France, Great Britain, but that has always been crushed, nothing ever changes there.
05:47   So, is there a rethink now? What is happening?
05:51   German export surpluses are scandalous, because they are
05:54   one of the major disruptive factors in the global economy,
05:57   now bigger than those of China and Japan,
06:02   so that’s really a negative factor for the global economy.
06:07   One of the main reasons for these large surpluses was the very low wage increases,
06:14   and Germany is actually obliged to stimulate the domestic economy massively,
06:20   and through that, eventually to reduce the high excesses.
06:25   So what would be popular, what should be, would really be the strengthening of the domestic economy,
06:33   in the end a change in the distribution of income through a wage increase for low-wage workers.
06:40   Germany has seen the fastest developing low-wage sector in the OECD
06:43   (Organization for Economic Co-operation and Development) countries in recent decades.
06:47   At the moment you can not really assess how it will work out with Corona.
06:51   What impact can it have, in the worst case scenario, for the global economy
06:55   if it doesn’t really abate quickly, but remains a problem for a longer period of time?
06:59   So, first you have to say that developed countries, such as the USA, Europe etc. etc.,
07:07   that those really have a relatively large playing field for national politics.
07:15   In an emergency, it is the central bank that finances gigantic fiscal programs.
07:23   There is no risk of inflation, either; there is more of a risk of deflation.
07:27   If there is no demand, wages don’t rise,
07:32   then the central bank can massively intervene.
07:37   The situation in the countries of the global south is completely different.
07:42   You already have massive capital flight from these countries to the USA.
07:48   Everyone wants the safest countries, that is, the USA and also Europe.
07:53   I see the greatest risk for the global economy in the global south.
07:58   There the corona crisis will really only arrive now,
08:01   and there the “crisis” will come to a head again.
08:04   Those countries have very little fiscal leeway, and if those countries
08:08   are not massively helped, there is a risk that the global economy
08:13   will actually collapse, and then, we will have a really difficult situation on our hands.

Video transcript #2

00:00   And what are you doing all summer long?
00:03   Do you fear for your life, through imminent death by Corona,
00:06   which is prophesied by politicians and the media every day?
00:09   As the saying goes: Non abbiate paura; don’t be afraid.
00:13   While you, like the rabbit in front of the snake, get the latest monstrous virus reports from
00:20   the most remote corners of the world ready to breathe in with your eggs for breakfast or dinner,
00:27   the daily vaccinated generalized anxiety disorder for your life manifests itself permanently,
00:34   down the drain goes our economy, that is, your company, your workplace, your daily bread,
00:41   your electricity bill, your leasing rate, i.e. your overall economic survival,
00:47   breaks down by an unbelievable 10.1% in Germany, with an even worse 12.8% in Austria.
00:53   A “number” that has never had to be recorded since the Second World War, until TODAY.
01:00   The “recession of the century” is already the media title,
01:03   and heralds what has long since been known and prophesied.
01:07   The recession is clearing away the rest of our real economy.
01:13   For fear of the viral death that we were promised, our politicians committed economic suicide,
01:21   and we believed those who sprinkled economic sand in our eyes.
01:27   You have heard so little about Sweden in the media lately. If you noticed, that country —
01:33   if our politicians, parties and the media are to be believed — has long since died out.
01:38   Perhaps this is because the Swedish economy is in a better position than the rest of Europe,
01:44   and the Swedish gross national product will drop by only 1.5% in 2020,
01:49   while across the Eurozone the economic decline is being mourned daily.
01:55   Perhaps this is because the “fear of the second wave” in this country
01:59   does not paralyze the economy and the people.
02:02   But, dear citizens, you’ve been believing Merkel’s words so well for the past few months;
02:07   you’ve been hanging on the lips of [Austrian Chancellor Sebastian] Kurz.
02:13   Those heroines and heroes who have protected you and your life with such sacrifice.
02:20   Perhaps you really believe that politicians save your company, or save you a job.
02:26   And maybe you also believe that these political leaders
02:30   organize your daily bread and pay your loan installments.
02:35   Then most likely you also believe in the rainbow-colored unicorn.
02:39   But, then, I don’t want to destroy your belief.
02:43   Keep on dreaming, and remain in the fear that robs you of reality.

2 thoughts on “Wuhan Coronavirus: An Engine of Economic Destruction

  1. Ahhh, my local has reopened. That first pint of ‘White Rat’ was nectar – I was forced to have another, and another… Brewed by the Ossett Brewery, just 4 or 5 miles away, it’s always on top form.
    I noted that Ossett Brewery has brought out a new brew, most likely in response to the so-called virus, it’s name a typical Yorkshire (Tyke) riposte to absurd hysteria, ‘It’ll be reyt’ – (reyt pronounced reight) – meaning no need to worry…

  2. The guy in the first video is the economist Prof. Hansjörg Herr.
    Working at the Institute for International Political Economy Berlin.

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