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Ask HN: How bad will the 2020 economic crisis be?

• jpxw 7y ago
  It’s probably going to be worse than the Great Depression.
  • smitty1e 7y ago
    The viscosity of information is much more favorable now than then. Even if peak unemployment is similar, the recover is likely to be snappier. The heat of the forest fore opens the pine cones, and there is new growth.
  • fennecfoxen 7y ago
    Unlikely. One reason the Great Depression was so bad because there was an environmental catastrophe (the Dust Bowl) which made agriculture very hard at a time when agriculture was still a really, really big deal. The virus does not make normal economic activity particularly hard; we are avoiding economic activity for mostly humanitarian reasons, and we can resume economic activity either when everyone gas been infected anyway (yay pandemics), or when testing and treatment is more readily available. Another reason the Great Depression got worse than a normal depression was that the Hoover administration unwisely decided to make money and credit less available during the crash. Today's policy response is more about throwing money at people (sometimes just at the politically connected, sometimes fairly). One can and should question many specifics (the response is not super coherent) but at least it is the opposite of fiscal and monetary tightening. Another reason the Great Depression stayed so very bad for so very long was as a consequence the FDR administration's unprecedented intervention into the economy. I don't mean Social Security, either, I mean things like the National Recovery Administration, which explicitly sought to turn the US into a planned economy, with minimum and maximum prices for everything, run by local politically-connected cartels with their own police powers. When the NRA was declared unconstitutional, its practices were shifted into other places. A few of the more ridiculous practices led by other agencies are still around. For instance, the Supreme Court only killed the USDA's Raisin Board in 2015 when a raisin farmer objected to them seizing 89,000 tons of raisins (30% of his crop) to give away for free in school lunches. (The USDA of that time was also great at encouraging the big agribusiness factory farming and pushing out what small farmers were still able to operate.) None of this planned-economy stuff is on the table today — not in the US, not with this administration anyway, and not with the current US senate. There's an outside shot of a fully nationalized health system if Bernie Sanders wins and Democrats take the Senate, and that's the most ambitious plan, and even if we assume the taxes to fund it were quite stultifying indeed, it's unlikely to be as harmful. No one is coming for our raisins.
    • gshdg 7y ago
      The Dust Bowl was a US catastrophe that made the Depression worse here. But the Depression was a worldwide phenomenon.
    • graeme 7y ago
      The Great Depression was global. It affected much more than the US. The dust bowl was local colour. The premise of your entire analysis is faulty.
      • fennecfoxen 7y ago
        The Great Depression was global, but much of the damage was US-led, so the factors that made it a great depression, not just another footnote in economic history, are relevant worldwide. The world economy was already integrating, particularly in the areas of banking and finance, so US monetary tightening affected many European economies and currencies, causing crises in European banks and currencies worldwide. Meanwhile foreign direct investment from the US dried up, neutralizing what had been a major source of European productivity growth in that era. Today, everyone's quit the gold standard and the forex situation is very different, blunting impacts of wild currency movements. US and European banks are not at risk of bank runs (as they are stabilized by general government policy and specific interventions), and whatever chaos we see, a ~35% contraction in the supply of USD is not on the table. If we are beset by deflation it's going to be puny in comparison. It is worth mentioning that the Depression was also associated with major breakdowns in international trade, in part due to lots of tariffs. The bad news is we're tariff-happy again, but not as bad as Smoot-Hawley for now? The protectionist impulse bears monitoring. And I'll finally clarify that we will still have a recession, and it might be pretty nasty. It's just not going to be Great Depression bad where we can't recover for a decade, not with just what's happened so far.
  • capableweb 7y ago
    I think that's clear as COVID-19 has seemingly impacted every single country in the world already, and we've yet to see the worst effects. Meanwhile, not all countries were impacted by the great depression, Spain being one of the countries not impacted because of the isolated economy at the time.
  • _red 7y ago
    Yes, brother works as corporate lawyer. Their office is overflowing with bankruptcy cases...including the very law firm he works for. Something thats flown under the radar of this is the new “Families First Coronavirus Response Act” which provides 12 weeks of “paid leave for those affected by Covid 19”. Most (90%) companies will be bankrupt by week 3 or 4, therefore most are now contemplating just declaring bankruptcy now to avoid any further bleed. It’s easy to write laws such as this, but where does the money for this 12-weeks come from?
    • bbbobbb 7y ago
      > Their office is overflowing with bankruptcy cases...including the very law firm he works for. I don't understand this. Why would they file for bankruptcy if their office is overflowing with cases?
      • _red 7y ago
        because (a) what happens after this single rush of cases, and (b) are the clients they are doing work for going to stiff them
• chewz 7y ago
  It doesn't have to be bad, on the contrary. Black Death in XIV century have invigorated European economy. Think of it as much needed reset on multiple levels. New supply chains will be created, new business opportunities. Capital re-allocated. It is going to be wonderfull times. Also historically plagues allow for great upward social mobility which is kick-start for the economy.
