Who Would Benefit from a Severe Global Recession?
As painful as this liquidation and repricing of risk is for borrowers and lenders, those without debt, those with cash and those with essential skills that are in demand regardless of boom or bust will all benefit.
Who would benefit from a severe global recession? The typical answer is “no one,” as a drop in economic activity is assumed to hurt everyone. But it’s not quite that simple; there are silver linings for some in all those dark clouds.
When demand for energy plummets, the price of oil tends to drop dramatically. There are several reasons for this:
1. Price is set on the margins so a modest decline in demand can trigger an outsized drop in price. In the 2008-09 timeframe, oil fell from $147/barrel to the $30s on a modest decline in demand.
2. While oil producers always announce production cuts to maintain high process, they are under pressure to offset plummeting income by pumping more oil, not less.
3. Speculative capital floods into oil when prices are rising and exits when prices are dropping. This financialization of the energy markets exacerbates price movements up and down.
Dramatic declines in oil hurt producers and benefit consumers. As demand for goods and services declines,
Article from LewRockwell
