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In times of panic, remember that in the worst likely scenario, this virus will slow consumer spending, increase demand for hospitals, stagnate productivity for
by lend000 7y ago
In times of panic, remember that in the worst likely scenario, this virus will slow consumer spending, increase demand for hospitals, stagnate productivity for about 12 months, and kill about 0.4% of the world's population (using Spanish flu infection patterns for reference, which infected ~25% of the world population). At that point, there will be sufficient herd immunity (and likely effective treatments or vaccines) to allow the virus to decay into obscurity.
Then the economy will pick up the pieces again, with actual technology, hard capital, and active workers in the workforce still existing after the hard times. I expect this market crash to look most like 1987, which saw new highs 2 years later.
The long term consequences, besides loss of life, are that most market interventions will protect interest rates for large businesses with huge credit lines and existing debt, while small businesses go under, furthering consolidating income inequality.
Would a crash be worse without intervention? Perhaps. But the long term consequences would also be more natural and redistribute resources more fairly, in my opinion.
- chillacy 7y agoPast performance is no guarantee of future success. Using the worst case scenario so far as meaning "worst possible scenario" is a fallacy (consider that the past "worst case" was already surprising to people back then because it was worse than the "past's past"). Not to imply we should panic over a low probability event, just pointing out that we should be careful about Kurtosis.
- lend000 7y agoNote that I wrote "worst likely scenario" not "worst possible scenario." Worst possible scenario is not really useful for short to mid term planning in an unconstrained event space (gamma ray burst or massive meteor hits Earth, etc.).
- AncientTree 7y agoAgreed, we need to just push onwards and all will be back to normal in 12 months. The facts remain that children, young adults, adults and even elderly without comorbidities will survive. Deaths are still restricted to those with existing health problems, particularly the elderly. From an economic perspective, this is the perfect pandemic. We should maintain all schooling and social activities to spread the virus as far and rapidly as possible, to gain herd immunity as quickly as possible. The vulnerable can self-isolate. The savings in pensions and long-term healthcare for the elderly, as well as a reduction in housing prices owing to the deceased estates, will promote an economic boom that may even - in the long term - offset the short terms costs we are facing right now. You can imagine a situation where the USA has survived the virus and gained mass immunity, with 5% of its elderly population perishing along the way, giving the USA a long-term advantage due to lower payroll taxes, versus Europe who shut down early, have continual flareups due to lack of herd immunity, and continue with a heavy taxation burden due to elderly losses of only 0.5%.
- mythrwy 7y agoWTF? Maybe we could just shoot all the old people now and get even a quicker competitive advantage? (yes, it's sarcasm but this line of thinking is evil).