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Author Topic: Global recession, supply issues and other COVID-19 consequences  (Read 48576 times)

Tom_Mazanec

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Re: Global recession
« Reply #200 on: March 22, 2020, 08:40:54 AM »
You know, this is the real story of this thing. Even in the worst case, the pandemic will be over in a couple years and four out of five will get through it fine. But the recession we caused to stop the pandemic will go on long afterward and affect everybody. Mind, it was the right thing to do.
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El Cid

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Re: Global recession
« Reply #201 on: March 22, 2020, 10:13:22 AM »
This pandemic will be over THIS year. Either thru containment or herd immunity. The recession will be over this year. It won't last at all. Why would it?

blumenkraft

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Re: Global recession
« Reply #202 on: March 22, 2020, 10:31:50 AM »
El Cid, premise one depends on a lot of unknowns.

We can't know if and how it will mutate (very likely it will, maybe to a less harmful strain, or maybe not!).
Therefore, we can't know if herd immunity will be a thing at all and we can't yet know if it becomes endemic.
We also don't know if there will be treatments or vaccines in a timely manner.

So premise two is obsolete.

Please don't state such things as facts. We can't possibly know!

Tom_Mazanec

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Re: Global recession
« Reply #203 on: March 22, 2020, 11:06:11 AM »
Weekly Commentary: Please Don’t Completely Destroy...
http://creditbubblebulletin.blogspot.com/2020/03/weekly-commentary-please-dont.html
Quote
I’ve been dreading this. In the midst of all the policy responses to the collapse of the mortgage finance Bubble, I recall writing something to the effect: “I understand we can’t allow the system to collapse, but please don’t inflate another Bubble.” It was obvious early on that policymakers had every intention to reflate Bubbles.

There was a failure to grasp the most critical lessons from that terrible boom and bust episode: Aggressive monetary stimulus foments market distortions, while promoting risk-taking, leveraged speculation and latent risk intermediation dysfunction. Years of deranged finance ensured unprecedented economic imbalances and deep structural impairment. There was no predicting a global pandemic. Yet today’s acute financial and economic fragility – and the risk of financial collapse - are directly traceable to years of negligent monetary management.

I have to adjust my message for today's post-Bubble backdrop: I understand we can’t allow the system to collapse, but Please Don’t Completely Destroy the Soundness of Central Bank Credit and Government Debt. Does anyone realize what’s at stake?
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Tom_Mazanec

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Re: Global recession
« Reply #204 on: March 22, 2020, 11:19:23 AM »
Covid-19 has exposed our financial fragility
https://unherd.com/2020/03/covid-19-has-exposed-our-financial-fragility/
Quote
But this recession will not only be driven by the economic loss of able-bodied workers, it will be helped along too by the steps political leaders take to avoid the spread of the coronavirus. In medicine, the immune system’s response can often be worse than the disease. When the body goes into septic shock, the immune system overreacts, releasing what doctors refer to as a cytokine flood, which can reduce blood to vital organs and lead to death. Sepsis is common and kills more than 10 million people a year. Today, the political reaction to Covid-19 is causing something akin to a septic shock to the global economy.

And then will our laws and institutions be changed by this?
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El Cid

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Re: Global recession
« Reply #205 on: March 22, 2020, 12:39:25 PM »
El Cid, premise one depends on a lot of unknowns.

We can't know if and how it will mutate (very likely it will, maybe to a less harmful strain, or maybe not!).
Therefore, we can't know if herd immunity will be a thing at all and we can't yet know if it becomes endemic.
We also don't know if there will be treatments or vaccines in a timely manner.

So premise two is obsolete.

Please don't state such things as facts. We can't possibly know!

Interesting thing is, you did not ask Tom not to state such things (" the pandemic will be over in a couple years and four out of five will get through it fine. But the recession we caused to stop the pandemic will go on long afterward and affect everybody") as facts.

Aren't you a bit biased?

I have said before and say this again: you can keep up a quarantine for two months but not 6 or 9. This means that by summer politicians will have either solved this or will let this go through the whole population. Either way, the recession will end this year and we will see recovery in 2021. That is my opinion. But of course I might be wrong, and anything could happen, it could mutate into the next Black Death, or an asteroid might hit the planet. Who knows? The future is unknowable. We should get back to this in 2021 to see who was right.

