There are strong arguments that uncertainty has been the defining economic feature of the past three years. From the US-China trade war to COVID-19 and the supply chain crisis of 2021, markets have been constantly up or down with remarkably few (and generally short) periods of stability in between.

2022 has only continued that trend so far. As the New York Times reports, stock markets have experienced several wild swings this year alone, with the S&P registering record losses (including its longest losing streak since 2011) amidst intermittent rallies.

Likewise, global events such as the Russia-Ukraine war, rising inflation, and enduring COVID tailwinds are contributing to this uncertain state of affairs.

Consequently, market participants and stakeholders are reacting with increased caution. CNBC, citing an Allianz Life survey, reports that 43% of investors say they’re “too nervous” to invest within this market, especially considering the lack of clarity as to what comes next. Stakeholders and participants may have to wait longer for clarity though, because, as I argue below, the unsure state of the market is only likely to continue. Here are the top reasons why.

Slowing global economic recovery

Mid-2021 produced higher than expected global growth figures, fueling an optimistic outlook for a global economic rebound. The pace of that growth slowed down before year-end though, due to chronic supply shortages and a resurgence of new COVID variants omicron and alpha.

This year has not brought any improvement in the situation. As the World Bank reports, global economies continue to experience decelerating growth due to the exhaustion of pent-up demand and unwinding fiscal support. Likewise, a sharp incline in global inflation rates has impacted consumer spending as greater income shares go to necessaries and less allocation to savings and investment.

Tightening monetary policy

I’ve mentioned tightening fiscal policy above, but it’s worth a closer inspection. Central banks in Europe, Japan, and the US intimated earlier in the year that they would be exploring a tighter monetary policy in a bid to combat rising inflation. Consequently, we’ve seen the Federal Reserve raise rates recently and the European Central Bank has given a clear signal on rate hikes in July.

As the New York Times reports, investors and industry are reacting to the news with caution as they consider the potential implications of these rate hikes and how they are likely to play out. Consequently, I expect decelerated borrowing activity while the industry gauges incoming measures.

Russia-Ukraine conflict

War is generally bad for stability, but in the case of the Russia-Ukraine war there are more reasons why this is the case. Russia is a major player in the global energy market, but its energy obligations to trade partners and general global supply are more susceptible to shocks due to the specter of war.

Global supply runs the risk of damage to critical Russian transmission infrastructure, such as the key pipelines running through Ukraine and other supply channels. Damage to these pieces of infrastructure may further congest an already inflated market, resulting in even higher prices and less of the product.

It’s unclear how long the conflict will last. Consequently, the energy sector will likely continue to experience elevated prices and uncertain supply.

COVID-19 tailwinds

Another important factor, which is largely being ignored for the moment, is the continuing effect of the pandemic on global trade. Enduring concerns over COVID variants, new and large-scale outbreaks in China, and attendant supply chain congestion are all contributing to a highly uncertain market state.

Considering that vaccine hesitancy is still wide-spread and vaccine penetration levels continue in the low figures (particularly in emerging economies), we’re likely some way off complete clarity in this area as well.

For companies still reeling from pandemic tailwinds and last year’s supply chain shocks, the Russia-Ukraine conflict couldn’t have come at a worse time.

While most organizations were focused on consolidating growth gained within the past year, new concerns raised by the war have forced boardrooms back into crisis mode as they grapple with rising energy and supply costs.

Likewise, further constrictions resulting from sanctions on Russian entities and individuals have impacted certain businesses, forcing them to either abandon or suspend ventures with Russian-linked partners.

As a remedial policy, the EU recently adopted new support measures to aid businesses that have been put at risk by the conflict and attendant sanctions meted on Russia. The measures, which went into effect on 23 March 2022, will provide financial aid up to €400,000 for some affected businesses and state guarantees on bank loans to qualifying companies.

Support measures for war-impacted companies

According to Margrethe Vestager, European Commission VP of competition policy, the state aid measures are adapted under a Temporary Crisis Framework (TCF) that aims to mitigate the impact of the war and existing sanctions while retaining competition in the Single Market.

