I survived the 2008 recession, and the Dot Com bubble so how is this different? How is it the same? Can you bounce out on our merry way or are the effects going to be worse than the great depression?
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Video Transcription:
Hey, guys so welcome today’s session on coronavirus versus the 2008 recession. So basically I’ve been through both these I’ve also been through the dot-com bubble recession while I was in Australia and the interesting thing is the number of similarities and differences between each one.
I think really the thing that we got to look at here is what are the similarities and differences do they even really matter? Does it matter about the story you know the headlines or is it the detail below. And I think that is one of the key lessons here is actually it doesn’t matter whether it’s coronavirus dot-com it doesn’t matter whether it’s the Great Recession whatever it is the economic effect is felt in a similar way. The instruments that we use to actually to get out of it or solve the problem are pretty much the same.
I mean sure the circumstances may be different and we may be able to have to you know QE more than you know one than the other all these sort of things. The reality is you know it’s a cycle it’s all the cycle and you know we’ve been building a big bubble for a long time. Has the bubble actually burst you know I’m not sure that the bubbles burst yet because there is a big bubble and that is a debt bubble.
But the interesting thing is and what I tend to be looking at right now. Most of the time a bubble is built and eventually goes poof and then everything asked to deflate back down. Normally about 30% if you know if you want to try figure out it 30% everything else to drop by whether that be house prices whether that be you know asset prices in terms of stocks and shares. Obviously some stocks will go down to zero some properties will go down, even more, some properties might go as much but generally the economy it gets to about 30% above where it should be and that’s when the bubble goes burst.
Now we have been flying at about 30% for quite some time and my argument actually has been for a long time is that the last bubble we didn’t actually deflate it what we did, for the most part, is we just threw money at it and threw money at it. And the only way to keep that bubble from bursting was the throat more and more and more and more and more and more and more and more. So the argument is that for a decade we’ll build some even bigger bubble and is that bubble bursting now? All right well what’s the answer?
Before we get into that let’s have a look at just the you know the other stuff that I cover every day. Basically eight days less than lockdown I think we’re gonna overshoot this and you know six days according to the UK government I think we are 69 days is probably more when we’re gonna start it is and I know I would agree with that much more closely. You know in terms of what 1.6 million people, 1.5 yesterday, 1.4 the day before 1.3 before that you know 1.2 before that so you know it’s still going up the numbers are still rising. You know we haven’t reached that peak yet from a world perspective but the good thing is Wuhan has opened up. So they’ve shown us how it can be done and you know how to get through this. And it is working I don’t care what you know there’s plenty of conspiracy theories around China but you know speaking to people in China and talking about the measures that have actually gone.
We know that lots of property guys that worked in China that you know that worked in the UK they moved to China quite a few years ago set up offices all that sorts of stuff. You know chatting to those guys you know the actual measures of working whether you like that want to hear it or not you know China has shown leadership in this, yes they may have hidden it for a month they may have played it down. But you know what most economies had two months and we’ll talk more about that in a sec.
But look at the UK you know 881 deaths it’s really getting hammered right now 2,000 deaths so it seems the US you know is about 2,000 deaths a day UK is about our you know 900 deaths a day you know and across the world we’re getting seven and a half thousand deaths a day so that will you know the obviously the cases will increase once they start to level off then we’ll see the hospital missions and then we’ll see the deaths I think so you know we’re still in this for a little while yet and we’re probably you know four to six weeks away from actually where you know we’ve got the new norm and the new norm is going to be an interesting one because there’s lots of you know theories around that.
But anyway so let’s work on the cavalry so there’s all those one point six there’s 450,000 that have outcomes whether that be that they passed away or 356,000 have recovered which is 79%. 25,000 just yesterday okay so that’s quite good. I’ve got to change that over the weekend it’s not over the weekend it’s yesterday. That is good news okay besides all the negative news and I actually saw I was amazed I think it was a Daily Mail reported on this yesterday so I was like they’ve caught up to me. I think you know this is cause for not a celebration but you know it is something we should be focusing on something we should be actually you know looking at.
Let’s get into looking at the similarities and differences in 2008. This bump here is 2008 recession okay and if we go down here we can see the drop-off thats the UK there. If you have a look at Europe yeah Europe has not really done that much since then. China has come up massively okay US has kept going. I mean but they are taking on massive debt massive stimulus continuous QE all that sort of stuff so they are really you know I mean that’s you know that’s the bubble building. The UK which did austerity for 10 years or 12 years you know and only really just got rid of it in the March budget and that’s in all seriousness you know up until then we’re still playing austerity games you know which actually I think is going to work very well for us. I don’t think this is gonna work as well for Europe I think Germany France all those sorts of guys because you have really now what’s coming out, is a north-south divide. And you know watching things like Serbia, Serbia has been 20 years trying to get the EU but because they support Russia and they’re playing both sides you know and it’s considered to be geopolitically incorrect to be part of the EU and support Russia. It’s all ridiculous geopolitics but you know that’s the state of play with anything these days.
