This prophetic and deeply disturbing report from The Federation of International Employers (FedEE) was published in May 2020.
According the report’s authors, the rest of the World was so concerned with its dislike of China that it did nothing to help China contain the coronavirus. Governments outside China then went into a panic and over-reacted by imposing excessive lockdowns that ignored the economic consequences of their actions. Moreover, there was no excuse for such a reaction as there had been a complete indifference to numerous warnings of such a pandemic from Bill Gates in 2015, WHO in 2018 and FedEE in the Summer of 2019. It also points out that there are a host of contagious diseases that already regularly kill more people than we have seen so far with COVID-19 – but none of them has given rise to a lockdown.
Most startling of all, however, the report points out that the extent of the lockdown (when the World was already on the verge of a recession) could well have tipped it over into an uncontrollable downward economic spiral. This has been a potential threat ever since the abandonment of the Bretton Woods System by President Nixon on the 15th of August 1971. Soon after that, all major currencies became “fiat currencies” that had value purely based on a shared feeling of confidence, rather than backed by inherently precious and limited holdings such as gold (or a currency, like the dollar, that was so based) – that gave them true value. What’s more, this opened the door to almost limitless government spending, especially in G20 countries, based on borrowing and the free printing of currency (quantitative easing) to protect wealth and improve living standards. Thus, the US national debt alone now stands at US$25.3 Trillion.
The authors observe that this new affluence depended on one assumption – that the World’s GDP would keep growing. If it did, then governments could afford to pay the interest on its borrowings and confidence would be maintained. The World came near to losing that security in 2007/8 – but manage narrowly to escape collapse. That is why it has desperately been trying to avoid a further downturn, as the fear of the last recession still reverberates amongst the few who know how close things came to a wild panic in markets last time – and a final demise.
Now governments have done what the last global financial crisis did not achieve – burst the bubble left by abandoning Bretton Woods System. We have already seen the huge impact the health crisis has had on stock markets, whilst the price of oil is now so low it cannot be given away. When the inherent value of currency consequently falls because confidence is shattered prices will escalate, not tumble – in spite of low demand. A recession is sure to follow.
The Report does suggest, in a footnote, how things might be resolved by a mutually agreed elimination of debt – but unfortunately that would be quickly undermined. Like the overloaded credit card, in the end we all have to pay up – and the longer we leave it the more impossible that debt becomes. Governments have survived so long by a dangerous Faustian pact and by following the mantra of the fictional Gordon Gekko that “Greed, for lack of a better word, is good”.
For access to the Aftermath Report, please contact the FedEE Secretariat ([email protected]).