Pandemic and Forex
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Has it ever happened to you to think that this pandemic will never go away? Or a slightly milder hypothesis, which will last much, much longer than we expect, let's say five or
ten years. Lately this thought is spinning more and more often in my brain. It was born one morning, completely unexpected and without external stimuli. One morning I went to wash
my face and as the cold water splashed on my face, the thought was born: this disease will never end. I was surprised by the thought and during my morning coffee I tried to clarify
the idea, trying to find arguments as to why it could really happen. I also always look for counter arguments, that is, why this hypothesis could be wrong. So I'll start with
criticizing my sudden thinking.
History teaches us that all pandemics, sooner or later, are over. Some spontaneously and some with certain efforts of human beings, to oppose the disease. In essence, this is not entirely true, because some pandemic diseases over time have become endemic, that is, related to a specific territory. A good example of this is AIDS, which is still present in many African countries, where it is often the dominant disease with a very high mortality rate. All right, I agree that the transmission of AIDS requires physical contact, which is relatively easy to avoid, while the coronavirus is transmitted by air. It is enough to spend some time with an infected person in a room or travel together on a bus. Yet all these pandemics for which air is the main means of transmission have sooner or later disappeared. So why could a coronavirus pandemic last a very long time or forever?
The last, really big pandemic was recorded about 100 years ago. It appeared in January 1918, while the First World War was still in progress, and lasted about a year and a half. It was Spanish influence. About half a billion people fell ill and nearly 100 million died. At that time, there were just under two billion people living on planet Earth. This means that around one in three inhabitants became ill and one in five of the sick died. Objectively, the fact is that these numbers are much worse than what we have today, but ... The population was almost four times lower than it is today; the world population will soon reach 8 billion. On the other hand, most of the population was engaged in agriculture and lived in villages. All this means that the population density was much, much lower than in the current situation. Today, as I said, we are four times as many and we have all moved to the cities. The cities have an extremely high population density and this is one of the reasons why the virus is spreading with this insistence. It is no coincidence that one of the fundamental tips to avoid contagion is precisely social distancing. Today we are much more technologically and pharmaceutically advanced, and this is what still keeps the numbers at a relatively low level, but the natural conditions for the spread of the infection are much more favorable to the virus than in the past. We have undertaken a mass vaccination of the population: this seems to us the only hope to overcome this disease, but variants of the virus are emerging. New variants appear often, almost every week we have a new one. It has already been mentioned that some vaccines are ineffective according to the South African variant, while others fight it just as well. Who can say for sure that it will be the same with the latest variants that will appear in the future. Furthermore, there is a big question, which has not yet been answered: how long the vaccine protects against the disease? The longer this situation lasts, the worse it is because the virus, through evolutionary processes, adapts better to the conditions in which it finds itself.
Here we cover the topic related to currency trading and I admit that I have gone a little beyond the main topic. I apologize, but I had to share my fears with someone. How does the coronavirus affect Forex, the world economy and finance? What was to be expected has happened: the traditional economy has largely stalled. The sectors of traditional services are particularly affected: tourism, catering, transport... We no longer travel, we do not go out for dinner, it is often forbidden to go from one municipality to another, or go abroad. At one time, one of the strongest branches of the traditional economy, the production and distribution of petroleum products, was in great crisis. Under the new conditions, the new players on the world stage, those who have appeared in the last 20 or 30 years, or even less, are the ones who have benefited from the crisis. The most important words in the world have become the Internet and the network. The shop that sells the product to whom we need is not open. No problem, we order from one of the many online sellers. The doors of cinemas and theaters are closed: we join one of the networks that offer countless films and documentaries online. I'm talking about the whole world. Look at how much the shares of the entertainment networks have grown: they have skyrocketed! As their number of users increases, their profit growth is exponential, because their cost increase is minimal; the only thing that matters to them is that the global network is fast enough and this has become a reality today. For all of them, profits grow abnormally, so I often suspect that they are dealing with the virus and the spread of contagion.
As for currencies, I don't see much connection with what the pandemic has brought us. Forex is trading with currency pairs, so if one currency goes up, the other goes down. Even in "normal" times it is not always easy to understand why the value of a particular currency changes, and with a pandemic this has become even more complicated. Ever since I started trading currencies, I always doubt that central banks are the ones that largely determine the value of a particular currency and that the market itself has a side effect on prices. According to the information I have, the Forex providers are celebrating this situation: they too are one of the online service providers, the financial ones. Their business has followed a global trend: they've gained a lot of new customers since this plague started and I'm not sure they too, like us, would like it to end.