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It's important to keep in mind that the current state of things is temporary. When the virus blows over, there will be a significant rebound. This situation is

by _bxg1 7y ago

It's important to keep in mind that the current state of things is temporary. When the virus blows over, there will be a significant rebound. This situation is V-shaped, it's just unclear how high the right side of the V will be. And in the meantime businesses will have to weather a period of hardship, and some of them will fail to. But there is nothing fundamentally wrong in the long run. The analogy to a hurricane seemed correct. 2008 was the total collapse of an enormous financial house of cards. Things broke that could not be repaired. The things that are broken at this moment, on the other hand, will repair themselves. They'll just really hurt in the meantime.

bamboozled 7y ago
How about the climate crisis which is also still a huge background issue ? It’s set to wipe trillions off the economy over the next several decades. Could you imagine a few climate change fuelled natural disasters thrown into the mix with this issue happening ? I’m not saying civilisation won’t recover, but we’re really starting to skate on thin ice here.
- _bxg1 7y ago
  That seems irrelevant to the present discussion. Most of climate change's worst effects will be several decades, if not a century, down the line. The time scale of the virus crisis is a couple months, the time scale of a recession is usually a couple years.
  - bsanr2 7y ago
    However, we're discussing it now, because there's a presidential election underway whose winner will presumably determine regulatory and economic policy in regards to climate change in both the short and long terms.
  - bamboozled 7y ago
    You'd be surprised how fast a decade goes...
tcbawo 7y ago
This would be true now, but over several weeks and months serious damage will be done (layoffs, bankruptcies, regulatory disruption) that will result in a permanent reduction in economic activity. The economy will repair itself, but the longer it takes, the less likely we will get a V-shaped recovery and the more likely it will take us much longer to get back to where we were.
- md_ 7y ago
  Yeah. By this rationale, any recession or depression is V-shaped. Which is true (or has been so far), but it doesn't help those who suffer from it. I'm also struck by the analogy to the Smoot-Hawley act and the theory that the breakdown in international trade contributed to the Great Depression. We don't yet see restrictions on cargo trade, but: 1. We could. 2. There seems to be some imperfect analogy to the effect of remote work (in the case of knowledge workers) and paused work (in the case of retailers and the like). The degree to which a number of developed economies have come to a practical stop in recent days is shocking. Will we recover, like, eventually? Sure, quite likely. Will there be lasting effects for the economy? Definitely. (I am, however, heartened by one other analogy to the Great Depression--perhaps, as in that case, an economic decline now will serve to reduce skyrocketing inequality, though it's hard to see that as a sufficient silver lining.)
naveen99 7y ago
The virus is temporary but the knowledge of what a fear of pandemic does to the market is forever. It needs to be priced into all future businesses and real estate exposed to risk of people in quarantine. The price will be a hedge on those types of investments in the form of increased interest rates on leveraged investments in those sectors. Wealth was marked higher than reality due to unknown risk. It needs to be rebalanced. We won’t go past the previous peak until we recover all previous economic activity + new activity to cover increased costs of pandemic exposed businesses.
RedBeetDeadpool 7y ago
Sure it’s V shaped based on the virus itself which causes a slowdown and I would also guess that it will recover just like someone does after a flu. It’s not a systemic issue like the Great Recession was. The only problem with your logic is that you underestimate the longevity of the virus. This isn’t something that will slow us down for the month while everyone is quarantined or while events are cancelled. It’s predicted to continue for 3-6 months and likely come back in the fall and next year and the year after that and the year after that [1]. Its predicted the coronavirus will rise back up when quarantines are pulled back (and their economy put back into to movement) [2]. The only thing we are really doing is shifting the peak and spreading the load on our health care system through time. So if it is the case that our economy is tied to the state of the outbreak, which I as well believe is the case, it’s still not something that will blip in and out within a matter of weeks. edited with refs: This ted talk outlines the difficulty of containing the coronavirus, and how its here to stay: [1] https://www.youtube.com/watch?v=Fqw-9yMV0sI https://www.youtube.com/watch?v=Fqw-9yMV0sI This interview of Infectious Disease Expert - Michael Osterholm - outlines the characteristics of COVID-19 and how its not a "corona-blizzard" but a "corona-winter" also suggests it will be back in China once quarantines are pulled back: [2] https://www.youtube.com/watch?v=cZFhjMQrVts https://www.youtube.com/watch?v=cZFhjMQrVts
nwallin 7y ago
I'm not convinced the current economic situation is entirely due to the coronavirus. The yield curve has been inverted for about six months now, which has been a sure fire predictor of recessions for as long as it's been measured. Maybe coronavirus popped the bubble early. But a popped bubble is a popped bubble. It doesn't matter whether high oil prices or a pandemic is the needle doing the popping.

by _bxg1 7y ago

bamboozled 7y ago

How about the climate crisis which is also still a huge background issue ? It’s set to wipe trillions off the economy over the next several decades. Could you imagine a few climate change fuelled natural disasters thrown into the mix with this issue happening ? I’m not saying civilisation won’t recover, but we’re really starting to skate on thin ice here.

