[alpha1]

Using statistics to calculate the risk of chaotic sequence of events is basically lulling yourself into believing that everything can be quantified and predicted.
Debt bubble is like that. Just like derivatives.

[SmartCat]

Originally Posted by alpha1

Using statistics to calculate the risk of chaotic sequence of events is basically lulling yourself into believing that everything can be quantified and predicted.

Using statistics to measure and mitigate risk is still better than solely depending on an individual or expert committee's opinion. Both can be used together to evaluate risk in the system.

Debt bubble is like that. Just like derivatives.

- For all the bad name that derivatives get, they have caused just one crash (2008) in the past 150 years. Historically, all financial crisis have been caused by the banking (lending) sector, debt bubbles, stock market bubbles, too much currency printing (hyperinflation), commodity/production shocks, war etc.

- There is a reason for excellent record of stability in derivatives market. There is daily accounting of risk (profits and losses). If a participant is taking too much risk, he will be blown out the markets very soon. This ensures that remaining derivatives participants do not take excessive risk. Eg: The coronavirus crisis is putting the banking system at risk. But do note that derivatives market is perfectly allright (as of now).

- In business media, you see figures thrown about like - derivatives is a $XXX trillion market. But this figure is not telling you the truth. I can take derivatives positions worth Rs. 1 Crore, but my maximum risk can be only be Rs. 5000.

- Meanwhile, derivatives is useful for most businesses. Let's say an Indian call center has $100 million in revenues and $5 million in profits (margin of 5%). If INR appreciates against USD by 5% in a year, his entire profits for the year will be wiped out. To mitigate this risk, this call center company can hedge their receivables in the derivatives market and ensure that profits are secured.

- Let's say there is a $100 billion pension fund catering to needs to 100 million retirees. If stock market tanks 50% and stays there for 2 years, there is no income to distribute to retirees. Pension funds can hedge their portfolio using derivatives to ensure that retirees don't lose much despite 50% drop in markets.

[ashokrajagopal]

Originally Posted by SmartCat

- For all the bad name that derivatives get, they have caused just one crash (2008) in the past 150 years. Historically, all financial crisis have been caused by the banking (lending) sector, debt bubbles, stock market bubbles, too much currency printing (hyperinflation), commodity/production shocks, war etc.

- There is a reason for excellent record of stability in derivatives market. There is daily accounting of risk (profits and losses). If a participant is taking too much risk, he will be blown out the markets very soon. This ensures that remaining derivatives participants do not take excessive risk. Eg: The coronavirus crisis is putting the banking system at risk. But do note that derivatives market is perfectly allright (as of now).

- In business media, you see figures thrown about like - derivatives is a $XXX trillion market. But this figure is not telling you the truth. I can take derivatives positions worth Rs. 1 Crore, but my maximum risk can be only be Rs. 5000.

- Meanwhile, derivatives is useful for most businesses. Let's say an Indian call center has $100 million in revenues and $5 million in profits (margin of 5%). If INR appreciates against USD by 5% in a year, his entire profits for the year will be wiped out. To mitigate this risk, this call center company can hedge their receivables in the derivatives market and ensure that profits are secured.

- Let's say there is a $100 billion pension fund catering to needs to 100 million retirees. If stock market tanks 50% and stays there for 2 years, there is no income to distribute to retirees. Pension funds can hedge their portfolio using derivatives to ensure that retirees don't lose much despite 50% drop in markets.

These are valid points, but you cannot compare GFC of 2008 with other crashes except the Great depression.
The name itself is a dead give away ( Great )

With the Great Recession, the underlying securities summed up to about 500 billion I guess including all the ratings from Junk to AAA skillfully hidden and clustered together. Its not a problem with Derivatives per se, but the underlying securities that was the confidence problem that dried up the market. Technically, it is not the value of the Mortgage backed securities that caused the recession -- if it was just that, we would have had the same kind of crash like the Dot com crash --- the enormous lack of confidence in the whole funding market trading in Asset backed commercial papers and Repo instruments that brought the system to a halt.

All the major banks ran into a liquidity problem; we know Lehman went from moving billions on a tuesday to zero the next day. But it was basically the same for all the banks.

Hedging is a valuable tool for the market, and for any investor, institutional or otherwise. But, but, but, the whole market cannot hedge against any event and be unscathed. It works and crumbles exactly like how insurances work. If everybody is claiming insurance for a natural disaster, the insurance companies would crash.