  • qubex 7y ago
    Oh yes, that’s a great example: “so many people died that the two-thirds that survived enjoyed benefits for generations”. Yes, it’s accurate... but I think it also somewhat misses the point. The unexpected consequences of a mass culling several years down the line probably is of the “extremely bad” persuasion.
    • lotsofpulp 7y ago
      How many years down the line? Because for the environment, I can’t see anything better than a “mass culling” (since the only way energy and other resource usage will go down is a reduction in population).
    • impendia 7y ago
      According to some historians, OP is right about the Black Death. For example, it has been suggested that it led to the Renaissance. See for example here: https://dailyhistory.org/How_did_the_Bubonic_Plague_make_the_Italian_Renaissance_possible%3F https://dailyhistory.org/How_did_the_Bubonic_Plague_make_the... The Black Death was horrific, but had what I would argue were some very positive long-term consequences.
      • qubex 7y ago
        I am absolutely certain that the OP is correct, I don’t dispute it But telling somebody who is managing a 40-people firm facing 20x revenue drop that “it might work out as well as the Black Death did” is... kind of missing the whole point, to be perfectly accurate.
      • 7y ago
• sfusato 7y ago
  We are in uncharted territory. At this point it's just guesses (educated or not).
  • smitty1e 7y ago
    Either this thing is "The End of the World As We Know It", or it is not. Give it another week or so.
    • mpodlasin 7y ago
      This advice does not work. I have been "giving it another week" for 3 weeks now, trying to figure out which direction it is going to go.
      • smitty1e 7y ago
        It's unknown at the moment, but I doubt the bad guys win. Pessimism isn't my style.
        • robjan 7y ago
          Who's the bad guy? Viruses don't have intentions
          • smitty1e 7y ago
            Some spreading them may.
    • KoftaBob 7y ago
      That's a pretty useless dichotomy. You could say that about pretty much any problem of any size, and it would be technically true. Enough of the dramatization. It accomplishes nothing but stress.
    • contravariant 7y ago
      The one thing I'm confident in predicting is that things won't be as they were. To what extent is impossible to say right now.
• mam2 7y ago
  What about putting everyone in chômage technique ?
• deleted 7y ago
  [deleted]
• majjam 7y ago
  I found this article to be insightful re the economic impact: https://www.economist.com/business/2020/03/21/much-of-global-commerce-has-ground-to-a-halt https://www.economist.com/business/2020/03/21/much-of-global...
• rihegher 7y ago
  I expect things to get much worst before it gets better, but I do believe some industry will profit of the situation, like food delivery, some will adapt like services switching to remote ans some will strugle and eventualy die.
• qubex 7y ago
  I’m an economist and I wish I had some guidance to offer, but unfortunately I have none. I’m struggling to get a grip on this situation. Firstly, though I have not worked there for six months or so, I am Italian (from Milan, in the north, the worst-hit area). The economy there has basically shut down. Consumer spending has collapsed, production has collapsed, and logistics are increasingly untenable. What can we expect? Six months of this (and some people are projecting up to eighteen months) are going to shut down demand. There’s a term going around now “demand destruction” — I’m not going to pretend to know more than I do, so I’ll admit forthright that I had never heard it until a few weeks ago — that seems to meet the requirements here. It’s uncertain whether the supply side of the economy will be similarly affected. Probably yes, as governments curb production to slow the spread at the workplace. Even three months will be dreadful. Now, let’s think of a few things: governments are stepping in with public support to support businesses, provide liquidity, and support workers that do not have income. That means debt. That means interest payments in future, for those businesses that are fortunate enough to survive. Taxpayers will be on the hook for decades. The situation is so severe that German economists are proposing a 1 trillion euro Eurobond issue to help support the economies because the southern economies cannot hope to cope with this. I guess I’ll sum it up thusly: this might turn out to be a “great pause”, but economies and demographics cannot idle without incurring enormous financial costs.
  • animalnewbie 7y ago
    I hope you take this time to hug a chinese person and do your part. Trump is already spreading a lot of anti-china hate.
    • loraa 7y ago
      That was after the Chinese government started blaming the virus on the Americans to save face.
  • nopinsight 7y ago
    Enormous liquidity injected into the system along with lower production suggests high inflation in the future after the crisis is over. Do you think that will likely happen? Note: Above is not a value judgement. The measure is necessary to prevent the system from completely breaking down.