Three types of aid are available under the TCF:

• Financial aid: Member states are allowed to establish schemes under which impacted companies in agriculture, fisheries, and aquaculture can receive an up to €35,000 grant. Companies in other sectors may receive up to €400,000, and in both cases, states may provide the grant in any form, including direct money transfers. Notably, the aid provided here is not linked to specific costs or liquidity issues.
• Liquidity support: The TCF provides liquidity support in two categories. The first category includes state guarantees in subsidized premiums to support existing loans owed by affected companies. The second category offers subsidized rate public and private loans. In both cases, maximum loan limits will apply depending on each qualifying company’s operational needs, energy costs, turnover, and liquidity needs.
• Energy assistance: Perhaps the most immediate impact of the Russia-Ukraine war is the current energy squeeze being experienced by individuals and businesses. The EU is a major energy trade partner with Russia, but that trade has mainly been suspended due to current diplomatic strains. These events hurt many companies, but the EU is providing some stimulus to subsidize rising energy costs. There are also caps to this aid, though. Companies can only receive 30% of eligible expenses, up to €2 million. If operating losses ensue, companies may receive additional assistance above the €2 million cap – up to €25 million for energy-intensive companies and a ceiling of €50 million for firms in specific industries, including aluminum, glass fibers, and basic chemicals.

Conditions attached to aid and duration

These measures carry additional conditions that states must apply regarding qualifying companies. The EC calls these “safeguards” designed to protect economically-viable businesses, ensure that aid reaches companies in need, and foster the long-term sustainability goals of the EU.

Accordingly, states should establish a link between the impact on affected companies, the scale of their economic activity, and the amount of aid they can collect. They might take each company’s turnover and energy expenses into account in this determination. Likewise, aid to energy-intensive companies is envisaged to mean companies whose energy expenses constitute at least 3% of production value.

Lastly, states are encouraged to consider tying aid to sustainability goals for the affected business, but in a non-discriminatory manner.

The TCF is slated to expire on 31 December 2022. Although, before expiry, the EC will convene to determine if there is a need to extend the framework.

Although Buy Now Pay Later (BNPL) emerged before the pandemic, the attractive e-commerce payment option is soaring on post-COVID adoption.

BNPL provides short-term financing to online shoppers, allowing them to split the cost of purchases into affordable installments. For most shoppers, BNPL is a comfortable payment alternative since it lets them enjoy goods instantly while experiencing the benefit of spread-out, potentially interest-free payments.

While the trend began with innovative Fintech companies, global payment processors and banks like MasterCard and Goldman Sachs have taken notice. Consequently, BNPL is on an explosive growth trajectory, and estimates are that spending using the service will reach nearly $700 billion by 2025.

But what is behind the BNPL rise and how does it work?

How BNPL works

As the name suggests, BNPL lets buyers purchase goods, typically online, and pay later either in a lump sum or installments. As I see it, the process involves three parties: the merchant, the customer, and the BNPL provider.

Between the customer and the BNPL provider, the agreement is that goods will be bought and paid for at a later date (a grace period of sorts), usually within a few weeks or months of the purchase. During this grace period, the buyer can pay installments or the full debt at no interest.

But if the buyer does not make payment within the agreed period, interest may begin to run. Likewise, if the buyer misses an installment, they may be liable to pay late fees in addition to the outstanding installment.

Between the merchant and the BNPL provider, the agreement is that goods bought will be paid for immediately by the BNPL provider. This way, the merchant need not wait potentially several months to receive full payment and can enjoy optimal liquidity. In exchange, the merchant agrees to pay the BNPL provider a percentage of the sale price (between 2-8%) for the service rendered.

Due to the fact that BNPL provides ease and convenience for both buyers and sellers, the payment trend has secured wide approval. Some of the major BNPL providers globally include firms like Affirm, Ant Financial, Afterpay, Klarna, Zilch, Flava, MasterCard, Visa, and PayPal.

Rapid spread of BNPL

As described by e-commerce platform VTEX, BNPL is currently the “fastest growing way to pay in the developed world.” To underscore just how fast the payment trend has grown since COVID, one study reports that BNPL use quadrupled in 2020.

While the trend is highest amongst younger shoppers, the affordable payment option is popular amongst adults of all ages, according to the BBC. Compared to credit cards, users see BNPL as a simpler and more transparent alternative since it avoids the complex terminology and conditions associated with bank cards.

The top reason why people adopt the payment method is its ease and convenience. Because it is instantly available and potentially more forgiving than credit card loans, buyers feel more confident adopting this payment option.

Likewise, merchants possibly attract higher average order volumes because people tend to spend between 10-40% more with BPNL. They’re also more likely to overcome buyer hesitancy because BPNL encourages more convenient returns – it’s easier to test out a product when you don’t have to pay immediately. It also works wonders for cart abandonment. In fact, Afterpay reports that 69% of millennials and 42% of Gen Z shoppers are more likely to complete the buying journey when BNPL is offered.

