A catastrophic Global Economic crisis sweeping containment measures have disrupted markets around the world including the u. S. A travel ban on 26 European Countries came into effect on friday and the unprecedented move sent stocks crashing to their worst losses in over 30 years on wall street the Dow Jones Industrial average sank 10 percent on thursday its biggest plunge since the black monday crash of 1907 wiping out billions across the e. U. And asia pacific the Airline Travel and Hospitality Industries are also expected to be hit the worst and theres been a slowdown in manufacturing particularly in china where the outbreak originated and the crisis has led to all we can demand for oil but it crashed further after a dispute between saudi arabia and russia on prices and production. Well lets bring in our guests to discuss this further in washington d. C. We have pedro de coster hes a Senior Reporter at Market News International joining us on skype from brussels haas circle the marquee yama director of the European Center for International Political economy and here in our london studio with me gareth leather senior economist who specializes in asian and emerging markets at the firm Capital Economics welcome to all of you gareth a dreadful week on the markets how bad would you say how clearly its devastating the worst in a single day since that monday in 1987 i think what it is its investors around the world waking up to the realisation of how bad this is going to be in kind of january february i think there was a hope they would be limited to china and maybe other parts of east. Asia but its clear now that this is going to devastate economies in europe and america at least for the next couple of courses and i suspect. We have before black monday a black friday will this go down do you think in the history of the stock markets as the black thursday i think it absolutely will and you know while i wasnt around to cover the markets in 1907 i was around for the 2008 crisis and i can tell you that this feels actually worse than that if i can you know if that is possible and the reason for that is that when a crisis is. As a Public Health nature theres no way for financial incentives Like Central Bank intervention and Government Spending to put a floor under peoples fears of people cant go out and spend money the economy is going to come to a screeching halt and im afraid thats whats likely to happen for much of the world this year in brussels also tell us whats your view on the Historical Perspective of this 2008987 how bad is this. Well it seems like every news article from europe start with a sentence that 2020 is the new 2008 but it seems that at least one person it doesnt agree with me is the chief of the European Central bank Christine Legarde i mean we have seen relatively measured efforts so far with a few more bond purchases and a little bit of adjustment on amending rates and we have actually seen quite a bit of a recovery over of the last a during the trading that weve seen today with the markets going up as much as 7 percent but unfortunately for europe with this is just the beginning we are now in the beginning of march which is the equivalent of if you look at the route 100 elements equivalent of where china was in the middle of january we have only see the beginning and we need to bear in mind that europe is extremely trade dependent perhaps even more than china and were facing a pretty gloomy prospect in terms of 2020 in g. D. P. Growth in the 1st place so we havent really seen the worst yet ok i want to demystify some of the jargon of people talk about a bear market bear some bulls i know this is quite basic for you but for all of us what a bear market place is classed as a 20 percent for in the stock market from peak to trough and so for most stock markets around the world now were in that kind of territory its but i think whats really unprecedented is the speed that we got there just in a matter of a couple of weeks normally takes a bit longer than that and i think it just shows the severity and the shock that people are having to wake up to how quickly this is hitting places and also on that drove us. Thats right and it came into action on both sides right on the downside on the selling and when there were signs of hope it actually trigger was triggered on the upside so there are basically 3 levels of Circuit Breakers and theyre intended to prevent market panics or at least to stem them if the market sells off. 7 percent theres a 15 minute halt to training if the market goes down 13 percent i think theres a i dont know the time period exactly if the market actually fell for a full 20 Percentage Points or a full 20 percent rather in one day it would just be halted altogether and we havent gotten to that stage primarily because the other circuits kicked in before we can get there so its its pretty bad and its fairly historic well obviously the reason everyone will agree with is the coronavirus but of course the timing of all this happening on thursday came after that speech that took place on wednesday night in the oval office where the president always goes to try and speak to the nation at difficult times he was trying to calm the markets calm the American People and yet it seems to have been this announcement was most controversial. After consulting with our top Government Health professionals i have decided to take several strong but necessary actions to protect the health and well being of all americans to keep new cases from entering our shores we will be suspending all travel from europe to the United States for the next 30 days well when i saw one quote from luke a poly need chief strategist at Pictet Asset Management who said that was the most expensive speech in history gareth your view on what trump did he certainly didnt come in the market no he didnt i think the problem is that Everybody Knows that theres now lots of cases in the u. S. Or transmission between people so its not just coming in from abroad and i think its his failure to take that on board and to take more forceful measures to stop it in the america rather than kind of trying to stop it from coming in from europe i think on the plus side in america at least a lot of the direction is going to come from state level so already youve seen schools close in a number of states youve also had sports game canceled so at least action is being taken in america if not from the oval office and all not specific on stopping the travel how worried are you about that specific in terms of the implications for Global Business and try to eat well normally i would say is quite significant but if you look at passenger traffic on airlines its not quite ground to hold but its its