• jawns 7y ago
  I've heard economic forecasters predict that the economy will spring back once the crisis is over. Their reasoning is that the crisis is an external issue, not a problem with the economy itself, as with the housing crisis. Once it becomes more contained and controlled, there will be work for people to do, and people available to do that work, and the economy will just start humming along again. I'm more pessimistic. The extent of the layoffs, even if temporary, is just too large to not have a lasting impact. What happens when people with inadequate emergency savings get laid off and can't pay their bills? There's a cascading effect. Maybe they owe a landlord with inadequate emergency savings who now can't pay his mortgage. Maybe they owe a bill to a small business operating on small margins that can't stay afloat. Maybe they owe a corporate behemoth that has aggressively taken on debt and now needs to lay off a bunch more people to be able to pay off that debt. The federal government's mortgage deferral solution might help homeowners, but it's not going to solve the problem that people are going to continue to need to buy things and not have the money to buy them. Even those of us who are fortunate to have some emergency savings will see those savings dwindle down if we're laid off. And keep in mind that in a lot of cases, when people lose their jobs in the U.S., they also lose their health insurance. Not a great position to be in during a public-health crisis.
  • rntksi 7y ago
    What you are saying, basically, is that due to money flow halting, we will enter a deflationary period?
    • User23 7y ago
      This is why fiscal stimulus in the form of checks to every citizen is a brilliant idea. It doesn’t matter if they “need the money” it matters if they spend it and productive capacity can meet the demand.
      • jawns 7y ago
        In that case, it seems like they should be debit cards with a 6-month expiration date rather than checks. Granted, it's still possible to cash those out and save the money, but there's a little more friction involved.
• ceilingcorner 7y ago
  The individual countries of the EU have not coordinated on this whatsoever and I can't see it remaining in its current form post-crisis. We're probably looking at a more loosely-defined trade union and a trend away from further integration. I'm not sure if this will be good or bad for the European economy, but it will certainly affect it in the short-term.
  • CaciaraAsAServi 7y ago
    I am of opposite opinion. Being a strange unprecedented political lifeform, the EU might be further defined in some of its instituions after this crisis. After the collapse of the USSR and German reunification they defined one piece, after the 2008 crisis some other piece, and so on.. maybe the EU can only be shaped crisis after crisis, being so particular a political entity. Look for example at how they are now discussing the Eurobond issue (means: moving a bit toward fiscal integration). It seems IMHO that such a historically new process cannot proceed linearly but only via sudden accelerations determined by the occurrence of crises (and talking about crises, I guess that in the next decades there will be enough of those) Or maybe not.
  • bambataa 7y ago
    I see it more of a restatement of the status quo. For all the talk in the UK of an EU superstate etc, each member state remains a sovereign country and can unilaterally shut its borders if it wants to. Yes it’s probably clipped the wings of the federalists but they never spoke for the whole EU.
• throwaway29358 7y ago
  The more the economic crisis worsens, and the more people have to watch their parents and grandparents die prematurely, the more virulent the global anti-China sentiment will get. The #fuckchina hashtag is really popular (not trending though, probably due to censorship) on Twitter: https://twitter.com/search?q=%23fuckchina&src=typed_query&f=live https://twitter.com/search?q=%23fuckchina&src=typed_query&f=... I don't think the CCP realizes yet just how harsh the backlash is going to be. China has zero soft power now. Expect to see supply chains being rerouted.
  • mrich 7y ago
    Don't think that will happen. China will clean up the root cause of the virus quickly (wild animal markets). They seem to have the outbreak under control now, are ramping up production again and are in excellent position to help other countries dealing with the crisis now, which is exactly what they are doing: https://edition.cnn.com/2020/03/16/africa/jack-ma-donate-masks-coronavirus-africa/index.html https://edition.cnn.com/2020/03/16/africa/jack-ma-donate-mas... https://www.wsj.com/articles/chinese-doctors-and-supplies-arrive-in-italy-11584564673 https://www.wsj.com/articles/chinese-doctors-and-supplies-ar... https://www.reuters.com/article/health-coronavirus-serbia-china/china-sends-serbia-help-to-halt-coronavirus-spreading-idUSL8N2BE0W2 https://www.reuters.com/article/health-coronavirus-serbia-ch...
    • JoeAltmaier 7y ago
      The Chinese have apparently quit testing, so naturally it seems they have it 'under control' since they report zero new cases (detected). And the live-animal markets have produced disease before, every year in fact for decades, and not been 'cleaned up' so far. I have little confidence in any of that happening. I have no problem with the Chinese as people, but their current government is not to be admired.
      • berdario 7y ago
        > The Chinese have apparently quit testing, so naturally it seems they have it 'under control' since they report zero new cases (detected). That's patently untrue https://www.nbcbayarea.com/news/coronavirus/bay-area-woman-faces-covid-19-testing-govt-monitoring-upon-landing-in-china/2258934/ https://www.nbcbayarea.com/news/coronavirus/bay-area-woman-f...
• deleted 7y ago
  [deleted]
• iamgopal 7y ago
  If we look at previous five years, basically there was constant increase in consumer demand and the supply did reflect to fulfill the same. To come back to that condition will take another five years.