However, despite its clear advantages to buyers and merchants, there are several unavoidable red flags with BPNL. In my opinion, unrestrained lending will only help perpetuate the ongoing global consumer credit debt crisis. Besides, consumers are naturally prone to underestimating risks and overestimating benefits, which might work to put many people in more debt than they expect.

While countries like the UK are already working on potential regulations for the sector, the question is: can they work fast enough to pass needed guidance before consumers get in way over their heads?

In the past two decades, national banks pumped trillions into their economies to grapple with recession and stimulate economic growth in a process called Quantitative Easing (QE).

However, with inflation at a 40-year high, the Federal Reserve, alongside other central banks, is backtracking from this policy in a bid to raise interest rates and disincentivize borrowing, according to Business Insider.

While QE may have defined the response to the 2008 global recession and COVID-19, Quantitative Tightening (QT) is “the new watchword”.

But with plans to shave roughly $2 trillion off the biggest central banks’ balance sheets, there are concerns over the potential impact of the policy. Just as QE was novel when adopted in 2009, QT has never been done on this scale. How could the Fed implement QT and what effects are likely to result? Here’s what I think.

What is Quantitative Tightening?

Quantitative Tightening is a monetary policy aimed at reducing the size of a central bank’s balance sheet – that is, its assets and liabilities. The policy, also called balance sheet normalization, is the exact opposite of Quantitative Easing. In QE, the central bank buys long-term government bonds in a process that actively increases the size of its balance sheet, thereby flooding the economy with needed liquidity that in turn pushes interest rates down.

As Bloomberg explains it, when a central bank implements QE, “it increases the supply of bank reserves in the financial system, and the hope is that lenders go on to pass that liquidity along as credit to companies and households, spurring growth.” The Fed implemented this policy during the 2008 financial meltdown, increasing its balance sheet from $1 trillion to $4.5 trillion by 2018, and again during COVID-19, leading to an all-time high balance of nearly $9 trillion.

In contrast, the central bank reverses its policy under QT, instead working to lighten its balance sheet and reduce the money supply in the economy. It does this by cutting down on reinvestment of proceeds from maturing government bonds and raising interest rates. The Fed has announced its intention to move forward with QT plans, and analysts quoted by Business Insider suggest that could be as early as summer this year.

How could the Fed implement QT?

As I see it, the Fed could adopt the same approach it took previously when it briefly implemented QT between 2017 and 2019. The first stage involved a steady tapering of its monthly bond purchases, which were roughly $120 billion a month as of November 2021. Current indications are that the Fed plans to end purchases by mid-March 2022.

At the next stage the Fed maintained its balance sheet for a three-year period during which it focused on raising interest rates. It took the first step towards a rate hike in December 2015, says the Federal Reserve Bank of St. Louis, and completed an increase from 0% to 2.5% by 2018. The Fed could take the same approach this time, although at a much faster speed.

QT will likely start gradually and then build up as it proceeds. Last time, the Fed started shedding its bond holdings at $10 billion a month, which eventually increased to $50 billion monthly at its peak. Projections are that the coming QT will proceed at a much more aggressive pace, possibly at $100 billion per month according to JPMorgan Chase & Co.

The big question though is: what effects will QT likely have on the economy? In theory, if QE helped lower interest rates and increase liquidity, QT should do the opposite and help bring down inflation. But no one, not even the Fed itself, really knows.

The last time the Fed attempted QT, the results weren’t encouraging. While the process started smoothly, stocks fell within three months (the S&P 500 fell by more than 6%), and after ten months of roller-coaster stock prices the central bank eventually pulled the plug. Might the same effects result this time around? I believe only time will tell.

The World Bank has warned in a recent report that, due to headwinds such as inflation and vaccine inequality, the world faces a two-speed recovery that could damage prior strides in global economic development.

Although there’s likely to be a general slowdown after the strong rebound in 2021, the results and any eventual recovery that follows are liable to create unequal outcomes.

In the same vein, I believe the anticipated “hard landing” that will create a chasm between the growth rates of advanced and emerging economies was also predictable. International development institutions such as the World Bank, the African Development Bank, the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development have warned of this.