slowed so sharply already that kind of the cuts in these planes off now probably wont make that big a difference i think its more just a sign that the hes betraying by this that hes that hes missed the boat in certain areas is more worrying. Petroeuro watching the markets but you know that in washington d. C. Taking the temperature of things weve seen President Trump over the last couple of weeks i think he had an eye on the markets and was trying to say well its not really this serious the coronavirus he seems to deeply misjudged things that deep. Well trump has him self literally aligned the success of his presidency with the stock market saying the stock market is a barometer of his presidency and so he does very paid very close attention to the market i think you can actually separate the selloff into 2 legs the 1st as we discussed earlier just the general the setting in of the uncertainty related to the pandemic the 2nd though which is what were seeing in the last couple days is just panic at the leadership vacuum that people see in the United States you know theres the sense that nobody is in charge and if the person of the top is in denial it doesnt matter how much states are doing how much localities are doing there is a lack of federal level preparedness thats going to lead to italy style lockdowns shortages of hospital beds and theres these are things that we can prepare for now and we know theyre coming so i think we should be very concerned in the markets are 2 of us are secure in an interesting position because youre a financial expert but youre also a former senior diplomats former representative of sweden to the World Trade Organization system the generation chancellor Angela Merkel saying that theres a possibility 60 to 70 percent of the german population will be infected in your view to the markets respect honesty. Well in the short term i think that the markets are 1st and foremost reactive to what the Central Banks have been doing and what i think what we have seen now is also perhaps more in the medium term how the european leaders are preparing for an extended the crisis of perhaps an unprecedented kind and one thing that becomes very very clear which actually is a common and there nominator of perhaps both china and europe and United States is that when it comes to a crisis of this scale there is very little Contingency Planning its not really about politics its really about civil Contingency Planning and Emergency Planning where europe is extremely poorly prepared and in extension also we can see more structural issues arising because as many people know we are in the trade war or beginning of a trade war with the United States with a number of key meetings and im now being counseled. Between United States and europe could also indicate that we are heading towards a very dangerous waters again and just the fact that the United States actually imposed a travel ban on europeans without actually consulting their european counterparts is something of an unprecedented diplomatic breach of etiquette. I mentioned the comments from the u. K. Prime minister Boris Johnson he in his downing street address said that the u. K. In his view is about 4 weeks behind italy and we know how bad things are in italy a member of tension here another 10 weeks to the paper well if youre going up the curve youve got to come back down again that assumes is another 14 weeks the other read and that takes us a think to the middle or end of september this is going to go a long a long time do you think the markets so ready for the for the length of potential length of this crisis its hard to say what markets are thinking at the moment because theyre so volatile but certainly the sharp declines i think youve seen over the past week does recognize a change in the markets that this is going to be for the long haul its not really over in a matter of a couple of weeks that is going to be months rather than weeks and that we should prepare for some quite significant economic consequences in terms of Companies Potentially going bust and getting into big troubles sharp rise in unemployment and so on at the very beginning of the way President Trump was tweeting saudi arabia and russia are arguing over the price and flow of oil that and the fake news is the reason for the market drop petro on the normal wake we will be talking about that being a hugely significant financial story and actually its only a small piece of it now. Absolutely i mean i think it certainly aggravated the initial soul of you had a severe down draft from the from whence when the stock market hit peaks there was a sell off of the coronavirus the oil shock hit right in the middle of it exacerbating those losses and then as i said now you have the sense of a lack of direction at the top and actually a lack of ability to respond right because as you said this is going to be a very long term issue so there is theres no amount of economic stimulus that can all we can do now is prevent the bottom from falling out rather than preventing the economy from slowing sharply and to give you some visibility on the future and all markets are volatile and its hard to look ahead but if you look at Interest Rate expectations not only do markets expect the fed to take rates again to 0 next week as it did in 2008 it expects the fed to leave them there for the next 10 years so essentially the markets are pricing in the scenario where the United States becomes more like europe and japan stuck in a low growth low inflation environment for a prolonged period just quickly on the oil aspect of this 1 do you see a threat to the shale gas industry in the United States now as a result of element and could that be another financial problem that were going to face in the coming months to see major difficulties for those companies petro youll take. I would tend to be a little less sanguine than that theres already signs that the companies that are the Energy Sector is extremely leverage because it was basically it was just flush with cash from low Interest Rates and so any significant change in the financial position of firms can leave them very close to insolvency so i think yes youre going to see many bankruptcies in the Energy Sector and not just in the Energy Sector look beyond that right the slowdown is going to affect events spaces anything that is related to large crowds Shopping Centers malls movie theaters are going to see large scale bankruptcies around the country and around the world well id like to expand that also looking at the various Industries Sectors where are your concerns perhaps well start with travel and tourism how worried are you that adelines in a matter of weeks will be going on. Well im thinking