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As a total dummy on macroeconomics, I find myself having the positive take "hey, we were probably moving towards some recession anyway, might as well get it ove

by DCKing 7y ago

As a total dummy on macroeconomics, I find myself having the positive take "hey, we were probably moving towards some recession anyway, might as well get it over with in one go". I'm saying this because the graphs go up again in the not too distant future. Besides the obvious personal suffering that is going to be the consequence of this event on at least the short term, and under the uncertain assumption that we're making some return to normal life in 2020, is there any merit towards my naive optimism?

nl 7y ago
hey, we were probably moving towards some recession anyway, That's a take that is gained from reading two many doom and gloom writers and not looking at the data. The data shows that economies - on average - expand and have done consistently, long term since the renaissance. Once you look at that, you see recessions as mistakes. Most large ones since the start of the 20th century have been caused by errors in the capital markets (1929, 1987, 2008) or commodity price shocks (1970s). Perhaps the run up in stock prices should have been corrected. But that would have been a recession caused by a financial market correction, so another 2001 "dot com crash" style thing. Nothing like this. is there any merit towards my naive optimism By most measurements this is the biggest economic shock since 1929 (and possibly larger). It's the first time we've have economic activity stop this quickly across so many industries all across the world ever (perhaps the black death in the 1300s was similar because many farms went unharvested because of the lack of labor - up to 80% of people died in some areas[1]). It's possible this will turn around quickly. We certainly stopped things quicker than I would have believed was possible a 4 months ago. But provided you understand that is an optimistic view and isn't really supported by history it's ok. [1] https://eh.net/encyclopedia/the-economic-impact-of-the-black-death/ https://eh.net/encyclopedia/the-economic-impact-of-the-black...
- djohnston 7y ago
  this is also different because there isn't an economic causal factor. we intentionally stopped everything. that didn't happen in 1929 or 2008 or the 70's, we collectively got together and said shut it down until we get a hold on this disease
  - nl 7y ago
    Yes exactly. This is completely uncharted, especially when you consider it is world wide, almost instantly. There have been national strikes in some countries before - perhaps we should be looking at the impact of them to try to understand this.
  - adequateness 7y ago
    The lockdown isn't the only reason for the current economic crisis. Look at what was happening in the repo market a few months back before Coronavirus was even a thing.
    - frockington1 7y ago
      I thought the repo market was mainly due to regulation drying up liquidity in that market. It didn;t seem to me like a larger concern. What are your thoughts on it?
      - adequateness 7y ago
        What regulations are you referring to? I didn't look to deeply into it but I interpreted it as companies wanting to hold cash more instead of lending because they expected a crash.
  - ModernMech 7y ago
    > this is also different because there isn't an economic causal factor. we intentionally stopped everything. Yes we intentionally stopped things, but that would have happened either way as the disease spread and people got sick. Look at the meat packing plant in SD where 1 case turned into ~300 and they had to shut down [1]. If we had not shut down things, that would be the story at workplaces across the country. Think about schools and universities throughout the country. If they had not shut down as the pandemic was ramping up, they would have become breeding grounds for the disease and would have had to shut down anyway as students and teachers fell ill. Yes we shut down things intentionally but our hand was forced. The flip side of this is we cannot re-open things just as intentionally because the result will be a flare-up of cases. So while it may seem like we have control over when we start/stop the economy here, really the virus is controlling the timeline. [1] https://abc7news.com/smithfied-foods-coronavirus-meat-packing-plant-covid-19-industry-in-pork/6099688/ https://abc7news.com/smithfied-foods-coronavirus-meat-packin...
- wycy 7y ago
  True that economies generally grow with time, but that doesn't mean the prices of stocks match reality. Prior to corona, the Dow Jones was nearly double it's value from 2016. Did the US economy really nearly double in value since 2016, or was there a mismatch between price and reality? Honestly, I'm not an expert. But before coronavirus, the wild growth in the markets seemed--to me--out of line with the realities of the economy.
  - nl 7y ago
    Sure I think that's a reasonable case to make. We could have - at some point - had a correction in the financial markets which might have caused a 2001 style disruption or maybe a 2008 recession. But this is nothing like that at all. A stock market crash takes months to move through the economy. A big crash means things like 700,000 new unemployment claims (2008 had that many at its peak). The US just had 6 million new unemployment claims. It's a whole new level.

