Home > Uncategorized > The shape of the recovery: Those who tell don’t know

The shape of the recovery: Those who tell don’t know

from Dean Baker

There have been a number of pieces in major news outlets telling us what the recovery will look like from this recession. Most have been pretty negative. The important thing to know about these forecasts is that the people making these forecasts don’t have a clue what they are talking about.

The shape of recovery will depend first and foremost on the extent to which the coronavirus is contained or is treatable, areas in which most of our prognosticators have zero expertise. I can think of a scenario in which we have a very robust recovery.

Suppose that in three months we have developed treatments to the point that the disease is not much more deadly than the standard u. In that case, we would look to restart the economy while trying to protect the most vulnerable segments of the population.

If this happens, there will be lots of people with money to spend (many are getting full paychecks, plus $1,200 from the government). They have gone three months without going to a restaurant, seeing a movie, or any other form of recreation. There will also be lots of pent-up demand for cars, houses, and many other things. This could lead to quite a burst of spending that could keep the economy going strong for some time. (Look for some inflation, insofar as a poorly designed economic survival package didn’t focus on keeping workers tied to their rms, so that businesses could restart quickly without having to hire and train workers.)

Will this happen? Ask someone who knows something about the virus, not me.

The point is that the course of the recovery will depend on what happens with the progress in containing and/or treating the coronavirus, and anyone who cannot speak authoritatively on that point has no clue what the recovery will look like.

  1. Patrick Newman
    April 1, 2020 at 12:20 pm

    Might it be conceivable that in a recovery employers take an opportunity to ‘reset’ the T&C’s of employment – unlikely to be infavour of the workers!

  2. Cristi C
    April 1, 2020 at 1:05 pm

    I think you are missing the fact that the current state of economic world is the result of three different factors: first was the slowing activity in the auto sector worldwide, the second was the coronavirus and the third is the oil price war causing blood on the street in the energy sector. While the virus may slow down in a month or two and the retail may recover somehow, the other two are not. Don’t expect that people will restart travelling at the pace a year ago. Don’t expect businesses will resume capex at the pace a year ago (which, btw, most companies froze capex as we speak). Everything will recover at a much slower pace than the downfall pace. And then, by the time economists will gather enough data to measure Q2, we will be in sep-oct when the epidemiologists warn us already that the virus may come back. The fear for the second wave is what will keep people from spending like there is no tomorrow, or should I say like tomorrow is the safest day on the year.

  3. April 1, 2020 at 7:06 pm

    The economy is not a motor, so that it can be started. As soon as you reduced production, you immediately received a decrease in income. The economy will have nothing to accelerate. Inflation will eat a lot of money, salaries will decrease, investments will lose their profitability, many (most) will fall below the poverty line, some banks will go bankrupt, large companies will begin to crumble like houses of cards, the number of suicides will greatly exceed the number of victims of the virus. The saddest thing is that economists are not ready to find a solution to problems of this magnitude. One thing pleases – oil and labor will become much cheaper.

  4. Ikonoclast
    April 1, 2020 at 10:30 pm

    Many assume that there will be a post-coronavirus world. This is not certain. COVID-19 might become endemic. Now it is loose, infection could be maintained indefinitely at a baseline level in any given large population in a given geographic area without external inputs. A vaccination might not prove possible. So far no vaccine has been created for any serious coronavirus threat and maybe not for any coronavirus at all (though I cannot confirm this latter contention yet).

    “Coronaviruses without preventive vaccines are the Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV), and the novel coronavirus SARS-CoV-2, which causes COVID-19 disease in humans.

    The need for human coronavirus vaccines was first identified in the mid-1960s. The emergence of a highly pathogenic coronavirus (CoV) in the Middle East has sparked new interest in human coronaviruses around the world. MERS-CoV was identified in 2012, almost 10 years after the highly fatal human SARS-CoV emerged from China in 2003.

    As of April 1, 2020, the US Food and Drug Administration has not approved any preventive or therapeutic coronavirus vaccines for use against the SARS, MERS or SARS-CoV-2 (COVID-19) coronaviruses.” – Precision Vaccinations.

    There is also some concern that COVID-19 might be bi-phasic. That is it could reoccur or be reacquired another one or more times. Some bi-phasic diseases are much more dangerous the second time round. Of course, these are speculations but then so are assumptions that we will arrive at a post-coronavirus world and economy.

    Not so long ago, there was much discussion and concern about our fat demographic tail. Everyone was assuming that people would live and live actively to 90 years or more. All these life hopes and economic fears (funding the aged demographic) now look possibly rather foolish. Each of us in the older age bracket must readjust our expectations and face a nearer approach of our own morality. I once thought I might live to 90 (given family history) and seeing what I’ve seen I feared that. I did mot welcome it. I don’t have to worry about that anymore. If we have season after season of COVID-19, which is still very possible, I reckon my life expectancy from current age 65 is about 10 years. A lot of people will be in the same boat as me. Such is life. Entropy always wins.

    As baby boomers we thought we owned the world. We thought it was always going to be our little oyster. Now we find the world owns us after all. This was always the case. We just didn’t know it. Our hubris was extreme. Economics in praxis has been sclerotic, run by near-senile billionaires and their ideological lackeys and functionaries. Economics in theory was captured by anti-scientific beliefs that the economy was not embedded in and conditioned by the real biosphere, real ecology (including viruses) and by the real capabilities and limitations of humans. Finally, the field will progress again. Economics will advance one funeral at a time.

    RIP Capitalism – Killed by COVID-19.

  5. Ken Zimmerman
    April 15, 2020 at 12:05 pm

    Viruses remain mysterious for we humans. They’re billions of years old. And for much of that time they’ve interacted with humans. That is, existed as parasites in human bodies. And existed is the correct term. Viruses don’t appear to be living. Scientists often classify them as on the border of living things vs. non-living chemical compounds. They cannot reproduce on their own. They reproduce only within cells of a host, such as humans. They have no DNA. Only RNA. At the same time many virologists “theorize” based on years of observations that viruses have played a major role in human evolution. In other words, they’ve played a big part in making humankind what it it today. This generally involves developing a symbiotic relationship between virus and host. Maybe the coronavirus in its many forms will prompt a change (hopefully beneficial) in human evolution. If so, our species improves its chances for survival. Although, many members of the species may die in the process. Put this in your economics pipe and smoke it.

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