Two crises, two lessons (Greed, avarice, nature's power, 2008 and 2020 crises)

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 Two crises, two lessons (Greed, avarice, nature's power, 2008 and 2020 crises)

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• Global recession: The IMF has warned that this 2020 recession due to the "Great Lockdown" will be quite extensive, compared to the post-2007 Global Financial Crisis (GFC).
• CFC and GFC: The Corona Financial Crisis (CFC) is quite different from the GFC actually. Four aspects -

1. FIRST - Origin and transmission - GFC came from the financial sector and was transmitted worldwide due to irrational exuberance shown by banks and FIs. Instruments used were CDS, CDO, MBS, ABS and others! People lost their incomes and demand collapsed. The contagion spread from financial to real economy. But CFC has come from natural ecosystems, and first impacted Chinese supply chains. Demand slumped due to national lockdowns. Real economic distress went into the financial economy. So in GFC, once the financial sector troubles were fixed, things were under control. But in the CFC, the virus has to be contained by science. Fiscal stimuli are temporary confidence-boosters only.
2. SECOND - Asymmetry of solutions - The GFC arose from the subprime mortgage sector of the US housing segment, and hit the whole world. The CFC came from China's Hubei province, and hit the world. For the GFC to be resolved, the US financial sector had to be made safe, and the world would be safe. In the CFC, each country has to fight a separate battle, and tomorrow, any one country can re-infect the others.
3. THIRD - Policy measures interacting with each others - In the GFC, the financial sector solutions reinforced the real economy solutions. RBI cut rates to help financial system, and intervened in forex market to stabilise the rupee. Govt. provided stimulus in real economy (housing, real estate). These two were synergistic. But in the CFC, policy actions are not so synergistic - lockdowns are directly harming real and financial economies. 
4. FOURTH - Nature of "Global" - The GFC was not truly global as it didn't hit all countries equally, but the CFC has. The Chinese provided a big stimulus in 2008-09 as they were less hit, and that kept the world economy going. But in the CFC, all big economies are hit, and no one is holding up the global economy. So for the future, intense global coordination is needed on early warnings (for new pandemics).

• Summary: There is one common lesson in both - greed and avarice of mankind will lead to its downfall, either through financial failures, or the 'revenge' of mother nature.
• The Global Financial Crisis of 2007 and the Corona Financial Crisis of 2020 are fundamentally different in nature, but carry the same message.

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