This flat curve here flat curve okay this GDP actually shows that we haven’t all you know bounced up now that I think will play into our favour in the recovery phase. That’s GDP what the GDP faces look like up to 2018 so this does not include the coronavirus this does not include 2019 figures. If you look at the United States they grew about 2.1% the and about the same for the UK which was actually some of the best figures of the EU.
However okay the UK before coronavirus was getting into the territory of negative growth, things had really slowed down. Now was the stimulus package that after in our Bojo and Rishi show started gonna solve things I think it would have and I think we would have seen things you know to come up but obviously Coronas put a dampen on that. But we’re in a pretty good position you know if you look at the amount of growth there you know versus the growth here. It really hasn’t grown that much we got hit real hard and the thing is what America didn’t do was austerity what America did was just pump money into the system whereas the Europeans they went the austerity route and you can see the results of that. Now China was different kettle of fish China is on a trajectory you know that’s what’s up but we don’t know that’s a topic for another video on why China has done that.
Now here’s my answer yeah what’s the differences in similarities between you know 2008 and now it’s the same same but different. And I said this before the bottom line is with this whole thing is it is whether we like it or not whether it’s a coronavirus, dot-com bubble whether it’s global financial crisis whether it’s the oil crisis whatever it is there’s always a name given to it. You know different name but same geopolitics almost you know they do change same economics same you know local politics happens. so same same different. Anyone who’s travel through Thailand will know that phrase and quite well.
Now let’s have a look at it a bit deeper so 2008 global financial crisis GFC okay it was caused by CDOs which is Collateralized Debt Obligations which were the securitisation where basically if I was a funder I would lend I would then take my good stuff and my bad stuff and I’d put it together and I go get it rated but I would say that it was good all good stuff and what happened was then everybody rolled that up and eventually had all this really poor risk or high-risk mortgages in with good risk low-risk mortgages and nobody trusted anyone. So the trust and the confidence was just shot and eventually, everyone went poop and funds dried up the whole system grind to a halt and we fell into a recession that was the global financial crisis.
We’ve been through massive gains and this is the key difference I think okay is this. Back in the GFC yeah we had that all economies have full productivity that would going at it bum bum bum bum bum and I’ve said this in my other things and what happened was we went stopped nobody trusted anybody. And all of a sudden everything’s stopped but you had developers who still had to build our properties so there was an overhang of supply. You know you had people with huge inventories all of a sudden had to get rid of that inventory so they weren’t ordering new inventories so everything took a dive.
Now you know in the US that is so that’s the case this time as well things have been really good productive blah blah blah so all of a sudden now they’ve got mass unemployment mass that so really for them and the way they’ve gone about it for me is shocking. Now where we’ve come from is we’ve been very slow you know things haven’t really taken off we’ve had 10 years of austerity you know developers haven’t been building you know vast development sites and that sort of thing so there’s no supply overhang that needs to take up slack before we can produce more. So our pause button is a lot better pause button and says the US has pause button yeah which is quite interesting. If we look to China China press port in fact they didn’t press pause they press stopped book stop and they brand everything to hold and they did that you know in Wuhan for 76 days now they’ve actually I mean they’ve started to ease before that but now they’ve opened it all up they’ve still got systems for QR codes and lots of things which is working really well I might add yeah really well okay and you know don’t I mean I won’t get into that.
The bottom line is in 2008 we had the bubble burst. There’s a big big big bubble and it burst yeah what happened was the US injected money and we got the big short film if you haven’t watch that that talks about how it happened and what happen that’s the thing. When bubbles burst they need to unwind my concern is is that because we’ve been pumping so much liquidity in we haven’t allowed it to burst. Not in all economies oK we’ve done the burst rather having a burst in the UK we’ve had a gradual decline which actually wasn’t a decline we would have been doing this but where it said we’ve done this so even though it’s been 10 years a pain yeah actually we’re in a much better position than we would have been if we had to just liquidity, liquidity as the US has. It’s very stark differences here and I think we’ll see stark results when we go back and we look at the figures that have actually come out of this.
So the UK’s approach to austerity, US was QE so on was austerity and I was don’t spend anything get the government debt down and slowly come out the other one was spend spend spend spend spend. At the end of day which is better which is worse well you know we’ll see in the end I personally think that an in-between is the better idea.