• chollida1 7y ago
  Well the stock market is now down below what it was when Trump took office, so we've already lost 3 years worth of gains in one month, which is pretty poor. Goldman put out a note saying the GDP would dip about 9-10.5% over the first quarter of the year, which is almost the worst we've ever seen. And that's a single quarter, a single quarter. US GDP maybe down 20% by the time this is over. And keep in mind no doctor that I've talked to thinks this will be over any time before mid 2021. And probably the worst news is that this is the type of drop that won't be V shaped, for all the talk of 2008, atleast it went down and then went right back up. Most recession affect a specific geographical area or market sector, This pandemic affects the entire world at the same time, which hasn't really happened since the 1970's gas shortages. The recovery here will not be V shaped, it will take years and years to recover. People have spent their savings just to survive, governments are delaying tax payments and throwing money at the problem. This recession/depression will be with us for years to to come and will be the worst thing that anyone alive can remember. Can anyone make the case that the recovery will be quick? Because I haven't seen anyone make that case yet in a believable way.
  • hef19898 7y ago
    No economist, so take that as my personal opinion. I see two extremes, a restart without to much issues. Laid of people are hired again quick. And after some time of rebuilding savings people start spending again. I would say that is not the most likely outcome, unemployment in the US is rising, this will impact the world economy. Remember, all it took 2008 was mortgage defaults in the US and Lehman Brothers to send world economy into a downward spiral. On the other extreme, the crisis shows all the cracks in our global economy. Some of them fail. Basic dynamics change, and there is no way of predicting what will happen. The only constant seems to be cheap money. No idea if that is a good thing...
  • incompatible 7y ago
    The US stock market always seems wildly optimistic. It was still near its all-time highs while it was already seeming quite likely that the virus would be a serious problem. The Australian stock market is now at 2013 levels. On the other hand, once there's a sign that the end of the pandemic may be in sight, I expect that the US markets will overreact on the side of optimism, regardless of the actual economic damage that has been done. Bear in mind that governments are adding to the vast stockpile of paper "wealth" that's already out there, and that tends to cause asset inflation.
• rubidium 7y ago
  We of working age need to be thinking of ourselves a the rebuilders. Let’s get through this, support each other, and be doing everything we can to be ready to spring back into economic action when COVID gets under control. I think it’s entirely up to the people’s response. The spirit of the country (and govt policies) will determine more about what happens after then pure economics can tell us. I personally don’t think there’s a good economic analogy so everyone is just guessing.
  • vickychijwani 7y ago
    Yes. I guess the post-WW2 rebuilds of Germany and Japan are good examples of this.
• _nalply 7y ago
  There are some trends since the seventies: higher productivity per employee and for marginal groups more and more difficulties to get a job. The pandemic economic crisis accelerates these trends. Let's have a look at company A and company B. Company A employs many people and is not able to offer remote work. Company B doesn't employ many people and can offer remote work. If these companies compete it is clear that company B will grow during the crisis, and company A won't. In other words, we have structure change bombed upon us. CEOs and owners say, let's see, a pandemic and suddenly labor disappears. How can we mitigate such problems in the future? My hunch is that after the crisis is contained economy returns, however it will be even more difficult for people to have a job than before. If the state doesn't help the people, economy will stay depressed because people are laid off and just don't have the money to buy things. Edit: many little improvements.
• apinstein 7y ago
  My view is that this isn’t an underlying financial crisis. However, of course the temporary disruptions will be of such magnitude that they will create one. Worst case IMHO is that it could be way worse than the Great Depression due to the very tight coupling, high leverage, high overhead and JIT nature of the global economy today. There will be a huge cascading failure effect. That said, interventions can have a huge impact on the extent of that. Interventions that delay/defer/mitigate economic damage at the entity and individual levels I think can do the most to simply “pause” the economy and prevent underlying degradation while we deal w the pandemic. Imagine the benefit of just all debt being rolled over month-by-month to the end of the loan term, and similar for renters. Defer irreversible economic decisions and go into subsistence mode. I think that will be the best best for the maximal eventual recovery. That will be the difference in a return to prior levels taking 6-12 mo vs 5-10 years. Sadly I don’t think the US is heading in this policy direction. I half wonder if we should just do it grassroots and then there will be ample support to reimburse it via tax or other incentive. That’s how I am thinking about it anyway.
  • apinstein 7y ago
    I realized I didn’t answer your specific q. Whatever impact you see in your business, assume it will continue for at least 3-4 months. If that is unsustainable then the sooner you deal with it the better. Not sure how unemployment insurance works in your country but in the US I spoke to restaurants and they just terminated people so that they could collect unemployment at a higher level than the business could provide income (salary or tips). Do what you have to do fast, and do it empathetically and in a way that preserves your options for restarting / re-hiring when things eventually improve.
• loraa 7y ago
  I feel reeaaal bad for anyone who doesn't own a gun.
• gmuslera 7y ago
  It may depend on the time frame. The markets were inflated, with a lot of voices telling how unsustainable things would be soon enough, and then this black swan happened. The current situation will last at least a month (and how bad it will be while it lasts is yet to be seen), and after that keeping social distances, and closed borders will remain for many months. The rules will be just different. It may be very bad for some old industries (travel, tourism, are easy ones), and good for some of the emergent ones.
