
Ask HN: How bad will the 2020 economic crisis be? - p0la
I run a ~40ppl business in Europe (Fr &amp; UK). 
While young and in a trendy sector, we aren&#x27;t a startup, in that we invested a lot in being profitable and using our profits to fund our growth. I&#x27;m trying to get a sense of what&#x27;s to come.<p>Our revenue this week is down 20x compared to the average of the past 4 weeks. In France, many local businesses are basically down to 0 turnover.<p>We can read here and there that the economic downfall will be worst than the 1929 crash. What will be the chain of events? How bad unemployment can get? Should we expect the real estate market to crash too? In 1929, what kind of businesses were affected the most, should we expect something similar here?
======
alexpetralia
Hopefully everyone will keep in mind that bailouts should go to the citizenry
at large to resurrect demand, not to large multinationals which need to pay
off debt they should have never incurred in the first place (and which was
spent on high-risk growth projects or shareholder buybacks).

"Take Boeing. The aerospace giant of course wants a $60 billion bailout.
Financial problems for this corporation predated the crisis, with the
mismanagement that led to the 737 Max as well as defense and space products
that don't work (I noted last July a bailout was coming). The corporation paid
out $65 billion in stock buybacks and dividends over the last ten years, and
it was drawing down credit lines before this crisis hit. It is highly
politically connected; the board of the corporation includes Caroline Kennedy,
Ronald Reagan’s Chief of Staff Ken Duberstein, three Fortune 100 CEOs, a
former US Trade Representative, and two Admirals, one of whom is the board’s
only engineer. Using the excuse of the coronavirus, Boeing is trying to get
the taxpayer to foot the bill for its errors, so it can go back to making more
of them."

[https://mattstoller.substack.com/p/stop-the-coronavirus-
corp...](https://mattstoller.substack.com/p/stop-the-coronavirus-corporate-
coup)

~~~
hinkley
Boeing's market cap is $54 billion. They need $60 billion??

------
jawns
I've heard economic forecasters predict that the economy will spring back once
the crisis is over. Their reasoning is that the crisis is an external issue,
not a problem with the economy itself, as with the housing crisis. Once it
becomes more contained and controlled, there will be work for people to do,
and people available to do that work, and the economy will just start humming
along again.

I'm more pessimistic. The extent of the layoffs, even if temporary, is just
too large to not have a lasting impact. What happens when people with
inadequate emergency savings get laid off and can't pay their bills? There's a
cascading effect. Maybe they owe a landlord with inadequate emergency savings
who now can't pay his mortgage. Maybe they owe a bill to a small business
operating on small margins that can't stay afloat. Maybe they owe a corporate
behemoth that has aggressively taken on debt and now needs to lay off a bunch
more people to be able to pay off that debt. The federal government's mortgage
deferral solution might help homeowners, but it's not going to solve the
problem that people are going to continue to need to buy things and not have
the money to buy them. Even those of us who are fortunate to have some
emergency savings will see those savings dwindle down if we're laid off.

And keep in mind that in a lot of cases, when people lose their jobs in the
U.S., they also lose their health insurance. Not a great position to be in
during a public-health crisis.

~~~
yulaow
I would add that even after the crisis is more under control, people will
still avoid any not necessary spending for a very long time and this will keep
the economy to restart. Also most of them will have depleated all savings at
that point and will want to rebuild them aggressively, further reducing
spending

~~~
Tepix
On the other hand i predict there will be a huge surge in tourism and
partying.

Also, not everyone has insufficient savings.

~~~
yulaow
I am willing to bet more than 50% of people have not enough saving for a
crisis long 8-12 months

~~~
jawns
More than 50% of Americans making less than $50K say they can't afford to miss
a single paycheck.

About 30% say they have absolutely zero emergency savings.

I would expect that the number of working Americans with emergency savings to
cover even six months of expenses is fewer than 1 in 10.

Granted, there are options such as HELOC, tapping 401k, etc.

But most of us are grasshoppers, not ants.

Granted,

------
qubex
I’m an economist and I wish I had some guidance to offer, but unfortunately I
have none. I’m struggling to get a grip on this situation.

Firstly, though I have not worked there for six months or so, I am Italian
(from Milan, in the north, the worst-hit area). The economy there has
basically shut down. Consumer spending has collapsed, production has
collapsed, and logistics are increasingly untenable.

What can we expect? Six months of this (and some people are projecting up to
eighteen months) are going to shut down demand. There’s a term going around
now “demand destruction” — I’m not going to pretend to know more than I do, so
I’ll admit forthright that I had never heard it until a few weeks ago — that
seems to meet the requirements here.

It’s uncertain whether the supply side of the economy will be similarly
affected. Probably yes, as governments curb production to slow the spread at
the workplace.

Even three months will be dreadful.

Now, let’s think of a few things: governments are stepping in with public
support to support businesses, provide liquidity, and support workers that do
not have income. That means debt. That means interest payments in future, for
those businesses that are fortunate enough to survive. Taxpayers will be on
the hook for decades.

The situation is so severe that German economists are proposing a 1 trillion
euro Eurobond issue to help support the economies because the southern
economies cannot hope to cope with this.

I guess I’ll sum it up thusly: this might turn out to be a “great pause”, but
economies and demographics cannot idle without incurring enormous financial
costs.

