The unprecedented world economic crisis will inevitably lead to social chaos and the breakdown of law and order and unknown consequences.
Lest you think this is an exaggeration, look at what’s happening in Lebanon.
Demonstrators in northern Lebanon have attacked banks and clashed with security forces for three consecutive nights, re-energizing a protest movement launched in October against a political class the activists deem inept and corrupt.
The government unanimously approved the economic plan after minor amendments, the presidency said on Twitter following a cabinet meeting in the presidential palace in Baabda.
Details were unclear but Prime Minister Hassan Diab was expected to reveal more during an address to the nation at 5:30 pm (1430 GMT).
President Michel Aoun called it a “historic day” for Lebanon.
Lebanon was in dire straits before the pandemic hit, with a serious economic crisis, rampant corruption, and political instability. But there are dozens of countries around the world where the same could be said of conditions prior to the coronavirus pandemic.
Since the recession/depression promises to deepen considerably, debtor nations will be holding out their hands for huge bailouts from the international community.
Among the first in line will be Lebanon, where almost a year of having no elected government and corruption tearing at the fabric of the country has reduced people to begging in the streets for food.
A rapid slide in the Lebanese pound, which has lost more than half its value since October, has sparked renewed unrest, with a demonstrator killed in riots targeting banks that have frozen savers out of U.S. dollar deposits.
Beirut hopes that with an IMF programme in hand, foreign donors will release about $11 billion pledged at a Paris conference in 2018 which was tied to long-stalled reforms.
“Implementation is the hard bit, and Lebanon has consistently failed on this. Progress will only be possible with that, on the basis of greater political and public consensus,” a Western diplomat told Reuters.
Africa, the Middle East, developing nations in Asia — all will be vulnerable to large-scale social upheaval and disruption because the pandemic has exposed their massive weaknesses. Civil society hangs by a thread in many countries anyway and with world economic growth entering negative territory, the basic needs of people to eat and find shelter will not be met.
With mass unemployment, commodity prices bottoming out, unsustainable sovereign debt levels, adding deflation to that toxic brew would be a killer:
A third issue is the growing risk of deflation. In addition to causing a deep recession, the crisis is also creating a massive slack in goods (unused machines and capacity) and labor markets (mass unemployment), as well as driving a price collapse in commodities such as oil and industrial metals. That makes debt deflation likely, increasing the risk of insolvency.
During an economic crisis, the doomsayers get a lot of attention, but it usually turns out they overstated the crisis or missed the boat entirely. This time, they may be understating what might happen. The world was already massively overextended and steeped in political crisis.
It’s going to be a very rough few years to come.
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