A Global Economic Depression is Inevitable. Brace for Impact.

Mahesh Prabhu

Mahesh Prabhu

Udupi Mahesh Prabhu is a seasoned media, management & political consultant. He is a Founder and Chairman of Vedic Management Center and Vivaswaan. A fellow of the Royal Asiatic Society of Great Britain & Ireland, London (UK) and member of the International Federation of Journalists(USA), he also holds a Masters in Business Administration with a specialization in Marketing. For more info visit www.indiamahesh.com

You can control many aspects of your life, but others always remain that you cannot control. In an era when people are obsessed with money, influence, and media – losing control is something not taken kindly. Therefore, most people in positions of power fail when to meet challenges they face of extreme importance.

With the Chinese virus continuing to infest the world population and hitting world economies harder – many people, particularly in positions of influence have begun to panic. Not surprisingly their responses have gone to extremes. While some are trying to pretend as if everything is hunky-dory; others are behaving like headless chickens. Sadly, neither of these two extreme approaches can be of any help. Both are ostrich approaches. You cannot dig your head in the ground and expect everything above ground will go well, or otherwise, for you.

With the Chinese virus continuing to infest the world population and hitting world economies harder – many people, particularly in positions of influence have begun to panic. Not surprisingly their responses have gone to extremes. While some are trying to pretend as if everything is hunky-dory; others are behaving like headless chickens. Sadly, neither of these two extreme approaches can be of any help. Both are ostrich approaches. You cannot dig your head in the ground and expect everything above ground will go well, or otherwise, for you.

There are a few facts everyone should realize. The global economy has already been on the decline for some time now. The world had barely managed to recuperate from the 2008 financial crisis. A slowdown was predicted by a many prominent economic analysts. Enter the China Virus – in four months the world economy was brought to a standstill – which only hastens an economic depression.

There is a stark difference between an “Economic Slowdown” and an “Economic Depression.” The economy is like an ECG. There are upward and downward trends all the time. But when the downward trend is more than the upward that is an Economic Slowdown. But when economic growth becomes stagnant with no clear signs of economic revival – it clearly indicates Economic Depression.

There is a stark difference between an “Economic Slowdown” and an “Economic Depression.” The economy is like an ECG. There are upward and downward trends all the time. But when the downward trend is more than the upward that is an Economic Slowdown. But when economic growth becomes stagnant with no clear signs of economic revival – it clearly indicates Economic Depression.

What we are seeing now is likely the beginning of global economic depression. This is happening after the global depression of nearly a hundred years ago. So, none who has seen the last economic depression remains to explain it in person. Yet, we only need to realize the consequences of the previous depression and multiply it a few times to determine the possible impact of what may happen now. This is because advancements in technology and the resulting interconnections of world economies may only worsen the situation when the global economy enters a state of depression.

During the Great Depression of 1929, national economies were not nearly so intertwined as they are today. Technological advances were not nearly as sophisticated as they are now. And yet, the Great Depression eventually set the stage for World War II.

It takes on average four years for vaccination to be invented, tested, and made ready for safe consumption. Most claims of vaccination, on scrutiny, appear to be vain attempts by the pharmaceutical companies to inflate their stock prices and make more money. However, we also need to factor in the ability of the human body to develop resistance to the virus besides the weakening of the virus strain over time. So, under any circumstance the situation prevalent today will likely continue for at least 2 years, until 2022.

It takes on average four years for vaccination to be invented, tested, and made ready for safe consumption. Most claims of vaccination, on scrutiny, appear to be vain attempts by the pharmaceutical companies to inflate their stock prices and make more money. However, we also need to factor in the ability of the human body to develop resistance to the virus besides the weakening of the virus strain over time. So, under any circumstance the situation prevalent today will likely continue for at least 2 years, until 2022.

Assuming this to be true, what are the consequences?

To begin with, many nations, particularly those without social security and unemployment benefits, are seeing excessive strains on their financial institutions, particularly banks. While governments were right in bringing in a moratorium – these measures are never without consequences.