Tom_Mazanec

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Re: Global recession
« Reply #206 on: March 22, 2020, 01:09:29 PM »
Let us just take predictions as opinions, OK? That is what everybody’s predictions are.
Otherwise I would have to phrase every future tense sentence as “It is possible, on the assumption that a rogue planet does not collide with the Earth or the sun does not go nova, or something else does not destroy the world, that the sun will rise in my city tomorrow at 6:51 AM.”.
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be cause

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Re: Global recession
« Reply #207 on: March 22, 2020, 01:47:34 PM »
exponential growth in use of the term ' great depression ' across cnn , bloomberg and the like .. b.c.

 
2007 + 5 = 2012 + 4 = 2016 + 3 = 2019 + 2 = 2021 
 (phew)

dnem

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Re: Global recession
« Reply #208 on: March 22, 2020, 01:49:40 PM »
The recession will be over this year. It won't last at all. Why would it?

Of course this is just your prediction, that's fine.  What I don't get it what appears to be your blind faith that central banks' and governments' response to this will necessarily be successful.  The ability to stimulate is not unlimited. There is a breaking point. No one knows if we will reach it, but no one knows that we definitely will not.

vox_mundi

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Re: Global recession
« Reply #209 on: March 22, 2020, 02:30:00 PM »
The 'D' Word: Top Economists See Some Echoes of Depression in U.S. Sudden Stop
https://www.bloomberg.com/amp/news/articles/2020-03-22/top-economists-see-some-echoes-of-depression-in-u-s-sudden-stop

The U.S. is entering a recession. The ultimate fear is that could turn into a protracted malaise that has some flavor of a depression.

As business activity halts and layoffs surge, some prominent economy watchers -- including former White House chief economists Glenn Hubbard and Kevin Hassett and former Federal Reserve Vice Chairman Alan Blinder -- have drawn comparisons to the Great Depression, though they’ve stopped well short of forecasting another one.

Former International Monetary Fund chief economist Maury Obstfeld said the world hasn’t seen a synchronized interruption in economic output in decades. The best example the University of California, Berkeley, professor can think of: “Well, maybe the Great Depression.”

By some estimates, the economy is headed toward its worst quarter in records since 1947. JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period while Bank of America Corp. and Oxford Economics both see a 12% drop. Goldman Sachs Group Inc. sees a 24% plunge.

Whether the coming contraction proves to be prolonged depends a lot on how long it takes to check the contagion.

“Unless this virus miraculously disappears from the population over the course of the next few months, it is a reasonable scenario that we might be in this lockdown setting for quite a while, measured in quarters,” said Harvard University professor James Stock, who is a member of the National Bureau of Economic Research panel that dates the timings of recessions.

If everybody stays home for six months, “it is going to be like the Great Depression,” Hassett, who’s returning to the White House to advise on economic matters, told CNN on Thursday.
“There are three classes of people: those who see. Those who see when they are shown. Those who do not see.” ― Leonardo da Vinci

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Tom_Mazanec

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Re: Global recession
« Reply #210 on: March 22, 2020, 02:50:30 PM »
Can I please be given a rigorous definition of “depression” as opposed to “recession”?
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blumenkraft

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Re: Global recession
« Reply #211 on: March 22, 2020, 03:00:44 PM »
Recession: widespread economic decline for 6 months

Depression: widespread economic decline for several years

dnem

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Re: Global recession
« Reply #212 on: March 22, 2020, 03:15:29 PM »
Generally accepted definition of recession is two consecutive quarters of falling GDP.

Tom_Mazanec

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Re: Global recession
« Reply #213 on: March 22, 2020, 03:34:46 PM »
I know the two quarter recession.
I once heard recession is fall down, depression is can’t get back up...so I guess it is duration and not severity that distinguishes them?
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blumenkraft

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Re: Global recession
« Reply #214 on: March 22, 2020, 03:36:15 PM »
Yep.

Sigmetnow

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Re: Global recession
« Reply #215 on: March 22, 2020, 03:52:06 PM »
Pandemic threatens to unleash economic chaos
Quote
Unlike past recessions driven by a chain of events that derailed the economy, the coronavirus crisis has forced the U.S. to suspend the longest expansion in modern history to prevent a widespread loss of life.