by DCKing 7y ago

nl 7y ago

hey, we were probably moving towards some recession anyway, That's a take that is gained from reading two many doom and gloom writers and not looking at the data. The data shows that economies - on average - expand and have done consistently, long term since the renaissance. Once you look at that, you see recessions as mistakes. Most large ones since the start of the 20th century have been caused by errors in the capital markets (1929, 1987, 2008) or commodity price shocks (1970s). Perhaps the run up in stock prices should have been corrected. But that would have been a recession caused by a financial market correction, so another 2001 "dot com crash" style thing. Nothing like this. is there any merit towards my naive optimism By most measurements this is the biggest economic shock since 1929 (and possibly larger). It's the first time we've have economic activity stop this quickly across so many industries all across the world ever (perhaps the black death in the 1300s was similar because many farms went unharvested because of the lack of labor - up to 80% of people died in some areas[1]). It's possible this will turn around quickly. We certainly stopped things quicker than I would have believed was possible a 4 months ago. But provided you understand that is an optimistic view and isn't really supported by history it's ok. [1] https://eh.net/encyclopedia/the-economic-impact-of-the-black-death/ https://eh.net/encyclopedia/the-economic-impact-of-the-black...

djohnston 7y ago
this is also different because there isn't an economic causal factor. we intentionally stopped everything. that didn't happen in 1929 or 2008 or the 70's, we collectively got together and said shut it down until we get a hold on this disease
- nl 7y ago
  Yes exactly. This is completely uncharted, especially when you consider it is world wide, almost instantly. There have been national strikes in some countries before - perhaps we should be looking at the impact of them to try to understand this.
- adequateness 7y ago
  The lockdown isn't the only reason for the current economic crisis. Look at what was happening in the repo market a few months back before Coronavirus was even a thing.
  - frockington1 7y ago
    I thought the repo market was mainly due to regulation drying up liquidity in that market. It didn;t seem to me like a larger concern. What are your thoughts on it?
    - adequateness 7y ago
      What regulations are you referring to? I didn't look to deeply into it but I interpreted it as companies wanting to hold cash more instead of lending because they expected a crash.
- ModernMech 7y ago
  > this is also different because there isn't an economic causal factor. we intentionally stopped everything. Yes we intentionally stopped things, but that would have happened either way as the disease spread and people got sick. Look at the meat packing plant in SD where 1 case turned into ~300 and they had to shut down [1]. If we had not shut down things, that would be the story at workplaces across the country. Think about schools and universities throughout the country. If they had not shut down as the pandemic was ramping up, they would have become breeding grounds for the disease and would have had to shut down anyway as students and teachers fell ill. Yes we shut down things intentionally but our hand was forced. The flip side of this is we cannot re-open things just as intentionally because the result will be a flare-up of cases. So while it may seem like we have control over when we start/stop the economy here, really the virus is controlling the timeline. [1] https://abc7news.com/smithfied-foods-coronavirus-meat-packing-plant-covid-19-industry-in-pork/6099688/ https://abc7news.com/smithfied-foods-coronavirus-meat-packin...
wycy 7y ago
True that economies generally grow with time, but that doesn't mean the prices of stocks match reality. Prior to corona, the Dow Jones was nearly double it's value from 2016. Did the US economy really nearly double in value since 2016, or was there a mismatch between price and reality? Honestly, I'm not an expert. But before coronavirus, the wild growth in the markets seemed--to me--out of line with the realities of the economy.
- nl 7y ago
  Sure I think that's a reasonable case to make. We could have - at some point - had a correction in the financial markets which might have caused a 2001 style disruption or maybe a 2008 recession. But this is nothing like that at all. A stock market crash takes months to move through the economy. A big crash means things like 700,000 new unemployment claims (2008 had that many at its peak). The US just had 6 million new unemployment claims. It's a whole new level.