Let’s so what I want to about now is the coronavirus side of things okay cuz there are two real phases there’s the phase we know right now which was the entry and lockdown phase and then there’s the post lockdown phase to come out and they’re both for me they’re two distinct phases. I have to say the lockdown phase has been done very well you know not from everyone US horrific Australia started out really bad you know and a lot of other countries started out really good and I think that for me you know the biggest thing is and this is where the total incompetence goes across the whole westernized and in fact not just West everywhere outside of China was yes China may not have revealed the full impact of it for the first month but you know what most politicians and most leaders around the world had two months warning and ignored it.
They chose to blame China yeah but the reality was you know they knew about it they had plans in place that they could have enacted to actually keep it all down but their inaction caused the real economic issues so a lot of the pain we’re facing now is because our leaders had the result had the actual outcome they needed and had the playbook and ignored it. And that’s not just Trump I mean Trump went the opposite of it but you know at the end of day all of our leaders pretty much ignored that playbook the ones that didn’t what happened well they control it. Control it? they managed, it manage it not control as Fauci said in all these guys you know you don’t control this virus yeah you manage it.
Now the interesting thing is the US had the same response to the crisis you know in the lockdown phase as they did in 2008 so as far as they’re concerned their response was same same let’s give billions away to the big companies and you know what then let’s forget about our poor middle class and let them fend themselves their most those guys still have not recovered from the 2008. So it is just a hell on earth for them living in the US you know that economic you know prosperity and all those big figures in GDP that doesn’t apply to people that applies to the major numbers you know the wealthy the billionaire class all those guys, they’ve had a field day yeah so the US response is totally different from what the UK responses and in fact a number of different countries now that are giving money directly or stimulus if you like directly to individuals and small business and that distinction is what separates us massive okay massively I think.
Guys just so you know if you’ve got any questions if you got anything you can pump them into the another question thing happy to answer questions but you know yeah so that’s that for me if you look at the US that’s one model which I think is a failed model it failed in 2008 and it’s failing now and there’s the other model now which we all took in 2008 which was we stimulated the big companies trickle-down economics was supposed to get to the people didn’t happen yeah all the did was cause to share buybacks which drove the prices up you know but now what’s happened the UK and in fact a number of countries now are giving monies to individuals or small businesses which has kept the unemployment rate very low comparison to what it would have been.
I think that’s the key here that as we come out and as we go into the next phase all right which is the post coronavirus phase yeah oops all right yeah which is basically that there’s gonna be so when we decide to come out of this there’s gonna be stimulus it has to be required yeah we get we have to require yeah we may see lower bank reserve limits because one thing that could happen was banks will lose confidence in lending. If they do that and there’s not money available now right now there is huge injections you stimulus huge liquidity being pumped in. But if that is not lent out then that is a problem if that just props up reserve limits and things like that then that becomes a real problem.
Sorry guys I think we’re having problems to the stream as well yeah perfect streaming on one bit but anyway it looks okay now so look
Bottom line is yet we may lower reserve limits which I think the banks already have they’ve already indicated that that is a possibility you know gradual the release of lockdown measures gradual weaning off of benefits I think that’s really important you know if we are on benefits for too long. The problem is going to be we’re used to having that and not used to necessarily owning our own money and then we’re back to it. Now the real problem I think with this post virus and I’ve said it many times is that you know if we sell right lockdowns off get back to work it’s gonna take so for instance my sales business is gonna take three months to start making money so who’s funding that three months if the government helps out fantastic then I can keep all my staff on everyone’s happy yeah. Then and then across the economy the unemployment rate stays where it should. The issue becomes if they go right lockdowns off get back to work we’re stopping the furloughing we’re stopping the stimulus and all of a sudden I go I’ve got three months listen guys looking at the cash flow looking where the business is I can only keep half of you and if that happens across the economy well then we have unemployment shoot up, demand goes down, the GDP goes down and we’re into a recession. And all of a sudden you know then if that goes across a number of economies then we’re in real problems I actually touch wood don’t think that that may happen I think actually a lot of the governments around the world have woken up they’re looking at the US and they’re saying they’re a basket case don’t follow them they don’t lead us any more there’s no leadership in the US. You know in fact look at them for what not to do let’s do our own thing let’s try some different things because the tools that we used to use and we used to have we’re still using them but now we’re gonna try them use them in a different way and I think if we come up with creative approaches which we have yeah certainly in the virus phase of this and if we apply them to coming forward then the likelihood is we may come away with not too much of a recession. Look make no mistake right now we’re probably in recession you know I mean you don’t stop an economy like that and it’s not stopped okay we’re talking you know you have taken out a lot of the consumer spending you’ve taken a lot of the production a lot of them you know so the and if that happens for two periods were in a recession. But make no mistake whether it’s technically a recession we are in recession.
