The Great Depression 2008 Verus The Great Lockdown 2020

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. 

-Charles darwin

In every phase, the world undergoes a drastic change to filter the fittest. History is proof that every time nature has surprised everyone with its series of extinction events that killed tonnes off species. Just like in every race, there are winners and losers. Some of the greatest evolutions of time are whales, African elephants, and more. Above all, human evolution is the most interesting one that in 21st-century humans strongly believe that for every problem there is a technical way out available.

Just the way nature keeps on surprising everyone with its filter. Economies keep on evolving to filter out the odds. The world has to change dramatically after every revolution either it is industrial, technological, political, or environmental like epidemic or pandemics.

Human history witness many drastic changes, among them the great recession of 2008-09 and current great lockdown 2020 was extremely tragic. The magnitude and speed of collapse in the activity that has followed is unlike anything experienced in our lifetime. Hence, here an in-depth analysis.

Analysis of The Great Recession Versus The Great Lockdown.

1. Origin:

The Great Recession:

It was a period generally marked as a decline in the national economies globally between 2007-2009.

The cause behind this great depression in 2009 was the combination of vulnerabilities and loopholes in the financial system. First, heavy loans to the non-credential identities later the collapse of the investment made in the real estate sector. Top of that bankruptcy of investment banks and guarantors in the economy causes the financial crunch. Later, which affected the trade in the major developed economics mainly North America, South America, and Europe, simultaneously developing countries suffered a little impact.

Note: Both Depression and Recession is different. How?

Recession: The recession is the downtrend in the economy that affects the employment and production of goods and services, this is reflected by the reduction in household income and spending. It majorly lasts for six months or consecutive six months.

Depression: Alternatively, depression is more severe than the recession which lasts more than a recession. It is recognized as widespread unemployment and major pauses in economic activities.

Great Lockdown: 

Alternatively, COVID-19 is a natural plague that originated in Wuhan, China. Affected the world in 2020 and put the world in a great Lockdown. Thus, collapse the working of all activities.

For More Read: 

Coronavirus Outbreak: Everything You Need To Know.

COVID-19: Top 5 Countries Handling Coronavirus Best

2. Global Growth Crisis.

Great Recession:

This is a crisis like no other. The great recession 2008 majorly affected the countries and region in trade with them as banks were no longer in a position to provide funds for business and for other major security activities. 

Great Lockdown: 

However, great lockdown causes the ultimate collapse of activities. This certainly impacted the livelihood of people. As most of the economies were under great containment zone.

According to the recent report of IMF the global growth rate in 2020 to fall -3% compared to -0.1% of the great recession making it worse than the great recession. No doubt this is a global crisis as no country is spared. However, if we do get a recession, it is likely to be much less severe than the great recession once things will be normal.

                                                         

3. Job Losses:

Great Recession: 

Job losses in the great recession were huge and longer than the many previous recessions. According to the Bureau of Labour Statistics since the start of the recession approx. 8.8 million jobs had been lost. It was longer in history because the employer did not begin to add jobs until 2010.

The Great Lockdown: 

In the recent Preliminary assessment report by the International Labour Organisation, there could be around 25 million jobs lost due to coronavirus. Industries reliant on tourism, travel, hospitality, and entertainment are affected the most.

Currently, the ILO suggested a 3 pillar model-including

• Protecting workers in the workplace,

• stimulating the economy

• Employment and supporting job and income.

4. How long it lasts.

Great Recession:

With millions of people forced out of work. There is no penny to spend as all drained into paying the debt. Business spending decimated, the downturn lasted 18 months.

Great Lockdown:

Both advanced economies, emerging market, and developing economies are in a recession. As it all started sinking at the beginning of the year. It was pre-assumed that it will reach a peak in a few months clearly at the end of the first quarter. But for many countries, their peak season is likely to be in summers. However, the downturn is likely to last six months or so.

5. Stock Market.

Great Recession: 

When the housing market fell, many homeowners defaulted on their loans. This dried the liquidity in the economy which heavily affected the financial market. Consequently, companies doing business with these banks were negatively affected and this stumbled their stock value in the market.

This entire financial crunch had effected the trading which ultimately led to a failure of confidence in the U.S. stock market as well. As a side effect, the stock market crashed followed by the fall in many markets across the world.  

Great Lockdown: 

Amid the pandemic, we have seen a huge fall in the equity market. Most of the economists downgraded their forecasts to point towards the coming global recession. Also, the fall in the growth forecast created the tension in the investor as they started selling the low valued stocks. 

According to Alok Agarwala - Head Research & Advisory, Bajaj Capital,” It becomes extremely important for the investors to re-shuffle the portfolio according to the current situation.” 

For many people, this period of lockdown become the opportunity to upgrade their portfolio and hold some good blue-chip companies at a very low value. Although, it is very well indicated you should maintain asset allocation discipline to avoid any heavy losses as the market is volatile. 

Be fearful when others are greedy, and be greedy when others are fearful.

-Warren Buffett 

Must Read:

What is Fundamental Analysis? Role of Fundamental Analysis While Investing in Stocks?

6. Business Opportunities:

Great Recession:

As it is a very known fact of the market that there is "never a perfect time to start a company," and it's important to "allocate resources" from the outset.

Several ideas sprouted from 2008 through 2010 that changed the trends of the market. The only idea was there to provide customers with more means that will ease their living. Some of the very good examples are WhatsApp, Pininterest, Uber, Groupon, Instagram, Google Venture that today sets the trend for the market.

Great Lockdown:

Coronavirus is itself a strange pandemic and the momentum with which it proliferates is astonishing above all is the guidelines to prevent the spread like social distancing, constant hand wash, wearing face mask and gloves, and so on.

 

But as we all know the basic of every industry is to serve customers by easing their living. Many companies and business people have done the partnership to support the healthcare system of their respective countries and communities.

 

As a consequence of lockdown situations like work-from-home, online classes, home delivery, telehealth boosted. That generated new business ideas like Zoom, Microsoft Team, Blue Apron, Uber eats, and so on. All these applications have made a major contribution during the pandemic in the society, and may they mark the trend in the future.

Bottom Line:

“Hang on!! Don’t give up dear.”

Every negative circumstance comes with positive in it. Like any other crisis, this too will pass and come to an end. Keep calm and take all your decision one by one.

Stay safe, go out, and maintain distance, “Human touch is expensive.” 

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