Coordinated actions by central banks and governments have a clear objective to prevent a sharp rise in bankruptcies. We are confident in central banks’ ability to address the liquidity crisis as central banks have entered a new regime: unlimited support. However, we have no strong convictions on the depth of the coming solvability crisis.
Covid-19 is acting as an incredible accelerator to put an end to the cycle.
A global recession is now inevitable in response to a combination of supply disruptions, dropping demand, and a sudden tightening in financing conditions. Coordinated and aggressive fiscal and monetary policy responses aim to ensure that the recession will be limited and does not morph into a deep economic depression. The big challenge for central banks and governments now is to avoid mass business bankruptcies, a very significant rise in unemployment and bank failures.
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