Oil crash: fear of contagion on all financial markets

The fall in oil prices caused a shock wave across the financial markets, with a new plunge in the CAC 40 and Wall Street…

When the price of a barrel of oil becomes negative, when the interest rates themselves are negative, not only is it absurd but they are the symptoms of a deep evil. And first of all, an illness that we cannot properly diagnose. Beyond technical factors, why does oil collapse? Because we do not know how to say if what awaits us in the coming months is a violent but fairly short recession, or a very deep depression from which we will take years to recover. Where is the world economy going? There is total uncertainty and we have never experienced this. Hence erratic movements on the financial markets which are like a navigator without a compass…

Can we hope for a lull?

The shock of the virus on the economy is too violent, it will leave very deep traces. The first is a phenomenal surge in public debts. Today - and this is the reason for the negative interest rates - the central banks are facilitating the financing of all these economic rescue plans. But we will quickly realize that we are not equal before the debt: some States will be able to repay, others will be in difficulty. There is, in germ, a major financial crisis. Finally this crisis will do damage in what is called the real economy: bankruptcies, unemployment and above all a redistribution of cards because some countries will recover faster. The global economic landscape will change dramatically. And for the financial markets, that means a lot of turbulence.