3 ms·

I won't opine on the correct value of the stock market at the moment, but the drop in demand due to measures needed to preserve life cause a financial issue. M

I won't opine on the correct value of the stock market at the moment, but the drop in demand due to measures needed to preserve life cause a financial issue. Many/most consumer-facing businesses can't withstand a drop in demand to near zero for a period of at least several months. So those businesses, absent some sort of national bailout, will go bankrupt. Or at the very least, they will go dormant. Either way there will be layoffs, and of course the laid off employees will reduce their spending further. Even once the virus is under control, it will take time to reverse this damage. Yes, of course, the market won't go to zero. But some firms will go under, and we don't know how severe the economic impact will be. Just because the crisis began with a natural disaster rather than a financial one doesn't mean there can't be serious financial impact.

tathougies 7y ago
Sure, but economic fallout from natural disasters typically recover much faster. It doesn't shock our trust in the financial system, and people are more community minded, since no person can be blamed for it. Already, we are seeing bipartisan attempts at governmental stimulus. Did you ever think you'd see Trump and Pelosi agree on government spending, because the white house was pretty quick to endorse the house's plan. But back to pandemics. Pandemics typically result in major booms due to (a) the die off, (b) the pent-up demand, and (c) the fact that everyone still trusts the financial system. The 1918 pandemic certainly caused major GDP losses, and short-term pain, but also caused the 20s
- SketchySeaBeast 7y ago
  But doesn't the 20's then lead to the 30s? And can't an argument be made that WW1 would have contributed as well?