Speaking at the time on the 6% global growth projected in 2021, Kristalina Georgieva, IMF Managing Director, noted: “The composition of the 6% is changing, with advanced economies broadly accelerating growth, whereas most emerging markets and developing economies are falling further behind. This is a dangerous divergence.”

However, despite early warnings, the world looks to be on track for precisely this dangerous divergence. The World Bank said that, while advanced economies will likely see a growth decline from 5% in 2021 to 3.8% and 2.3% in 2022 and 2023, respectively, they will return to pre-pandemic levels by 2023. But growth declines elsewhere will be steeper.

Comparably, 2023 will see emerging and developing economies still 4% below pre-pandemic levels. Worse, fragile and conflict-affected economies will fall 7.5% below their pre-pandemic path by that time, and small island states will likely be even lower, at 8.5%.

The rich forge ahead, as the rest fall behind

The causes of this anticipated two-track recovery are obvious and have been here for a long time. Massive debt levels, income inequality, infrastructure deficits, and reliance on commodity exports (subject to notorious boom-bust cycles) already put developing and fragile economies on a path that would see them unable to respond robustly to the pandemic.

As a case in point, while advanced economies could push massive spending budgets to aid their economies and provide stimulus, emerging and vulnerable economies either could not afford a stimulus or had to withdraw them before recovery in response to inflationary pressures. Unsurprisingly, Financial Times, quoting the World Bank, noted a 5% rise in per capita income within advanced economies in 2021, compared to a 0.5% increase in low-income countries.

Likewise, vaccine inequality, exemplified by the developed world purchasing five billion more doses than it needs for its citizens (enough to vaccinate Africa twice), and the stuttering rate of global vaccination showcases the difference in outcomes.

In the aftermath of the pandemic, these emerging and vulnerable economies are now faced with the bill of nearly a year of lockdowns and painful health-motivated restrictions. They are in deeper debt (global debt is at its highest levels in 50 years), inflationary trends are contracting savings and investments, and they now have less money to fund capital projects and economic initiatives.

As a result, we’re now going into a critical period for world peace and stability. Prosperity increases stability and vice versa. With the harsh incoming times for the developing world, we could see the hard-fought gains in global development over several years wiped away in just a few, making political and economic instability more likely.

I think the lesson here is that global peace and prosperity are a collective effort. The world now has a difficult task to manage the incoming challenge to foster and preserve a collective global charge in the right direction post-COVID.

I have closely followed the recent upsurge in energy costs that characterized the end of 2021. According to global reports, coal, gas, and electricity prices rose to decade-high levels in the final months of the year, and projections were that the energy shortfall would continue well into 2022.

The International Energy Association reports that gas prices are at a record, with costs as of 3rd quarter 2021 at ten times the price a year ago.

In addition, coal prices increased 5x compared to 2020 prices, and natural gas prices tripled in October 2021 to their highest levels since 2008.

Many factors have been fingered as culprits for the energy squeeze, but one that seems to be thrown in now and then is the effect of reduced investment in fossil fuels and capital transfer to fledgling green energy projects.

Right off the bat, I would like to emphasize that investment in green energy is not the cause of the energy crisis. Moreover, as both the International Monetary Fund and the IEA clarify, blaming the clean energy transition for the situation is “inaccurate and misleading.”

Instead, there are various factors involved, not least of which are the 2014 and 2020 commodity price collapses and the resurgence of energy demand after a COVID-induced hiatus. I will briefly outline some of these causes and how we can expect things to evolve.

Why are energy prices so high?

While it seems like the energy crisis hit out of nowhere, there are longstanding reasons for the situation, and they mainly stem from the collapse of oil prices in 2014.

At the start of the 2010s, strong growth in the price of commodities created an oil industry boom, with prices sitting around $100 per barrel. The boom encouraged greater investment in the sector, significantly increasing supply. Similarly, developments in energy efficiency reduced worldwide demand, thereby creating an oil glut. However, major oil-selling countries failed to respond by lowering supply, and as a result, oil prices fell by 70% from 2014 to 2016.

One implication of this collapse was that investors lost appetite for new fossil fuel investment. Second, abundant oil also created a natural gas glut, making gas cheaper and a viable alternative for coal. Due to this, gas-fired plants gained ground, and the electricity systems worldwide began to rely more on gas instead of coal.

By the time COVID came around, the pause in fossil fuel investments was already several years old, and as Bloomberg reports, supply was already falling behind demand. COVID-19 tanked energy production globally due to lockdowns, the rampaging pandemic, and health regulations. While demand rebounded faster and stronger than expected, supply quickly fell further behind due to unexpected outages, a sizable maintenance backlog, and supply chain inefficiencies. Households and power plants began to compete for limited gas supply, which helped increase prices even more.