In India, particularly, with the moratorium ended the financial stress on individuals and institutions is making it hard on the economy.  Double digit increases in the percentage of defaulters can cause havoc on many industries – real estate and automobiles, particularly. And when such critical industries are hit, they are bound to cause a domino effect on other sectors.

The Information Technology and Information Technology Enabled Services are already cutting their staffs. Places like Bangalore and Pune are hit the worst. Although there are no confirmed estimates – according to confirmed sources over 40% of people in these sectors have already lost their jobs.

With scores of people becoming unable to service their mortgages – the collapse of inflated real-estate prices can occur. And the way I see it – it is only wise to let the real-estate markets slump. Let us not forget that in countries like India – over 70% of people still do not own their own houses. Many people only work to get a home on loan and spend the rest of their professional live trying to repay it. The collapse of real estate causes a fall in the prices of land and apartment rates. This will help people to afford a decent house. Yet, the government is determined to protect this industry at all cost. This is because a sizable number of politicians are invested in real estate. And the collapse of the real estate market would come at great cost for them – which could mean losing the upcoming elections. The real-estate industry is already in the final state of this virus called an economic downturn. Any last-ditch efforts will only end up making the collapse worse.

With scores of people becoming unable to service their mortgages – the collapse of inflated real-estate prices can occur. And the way I see it – it is only wise to let the real-estate markets slump. Let us not forget that in countries like India – over 70% of people still do not own their own houses. Many people only work to get a home on loan and spend the rest of their professional live trying to repay it. The collapse of real estate causes a fall in the prices of land and apartment rates. This will help people to afford a decent house. Yet, the government is determined to protect this industry at all cost. This is because a sizable number of politicians are invested in real estate. And the collapse of the real estate market would come at great cost for them – which could mean losing the upcoming elections. The real-estate industry is already in the final state of this virus called an economic downturn. Any last-ditch efforts will only end up making the collapse worse.

Also, on the losing side are the media and education sectors. Without economic growth advertising is sure to dry, and not being able to open their doors will endanger academic institutions. A significant number of academic institutions is bound to collapse and those who do not will be forced to downsize. As the result of these declines, salaries are bound to come down, particularly for high flying executives. This will in turn hit other sectors like hospitality, aviation, and tourism. What is required at this danger time is neither a sense of optimism nor pessimism, but balance. There are times to fight and then there is also times to retreat.

In the wild when the winter arrives, and food is scarce animals go into hibernation. Through this process, they preserve their energy and endure through the difficult times. What we are about to see can be called an economic winter. It is futile to try and plow the fields in winter. It is equally futile to cry about the inevitable. Instead, it is time to preserve cash, cut costs and build one’s skills and knowledge.

The economy is bound to bounce back after 2022 albeit slowly. Those who waste their energy in wrong projects during these two crucial years will decline or disappear. But their decline will provide new opportunities.

In nature when an animal dies, its corpse is consumed by smaller animals who in turn benefit from the energy. Life is a continuous cycle of upward and downward trends. When the trend is upwards, it helps to be cautious and build reserves for the future. And since most people today have failed to save; and instead, take multiple loans to buy properties as “investments,” there is a certain pain they are bound to suffer.

In nature when an animal dies, its corpse is consumed by smaller animals who in turn benefit from the energy. Life is a continuous cycle of upward and downward trends. When the trend is upwards, it helps to be cautious and build reserves for the future. And since most people today have failed to save; and instead, take multiple loans to buy properties as “investments,” there is a certain pain they are bound to suffer.

Economic depression is a Karmic course correction. It is also inevitable. And it is certainly a gloomy era. When we are faced with the darkness, we must light a candle. Today this means to build our knowledge and skill sets and prepare for the eventual return of the sunlight. Cursing the darkness does not help.

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Learn about our continuing and online course connecting Vedic knowledge with contemporary situations including mind, body, management, leadership, politics and diplomacy.
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A unique Vedic Management Centre Initiative specially devised to rekindle the lost art and science of Vedic leadership for management, politics, and diplomacy.
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