“The economy is in a medically induced coma,” said Daniel Alpert, managing partner of investment firm Westwood Capital, who estimates that 37 million Americans may be vulnerable to layoffs.   “The world has effectively come to an abrupt halt,” he said.

Economists broadly agree that the best tool to dig the U.S. out of recession is bolstering the medical response that allows Americans to emerge from isolation as soon as public health officials deem it safe. While the economic toll of social distancing is stark, economists say failing to mitigate the pandemic’s spread would be far costlier in the long run.

“This is a situation where physically, people cannot move. If you were simply talking about, you know, turning over the economy to fight a war, that’s easy. Rosie the Riveter would come out and rivet planes together,” Alpert said.

“The fact is," he added, "Rosie the Riveter is sitting at home sick or fearful of getting sick.”
https://thehill.com/policy/finance/488751-pandemic-threatens-to-unleash-economic-chaos
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El Cid

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Re: Global recession
« Reply #216 on: March 22, 2020, 04:21:04 PM »
The recession will be over this year. It won't last at all. Why would it?

Of course this is just your prediction, that's fine.  What I don't get it what appears to be your blind faith that central banks' and governments' response to this will necessarily be successful.  The ability to stimulate is not unlimited. There is a breaking point. No one knows if we will reach it, but no one knows that we definitely will not.

Yes, you are partly right but partly wrong I believe. This is the great test for Modern Monetary Theory which basically postulates (among other things) that any country which has its own central bank and is not indebted in a foreign currency can spend ANY amount of money. Basically the government issues government bonds and the Central Bank prints enough money to buy it, so the government has as much money as they wish.
If the output gap is negative(meaning we are in a recession like now, for sure) it will not cause inflation - provided that you withdraw the stimulus in time.

In nominal terms most big, developed countries have UNLIMITED funds to be spent. In real terms of course, it would soon hit real economic constraints (eg, you can print billions of dollars but if you don't grow enough food it will only cause food prices to rise). But to manage a crisis, they can spend any amount of money. They can send a cheque of 10 000 dollars for each person if they wish to. It is a brutal, stopgap measure, but works as long as the crisis is short.

Of course, if this virus mutates into something much more evil then it will be no use, but the way things stand, I see absolutely no limit for fiscal spending and countering the economic collapse. The Federal Reserve can buy all the corporate bonds and all the stocks they want to stabilize prices, and the Administration can spend as much money as they wish on any projects.

dnem

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Re: Global recession
« Reply #217 on: March 22, 2020, 04:26:11 PM »
You basically contradict yourself there, EC. It it is either unlimited or in real terms it will hit a limit. You can't have it both ways. No sense in debating this here.

I am less sanguine than you about central banks' ability to respond.

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Re: Global recession
« Reply #218 on: March 22, 2020, 06:26:38 PM »
You basically contradict yourself there, EC. It it is either unlimited or in real terms it will hit a limit. You can't have it both ways. No sense in debating this here.

I am less sanguine than you about central banks' ability to respond.

No, EC is correct.  There is no limit to how much liquidity and "quantitative easing" (money printing) the central banks can do.  Though hyper-inflation is possible, the central banks also have unlimited ability to reverse these actions, very rapidly.   Expect, then, a severe contraction of the money supply (recession and deflation), counter-acted with the above stimulus, with an overshoot leading to serious inflation, compensated for by the reverse of economic stimulus.  Thus, deflation --> inflation --> eventual normalization.

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Re: Global recession
« Reply #219 on: March 22, 2020, 06:34:37 PM »
I would argue what you are describing is a fundamental destabilization of the monetary system.

blumenkraft

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Re: Global recession
« Reply #220 on: March 22, 2020, 06:36:49 PM »
... Though hyper-inflation is possible ...

... fundamental destabilization of the monetary system.

Bitcoin is available at a discount ATM.

Just sayin'.

El Cid

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Re: Global recession
« Reply #221 on: March 22, 2020, 09:07:49 PM »
You basically contradict yourself there, EC. It it is either unlimited or in real terms it will hit a limit. You can't have it both ways. No sense in debating this here.

I am less sanguine than you about central banks' ability to respond.