• idlewords 7y ago
  The crisis is tied to an ongoing pandemic whose scope and consequences are global, but not predictable. No one can credibly claim to know the extent of the disruption, other than the simple observation that large parts of the economy have stopped and might not come back for a while. Anyone who claims to know more is guessing.
• brown9-2 7y ago
  Why are you posting this question as if anyone here knows the answer?
  • meva 7y ago
    How would anyone check if there's an answer to a question without posting the question?
  • jpindar 7y ago
    This isn't StackExchange, we're allowed to just discuss our opinions.
• nopinsight 7y ago
  Chance of 1929-style Economic Depression: ~60% (Recession chance: >95%) Make sure you have the cash to live properly and satisfy urgent needs if necessary over the next 6-12 months or longer. Only invest the remaining in highly-rated bonds or great stocks with long-term resilience. The world is facing a liquidity crisis, along with both demand & supply shocks that can’t be easily fixed by governments. We are in a war with the virus and, in most of the world, we are losing. Global economy can be rescued only if we can mostly mitigate the virus impact. The other 40% is for the case where we found a way to do that and the liquidity injection & fiscal measures are sufficient.
  • adrianmonk 7y ago
    You've called it a war, which is just an analogy, but aren't actual wars sometimes good for the economy in certain ways, like generating economic activity? Is there a chance that could apply here? Though maybe the work of fighting a medical war is more narrow and specialized than the work of fighting a literal war. For example, you cannot institute of draft and make people into doctors in time to fight this. Whereas with an actual war you can stick people on the front lines with a few months of training or put them to work in a factory.
    • polishdude20 7y ago
      Problem is that in war, you can still go outside in your home country and do work.
  • bequanna 7y ago
    > Chance of 1929-style Economic Depression: ~60% How did you arrive at this probability?
• rdthree 7y ago
  Way too early to tell what’s going on but worse than 2008. Everyone is too busy writing bullshit about covid to see the 2nd and 3rd order effects. Italian and Spanish banks have been near insolvent for a good part of a decade they are going to completely blow out. A lot of other Banking institutions will fail as well because levered bets got blown out and we had a 3 or 4 sigma event nobody headges for not to mention lack of payment that will show up on balance sheets 4-6 months from now. I doubt anyone is going to be super keen on investment in that money loosing miracle startup now money will dry up soon it’s just been so sudden people haven’t really adjusted yet. I don’t think it will be as bad as the depression of 29 though. There is plenty of food available and some limited safety nets will keep people from starving. The gears of forclosure are so slow many will stay in “free” houses for 2-3 years. The real question is jobs, will Americans work the fields? Or Will they just sit on government benefits? Will manufacturing come back? How do we deal with global labor and ecological arbitrage. Honestly I don’t think trump or Biden are going to be capable of addressing these Structural issues so we’re gonna loose 4 more years and risk a second smarter and more dangerous Trump in 2024
• thoughtstheseus 7y ago
  U.S. focus: Right now the biggest issues are demand and liquidity. Demand fell off a cliff. When demand falls off like that it screws up working capital flows so now there’s a huge demand for cash. That’s why the fed stepped into the treasury, money market, commercial paper and municipal bond markets. It also looks like they may try to step into the corporate bond market to keep it functioning. Prior to all this the general consensus was that markets were priced to perfection, highly priced but not unreasonable given growth. The market needed growth to function. The risk of defaults will be delayed a bit but severe when if/it hits. Much of the market is covenant lite so by the time you report financials, break covs, get through the cure period many businesses will have the entire capital structure wiped out. Events like this tend to have lasting impacts on people, it changes their consumption and savings behavior. People will demand that certain industries have more resilient supply chains and larger economies will take protectionist stances in those industries. There’s so much to unpack here...
• friendlybus 7y ago
  It won't crash now, we are just weeding out the companies that aren't working. Real estate will drop, the money men will become king for a while, manufacturing pulled most countries out of the Great Depression after sometime of struggling trying to get it started. Save emergency funds and in the next decade of growth and stockpile for the 30s, when we hit real trouble. Find a currency or commodity that won't be washed out, silver kept China out of trouble in the 30s until the US raised demand for it so much that they got dragged in too.
• filleokus 7y ago
  I have no expertise in any area, but I would like to put down my thoughts for posterity (and feedback). I think we will see governments in the coming week or two start doing broad randomised samples of the population for antibodies and realise that many many more people have been infected than previously thought. Meanwhile fears for the economic consequences will grow larger. Also (hopefully) countries like Germany and the UK will not see Italy levels of death and misery. Around the mid of April when spring in the Northern hemisphere is really kicking off people will have been socially distancing/quaranting for 4-6 weeks and will be really tired of it. These factors will start to lessen the public support for social distancing and life will start to return to normal. Big events will probably still be canceled, people will not travel for holidays etc but economic activity will start to pick up in some sectors. Some sectors like hospitality (which employs many low skill workers) will continue to see very low demand until July/August (or possibly even longer). If the important summer season doesn't deliver, these industries will be doomed. While many other sectors will get a swifter recovery. A litmus test for the general economy will be sales of new iPhones this fall. I suspect it will be slightly below last year, but not like 50%. If it is, my predictions were completely wrong and we are probably much worse off than I expected.
