The global recession is shaping up as deeper, longer and more dangerous than initially feared, with recovery likely to take years. My analysis. nytimes.com/2020/04/01/bus…
2/Among investors, conventional wisdom still has it that recovery will be V shaped: We freeze the economy until we contain the pandemic, then we restart everything. Everyone goes back to the mall, planes fill, life snaps back to normal. That vision looks increasingly ridiculous.
3/ The world that emerges from this will be damaged. Businesses fail, hundreds of millions will lose jobs. Fiscal and monetary relief will help, but the scars will be real; productive capacity will be lost; supply chains disrupted. None of that gets put back together quickly.
4/ Here's how @krogoff put it: "I feel like the 2008 financial crisis was just a dry run for this. This is already shaping up as the deepest dive on record for the global economy for over 100 years."
5/ More @krogoff: "Everything depends on how long it lasts, but if this goes on a long time, it’s certainly going to be the mother of all financial crises.”
6/ It is hard to shake sense that the virus is reconfiguring basic notions of public space in ways likely to endure. Social distancing will not just get switched off; it will be a gradual process, prone to failures and restarts.
7/ Will we all be eager to jam into packed venues as soon as this is over? What happens to restaurant business models and jobs if the answer is no? "The psychology won’t just bounce back,” says @CharlesDumasTSL “People have had a real shock. The recovery will be slow."
8/ After the Great Depression, savings rates went up and stayed up a long time. They rose after the Great Recession. Caution may endure this time, too. Given that consumer spending is two-thirds of economic activity in many major economies, that will slow global growth.
9/ During the Great Recession, a smart and thoughtful economist I know said something dumb that I keep thinking about: "The economy is like a rubber ball. The harder it hits the ground, the harder it bounces back." The economy is not a rubber ball.
10/ People remain hard-working, innovative and capable of dreaming up all sorts of ideas that will alter this picture. Humans have endured more than this. But the downturn appears likely to be long-lasting and painful, with a quick recovering looking increasingly unlikely.