There is no contradiction. Central Banks can print any amount of money. This can stabilize the economy and panicky markets. However, money printing does not create real goods. If they overdo printing they will risk inflation.
But, when your house is on fire you do not care that you step into a nail. You will deal with the nail later, after putting out the fire. That is what they are going to do. 1st: put out the fire, and then deal with any problems arising.
Expect central banks to start buying huge quantities of government bonds and if needed corporate bonds or even equities. Coming soon!

oren

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Re: Global recession
« Reply #222 on: March 22, 2020, 09:34:13 PM »
In Japan they've been doing this for years to no avail.

El Cid

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Re: Global recession
« Reply #223 on: March 22, 2020, 09:50:11 PM »
Yes, that is a popular misconception.

1) actually they never did do it fullscale, only halfheartedly
2) even then, japan's per worker gdp (ppp) growth is no worse than usa or europe, see:
https://seekingalpha.com/article/288071-the-myth-of-japans-lost-decade

many think that japan's policies failed but their only real problem is a very quickly aging society

vox_mundi

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Re: Global recession
« Reply #224 on: March 22, 2020, 10:21:23 PM »
U.S. Jobless Rate May Soar to 30%, Fed’s Bullard Says
https://www.bloomberg.com/amp/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q

Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product.
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Re: Global recession
« Reply #225 on: March 22, 2020, 10:29:43 PM »
While you lot are debating the extent to which Governments & Central Banks can hurl money at the problem, I am wondering if this slump in economic activity is NOT going to be quickly over.

The UK Government (and maybe the US Government) is looking seriously at the policy of several cycles of ...
- draconian measures to reduce infection growth,
- followed by relaxation of such measures resulting in new spikes in infections -
- followed by resumption of draconian measures....
Repeat until the virus has gone through the majority of the population - infections continue but at a low to moderate rate indefinitely. That policy does not fit well with Wall Street's view of getting it over with quickly followed by a V-shaped recovery and BAU by Q4/2020 to Qu1/2021.

The longer it drags on the harder to maintain the confidence trick that underpins the "Promise to Pay the Bearer on Demand" on paper (and now electronic) money.

Add to that the probability of unrestrained infection through many countries with 1 to 2 billion people seeking help from often extremely under-resourced Health systems which is likely to increase the mortality rate. Those countries do not have the financial expertise, systems and services required to manufacture these bailout mechanisms, unless the IMF magically manufactures a 2 trillion credit line.

There will be places where the dead will only be found when people bang on the door and break in. Remember Katrina?  They say that superficially New Orleans is thriving again, but for most of the population (that remains) - not.
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dnem

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Re: Global recession
« Reply #226 on: March 22, 2020, 10:38:12 PM »
I ain't debating it. I wholeheartedly agree. I do not think that the fiscal stimulus or bond buying or any of it is remotely up to the task at hand. It is barely relevant.

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Re: Global recession
« Reply #227 on: March 22, 2020, 10:51:30 PM »
And or food supply depends for a pretty big part on countries with a not so very good health system. If the coronavirus reaches the countryside in these places. The same time you already have places in Africa that are hit by drought or still fighting the results of typhoons. There are giant swarms of locust in some areas in Africa and the Middle-East. We do have the advantage that most supplies are big for already many years. That's what kept the price for stuff like corn, rice, wheat......low. But still i think there is a pretty big risk. How much supply may become disrupted before the panic starts. Places like India, Brasil.....

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Re: Global recession
« Reply #228 on: March 22, 2020, 11:26:21 PM »
A friend just phoned from his pizza restaurant in a mall in Hamilton. He was locking up when done with our conversation. He'd been open for less than a year.


Zero walklin customers today and no capacity to maintain his payroll. Everyone was terminated so that they could immediately apply for unemployment.


In 5 days his mall has gone from 184 businesses to 6 - now 5.


He closed his other location in Kitchener last Wed.


The Neapolitan Pizza he's been offering for a little over two years is new to the Canadian market.
They're wonderful when fresh but don't travel well.
Pizza as health food - who woulda thunk it.


This was his first attempt at business and he was doing well, if not spectacularly well. He expressed concern over his employees futures as well as his own. None of them have anything to fall back on, and he expects that his credit has been ruined. His 25 year old BMW is looking it's age & needs work.