And to be clear, in my opinion, the recovery from 2008 was only thru the government involving in the Repo markets and using Credit swap lines to provide liquidity support to the banks to resume trading. This is fine theoretically, but this is also a Geo Political tool as has been shown in the last 10 years.
Even right now, by last week, other than the "Elite" central banks, US Fed opened CDS to emerging markets too like Mexico, South Korea and Brazil. South Korean Won I guess bettered itself in valuation, but Mexican Peso is still volatile ( I dont know latest status).

From September 2019 onwards, much before the Covid shock, US Fed has been involved in the Repo market, to the tune of I guess 1 trillion dollar by now. In the last 2-3 weeks they have increased their presence with the swap lines in full flow.

Despite the leaders' bromance, we dont have a CDS line. Which means, our only line of defense against Rupee devaluation because of capital flight may be selling dollars. Currently looks fine, but what happens over the next year ought to be seen.

Long story short -- if the crash is deep enough, you need major government involvement to pull the market out. Its not technocratic anymore, it is purely political after that point. As has been seen in the last 12 years.
Derivatives are good, but the scale of derivatives can magnify any crash, and just like 2008, it can trigger into geo political transformations.

[SmartCat]

Originally Posted by ashokrajagopal

It works and crumbles exactly like how insurances work. If everybody is claiming insurance for a natural disaster, the insurance companies would crash.

Actually, no

If everybody claims insurance, the company won't run out of money. Because insurance companies insure their portfolio with reinsurance companies. Berkshire Hathaway, Swiss Re, Munich Re are one of the largest reinsurance companies in the world. India has GIC Re. From their website:

As a sole reinsurer in the domestic reinsurance market, GIC Re provides reinsurance to the direct general insurance companies in the Indian market

Whenever you buy car insurance, the insurance company will spend anywhere between 5 to 10% of the premium on buying reinsurance. This reinsurance policy is triggered only when a major disaster strikes a city (floods, earthquake etc).

Large global reinsurance companies can easily handle a global health crisis like Coronavirus too, using complex derivatives strategies.

[ashokrajagopal]

Originally Posted by SmartCat

Actually, no

If everybody claims insurance, the company won't run out of money. Because insurance companies insure their portfolio with reinsurance companies. Berkshire Hathaway, Swiss Re, Munich Re are one of the largest reinsurance companies in the world. India has GIC Re.



Whenever you buy car insurance, the insurance company will spend anywhere between 5 to 10% of the premium on buying reinsurance. This reinsurance policy is triggered only when a major disaster strikes a city (floods, earthquake etc).

Large reinsurance companies can easily handle a global health crisis like Coronavirus too, using complex derivatives strategies.

I know about reinsurance, but I am not sure it can handle a global shutdown like now, or may be a wholesale market shutdown like 2008.
A localised earthquake or terrorist attack is certainly different.

The complex derivatives strategy is what usually most companies that provide hedges uses, but unless that is a large bag of gold or US treasury bond I cant figure how it wont hit a liquidity problem when everybody claims it at the same time.

[SmartCat]

Originally Posted by ashokrajagopal

I know about reinsurance, but I am not sure it can handle a global shutdown like now, or may be a wholesale market shutdown like 2008. A localised earthquake or terrorist attack is certainly different. The complex derivatives strategy is what usually most companies that provide hedges uses, but unless that is a large bag of gold or US treasury bond I cant figure how it wont hit a liquidity problem when everybody claims it at the same time.

Ajit Jain of Berkshire Hathway is supposed to No.1 in this field. If you have heard of Charlie Munger, Warren Buffett and Ajit Jain, you will love this video. It addresses your concerns partly too.

https://www.youtube.com/watch?v=ecDIns2OqqM

[ashokrajagopal]

Originally Posted by SmartCat

Ajit Jain of Berkshire Hathway is supposed to No.1 in this field. If you have heard of Charlie Munger, Warren Buffett and Ajit Jain, you will love this video. It addresses your concerns partly too.

I saw the video (I knew the individuals, but dont generally follow them or their strategies). Thanks.
But this still only explains the strategy of Berkshire as a firm in dealing with special contracts and dealing with these cases as both as an investor and insurer of last resort.
Let me read a bit about how much of volume they can handle based on their past strategies. Thanks again.

[Samurai]

So, US government is going to give $2 trillion stimulus to its economy. Feels nice to see the government coming to rescue in a timely fashion. But I am worried.