  • Unknown_Unknown 7y ago
    > A litmus test for the general economy will be sales of new iPhones this fall. I actually would go with the sales numbers for the new PS5 because: - People who already have a console and are stuck home will not buy a new one because the cash is not there. - PS5 is a nice to have but not a necessity. Though the iPhone is in the same category but at a much higher price. The PS5 is estimated to be sold at $470-$499 while the new iPhone is much more expensive $799 up to $999. - People who don't own a console will likely put this off and buy it next year and focus on more necessities. - The entertainment industry is hit massively by this crisis, and this will be a good indicator of where things are going. Going back to the main subject, I believe the economy may well bounce back. The issues that may arise may be more related to security and politics. If things go on like this, there could be worldwide riots, or even revolutions in some places. Let's just hope a vaccine is found quickly.
  • biolurker1 7y ago
• danielTheM 7y ago
  I have been wondering: Isn't this (likely) downturn a chance? Don't we need to rebuild our economies anyway given climate change? Maybe it is a good thing that airlines are going away because you shouldn't be able to fly from Paris to New York for 400€. It seems that we now have a chance to build something new so instead of rescuing these companies we should let them shrink and support former employees to transition to less carbon intensive sectors.
• alexpetralia 7y ago
  Hopefully everyone will keep in mind that bailouts should go to the citizenry at large to resurrect demand, not to large multinationals which need to pay off debt they should have never incurred in the first place (and which was spent on high-risk growth projects or shareholder buybacks). "Take Boeing. The aerospace giant of course wants a $60 billion bailout. Financial problems for this corporation predated the crisis, with the mismanagement that led to the 737 Max as well as defense and space products that don't work (I noted last July a bailout was coming). The corporation paid out $65 billion in stock buybacks and dividends over the last ten years, and it was drawing down credit lines before this crisis hit. It is highly politically connected; the board of the corporation includes Caroline Kennedy, Ronald Reagan’s Chief of Staff Ken Duberstein, three Fortune 100 CEOs, a former US Trade Representative, and two Admirals, one of whom is the board’s only engineer. Using the excuse of the coronavirus, Boeing is trying to get the taxpayer to foot the bill for its errors, so it can go back to making more of them." https://mattstoller.substack.com/p/stop-the-coronavirus-corporate-coup https://mattstoller.substack.com/p/stop-the-coronavirus-corp...
  • tarsinge 7y ago
    Exactly this. This is not a financial crisis, corporations bailout without Demand will do nothing and we’ll have wasted all that money.
  • LZ_Khan 7y ago
    How can giving money to people resurrect demand if people aren't buying anything right now?
    • drannex 7y ago
      People aren't buying anything because they don't have any money or they are in fear of not having a paycheck sometime down the road.
      • Red_Leaves_Flyy 7y ago
        There are plenty of people buying plenty of necessities. That being said, if your job is not essential prepare to be laid off and without work for a long time.
• mrich 7y ago
  Some thoughts: - Short term we need government to step in and avoid a large-scale meltdown of businesses that would be more catastrophic than the virus itself. This will likely involve taking equity stakes in airlines etc. Warren Buffet might also be willing to help here again, he has 128 billion USD saved up for times like these :) - Stock market likely hasn't seen the bottom yet. There will be more deleveraging and panic selling. Long term (10+ years) it's still a good point to buy (perhaps with one third of the capital you do not need anyway) - Western countries might lose some civil rights that are necessary to quickly control new outbreaks (e.g. analysis of cell movement data to locate all places an infected person visited) - There will be long-term impact with regards to stricter controls necessary to quickly contain new outbreaks. This will increase costs for a few, potentially a lot of industries (everything travel, potentially logistics) - I have some fear that some countries which are simply not able to get the virus under control will be disconnected from the rest of the world economy, since no one wants to risk importing the virus from them again. I hope most of the countries go the way China went in Hubei: Take the most radical measures immediately - i.e. total lockdown, government backs the economy. This will make it possible to lift them after a very short time and affect the economy the least while controlling the spread of the virus.
  • thiago_fm 7y ago
    That's a joke. Big airlines are terrible businesses, Warren Buffet would never invest on them like this, unless he has gone insane. Also, those billions is from Berkshire, they won't invest the money of their shareholders into bad businesses, I don't see that happening. Second thing is that you suppose that there will be forever lockdowns. We're only having it because the current health system isn't able to handle all the patients given this exponential spread. Once we finally manage to handle it well and enough people get infected and cured(yes, it is also important). We will move on... until we find a new kind of virus.
