2020 is coming to an end. How was he? Most of the people you know will say fatal. In fact, it was a period that most likely began a new era in the history of the economy. In this article, we will try to summarize the last 12 months and reflect on what the year 2021 will be like.
Of course, this year was marked by the coronavirus pandemic. What officially started in Wuhan (although the discovery of Italian scientists that the virus was already in their country in September 2019 sheds a different light on the overall phenomenon) has spilled over the world. And history will happen.
For the first time in history, politicians froze the global economy. As a result of lockdowns, they locked their nationals at home and made the current economic crisis different from any recession before.
The pandemic will probably last for several months, but the effects of recent politicians’ actions will remain with us for years.
That’s right, politicians in 2020 had an idea how to overcome the crisis caused by the coronavirus. Lockdowns and frozen markets threatened to cause companies around the world to collapse en masse. This will result in a jump in unemployment. Central bankers came up with an idea how to save the world from apocalypse. They turned on the printers. And on a scale we didn’t know before.
Only in spring, the US authorities gave their citizens $ 1,200 and $ 500 for each child in special checks. The operation was repeated in the summer. Faced with opposition from the Republicans, ultimately US citizens will only receive $ 600, and not $ 2,000 as the Democrats wanted. The latter point is not certain, however, as the debate on this subject is still ongoing in the US.
The European Central Bank also started reprinting. Almost all over the world, such institutions cut interest rates. to almost zero. Including the Polish National Bank of Poland, which, at the beginning of 2021, may continue this policy, as emphasized in recent days by President Adam Glapiński.
– In the first quarter of 2021, it is possible to further reduce interest rates, we at NBP conduct appropriate analyzes of the possible circumstances and potential effects of such a reduction – he reported in an interview with “Observer Finansowy”.
What effects will such a policy have? Today inflation is rising, but it is not yet at such a level as to threaten the economy in real terms. But with such phenomena it is a bit like with a wild animal – locked in a cage is not very dangerous, but it will be worse if it suddenly bites through the bars. In other words, when lockdowns pass and consumers go shopping with new money printed on it, this can result in a significant jump in prices. Worse still, it will be very difficult to stop inflation then. As the history of money shows, this can often result in the necessary withdrawal of the currency and its replacement with a new one, along with the devaluation of the value of citizens’ savings.
With the issue of the aforementioned checks in the USA, the topic of guaranteed income returned. It is possible that 2021 will be marked by the implementation of such solutions in the real economy. In recent months, experiments in this field have already been carried out by Germans and Spaniards.
Gold always becomes more expensive when the currency world shakes its feet. It is not without reason that the precious metal is called “the only real currency” or a safe haven during the crisis. It was not different this time. Although, for example, the dollar depreciated, the gold gained and at some point became record high. It is possible that this trend will continue in the coming months.
This year we also watched the election campaign in the USA. The Republican candidate for the second time – obviously – was Donald Trump. Joe Biden from the Democratic Party became his rival.
As a rule, it was the incumbent president who won the fight for re-election. Saying that this was the standard in US history is too much, but it is certainly Trump’s initial advantage over Biden. And he would probably have won the elections had it not been for COVID and the crisis. The current resident of the White House initially mocked the coronavirus, and as the pandemic blew up in his country, he began to respond to it, but it was too late. The icing on the edge was the fact that Trump himself fell ill with the “Wuhan virus”.
Ultimately, it was the Democratic politician who won the race to Washington.
The China – USA rivalry
Since we are with Biden… Many are wondering what policy he will pursue towards China. This is a good question. Trump started a trade war between the great powers. Will the Democrat – as his supporters want to see it – ease the conflict with the Middle Kingdom? It’s doubtful. Why?
Let’s start with the fact that America has had a serious problem for many years. She discovered that globalization – something that was supposed to establish her position in the world – was no longer working in her favor. Not only that, it has strengthened China. Today, Americans feel threatened by the Chinese economic impact on the world, and the Washington elite are beginning to fear that the dollar will lose its status as a global accounting currency.
It is worth remembering that the above was not noticed by Trump, but by his predecessor, Barack Obama. It was during his term in office that the US began to take a new interest in the Pacific and Asia regions. Although the so-called The pivot to the Pacific was then somewhat overshadowed by the trade war that Trump declared against China, it was the move that showed the continuity of Washington’s actions and that regardless of who happens to be in the White House, US priorities are the same.
New Deal in 2021?
Politicians around the world are already saying that in 2020 a new order began to be born before our eyes. Prime Minister Mateusz Morawiecki has said it several times.
So what will 2021 be like? There is a risk that the dangerous policies pursued by modern politicians will not disappear with the vaccination of COVID-19 even by half of humanity. Probably the printing of currencies will continue, which may strengthen gold and other alternative assets – including cryptocurrencies.
There is a risk (a chance?) That in the next 12 months a country will implement a full guaranteed income system, which, combined with high currency printing, may additionally strengthen the role of cryptocurrencies and precious metals.
It is worth noting that the problems we described above concern the countries of the West – the USA or the EU – to a greater extent and less to the East. Not only that, China today seems to be the global player that gained importance during the crisis and showed its strength like never before. It is possible that this will exacerbate the rivalry between the Middle Kingdom and the US.
In any case, 2021 will probably be as surprising as 2020. We will see it soon …