When senator Bernie Sanders proposed that the entire US student debt of $1.5T be cancelled, he was asked who is going to pay for it. Same question can be asked now, and with much more reasons. Unlike in student loan cancellation, the $2T stimulus comes at a time when the world GDP has taken a huge hit.

Generally, the central banks can print more money without devaluing it when the demand for the currency rises. If they print more money without such demand, the currency will depreciate. A nation's currency has high demand when that country's products/services are in high demand. But USA has a special advantage that US dollar has high demand even when no one is buying US product/services. If India buys something from China, they are paying in US dollars.

The Coronavirus pandemic has crippled businesses worldwide, hitting both supply and demand. That means lot less will be bought and sold this year. The demand for US dollar will be lot less in both domestic and international market. Under such circumstances, if US prints more money to enable this $2T stimulus, it will devalue the US dollar against other currencies. That will lead to lot of other complications.

Think about what happens to India. If rupee suddenly becomes stronger against dollar, many export oriented businesses will not be able to sustain themselves. The imports will become cheaper, affecting the domestic manufacturers.

What do the regulars on this thread think?

BTW, I must put couple of disclaimers for people who are new to economics.

1) When I say printing more money, I don't mean literally. These days it just means changing the numbers in a computer.
2) Relative exchange rates don't mean much. It is the volatility that matters. For example, 1.45 Japanese Yen is just 1 rupee, it doesn't mean rupee is strong than Yen. It is just a number. India is a much stronger economy now at ₹75/dollar than when it was ₹15/dollar in the 80s.

[SmartCat]

Originally Posted by Samurai

The Coronavirus pandemic has crippled businesses worldwide, hitting both supply and demand. That means lot less will be bought and sold this year. The demand for US dollar will be lot less in both domestic and international market. Under such circumstances, if US prints more money to enable this $2T stimulus, it will devalue the US dollar against other currencies.

I expect all countries (including Euro Zone) to follow suit, and launch their own billion/trillion dollar stimulus package. Like how all central banks launched their own QE programs in 2009, following the lead of Fed. This is not considered a major inflation risk right now, because WPI inflation is likely to be low everywhere because of lack of demand.

That will lead to lot of other complications.

It all depends on how all global central banks act when velocity of money reaches normal levels.

- There could be high inflation globally like in 1980s. (AND/OR)
- Money chases assets instead real goods and there will be bigger bubbles in global stock market, real estate market, art, wine, vintage cars etc. Asset bubbles widen the gap between rich and the poor.

Think about what happens to India. If rupee suddenly becomes stronger against dollar, many export oriented businesses will not be able to sustain themselves. The imports will become cheaper, affecting the domestic manufacturers.

Let's assume that I'm wrong about stimulus package by all central banks and Govt. Then yes, US Dollar will depreciate in value. But other central banks and Govt usually takes steps to let their currency devalue against USD or stay in a broad range, so that their exports are not hit. For Eg: China in the past decade has always ensured that 1 USD is worth around 7 Chinese Yuan

The value of US Dollar against major currencies is tracked using US Dollar Index..



It is usually hangs around 90 levels. Higher the Dollar Index, higher is the relative value of USD against basket of major currencies. And vice versa. Historically, Dollar Index goes over 90 levels (flight to safety) during the time of global economic crisis, and falls below 80 during 'good times'.

So if you want to check the long term effect of trillion dollar stimulus package on USD strength, you can just look up the value of "US Dollar Index".

[ashokrajagopal]

Originally Posted by Samurai

So, US government is going to give $2 trillion stimulus to its economy. Feels nice to see the government coming to rescue in a timely fashion. But I am worried.
<SNIP>
Generally, the central banks can print more money without devaluing it when the demand for the currency rises. If they print more money without such demand, the currency will depreciate. A nation's currency has high demand when that country's products/services are in high demand. But USA has a special advantage that US dollar has high demand even when no one is buying US product/services. If India buys something from China, they are paying in US dollars.

The Coronavirus pandemic has crippled businesses worldwide, hitting both supply and demand. That means lot less will be bought and sold this year. The demand for US dollar will be lot less in both domestic and international market. Under such circumstances, if US prints more money to enable this $2T stimulus, it will devalue the US dollar against other currencies. That will lead to lot of other complications.

Think about what happens to India. If rupee suddenly becomes stronger against dollar, many export oriented businesses will not be able to sustain themselves. The imports will become cheaper, affecting the domestic manufacturers.