we might be even looking at the east and we are also looking at perhaps massive bailouts unless. Well the governments are ready to throw them under the bus but also from a Bigger Picture i mean the 1st of all the biggest concern to china even conservatively real looking at a haircut the one percent of g. D. P. China doesnt react to equity prices the biggest problem is the g. D. P. They need to keep the entire economy on the machinery go in and china was already heading for. A soft landing with an a minus one percent projection on g. D. P. This year and we are now looking at perhaps even more than that and that which basically means that if china doesnt manage to grow grow more than 6 percent we can have actually quite a bit of social unrest inside china we have more than 100000000 of Seasonal Workers in china looking for work and who isnt and cannot return to the factories and the ones that china is getting out of its its own Health Crisis europe their biggest market isnt getting into theirs which basically means that we are seeing a huge demand contraction in International Trade which is going to affect china 1st and foremost and 2nd we also looking at the same kind low Interest Rate and where we were hoping the euro area to recover even slightly around 1. 3 percent of g. D. P. Growth i dont think that is even a feasible scenario because we dont really know when this is going to end and as we said before iraq has it risen the world weve talked a bit about aviation but where else so your real concern well i think 1st and foremost its going to be tourism this hardest with passenger planes and airports just running dry this is going to be very little tourism going on for the next few months at least retail sectors you know sporting events that will be hit hard as well i think the key really now is for the. Policy makers to step up and ensure that otherwise Healthy Companies can try to make it through this crisis and so it can be difficult for them because theyre going to basically kind of relying on banks to carry on lending through this crisis and theres no kind of legislation for that is going to be kind of quite informal but nudging nudging commercial banks to keep lending so that these companies can get through all of you are not particularly on the help that might be needed to Small Businesses for example facts thats absolutely right i think the layoffs are already beginning were seeing anecdotal evidence in stories you know news articles about layoffs its you know the infrastructure for helping Small Businesses is kind of nonexistence we do have the s. B. A. But to disburse loans to you know thousands tens of thousands of Small Business on a regular businesses on a regular basis in the United States would take kind of a financial infrastructure overhaul i also want to not forget the you know families and individuals who are going to suffer we worried about the health of the firms im really worried about the health of the humans and i think that the primary thing right now is really to make sure that people have and what about the economy workers so i think theres a vast the u. S. Has a very poor social safety net and we have to make sure that people can get through these 6 months with at sea of civil disorder in china is there a problem as well with the supply. Of people getting supplies of basic things around the world now. Well actually my local supermarket actually was completely sold out there was actually not a single item left and i actually want to say i can also just introduced you that one assumes that because people are stockpiling things its not that things arent getting to the supermarket in the 1st place indeed thats true and. For the sake of levity i should mention that the 1st item there was all about whats actually the corona beer so there seemed to be nothing wrong with the belgian sense of humor. But no it is indeed true that we are waiting for the supplies and the people are really starting to realising the scale of this but it just to read through some of the point that were mentioned there on the other markets is that europe is really not to receive and especially not s m e s and if you look at the numbers in terms of resilience of the german semis which is extremely important for the deal broke growth of europe they can actually we stand about 2. 00 to 3. 00 weeks of disruption before we start to go under so in that sense we are we are extremely vulnerable policymakers right now whether they be central bankers or government what do they need to do right now as a little i think what we need is a massive fiscal stimulus from all of the parties involved u. K. Germany seems to be coming around to it but this fiscal stimulus needs to have. Also massive Public Health component to it because as i mentioned earlier i think the biggest sort of public crisis facing the United States in the next 2 months is going to be a lack of hospital beds and a lack of sort of social infrastructure for people to continue living their lives children who need lunches from schools and so you need a fiscal stimulus that addresses all of those issues ok and basically ok i was also or an apostle of your celebrity your recommendations quickly whole circuit of what policymakers should do top thing they should. The focus should be on helping people not the structure of the economy at this stage we are really very much in damage control a phrase which essentially means that well disease prevention comes 1st collect the data and act on that data gareth you get the last word in this discussion what do you think is the key priority at this very moment for policymakers is preventing a health an economic crisis from becoming a Financial One because then the effects will snowball and become much more significant and do you think a global recession now is inevitable i think a very sharp slowdown in Global Growth is inevitable but provided the virus is eventually contained then think should recover quite quickly ok well its certainly going to be a very tough few months for everyone thank you to all of you pedro de coster in washington are certainly marquis yama in brussels and gareth lever here in the studio in london with me if we didnt have enough to worry about the state of the Global Economy well certainly in a state you can catch this for your thoughts comments and other contributions also welcome on twitter our team endo ha and london thank you for watching see you again here soon. 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Youre watching aljazeera live from our headquarters here in doha also coming up strict measures in new zealand everyone entering the country will have to go into court
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