Ten reasons why a 'Greater Depression' for the 2020s is inevitable

Ominous and risky trends were around long before Covid-19, making an L-shaped depression very likely

After the 2007-09 financial crisis, the imbalances and risks pervading the global economy were exacerbated by policy mistakes. So, rather than address the structural problems that the financial collapse and ensuing recession revealed, governments mostly kicked the can down the road, creating major downside risks that made another crisis inevitable. And now that it has arrived, the risks are growing even more acute. Unfortunately, even if the Greater Recession leads to a lacklustre U-shaped recovery this year, an L-shaped "Greater Depression" will follow later in this decade, owing to 10 ominous and risky trends.

The first trend concerns deficits and their corollary risks: debts and defaults. The policy response to the Covid-19 crisis entails a massive increase in fiscal deficits - on the order of 10% of GDP or more - at a time when public debt levels in many countries were already high, if not unsustainable.

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