Well, do we have to worry ? Yes and no.
a) The demand for dollars has only increased in the Emerging markets. Hence the increased number of central bank swap lines now in the past months out to include Mexico, South Korea, Brazil etc. There is heavy capital flight from EMs now, and based on the kind of financial structure we have for many decades now, that typically goes into a want of dollars. The US Fed to other banks swap line functions as a dollar ATM for the central banks to draw dollars.
We, India, does not have that yet, although there has been calls for that from people like Raghuram Rajan. India's plan I guess is to do a sale of dollars to control the rupee devaluation.

b) Should we be worried about dollar depreciating heavily against INR ? Absolutely not, in my opinion because that is not going to happen. Would there be a free fall of INR against USD ? We have more probability of that depending on how long the crisis lasts.

c) As regarding US printing more money ... I had written about that before in this thread, US/ECB/BOJ/BOE together had pumped in trillions of dollars of QE money (this is 20% of world GDP) during peacetime in the last 10 years. No, there is not going to be any devaluation of USD or Euro unless they deliberately do it for want of investment from elsewhere and we know that is not even a probability for the next 50 years or so.

If the Govt is focussed on policy on controlling inflation, there is absolutely no retail inflation that is going to happen. We have the last 20 years as proof. But all this money has to go somewhere -- assets, assets, assets. They all increase in price, be it gold, real estate or stocks.

Originally Posted by SmartCat

I expect all countries (including Euro Zone) to follow suit, and launch their own billion/trillion dollar stimulus package. Like how all central banks launched their own QE programs in 2009, following the lead of Fed. This is not considered a major inflation risk right now, because WPI inflation is likely to be low everywhere because of lack of demand.


It all depends on how all global central banks act when velocity of money reaches normal levels.

- There could be high inflation globally like in 1980s. (AND/OR)
- Money chases assets instead real goods and there will be bigger bubbles in global stock market, real estate market, art, wine, vintage cars etc. Asset bubbles widen the gap between rich and the poor.

The second scenario from above will happen. We only have to look at the last 10-12 years to see how it will pan out.


The key point to note here is that USD, as most knows is the world's reserve currency and the safest asset. Even in times of 2008 GFC, demand for dollar liquidity only increased, which is counter intuitive to the fact that the crazy market collapse got triggered in US. When USD indeed becomes the world reserve, it is also a huge political tool for the US.

The only variable from GFC to now that is a concern is the interest rate. Actually nobody knows how that will pan out when all of west has zero or near zero interest rate. Other than simulations, we have to really see it to know what kind of changes it will create in the society.

Think about it this way for a simplistic illustration -- when a bank charges 10% interest rate, the charge is punitive enough to force the borrower to be alert with the money. But ther e is the growth question, which forces govts to lower the interest.
When central banks move to zero or near zero interest rate, the banks have to close in too much on such stuff like the credit rating, history, reputation etc of the borrower to ensure some sort of guarantee of repayment. This means that large players benefit by default. eg. all banks in the world would be ready to lend to Amazon/Microsoft/Google. It would be in the bank's interest to do this. This means that credit would flow unevenly to the top and we can expect more share buybacks and other mechanisms of cash hoarding.

A second aspect which is very very troublesome is what happens after 2 years or so after all the governments have injected money into the markets. They all will start tightening up, which means Austerity of the last decade in the West is here to stay. This may crack up in larger magnitude in places like EU. More populism and xenophobia ? This is not good for anybody in India, be it a migrant worker or a business that sells to the west.

[Samurai]

Originally Posted by ashokrajagopal

a) The demand for dollars has only increased in the Emerging markets. Hence the increased number of central bank swap lines now in the past months out to include Mexico, South Korea, Brazil etc. There is heavy capital flight from EMs now, and based on the kind of financial structure we have for many decades now, that typically goes into a want of dollars.

I am not talking about now, but after the $2T stimulus starts getting spent. That hasn't happened yet.

Originally Posted by ashokrajagopal

c) As regarding US printing more money ... I had written about that before in this thread, US/ECB/BOJ/BOE together had pumped in trillions of dollars of QE money (this is 20% of world GDP) during peacetime in the last 10 years.

That printing was matched by similar or more raise in GDP over the last 10 years. The new $2T printing will be accompanied by dropping GDP. Whenever this happened, it resulted in hyperinflation. And it will happen to US currency. What other currency can play the reserve now?

If you are telling me that US dollar will remain strong, you have to tell me how, using first principles. Suddenly $2T more cash is available, while the production is taking a dive. More cash is available, but less goods and services are available than before. How is dollar going to remain stable?

