Dirty Word - Depression
I've been hearing the D-Word be thrown around in the media lately. If this pandemic lasts longer than two months is it likely that we fall from recession into depression?
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Steve Mnuchin says we could face 20% unemployment unless congress acts. I think the great depression was around 23%? If this is just a short term say 1 month shutdown then I think it will be a quck recession. If it's longer then 4 months then it will get ugly and fast. Already seeing a record number of layoffs and unemployment claims. The longer it takes for congress to act the worse it will get, and I mean they need to pass legislation before March ends. The other flip side to this is that you can only provide so much stiumlus when everything is shutdown. Some people are saying there will be a U shapped recovery but I'm skeptical were able to turn it around as fast. Probably more like a Hokey Stick shape of a recovery, and the longer the shutdown the longer it will take to recover to were we were at the beggining of the year.
We are not going to see a repeat of the Great Depression.
We would have gotten a Depression in '08/09 had the Fed not acted; had we not gotten TARP.
We are going to see a severe economic contraction while we have social distancing in place-- on the order of the Great Depression. But I think we will bounce back. The delta will be large, but the integral will be smaller than 08/09 barring something very severe.
What do you mean? These statements seem to conflict with each other.
A recession/depression typically requires two quarters of declining GDP.
My take is that there will be one quarter of seriously declining GDP and a bit of a snapback.
Take the integral underneath Q42019 GDP, and the number will be small.
Take the displacement from Q42019 GDP and the number will be bigger.
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