He's young, healthy and bright as hell - but he put his heart into the business & his heart is broken. He expects to live with his sister. They've 2 youngsters and have use for a live in sitter.


We spent the best part of an hour online. I'd no idea what to say other than encouraging niceties. Platitudes that don't placate.
What do you say to someone who has called to say that they've lost their dream?


Calls like this are being made all over the world. Whenever you see a boarded up window someone's dream was crushed.


Sad Times
Terry

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Re: Global recession
« Reply #229 on: March 23, 2020, 06:17:12 AM »
If/when the crisis is not over soon there also won’t be a quick V shaped economic recovery. This may turn recession into depression.  A depression permanently destroys the production capacity of an economy; it’s like an financial WMD that kills good and healthy businesses along with the bad.

Yes, governments can help but they cannot replace companies’ customer base if demand completely collapses. If this becomes a depression there will be bankruptcies and high unemployment.

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Re: Global recession
« Reply #230 on: March 23, 2020, 06:49:38 AM »
If/when the crisis is not over soon there also won’t be a quick V shaped economic recovery. This may turn recession into depression.  A depression permanently destroys the production capacity of an economy; it’s like an financial WMD that kills good and healthy businesses along with the bad.

Yes, governments can help but they cannot replace companies’ customer base if demand completely collapses. If this becomes a depression there will be bankruptcies and high unemployment.

I totally agree. That is why I say that you can quarantine an economy for 2 months but not 9. The economic pain would be too much to bear. They will rather let the pandemic take hold and be done with it

bluice

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Re: Global recession
« Reply #231 on: March 23, 2020, 08:21:27 AM »
El Cid, I'm afraid BAU is not really an option. Quarantines and lockdowns cause economic hardship, but so does the pandemic itself. It's not an either-or situation where we can choose between economy or public health.  You cannot run a functioning economy when hundreds of people are dying daily as it's happening in Italy and Spain.

Lest not forget the airlines started to cancel flights due to lack of demand, before they were forced to do so. Here in Helsinki hotels and restaurants are still open but closing fast because they have no customers. Somebody I know works in a 250 room hotel and they two guests over the weekend...

El Cid

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Re: Global recession
« Reply #232 on: March 23, 2020, 08:25:23 AM »

Tom_Mazanec

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Re: Global recession
« Reply #233 on: March 23, 2020, 10:49:55 AM »
Quote
I totally agree. That is why I say that you can quarantine an economy for 2 months but not 9. The economic pain would be too much to bear. They will rather let the pandemic take hold and be done with it
I'm not so sure we can even survive 2 months, El Cid. With the small businesses operating with razor thin reserves and the big businesses putting all their money into stock buybacks even 2 months could kill the economy.
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El Cid

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Re: Global recession
« Reply #234 on: March 23, 2020, 11:29:21 AM »
Quote
I totally agree. That is why I say that you can quarantine an economy for 2 months but not 9. The economic pain would be too much to bear. They will rather let the pandemic take hold and be done with it
I'm not so sure we can even survive 2 months, El Cid. With the small businesses operating with razor thin reserves and the big businesses putting all their money into stock buybacks even 2 months could kill the economy.
True. That's why you need immediate, huge fiscal spending. And we will get it

oren

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Re: Global recession
« Reply #235 on: March 23, 2020, 11:34:44 AM »
I think what could save the economy is a massive testing for antibodies to identify those (supposedly) immune. There are many people who have already had the virus with mild symptoms, or no symptoms at all. These people can (supposedly) walk free, operate shops, factories, schools and so on.

Massive money printing and massive government deficit spending will surely be done, but they don't solve all problems, or the world's economic problems would have been solved a long time ago.

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Re: Global recession
« Reply #236 on: March 23, 2020, 11:54:45 AM »
Can I please be given a rigorous definition of “depression” as opposed to “recession”?

Recession is when many people loose their jobs, depression is when I loose my job.