    • mrich 7y ago
      Buffet's already done it for Delta beginning of March: https://www.foxbusiness.com/markets/buffett-coronavirus-battered-delta-air-lines-share-purchase https://www.foxbusiness.com/markets/buffett-coronavirus-batt... I'm not assuming there will forever be lockdowns, quite the contrary, but for that there needs to be an effective system for responding to these kind of viruses so there doesn't have to be a full lockdown again. Basically you have to be able to quickly follow up on each case, and this will require things like determining where someone has been the past 10 days or so, and also regular controls (no more flying with any fever?)
• cynusx 7y ago
  Last crisis (Spanish flu) caused a 5% decrease in global GDP and that was without widespread shutdowns and an already depressed GDP from the first world war. I think realistically the drop in demand, the onslaught of bankruptcies, the stopping of lending and the depletion of consumers' and corporate cash savings will lead to a prolonged recession of at least 5% GDP decrease. On the upside, climate change is now within bounds for the coming years.
• gdubs 7y ago
  As others have said, this is largely a guessing game right now. How swiftly and how boldly governments act is going to determine a lot. In 2008 you had people like Paulson and Bernanke who studied the Great Depression and desperately wanted to avoid the mistakes of the past. They saw those mistakes largely as a failure to act quickly. I’m not an economist, but in my humble opinion what we need is cash in the hands of working people who are losing work at an alarming pace. What I’m seeing is too much feet-dragging, means-testing, and timidity. This is a situation where every second counts, so for the best sense of how this all resolved, once again, pay close attention to how swiftly and how boldly governments act to provide stimulus to help people weather the next 18 months.
  • kevindong 7y ago
    Just giving out cash isn't going to fix the problem. It is however one required part of the solution to prevent the situation from spiraling as hard as it otherwise would. The crux of the issue is that economic activity is severely hampered due to the paralyzing fear of the coronavirus. Even if the government pays out benefits as though everyone remained employed as they were a few months ago, that's not truly economically productive activity. It's an economically-neutral but socially-positive action. Economic value is generated when people exchange goods (in a better example to reflect modern life, money for goods and vice versa) such that every party is better off. Shuttered businesses prevent this value generation. I live in NYC and most non-food/beverage stores are closed.
• bufferoverflow 7y ago
  It's going to be bad for the following reasons: 1) Governments are not shutting everything down fast enough. Many countries are in the phase of "oh, we only have 200 cases, not a problem, look at Italy". They are just a few weeks behind Italy. 2) Some people, especially young ones, are not following quarantines. All it takes is one super-spreader to start another wave of infection. 3) People will run out of money soon. Governments will have a choice of either a) printing money b) distributing food and meds to everyone c) letting people work in masks / googles / gloves 4) Not nearly enough testing is done. South Korea and China are the only countries that did it right. Italy is not testing everyone suspicious (though more than other countries). 5) Most countries are not ready for thousands of patients requiring an ICU. No country is ready for a million ICU patients. I think our only hope at this point is one of the drugs works very well. People suck.
  • IanSanders 7y ago
    > 1) I'm just a rando from the internet but my suspicion is that governments could be intentionally trying to slow the infection rate down rather than stop it completely. If you perform a perfect shutdown with 200 cases, lets say another 400 are identified since, all 600 recover/don't make it, but once you stop the quarantine everything will be back to square one - someone will spread it again eventually. On the other hand if you let it spread a bit, then shutdown, high but manageable number of people will get sick and recover. (I will be less efficient so some transmission will still occur, eventually ensuring everyone either recovered or died, with as many as possible getting the medical care)
    • harambae 7y ago
      >intentionally trying to slow the infection rate down rather than stop it completely The individualistic attitudes in the US (and probably Europe, although I'm not an expert there) were never going to lead to the infection being stopped entirely. I can't imagine anyone was actually worried about being too effective in containment.
      • IanSanders 7y ago
• m0llusk 7y ago
  This crisis will be very large and also very drawn out because of all the debt and other economic overhang. The thing to focus on the most, though, is that there will be recovery and with that great opportunities for buying stocks and lows and expanding into markets as they regrow.
• sergiotapia 7y ago
  What I want to know: With all this god damn quarantine and stay at home, what's to prevent one sick person to go out after the all clear and just reinfect everybody. This stay at home situation is not sustainable. Is this an economic war from China?
  • jrockway 7y ago
    Everyone is going to get sick unless we find a vaccine or a cure. That is inevitable. The idea behind isolation is to spread out the cases in time so that supplies/treatment are available for you when you get it. If you get sick right now and need an ICU, you might just flat-out die because there aren't any ICU resources for you. If you get sick 6 months from now, there will be more resources.
• hnarn 7y ago
  If I was running a company of any size and revenue dived by 20x I would probably consider emergency measures. Skeleton crew of only the most essential employees, unpaid leave for the rest (that will accept it) and underline that these are temporary measures to keep the company alive. Some will inevitably look for and find other work, but if the whole company goes under everyone will be in the same boat. I'd say this is not going away in the near term and if you're not acting like it's a crisis now you may be unprepared for a sustained or even worse drop in revenue. Just my five cents, obviously noone can predict this with any certainty.
