For the economist, the crisis will strongly affect the United States, and China will emerge strengthened from the ordeal.
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Can a financial crisis follow a health crisis?
Banks are going to be very bad in the United States, because the American government has not done like the European government and is not trying to prevent rising unemployment, which will cause considerable income losses for many people . As in the past, the latter will stop repaying their loans, which will cause a banking crisis. In Europe, I do not think that will happen because there will be no massive increase in bankruptcies, the banks are in debt at less than 0.75% with the ECB.
Why do you think the crisis would be greater in the United States than in Europe?
For three reasons. The first is therefore the rise in unemployment and default on household loans; the second is the weight of the crisis on the effects of land wealth, especially for retirees and future retirees; and the third is petroleum. The price of crude oil will be permanently, and not just for a few months, lower than what the country can bear. To exploit oil in the United States, you need a price per barrel of around 35 dollars (32 euros), today we are at 12 (11 euros). So if we don't go back to 35, we will stop producing on site, which would be a huge shock for American industry. And what I say about oil is also true about gas. The price of gas today does not cover production costs in the United States.
This makes economic sense since we will consume less oil over time, with the evolution of climate rules. We should stop using it in 2050. The interest is therefore to consume the cheapest oils as we go along. Hence the abandonment in Canada, in the Arctic or in the deep offshore. The Americans persisted in wanting to produce expensive oil because they got it from their homes. No doubt it will stop, and it will be a terrible shock to the American economy as millions of jobs will be destroyed.
Will China emerge a winner from the crisis?
She’s fared pretty well so far. Of course, there are more deaths than the official figures say, but she handled the crisis quickly, so economic growth will start sooner than elsewhere. In addition, the country is sitting on a mountain of savings which allows it to intervene in the rest of the world and help a lot of countries, thus increasing its political power. Finally, as the economy remains fairly closed – exports represent 20% of GDP, less than in France -, the lasting weakness of world trade will not be so detrimental.
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