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The Normal Economy Is Never Coming Back

Dangerous Financial Measures

Many banks are in effect printing money, something that is unprecedented and points towards the extremity of the problem. These measures will lead to complications and politics sooner rather than later.

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IDEA EXTRACTED FROM:

The Normal Economy Is Never Coming Back

The Normal Economy Is Never Coming Back

https://foreignpolicy.com/2020/04/09/unemployment-coronavirus-pandemic-normal-economy-is-never-coming-back/

foreignpolicy.com

7

Key Ideas

Economic Free Fall

The current pandemic has led to an economic free fall which is unparalleled in history. In the US alone, the unemployment rate plummeted at such a speed that more than 10 million have claimed unemployment insurance in a matter of three weeks.

With over 30 percent of the U.S. population expected to be unemployed by this summer, and the GDP shrinking at a faster rate that the Great Depression of the 1930s, the current situation is uncharted territory, even for the experts.

The Lockdown: U.S.

The Pandemic Lockdown in the U.S. directly affects the livelihood of a shocking 80% of American workers who work in retail, real estate, education, entertainment and restaurants.
Many of these offices and stores are not going to open after that.

The Lockdown: Europe And Asia

  • In Europe, The north of Italy, which is the main tourist hub, is seeing a collapse in economic activity, along with Germany, which is falling at a steeper rate than the United States. Even countries like Japan, which are not hit that hard, are about to witness an apocalyptic fall.
  • In India, with the abrupt 21 days shutdown, which was recently extended by another 19 days, only a small percentage of the 1.3 billion population is covered by any social security, and millions of daily wage or migrant workers, have no hope, future or place to stay.

Injecting Life

Countries are opening up their purse strings and providing stimulus packages and concessions to boost the economy, but these measures will show results after months and may not be enough.

Falling Consumption

Falling consumption has resulted in 70 percent of Americans losing their income in March, and for many that loss can lead to long-term hardship and suffering.

There is an 88 percent decrease in petrol consumption in Europe, and automobiles sales are now zero.

The World In Lockdown

A long period of Lockdown can lead to deep scarring of the economy with a slow recovery, but as there is a risk of a second wave of infections once this dies down, these movement restrictions will need to stay in place.

Dangerous Financial Measures

Many banks are in effect printing money, something that is unprecedented and points towards the extremity of the problem. These measures will lead to complications and politics sooner rather than later.

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State Of Emergency

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Resolve

The measures to stop the spread of the virus are well-known by now: staying home in lockdown, working from home as a default option, schools switching from physical classrooms to e-learning models.

Not every country has been able to make these choices fast, due to a combination of hesitation, inaction, and paralysis. Before any decision is made, the first thing to do is determine what needs to be done and at what pace and scale.

Resilience

As the current health crisis steamrolls into an economic crisis unparalleled for the last 100 years, the decline in economic activity is already at par with the great depression.

This crisis of global proportions requires resilience, both for near-term issues like liquidity and cash flow, as well as long-term issues like uncertainty, personal financial stress and recovering from multiple challenges that were already present and are now further complicated due to the pandemic.

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The Great Depression

The Great Depression

.. was a devastating economic collapse which started in the US in 1929, lasting a decade. Europe was already struggling post the WWI recession, while the US was thriving. As borrowings and stoc...

Wall Street Down

On 29th October 1929, the infamous crash of Wall Street happened, where 30 million dollars were lost in a week, leading to customers rushing to withdraw their money, known as the ‘bank run’.

The entire world felt the capitalistic fall and realized that a boom leads to a bust, eventually. The disastrous effects felt around the world showed how economically interconnected the world had become.

A New Deal

In 1933, then-President Franklin Roosevelt promoted his recovery path of Relief, Recovery and Reform, to give shape to the slow and arduous reform process that will take decades.

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A new playbook

Growth evangelists are right when they state that severe lockdowns produce a parallel human misery of unemployment, looming bankruptcies, and extreme financial anguish. Yet, opening the economy too...

The false choice

“Save the economy or save lives” is a false choice.
A group of economists published a paper on the 1918 flu outbreak. Their findings revealed:

  • Early and aggressive interventions saved lives and triggered a faster rebound, such as job growth and banking assets.
  • Without a healthy population, there can be no healthy economy.

The hope is for a deep, short recession, to show that people have shut the economy down to limit the spread of disease.

A living wage

Asking millions of able-bodied workers to stop working creates a crisis of unemployment.

During this time, the U.S. is expanding unemployment benefits and are also delaying tax filing. In northern-European countries, the government is directly paying businesses to maintain their payrolls to avoid mass layoffs and furloughs.

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