• tarsinge 7y ago
  I'm not well versed in economy and I have a maybe dumb question: how would large public infrastructure projects financed by the government in the post-crisis period help with keeping people employed and help the economy spring back? Edit: are there historical examples relevant?
• generalpass 7y ago
  Just focus on the strength and depth of the government responses, most especially the establishment of martial law. No sector is actually an island because the economy is an abstract concept used to describe certain types of interactions that impact resources. It isn't like you can just turn the A/C in a car off to make the gas last a little longer because it isn't a singular, engineered thing with clear systems. It is a system more complicated than anyone understands.
• jacobwilliamroy 7y ago
  The Big One is coming. This is just gonna be a recession, no one is going to lose their retirement or social security this time. Still, big banks like American Savings and Chase are going to be buying up lots of property ("seizing" is probably a better word for it). When The Big One comes, we will all have to forfeit our property to the Federal Reserve, and they will start the cycle all over again. I think the cycles are getting shorter, because of computers and the internet which allows this manipulation of the economy to literally happen at the speed of light. It is possible to maintain our current standard of living without the work of the Federal Reserve, but such would require drastically cutting military spending and other uneccesary expenses (conversation for another time). One way to cut the military budget, without actually reducing our firepower would be to merge all branches together into one command structure to facilitate interoperability between machines. For example, military contractors will sell the DoD 3 different copies of the same helicopter with slight differences which make it hard for them to interoperate; you would need 3 different mechanics/computer techs, with 3 different sets of parts and tools.
  • _bxg1 7y ago
    Specifics about how to make the military more efficient are probably out of scope (and out of depth for anyone here), but I agree we should spend less on it (and I think we could, without making any other changes, and still remain the dominant power by a wide margin)
    • jacobwilliamroy 7y ago
      I think there are a lot of ex-military, active duty, and military contractors using HN at the moment.
• _bxg1 7y ago
  > Our revenue this week is down 20x compared to the average of the past 4 weeks What industry are you in that things are this bad? Surely it must be one that's directly impacted by people not going out?
• aussiegreenie 7y ago
  It will be as bad as 1974.
• throwVKPPQHQZ 7y ago
  It would be wise for mostly everyone in the West as an investment for the medium and long term status post the pandemic to start learning Chinese.
• CyanLite4 7y ago
  I’m betting on a V-shaped recovery. Reasons: 1. There’s so much friggin stimulus coming that something big will happen. The (U.S.) Fed is buying trillions of anything resembling bonds at the moment. Treasuries, commercial paper, muni’s. And doing a trillion PER DAY in the repo market. Plus $2+ trillion coming from Congress, which includes checks directly to consumers and also up to $4 trillion more in direct lending to small businesses with forgivable loans. Not to mention interest rates at 0% and gas prices at $1.50/gal. The financial sector is healthy. Big tech companies are still sitting on a few trillion in cash. 2. Everyone has cabin fever and missed their spring breaks and perhaps summer vacations. Prices on travel and leisure are at an all time low. A weeklong trip to Hawaii for a family of 5 is down to like $1500. 3. At some point (I believe in days/weeks) there will be a medical breakthrough. Hydroxychloroquine+Azithro has had stunning results in South Korea, China, and France. Many US docs are already prescribing now. Even if this works only 40% of the time, that’s significant enough to flatten the curve and most importantly lower the death rate around the seasonal flu. Early anecdotal evidence suggests it’s been effective in 90%+ of cases. 4. I think by mid-April folks especially in the U.S. are gonna say enough is enough and break containment. The rest of the 80% of America isn’t willing to shutdown the entire economy for the 1% who face almost certain death from this disease. I know that’s crude and sounds cold-hearted, but Fox News is going to be very convincing that we should just resume our normal way of life and let the chips fall where they may. Election season starts in earnest in mid-Spring and Trump I believe will end the shutdowns and tell us to go back to living our lives. Biden will almost certainly do the same with a focus on rebuilding America. People can shut down for a week or two, anything longer than that and you face rebellion. School has been out since early March and the soccer moms here just want to go back to being normal. Expect a presidential candidate to jump out first with a “let’s get America back to work” strategy and end the shutdowns and maybe only recommend quarantines for the at-risk population.
• jasonv 7y ago
  I live in SF. The company I worked at, which you’ve heard of, shed all its contractors on Friday. One week into the shelter in place. i just moved back here to take the gig a few months ago. Now I have a Bay Area rent obligation with little probability of finding a job until this is over, and then some. I keep saying wait one or two “1st of the month” milestones, see how things look. That’s where my own decisioning is headed.
• bashwizard 7y ago
  Oh it has just started. The Buffett Indicator.
• bashwizard 7y ago
  Oh it has just started. 2008 will be a fart in the wind compared to the shitstorm we're heading towards.