Edit Not rigorous but it was what my economics teacher would say many many years ago.
« Last Edit: March 23, 2020, 01:13:08 PM by NevB »

Tom_Mazanec

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Re: Global recession
« Reply #237 on: March 23, 2020, 01:16:25 PM »
Quote
I totally agree. That is why I say that you can quarantine an economy for 2 months but not 9. The economic pain would be too much to bear. They will rather let the pandemic take hold and be done with it
I'm not so sure we can even survive 2 months, El Cid. With the small businesses operating with razor thin reserves and the big businesses putting all their money into stock buybacks even 2 months could kill the economy.
True. That's why you need immediate, huge fiscal spending. And we will get it
What is your guesstimate for the National Debt in two years than?
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Re: Global recession
« Reply #238 on: March 23, 2020, 01:16:58 PM »
Quote
I totally agree. That is why I say that you can quarantine an economy for 2 months but not 9. The economic pain would be too much to bear. They will rather let the pandemic take hold and be done with it
I'm not so sure we can even survive 2 months, El Cid. With the small businesses operating with razor thin reserves and the big businesses putting all their money into stock buybacks even 2 months could kill the economy.
True. That's why you need immediate, huge fiscal spending. And we will get it
But who gets the money?

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The Associated Press on the delay in the $1tn economic stimulus package :

Democrats in the U.S. Senate on Sunday blocked legislation that would pump well over $1 trillion into the American economy on programs to help companies losing business during the coronavirus outbreak and unemployed workers.

The measure faltered after it failed to get the necessary 60 votes in the 100-member chamber to clear a procedural hurdle after days of negotiations.

The bill is Congress’ third effort to blunt the economic toll of a disease that has killed at least 400 people in the United States and sickened more than 33,000, leading governors to order nearly a third of the nation’s population to stay at home and putting much business activity on hold.

The measure envisages financial aid for regular Americans, small businesses and critically affected industries, including airlines.

Democrats had raised objections to the Senate bill throughout the day, with the Senate’s top Democrat, Chuck Schumer, saying it had “many, many problems” and would benefit corporate interests at the expense of hospitals, healthcare workers, cities and states.

The failure of the measure to move forward sends Democrats and Republicans back to the negotiating table. The speaker of the House of Representatives, Nancy Pelosi, said earlier on Sunday that Democrats in that chamber will begin crafting an alternative to the Senate bill.
"Para a Causa do Povo a Luta Continua!"
"And that's all I'm going to say about that". Forrest Gump
"Damn, I wanted to see what happened next" (Epitaph)

Sigmetnow

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Re: Global recession
« Reply #239 on: March 23, 2020, 01:37:53 PM »
Nothing says, “We’re f’d,” more than day after day of “unprecedented moves” by the Fed — and a US Senate who can’t agree on how much of the economy and US population beyond themselves is worth saving.

Washington Post:
Fed announces unlimited bond purchases in unprecedented move
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The Federal Reserve announced Monday an unlimited expansion of bond purchasing programs to backstop the credit markets, as millions of American households and businesses are getting crushed by the economic shutdown due to the spreading coronavirus.

The Fed said it would purchase Treasurys and mortgage-backed securities “in the amounts needed to support smooth market functioning,” an indication the central bank is willing to do a lot more than the $700 billion in new purchases announced last week. This is an extraordinary move that effectively puts no limits on assets the Fed is willing to buy, an effort to goes even further than the 2008-09 financial crisis playbook.

In a series of sweeping moves, the Fed has taken bold action to ensure companies, cities and households have access to credit. On Monday, the Fed said it also expects to announce “the establishment of a ‘Main Street Business Lending Program’ to support lending to eligible small businesses” in the near future, another unprecedented step.

“The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time," Fed leaders wrote in a statement.

These move come as Congress has stalled on a major $1.8 trillion relief package for the nation and markets around the world plunged again. St. Louis Fed President James Bullard predicted Sunday that unemployment could hit 30 percent in the second quarter, a higher level than during the Great Depression.

“It has become clear that our economy will face severe disruption,” the Fed said. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”

The Fed also said Monday that it will support the commercial lending market by purchasing commercial mortgage-backed securities in addition to mortgage-backed securities made up of home loans.
https://apple.news/ALWMxet2rQdqTRP6EHGNKhg
People who say it cannot be done should not interrupt those who are doing it.

El Cid

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Re: Global recession
« Reply #240 on: March 23, 2020, 01:39:03 PM »
Case in point :

https://www.marketwatch.com/story/fed-announces-unlimited-qe-and-sets-up-several-new-lending-programs-2020-03-23?mod=home-page

Fed announces UNLIMITED QE!

