IGTA Journal - Winter 2020/2021

months and years to support the global economy. In normal circumstances (whatever it means in economy these days), bankruptcy rates rise in the quarters after gross domestic product starts coming down. However, the opposite happened when the pandemic hit the Western economies. We can notice (confirmed by IMF) that the number of bankruptcies began to drop significantly and may continue to do so. It looks like an hiatus in the classic economic principles we all have been taught, isn’t it? These stimuli and all QI measures were certainly necessary but they hide the reality. These heavy measures and schemes covered worker’s wages, guaranteed loans, protected companies’ borrowings, enabled investing in dodgy or high yield debts, gave moratoriums on bankruptcy filings, encouraged banks to lend more than normal and all-in kept some unviable firms afloat when they should have gone bust. But the key question is whether they do less or more damage when they stay alive longer. It is not easy to answer and to make recommendations. I would be tempted to say: yes, it does help. However, up to a certain level. Isn’t it moving back for better jumping? Unprecedented situation The figures we have seen are unprecedented and exceptional. The incredible and unusual situation justifies such measures. The peculiar nature of this crisis (not a financial crisis but a green swan and health crisis having financial consequences) explains these unusual reactions and “nuclear financial weapons” used by ECB. A “normal” (providing it exists) economic crisis comes from imbalance in the financial structure or from specific situations (e.g., dot.com bubble, sub-primes, government debt issues, oil shocks, etc…). A recession following a crisis implies measures to correct it and prevent further issues (e.g., new financial regulations after GFC in 2008). Here the cause came from outside the economy and require waking it up despite it was doing well (just before the COVID). And furthermore, we do not have references, benchmark, or credentials to base our reactions on and to fight the issues. We may have reached one of the highest levels of global indebtedness level ever. The risk as always mentioned could come after the storm. Artificial situations The precise magnitude of the crisis and artificial distortions generated may emerge once all emergency measures will be lifted and the situation normalized. The world economy is on life support. When central banks will stop respirators and stimuli, we may discover the full magnitude of the disaster. Some companies because of this exceptional support are maybe not addressing the issues. Some hardly hit sectors will have trouble to come back to pre-COVID situation and maybe will never be back to those levels. Are they properly addressing business issues? I am not sure. We are convinced of the well-founded of all the financial support measurers to avoid social disasters. Nevertheless, we also know that jobs protected during the pandemic could be lost in masses afterwards. Politicians have pushed forward problems in keeping zombie companies alive and perfectly know that sooner or later like a boomerang it could come back straight to their face. Even if IGTA eJournal | Winter 2020/21 | 35