Currently, OPEC and Russia seem unwilling to intervene and help stabilize prices with increased supply. At the same time, the EU and other countries in the Northern Hemisphere have all but depleted their reserves in response to unseasonal weather, thereby leaving them unable to ease the supply hardships within their territories.

That said, I should note that climate policy is not exactly blameless in the overall operation of forces leading to this crisis. For example, increasingly stringent emissions targets in Europe, North America, and China have contributed to policies favoring gas (which is cleaner) over coal. But in the general scheme of things, climate policy has had a negligible effect on the crisis.

What will the new year bring?

The causes behind the current energy crisis are myriad, so it’s uncertain how things will develop within 2022. While major oil producers will likely open up their stores and help provide stability at some point during the year, other factors such as maintenance difficulties and destructive weather events are less certain.

I believe one potential solution could be to increase investment in renewable energy sources to help make the global system less vulnerable to wild swings in commodity prices. With decentralized energy production and renewable sources enjoying more production capacity, the world can recover from these commodity cycles quicker and suffer less damage as a result.

As the world looks to bounce back from the 2020 COVID-induced slump, inflation is playing a larger role than anticipated in global economies. A slower than expected economic recovery, a flagging labor market, and supply chain disruptions have created concerning inflationary conditions, affecting middle-class families globally.

For instance, the UN Food and Agriculture Organization reports that food prices rose for the third straight month in October 2021, climbing to their highest levels since 2011.

Likewise, in Europe, annual inflation was reported at 5% in December 2021, with energy costs driving higher figures at a rate of 26.5%. The higher cost of energy is in turn pushing up the prices of necessaries, from heating to transportation, food, and gas.

While inflation is a global concern, data shows that middle-class families are feeling the pinch of rising prices more. Here’s why I think that might also be bad for the global economy.

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Inflation has hit the middle class hard

As a general rule, inflation impacts individuals and families by reducing their spending power. However, the trend is usually tougher on lower-income families because they have less money to spend than the upper-middle class and the rich. For instance, the IMF found that people who identify themselves as poor are 10.5% more likely to name inflation as a major concern than those who identify as rich.

According to the Penn Wharton Budget Model, low and middle-income families spent 7% more in 2021 on the same products they purchased in 2020 and 2019. On average, they spent $3,500 more on the same products as they did two years earlier.

Similarly, the World Economic Forum states that one survey of 20,000 respondents from 30 countries found that at least half reported higher healthcare, clothing, housing, and entertainment costs. Seven out of ten people said that they expected the price of food, gas, public transport, and groceries to increase even further.

According to Reuters, Argentina reported the highest inflation rates, with prices rising to 54% as of October 2021. While countries such as China and Japan have reported the least inflation figures (at 1.5% and 0.1%, respectively), the general trend paints a troubling picture overall.

Food prices are more than 6% higher than in 2020, and gas prices jumped to 58% at the end of 2021, forcing these families to devote more of their budget to necessaries. In many cases, the inflationary trend is forcing middle-class families to explore cheaper alternatives to everyday staples, according to NBC. More people with incomes ranging between $50,000 to $100,000 are looking for deals in stores that traditionally serve rural and low-income shoppers.

Why this is bad for the economy

The middle class is a vital driver of business within the global economy – they sit at both ends of the table as business and consumer.

I see one reason for this as their overwhelming representation in the ownership of SMEs, which constitute the vast majority of businesses worldwide. Without a strong and financially stable middle class, more businesses will likely suffer cash flow issues and struggle to keep shelves stocked or services going.

As consumers, inflation takes more money from middle-class households in return for fewer goods. Therefore, they suffer reduced purchasing capacity and are ill-equipped to provide the demand that helps businesses arrest cash flow concerns. In effect, each phenomenon reinforces the other and produces a risk that all players will be caught in a vicious cycle.

Eventually, the economy bears the brunt of middle-class woes. Research shows that higher middle-class incomes presage better economic growth overall. Likewise, an ailing middle class is bad news for the economy, as high inflation levels leave them with less money to save, invest, or spend.

Unfortunately, it’s not certain how long this inflationary trend will continue or what might be done to arrest the trend. Seeing as the root causes are numerous, it is more likely that countries will provide whatever support they can through subsidies and stimulus payments while looking to the market to correct itself in due course.

