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World Economy and Digital Assets Overview

Written by: World Maker

The numbers and data from the first quarter of 2020 indicate that the looming economic crisis is set to be one of the most severe financial crises since the 1930’s Great Depression. The Chair of the US Federal Reserve, Jerome Powell, recently announced that the Fed will use all the tools available and unlimited QE ‘ammunition’ to fend off a recession.

In this economic outlook, World Maker has summarized the data for readers to easily comprehend and digest the current status of the world economy and the upcoming trend of digital assets as follows:

1. Powell and the Feds expect to see economic recovery within the third and fourth quarter of 2020. As the current unemployment rate sits around 15% or 20.5 million people, this is worse than the situation seen during the Second World War.
2. The Feds earlier revealed that the “risk-on assets will face more turbulences if the pandemic remains out of control and the world economy will take another devastating blow if the second wave arises.”
3. Many hedge funds operating in the U.S. are highly over-leveraged, if the stock markets take another nosedive, those funds will be forced to liquidate their positions.
4. The effect on the third point will be felt throughout the market as most investors are gambling on these hedge funds with borrowed capitals, risking a chain-reaction of defaults.
5. Central banks in the U.S., EU, and Japan’s balance sheets are skyrocketing. The U.S. balance sheet accounts for more than 30% of the country’s GDP while for Europe, it is already exceeding 45%.

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6. Bloomberg expects the Feds to buy back treasury bonds worth more than $3.7T in 2020 and $2.1T more over the course of 2021.
7. The global economic growth in the second-quarter  is expected to plunge 39.6%.
8. National reserves of the U.S. and Europe took a nosedive, the U.S. government budget balance has plunged 15% from the share of GDP.

9. The yield of 10-year treasury bonds of many countries are falling to 0% and Germany is now offering negative returns.

10. There are rising concerns about hyperinflation after the COVID-19 pandemic subsides.
11. The Feds is looking to implement Yield Curve Control for bonds as a grip to have better control over bond return rates in the future.
12. U.S. retail sales plunged 16.4% in April, twice as much as that of March.

13. U.S. industrial production plunged more than 11% in April, set a new record as it becomes more severe than during the Great Depression.

14. U.S. manufacturing productions fell by 13.7%, the highest in a century (since 1919.)

15. The U.K. government is acquiring a $360 billion loan and this accounts for more than 15% of the country’s GDP.

16. Economic uncertainty in Europe has reached back-to-back All-Time-Highs (ATH) for two consecutive months.

17. Asia’s industrial productions and retail sales have shown signs of recovery at the beginning of the second quarter.

 18. Zombie companies (companies with no profit) are once again rushing to sell new bonds to investors.

19. European Stoxx 600 index is trading at a record low as compared to the U.S. S&P 500.

20. Bank stocks in Europe are trading at 0.4 Book Value as investors are still grappling with fear and uncertainties.
21. Commodities and Digital Currencies such as Gold and Bitcoin are yielding good returns as investors are turning to safe-haven assets.
22. Gold spot reached a new local-high at $1,765/Oz before experiencing a minor pull back to $1,725/Oz.

23. Digital Currency like Bitcoin is gaining popularity as news of the Chinese DC/EP as well as the third halving event which occurred a few weeks ago have brought more attention to the space.
24. Historically, after each halving Bitcoin always enters a new bull-cycle, sending the price to a new ATH.
25. The halving also emphasized the digital scarcity narrative of Bitcoin.

References: 

1.https://www.bloomberg.com/news/articles/2020-05-18/powell-says-fed-to-use-full-range-of-tools-to-support-economy
2.https://www.bloomberg.com/news/articles/2020-05-15/fed-warns-of-significant-hit-to-asset-prices-if-pandemic-grows
3.https://www.reuters.com/article/us-usa-fed-stability/fed-warns-of-significant-financial-vulnerabilities-from-pandemic-idUSKBN22R34Y
4.https://www.bloomberg.com/news/articles/2020-05-15/pandemic-bills-are-so-big-that-only-money-printing-can-pay-them?srnd=economics-vp
5.https://www.bloomberg.com/news/articles/2020-04-24/u-s-budget-gap-may-surge-to-3-7-trillion-this-year-cbo-says
6.https://www.bloomberg.com/news/articles/2020-05-15/charting-the-global-economy-covid-19-pandemic-s-toll-deepens
7.https://www.bloomberg.com/news/articles/2020-05-15/u-s-factory-production-plummets-by-most-in-records-to-1919
8.https://www.bloomberg.com/news/articles/2020-05-19/america-s-zombie-companies-are-multiplying-and-fueling-new-risks
9.https://www.bloomberg.com/news/articles/2020-05-17/stocks-too-pricey-wall-street-legends-may-have-forgotten-europe

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