Yesterday smartcat shared this story.

This is not normal scenario, no business books have talked about this kind of stuff. May be fiction paperbacks on apocalypse have addressed it.

[ashokrajagopal]

Originally Posted by Samurai

That printing was matched by similar or more raise in GDP over the last 10 years. The new $2T printing will be accompanied by dropping GDP. Whenever this happened, it resulted in hyperinflation. And it will happen to US currency. What other currency can play the reserve now?

If you are telling me that US dollar will remain strong, you have to tell me how, using first principles. Suddenly $2T more cash is available, while the production is taking a dive. More cash is available, but less goods and services are available than before. How is dollar going to remain stable?

Yesterday smartcat shared this story.

This is not normal scenario, no business books have talked about this kind of stuff. May be fiction paperbacks on apocalypse have addressed it.

Lets first put a pin on GDP -- because GDP is a specific kind of accounting activity, which may or may not correlate with excess money supply in a given period of time, because it does not necessarily account for excess money that is spent to buy overvalued stuff.

Much of the stuff I write here is known to most people, but I am still writing so I can articulate in full. So, please excuse if the explanation is too basic.

I wholeheartedly agree, this is not a normal scenario. But the last few decades' history can rhyme again with minor variances. And I also assume no major changes in geo politics. Anything can happen if those kind of changes occur, but its not very realistic to expect a revolution now.

The printed money is basically made up accounting, I am sure we all know how the Fiat works. The easiest accounting method on this is to add this as a debt from future. When that goes into a low interest borrowing from future, this goes in as a dilution on existing money supply, which goes into hyperinflation of the normal kind.
Enter government at this point.
The governments' (all govts) central banking principle has been primarily based on inflation control for a long time now. If you think of it in pure economics perspective, inflation control is done purely thru control of money supply. But that is not how the inflation control has played out in the last decades. The politics as a whole globally is turned against inflation now, not just thru central banks.

The government is going to strictly enforce policies that control price increase (as has been happening for a long time now). Whatever it takes to keep the retail prices low for goods are going to be done. Services may zigzag for a while, but they are also going to continue into a low inflation mode. This has to be done thru a policy of austerity all around, so it starts with low taxes and spending from the government side. A natural side effect of this is the lack of social security which automatically translates to consumers needing cheap stuff, which means that those entities able to provide cheap stuff with high volume trade are the only ones going to survive in the long run (like Amazon). What seems as Amazon winning the market is actually an effect of the following all happening at the same time
a) salaries and wages not increasing.
b) social security decreasing
c) people generally very concerned about prices
d) people automatically choose cheaper goods
e) volume players with low margin gain more market

The sentiment of people in general of having no security of future plays very well in the other market -- of assets. Assets hyperinflate the hell out, as has been happening in the past. Gold, Real Estate, Stocks all such stuff that can account as store of wealth would inflate because people would be desperately after that security that they are so concerned about in the future.

So, what role does USD play in a scenario like above ? USD is the global safe asset. The treasury returns can drop to zero, but they are still going to be valued because this move to assets to buy your future security is the general theme for all players. To do that, USD is the medium and in some ways it is the end in itself.
Illustration for this : We know Dubai has no real product, no real resource, but it is a great store of wealth for the rich. Holding an asset in Dubai is important not because Dubai is the most liveable place, but because asset in Dubai is equal to X million dollars. Since the asset (property in Dubai)is bought and accounted by another asset (USD), they both fulfill each other.
Where products and services do not chase USD, the assets chase USD.

What would the other countries do in normal scenario ? For the last few decades, we know maintaining 3% to 6% of debt to GDP is the norm. There is not much value in that theory, but we know that is the norm.
This directly means that countries like India cannot really borrow that much for social spending and we either have to tax or reduce social spending.

Reducing social spending translates to lack of social security for people, which means the mad rush towards assets and them hyperinflating happens.
Which means on the one hand as a consumer, I will help maintain the low inflation regime by choosing the market mechanisms like Amazon (which play the volume low margin game) because of my future security issues, and contribute to moving the money I have into assets on the other hand.

Increasing taxes mean that I face the financial pinch directly, and owing to the lack of current social securities eventually think about moving out elsewhere a la, the migrating Indian. If I dont migrate, I will at least think of moving my capital elsewhere which again by default gets accounted in a USD convertible asset.

