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SEPTEMBER 2020

Money Losing Value In COVID-19 Crisis

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Money Losing Value In COVID-19 Crisis

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Money can no more buy safety.

On April 17, Russia recorded 32,008 coronavirus cases, including a record 4,070 in the last 24 hours, as President Vladimir Putin warned of “very high” risks, particularly in some regions of the county.

“The risks surrounding the epidemic’s spread are still very high, not just in Moscow but in many other Russian regions,” Putin said during a televised video-conference with regional governors.

According to the president, the regions fail to adopt all the funds allocated by the government in the framework of the special programs to support the medical infrastructure, citizens and businesses amid the COVID-19 crisis.

In late March, the federal government allocated 33.4 billion rubles to increase the number of places in hospitals as part of the fight against coronavirus. Also in early April, the Cabinet of Ministers distributed 5.1 billion rubles among regions for payments to health workers. Later for the same purpose, the authorities sent another 45.6 billion rubles. On April 15, Putin proposed transferring additional assistance of 200 billion rubles to the regions.

In particular, Vladimir Oblast (Region) governor Vladimir Sipyagin said his region of 1.36 million only has 71 ventilators and half the needed resuscitation experts. The region also lacks personal protective equipment for doctors, and there are difficulties with the purchase of suits, glasses, respirators and medical equipment, Sipyagin added. According to him, the hydroxychlorin, which the authorities allowed to use in COVID-19 cases, Vladimir Oblast receives only 50 people.

Putin responded that governors’ commenting on the situation that they “are sitting there in order to overcome challenges”.

At the same time, the situation in Russia’s regions demonstrates that in the conditions of the global crisis the allocating of large sums of money is not enough to settle appearing difficulties and crisis tendencies. The important role is being played by the political will of the federal government as well as the provided administrative and organizational support in the task of using the provided amounts.

Earlier, the similar problem appeared in the United States, where different states were openly competing for medical equipment and other key features needed to contain the COVID-19 outbreak.

The New York governor, Andrew Cuomo, spoke out against the current bidding wars over ventilators, as each of the 50 US states and the Federal Emergency Management Agency were purchasing essential equipment separately:

The United States federal government allocates even larger sums than the Russian one to contain the COVID-19 outbreak and the economic consequences of the lockdown. However, this also appears to be not enough. The unemployment rate in the US reached the new peak with over 22 million U.S. citizens lost their jobs in the last four weeks.

Additional factors that contribute to the current situation is the decision of many countries to de-facto close their borders and the regionalization of the global economy. This leads to the creation of separate economic clusters, the slowing down of global trade and the destruction (at least changes in) of the existing economic relations.

If one takes into account the fact that the mechanisms of international control mostly do not work in the current situation, he will easily find out that the outflow of investments, the instability of financial markets and currencies also contribute to the inability of the governments to react properly to the challenges appearing in the crisis times.

The global financial system is crumbling. In the conditions of the global crisis, countries that relied on the ‘post-industrial’ (or even ‘non-industrial’) concept of the economy (relying on the selling of financial, informational, tourism and other services, as well as directly selling natural resources) appear to be less stable than their counterparts that kept the industrial potential.

The dominance on the financial market is no more the only and key resource allowing to keep the global leadership. The world has changed.

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