No surprise here. There will be an enormous amount of fiscal spending as all bonds will be bought by the Fed. You don't need to worry about government debt as can be seen from the Japanese example of the past few years. Although Japans' gobernment debt to gdp is a gigantic 260% (vs 60-90% average of developed nations), half of it has been bough up buy the Bank of japan, effectively eliminating it.

If you want to know what comes, look at the US monetary regime during and after WW2. The Fed then fixed short term rates near zero and put a ceiling (yield curve control) on longer dated bonds as well. This is a new war, wartime rules apply.

Soon to come: corporate bond buying by Fed and later possibly even stock buying (though I doubt they will use this tool at this time). Also: 10+% government deficit in the USA

Sigmetnow

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Re: Global recession
« Reply #241 on: March 23, 2020, 01:49:07 PM »
The US is running two races against coronavirus. It has to win both
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Race No. 1: How quickly can the United States contain the coronavirus? Experts say the pressure on stock markets won't lift until the rate of new infections slows dramatically.

Race No. 2: How quickly can US lawmakers agree on an economic rescue package? Investors were hoping that a deal would emerge over the weekend in the Senate. It did not. Now, House Speaker Nancy Pelosi says that House Democrats will introduce their own plan.

Tick, tock. Tick, tock.

I'm focusing on these two races because they are the most important factors in putting a floor under the dramatic stock market plunge in the United States. And they both need to be run simultaneously.

If policymakers are able to deliver a stimulus package, but can't bring down the infection rate, the US economy is likely to remain on lockdown and markets will remain under pressure. At the same time, if progress is made on limiting the spread of the coronavirus, but no support arrives for business and workers, the country will still be headed for a lengthy and nasty recession.

Here's Neil Shearing of Capital Economics:
"Economic policy can do little to offset the near-term damage caused by shutting down large parts of the economy -- its main function is to stop that hit from turning into a longer depression. A lasting recovery in markets is unlikely until we also see clear evidence that the global spread of coronavirus is slowing, allowing lockdowns to end," he said.

A handful of countries have made progress on both fronts. South Korea and China are good examples. Can a fractured Washington do the same? ...
https://www.cnn.com/2020/03/23/investing/premarket-stocks-trading/index.html
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oren

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Re: Global recession
« Reply #242 on: March 23, 2020, 02:53:44 PM »
Of course, nobody in the business media cares about the disease or the livelihood of ordinary people, only about the stock market plunge.

Sigmetnow

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Re: Global recession
« Reply #243 on: March 23, 2020, 03:26:19 PM »
Stock market live updates: Dow down 200, Fed goes all-in, waiting on Congress
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9:12 am: Fastest drop of 30% on the S&P 500 ever, notes Bank of America

The coronavirus outbreak, which has halted travel and slowed business activity worldwide, has sent the Dow Jones Industrial Average and S&P 500 tumbling into bear market territory at a record rate. "The 2020 correction continues to make history, having already claimed the title as the third fastest end to a bull market going back to 1928," Bank of America said in a note to clients Monday. "In a little over four weeks since the February 19 peak, 22 trading days, the S&P 500 (SPX) has sold off 30% on a daily closing basis, making this the fastest 30% decline in history," the firm added. The Dow is 35% below its February all-time high level, while the S&P 500 is 32% below its high. - Stevens


9:31 am: Stocks fall despite Fed action, hopes of relief package, Dow down 300 points

The three major averages fell on Monday despite the Federal Reserve announcing limitless asset purchases, which originally lifted stock futures.The Dow Jones Industrial Average fell 350 points after the opening bell. The S&P 500 and Nasdaq dipped 1.7% and 0.15%, respectively. Investors are waiting on a government stimulus package announcement as soon as Monday. — Fitzgerald

Such a doofus.  He’d kill everyone, starting with states that didn’t vote for him. ::)
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10:17 am: Trump weighs potential easing of [health] guidelines to boost economy

A series of tweets on Sunday as well as multiple administration sources revealed President Donald Trump's fears about economic damage from the coronavirus shutdown. In several posts, the president suggested that he was looking to ease the coronavirus-related guidelines that the White House imposed last week for a 15-day period that will end next Tuesday. "WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF," Trump wrote in a tweet posted near midnight on Sunday. "AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!"  Investors worried Trump's tweet may indicate the president is weighing sending the country back to work before the health system has a handle on the pandemic, leading to greater long-term economic damage.

