Virus Update 2020 Depression

As I predicted would happen when I developed this theory of scientific revolutions causing economic depressions in advanced economies in 1990, the advanced economies have entered into a depression that started when China and then other countries started to quarantine and lock regions or their entire country down in January.  This is the second dip that I’ve long waited for. This model has long predicted not only a deep recession or depression period starting in 2009 or so (this started in 2008) but that the entire decade of the 2010s and early years of the 2020s would be a depressionary or deep recessionary period. The theory was proved right. So far, each major prediction of this theory since it started giving predictions in 1990s have been proved accurate.

In my Economics News Updates page on the dashboard, in the February 27, 2020 post, I wrote I thought that the other major economies of the world would go into depression or a deep recession this year, but I thought the US would escape it and actually experience a boom. I thought that this pandemic situation would seriously affect China, East Asian and European economies and others, but that Trump’s early closure of flights from China would help protect the US. I also thought that of all the countries in the world, the US had the best chance of isolating yet independently growing economically since it is a large country with sufficient resources internally and since it was in the process of reindustrializing as companies and organizations transferred their production from abroad back into the US. However, the US too is now in a depression. People are predicting that as the shutdown and quarantines continue, 30 or 35 million Americans will not be working by May of 2020. Maybe a substantial percentage of people will find ways to work from home or where they are sheltering though, and maybe some regions of the US, especially in sparsely populated areas, may not be put under quarantine regulations.

The government in America did not follow up quickly enough on stopping flights from other countries and stopping border crossings from Mexico and Canada. The states and the federal government did not implement serious preparations for this virus including producing sufficient masks, telling people to social distance and wear masks, and producing medical equipment and medicines until this month or so. So now there is an epidemic in the US too.

Trump’s trade policies to promote industry and businesses in the US and China’s actions such as trying to force their staff into the boards of foreign companies in China made companies want to move production back into the US. There was a general trend of increased economic production, a boom in the stock market, and historically high levels of producer and consumer optimism up to January of 2020 or so.

The shutdown of Chinese production is causing Americans to try to make products such as masks, medicines, medical gear and essential parts and equipment in the US or to try to source from other countries such as India. However, India is now in a national shutdown and quarantine also.

It looks like the economy of China is collapsing. Though they say there several new deaths in the last two weeks or so, the evidence and internal reports indicate otherwise, and a vast population is still either in quarantine conditions or effectively locked in such as that other provinces will not allow people from central China to enter. The officials themselves act as if there is still an emergency, and reports show a second wave is happening.

In Europe, major economies such as Italy are already in depression, and there is no end in sight for when conditions will improve. Economies may collapse this year.

Japan and Taiwan seem very successful so far now relative to other countries. But with world trade depressed, I can’t see that they can escape depression unless perhaps if they can keep up industrial production, these two countries may be able to fill in the gap left by the collapse of the economies of China, major European countries, and other countries.

In general, I think the US will record a depression or a recession this year, but if it can come out of this pandemic less scathed than other countries, reindustrialize and make products internally, and have a successful year agriculturally, then if in some way there is a cure or people find effective medical treatments, the US still might boom economically once this pandemic period ends. Hydroxychloroquine looks promising based on use in Korea and other countries. Hopefully, it will end soon. However, I think China and Europe will experience devastation this year as has already been happening.

Based on the historical pattern, this theory predicted that this would be a technological acceleration depression era. What this means is that a depression or deep world recession would happen around the world at this time 40 years after the start of the 1970s deep recession because of the inherent unemployment effects of the rapid productivity growth and the automation of production during these technological acceleration eras. So thus far, the major predictions of this model keeps proving accurate. This model predicts a deep recessionary or depressionary era for the next few years. Historically, these technological acceleration caused depressions have lasted from about 13 to 24 or so years.  See the chart and the animation at the top of the page to see the depressionary pattern and the pattern of technological revolutions.

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