_bxg1 7y ago
That seems irrelevant to the present discussion. Most of climate change's worst effects will be several decades, if not a century, down the line. The time scale of the virus crisis is a couple months, the time scale of a recession is usually a couple years.
- bsanr2 7y ago
  However, we're discussing it now, because there's a presidential election underway whose winner will presumably determine regulatory and economic policy in regards to climate change in both the short and long terms.
- bamboozled 7y ago
  You'd be surprised how fast a decade goes...

tcbawo 7y ago

This would be true now, but over several weeks and months serious damage will be done (layoffs, bankruptcies, regulatory disruption) that will result in a permanent reduction in economic activity. The economy will repair itself, but the longer it takes, the less likely we will get a V-shaped recovery and the more likely it will take us much longer to get back to where we were.

md_ 7y ago
Yeah. By this rationale, any recession or depression is V-shaped. Which is true (or has been so far), but it doesn't help those who suffer from it. I'm also struck by the analogy to the Smoot-Hawley act and the theory that the breakdown in international trade contributed to the Great Depression. We don't yet see restrictions on cargo trade, but: 1. We could. 2. There seems to be some imperfect analogy to the effect of remote work (in the case of knowledge workers) and paused work (in the case of retailers and the like). The degree to which a number of developed economies have come to a practical stop in recent days is shocking. Will we recover, like, eventually? Sure, quite likely. Will there be lasting effects for the economy? Definitely. (I am, however, heartened by one other analogy to the Great Depression--perhaps, as in that case, an economic decline now will serve to reduce skyrocketing inequality, though it's hard to see that as a sufficient silver lining.)

naveen99 7y ago

The virus is temporary but the knowledge of what a fear of pandemic does to the market is forever. It needs to be priced into all future businesses and real estate exposed to risk of people in quarantine. The price will be a hedge on those types of investments in the form of increased interest rates on leveraged investments in those sectors. Wealth was marked higher than reality due to unknown risk. It needs to be rebalanced. We won’t go past the previous peak until we recover all previous economic activity + new activity to cover increased costs of pandemic exposed businesses.

RedBeetDeadpool 7y ago

Sure it’s V shaped based on the virus itself which causes a slowdown and I would also guess that it will recover just like someone does after a flu. It’s not a systemic issue like the Great Recession was. The only problem with your logic is that you underestimate the longevity of the virus. This isn’t something that will slow us down for the month while everyone is quarantined or while events are cancelled. It’s predicted to continue for 3-6 months and likely come back in the fall and next year and the year after that and the year after that [1]. Its predicted the coronavirus will rise back up when quarantines are pulled back (and their economy put back into to movement) [2]. The only thing we are really doing is shifting the peak and spreading the load on our health care system through time. So if it is the case that our economy is tied to the state of the outbreak, which I as well believe is the case, it’s still not something that will blip in and out within a matter of weeks. edited with refs: This ted talk outlines the difficulty of containing the coronavirus, and how its here to stay: [1] https://www.youtube.com/watch?v=Fqw-9yMV0sI https://www.youtube.com/watch?v=Fqw-9yMV0sI This interview of Infectious Disease Expert - Michael Osterholm - outlines the characteristics of COVID-19 and how its not a "corona-blizzard" but a "corona-winter" also suggests it will be back in China once quarantines are pulled back: [2] https://www.youtube.com/watch?v=cZFhjMQrVts https://www.youtube.com/watch?v=cZFhjMQrVts

nwallin 7y ago

I'm not convinced the current economic situation is entirely due to the coronavirus. The yield curve has been inverted for about six months now, which has been a sure fire predictor of recessions for as long as it's been measured. Maybe coronavirus popped the bubble early. But a popped bubble is a popped bubble. It doesn't matter whether high oil prices or a pandemic is the needle doing the popping.