After the initial all-caps message, the president retweeted a number of accounts suggesting that future guidelines from the White House will call for isolating high-risk groups only. NBC reported that creating a separate set of rules and restrictions for the hardest-hit states – notably, CA, NY, and WA – while allowing other states to return to business is a possibility. — Fitzgerald, Higgins
https://www.cnbc.com/2020/03/23/stock-market-live-today.html
« Last Edit: March 23, 2020, 03:31:20 PM by Sigmetnow »
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gandul

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Re: Global recession
« Reply #244 on: March 23, 2020, 03:42:06 PM »
I think what could save the economy is a massive testing for antibodies to identify those (supposedly) immune. There are many people who have already had the virus with mild symptoms, or no symptoms at all. These people can (supposedly) walk free, operate shops, factories, schools and so on.

Massive money printing and massive government deficit spending will surely be done, but they don't solve all problems, or the world's economic problems would have been solved a long time ago.
That will come, but bear in mind the recovered count currently as 0.01% in Italy and Spain.
It will take a year until recovered+vaccinated (hopefully) make a significant fraction.
If we don't flatten the curve we would all be infected by summer, and could recover activity, but at the expense of millions dead everywhere without medical attention. I don't want to see that happening .

El Cid

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Re: Global recession
« Reply #245 on: March 23, 2020, 03:57:54 PM »
This thread is about the recession and possibly the recovery thereafter. How deep is the recession going to be, how long, when and why the recovery will start.

I agree that it would be, or rather would have been great if our leaders started strong quarantine measures earlier, would have started mass testing, contract tracing, etc etc. But that is sadly beside the point and belongs to the main COVID thread...where amazingly some people still argue about the usefullness of face masks, which should have been mass produced weeks ago by governments, distributed to all, and made compulsory in public...amazing

Sigmetnow

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Re: Global recession
« Reply #246 on: March 23, 2020, 04:19:02 PM »
When a leader acts, or suggests actions, in ways that will extend the pandemic and thereby worsen and extend the recession-in-progress in the longer term, it very much belongs in a recession thread.  Similarly, actions which speed the resolution of the pandemic also affect the severity of the current economic crisis, and thus merit discussion.
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oren

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Re: Global recession
« Reply #247 on: March 23, 2020, 05:31:12 PM »
I think what could save the economy is a massive testing for antibodies to identify those (supposedly) immune. There are many people who have already had the virus with mild symptoms, or no symptoms at all. These people can (supposedly) walk free, operate shops, factories, schools and so on.

Massive money printing and massive government deficit spending will surely be done, but they don't solve all problems, or the world's economic problems would have been solved a long time ago.
That will come, but bear in mind the recovered count currently as 0.01% in Italy and Spain.
It will take a year until recovered+vaccinated (hopefully) make a significant fraction.
If we don't flatten the curve we would all be infected by summer, and could recover activity, but at the expense of millions dead everywhere without medical attention. I don't want to see that happening .
I believe Italy could have at least 50,000-100,000 people by now who have had the virus unknowingly and are not contagious anymore. Most of these would be relatively young and fit. Such a large number could help fill in high-exposure jobs in healthcare and commerce, making an economic difference and speeding the economic recovery.

TerryM

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Re: Global recession
« Reply #248 on: March 23, 2020, 06:05:01 PM »
The owner of the gym that Carole attended has announced it's closing.


A second generation Portuguese/Canadian, the young owner attained masters in sports therapy & something else related to the business. His direct family had invested heavily in the enterprise together with other relatives and friends.


He'd been doing well & had purchased a large building that he and family members had refurbished with 2 open exercise rooms and a number of private therapy rooms, the results were impressive & all of the investors were content to "let it ride".


Possibly the next generation will catch a break.
Terry

johnm33

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Re: Global recession
« Reply #249 on: March 23, 2020, 07:58:06 PM »
"but who gets the money?" My guess is the bankers just in time to snap up all the assets sold off in fire sales.