The electric revolution in European skies could take just a few years. Judging by the speed at which things are moving, particularly in Scandinavia, the first to see the dawn of zero-emission aircraft will be passengers in the far north, where a number of experimental initiatives are taking shape to get small battery-powered aircraft into the air: models that have already attracted the interest of regional carriers.

The type of demand for air transport is specific to northern Europe, with almost half of the operators covering a distance of less than 200 kilometres and often carrying fewer than 10 passengers.

Short-haul routes are not economically viable for carriers, except when they are generously subsidised by the state to provide a public service to the community; the advent of electric aviation would open new frontiers to and from provincial airports. But not only that. Although it too is beginning with trials of small aircraft, the aim of the partnership between Wright Electric and the British low-cost carrier EasyJet is to produce 186-seat electric aircraft by the end of the decade. Interest in battery-powered aviation is also growing in southern Europe: in Spain, Volotea and Air Nostrum are partners in a project to convert turboprop Cessna Caravans into electric-powered aircraft, an operation they hope will be co-financed by the Madrid government, as well as the EU Next Generation funds. It’s not just about developing the aircraft of tomorrow. The advent of electric aviation in the next five years will also require strong ground support and the creation of the necessary infrastructure to recharge the batteries after landing.

US Trade Representative Katherine Tai announced that “these extraordinary times and circumstances call for extraordinary measures.

It is reported that 10-15 billion vaccine doses are needed to stop the spread of the virus; by April 2021, there had only been 1.2 billion doses produced worldwide.

The way I see it, US’s stance is circumstantial and in a way symbolic; the WTO negotiations could last for months curtailing to have an immediate impact in ending this present health crisis. Nevertheless, I believe this is very big news.

With this declaration US administration is following India and South Africa, which in early October 2020 issued a proposal for temporary suspension of IP rules in the context of Covid-19. In this regard, EU Commission President Ursula von der Leyen also said she was “ready to discuss any proposal that would tackle the crisis in an effective and pragmatic way.”  WHO Director-General Tedros Adhanom Ghebreyesus and UN Secretary-General Antonio Guterres were overjoyed with the news and congratulated the US on this historic decision.

Not surprisingly, the pharmaceutical industry took the White House’s decision very badly. They argue that developing countries lack the skills and resources to manufacture COVID vaccines based on new technologies. They also say that it will undermine the pandemic response, risk-taking and innovation in vaccine research. In my view, one thing is clear; this waiver, if can be applied timely on WHO scale, will deprive the big pharma of monopoly profits during this pandemic.

The big pharma prefers the donation of vaccines to patent infringement. There, however, promises have not been kept so far. The COVAX Facility, the global pooled procurement mechanism formulated by WHO for COVID-19 vaccines, was supposed to distribute two billion doses by the end of 2021 to the poorest countries, has not received enough deliveries, being able to provide only 53 million doses so far. Despite this largest vaccination campaign in history, one in four people in developed countries have been vaccinated to date, while in low-income countries it is one in 500. Can we give a better example of inequality?

On the flipside of the coin, there are also geopolitical concerns. Thus far, China and Russia exported their vaccines in quantity and have engaged in significant technology and knowledge transfer, forging partnerships around the world, and helping to speed up the global vaccination effort. This has been clearly an act of benevolent power to the world. The US and the EU are surely taking this perspective into account as well.

In today’s world, I think it is nearly impossible to think outside of the box of Big Data. Generous and benevolent they all seem, these programs will help to gather huge amounts of valuable medical information and records in less developed countries, where privacy and data protection regulations are much more lax compared to developed countries.

By far not all the lessons of the 2008 financial crisis have been learned. And those that have been learned have not necessarily been applied. Nevertheless, one of them – drawn and applied – will certainly have been of great help in the current crisis.

BIS, aka central bank of central banks, says that the banks have served as a “reliable first line of defense” and that “backed by swift action by the authorities, banks helped to limit economic stress at the beginning of the pandemic”.

I must stress the fact that the starting point of 2008 crisis is very different than the actual one. Back then, the crisis came from a freewheeling financial sector, overwhelmed by bets on sub-prime mortgages, which have proved to be much more dangerous than expected. Poorly capitalised, many banks that had considered risk management as a trivial activity found themselves on the brink of collapse, with some having to seek state support. In the actual case, the crisis did not initiate from the financial sector and it affects entire global economy.