Recession as in you know everything is dropping away but it’s about how we manage it on the way out that really counts other things we do increase government spending but of course that causes borrowing for the most part for most kind because obviously they haven’t got you know the cash sitting there and therefore that will have to be head out but I think short-term cutting taxes so there’s you know there’s in the news now at all he must and stamp duty cuts you know which are a good thing stimulate sales and then what they can do is then to pay back all this borrowing which is you know we don’t have to pay back at some point. Unless we just choose to do the American model and inflate it away which I’m not sure is a good idea in the way they do and remember we’re not the reserve currency I’m not sure they are either but that’s a whole nother video as well but you know we have to pay back those debts so taxes will probably go up. I think how we going to get out of this and the post virus phase is we need to look to my China for the model for reopening I think if we do that the likelihood is that we could actually see things be quite good.
So that sort of gives you a bit of an idea of simulating I mean same same different it is still there’s still a high likelihood that we are going to go into recession the question is is how long that we stay in that recession and whether we make the same mistakes we made in 2008 which was for me austerity for such a long period. Whereas we should have stimulated the economy for a bit longer after to get things moving and then pulled back on the spending. We didn’t we just went straight in and said no we’re just going to do some tough times and I think part of the problem was Australia did this many years ago and it actually worked. You know it was a very deep recession but then they went back up you know
Hey Marco how are you in light of the crisis recession all the soft markets are down would you invest in a company share. Look I’m chatting to a lot of my mates who are in that sort of market it’s not really my game and they’re saying hold off and I agree with that because if you look at how things happen there’s the initial shock and then there’s repricing and then there are the fire sales you know and then tends to be you know come they come down again. But you know it depends on your situation I’m not going to give stock advice here I think there are so many unknowns right now you know and when I say same same but different the different is you know this is you know this type of simulation direct to individuals and that hasn’t really been played out before.
This may work like a like a dream and actually we end up having this massive rebound I’m in China right now telling you the guys in China China is actually coming back and actually cut bounce back and people who just got back to work and just going about their day and actually potentially they haven’t had they won’t have a recession ish. They may have you know I mean if you think they’ve been growing 6% other thing is real who knows so yeah you know it would have been you know now and you know if so what would you pick.
Well I mean my advice is always pick something you know so you know if I’m gonna go back into probably property companies that I know are doing really really well interestingly because most of the property companies had been at a low level of sales and a low-level building a lot of them are positioned really well to come out of this really well you know and so and you know for us we’ve been working with the larger developers so they’re actually I mean when we talk about lower prices you know I mean who’s funny wasn’t the phone the other day I was chatting you know I reckon it’s 30% drop and one of my mate is the developer who’s just like great you’re a freaking idiot like that’s just not even on the cards that are not gonna happen and I have to agree right now there’s not I don’t see that happening now everyone says if you know the US coughs the world catches a cold I’m not sure that’s the case anymore yeah I’m not sure that’s the case in the same way it was say ten years ago 2008 or even before that.
I think most countries most leaders most politicians now look at America and go you know they’re a necessary evil but they’re a bunch of bloody you know Banana Republic you know and that’s you know that separation which has been happening for you know well certainly since Trump you know that’s gonna continue but obviously now people playing geopolitics China and the US and they’re playing off each other and you know I mean that’s causing a separation whereas before there was no China it was the US were the granddaddy they had you know the five they had all the Navy you know putting their power out and they’ve still got that you know so they’re not going away in a hurry I’m not saying that they’re going to collapse and crash in a hurry I don’t think that will be the case right now but I think they’re gonna go through another 2008 crisis. Where you know they’re gonna hit get hit harder than everyone else and they you look at they’re a virus response I think that’s going to continue you know unfortunately you know that’s just the way I look at it.
You know but yeah yeah so guys that’s all I’ve got for today you know any other questions you know put them through an hour happy to answer them I’ll be back on Tuesday, I’ve taken Monday off be back on Tuesday got a few more videos that are on the weekend but yeah but you know stay on my channel you can also go to www.gladfish.com/covid19 and all of my videos there we’re up to over 45 videos right now since I think three weeks ago. Busy little beaver I’m pretty sure my wife doesn’t know who I am right now or my kids but no guys no keep watching keep the questions coming you know it’s great really enjoying this and yet we’ll see you next week have a fantastic Easter all right guys see you later bye
April 13