The global cities have seen this time and again in the recent past -- Melbourne, Sydney, Paris, Vancouver, Berlin, New York, and the mother of all stores of wealth, London. Basically, new asset classes and products will emerge in such places which can have USD convertibility.

I think this is how it will play out in the corona year(s) as long as no political revolutions happen. This is exactly how it happened after GFC.

-2T gets spent in the upcoming months to feed the demand for medical supplies and to pay a part of the wages
-Some loss making businesses are going to be bailed out by US Govt, but they are going to wait the crisis out in maintenance mode.
-Once the crisis is over, pent up demand is going to create a wave of new opportunities for the large players who can wait this out
-The debt bill is going to worry govts into fiscal responsibility and such stuff and thereby reduce social spending.
-The assets are going to balloon once again.
-Political discontent going to stay on in the West blaming immigrants and globalization.
-Geo politics is going to play out in such a way that if you are an accomplice to US block, you get in. Not necessarily good for all people of those country, but very good for the asset holding upper class.
-The working class, especially in global south are going to get new lessons on dignity of labor, how poverty is a lack of character, how inequality is natural etc.

[V.Narayan]

^^^^^^
Samurai, Ashok, Please could you explain this in layman's terms and what if anything does it mean for the Indian economy. Thanks in advance for your trouble.

[ashokrajagopal]

Originally Posted by V.Narayan

^^^^^^
Samurai, Ashok, Please could you explain this in layman's terms and what if anything does it mean for the Indian economy. Thanks in advance for your trouble.

I am not a very articulate person when explaining Sir, but will give it a shot.
There is no technocratic solution for any economics problem that does not involve geo politics. In other words, economics is politics.
Capital injected anywhere in the world is like water and it will seep in and flow. Wherever the velocity of capital flow is higher than optimum it creates inflation. In some cases it is okay and in other cases it is not okay.

I am trying to illustrate with a figurative example.
Just think of the India case itself. There was about 1.76L crore or so of relief package for the poor, farmers, women self help groups etc. Now, this is not really in full, and there is a lot of accounting magic shown which was questioned, but I am not going into the details. At the most optimistic estimation, this results in about 1.5k to 2k monetary benefit for the urban poor/rural farmer.

The moratorium on EMIs, which we can typically say helps the middle and upper middle class home owner/business owner has provided a cushion of 3 months of liquidity. Lets assume a median level of 20k liquidity support per middle class person.

The scarce supplies at this time, like say a food truck is coming to the market to do business. Which business will the food truck pick up -- an order to deliver peanut butter to urban middle class or an order to deliver rice to the poor ?
This shapes politics over the long term.

At the end of 3 months, the middle class man is going to come out of the liquidity support time and crib that his interest is not cut, but the government gave out 1.5k free to the poor. This is going to reflect in his attitude towards government and taxes in general. This shapes politics over the long term.

In testing times like this, the leverage that anyone with liquidity of money holds over anyone without liquidity of money is immense. This shapes politics over the long term.


This is going to play out in a global north vs south capital fight and flight in the coming years. So, from India's perspective, expect more capital infusion in the form of FDI challenging local businesses. Middle class is going to love fiscally prudent governments (which means less social spending and therefore less taxes), which means volatile politics for a long time. When there is more to worry socially, the politics is going to become more polarizing. In many ways, we are seeing all these things already, but the current crisis will accentuate many of this much more. Also, a lot of young people are going to be dependent on previous generation's help in gathering assets (because there is going to be an asset run).

[ashokrajagopal]

Quoting from a recent news article on commodity prices
https://www.cnbc.com/2020/03/19/copp...us-crisis.html

Copper is a good indicator of mfg activity. Copper vs crude correlation is like below.

Now, from a global perspective, try to simulate the capital flow. For the next few months to a year, mfg activity is going to be really low. Capital is going to flow into safe assets like USD and the rest of the west. Mineral producing countries from Africa and South America are going to have a troublesome year with steady drop in income. At that same time, these countries are also going to be worst affected by health crises. The affluent business/politician class in these countries have incentive if they tie up with a western corporation that takes on a long cheap trade contract. Social issues surge in these countries and the higher and middle classes there can't stand the chaos and start moving capital away. This goes into a downward spiral for the countries themselves, but the "safe assets" of the world have a lot of takers chasing them now - western businesses, western rich, western middle class, affluent and rich from global south escaping the crises stricken countries and so on.

There's also a nice correlation between US 10 year Treasuries and copper prices in the link above.