~~~
nopinsight
Enormous liquidity injected into the system along with lower production
suggests high inflation in the future after the crisis is over. Do you think
that will likely happen?

Note: Above is not a value judgement. The measure is necessary to prevent the
system from completely breaking down.

~~~
qubex
To be honest, it seems that the basic tenants of inflation have been violated
since the 2007/8 crisis and the subsequent massive influxes of liquidity
(primarily through the various quantitative easing programmes), so I really
cannot say with any certainty.

There’s an enormous amount of money already sloshing around in the systems,
and it seems to be pooling at the top (hence all the inequality).

On one level, somebody could argue that all the typically ‘renter’ activities
(rents, licenses, _et cetera_ ) should be suspended during the period of
crisis to prevent those who “profit from standing still” to absorb more
liquidity and boost their wealth whilst the scurrying masses are bled white,
but I don’t think that’s practical.

~~~
nopinsight
A key reason why this time might be different: A call for helicopter money
even among some fiscal conservatives.

Before this, such as in the 2008 crisis, much of the liquidity injection
didn’t flow down the bottom part of economic hierarchy. Thus, they haven’t had
much increased spending power. So, no inflation of common items. The prices of
trophy and other assets preferred by the wealthy _did_ rise up greatly in the
past decade.

If the helicopter money plan actually happens in substantial quantity, then
inflation of everyday items might occur this time.

~~~
danaris
...Can you clarify "helicopter money"? That's not a term I've heard before.

~~~
harambae
It's a term coined by Milton Friedman many years ago

[https://en.wikipedia.org/wiki/Helicopter_money](https://en.wikipedia.org/wiki/Helicopter_money)

------
mrich
Some thoughts:

\- Short term we need government to step in and avoid a large-scale meltdown
of businesses that would be more catastrophic than the virus itself. This will
likely involve taking equity stakes in airlines etc. Warren Buffet might also
be willing to help here again, he has 128 billion USD saved up for times like
these :)

\- Stock market likely hasn't seen the bottom yet. There will be more
deleveraging and panic selling. Long term (10+ years) it's still a good point
to buy (perhaps with one third of the capital you do not need anyway)

\- Western countries might lose some civil rights that are necessary to
quickly control new outbreaks (e.g. analysis of cell movement data to locate
all places an infected person visited)

\- There will be long-term impact with regards to stricter controls necessary
to quickly contain new outbreaks. This will increase costs for a few,
potentially a lot of industries (everything travel, potentially logistics)

\- I have some fear that some countries which are simply not able to get the
virus under control will be disconnected from the rest of the world economy,
since no one wants to risk importing the virus from them again.

I hope most of the countries go the way China went in Hubei: Take the most
radical measures immediately - i.e. total lockdown, government backs the
economy. This will make it possible to lift them after a very short time and
affect the economy the least while controlling the spread of the virus.

~~~
thiago_fm
That's a joke. Big airlines are terrible businesses, Warren Buffet would never
invest on them like this, unless he has gone insane. Also, those billions is
from Berkshire, they won't invest the money of their shareholders into bad
businesses, I don't see that happening.

Second thing is that you suppose that there will be forever lockdowns. We're
only having it because the current health system isn't able to handle all the
patients given this exponential spread. Once we finally manage to handle it
well and enough people get infected and cured(yes, it is also important). We
will move on... until we find a new kind of virus.

~~~
mrich
Buffet's already done it for Delta beginning of March:
[https://www.foxbusiness.com/markets/buffett-coronavirus-
batt...](https://www.foxbusiness.com/markets/buffett-coronavirus-battered-
delta-air-lines-share-purchase)

I'm not assuming there will forever be lockdowns, quite the contrary, but for
that there needs to be an effective system for responding to these kind of
viruses so there doesn't have to be a full lockdown again. Basically you have
to be able to quickly follow up on each case, and this will require things
like determining where someone has been the past 10 days or so, and also
regular controls (no more flying with any fever?)

------
gdubs
As others have said, this is largely a guessing game right now. How swiftly
and how boldly governments act is going to determine a lot. In 2008 you had
people like Paulson and Bernanke who studied the Great Depression and
desperately wanted to avoid the mistakes of the past. They saw those mistakes
largely as a failure to act quickly. I’m not an economist, but in my humble
opinion what we need is cash in the hands of working people who are losing
work at an alarming pace. What I’m seeing is too much feet-dragging, means-
testing, and timidity. This is a situation where every second counts, so for
the best sense of how this all resolved, once again, pay close attention to
how swiftly and how boldly governments act to provide stimulus to help people
weather the next 18 months.

~~~
kevindong
Just giving out cash isn't going to fix the problem. It is however one
required part of the solution to prevent the situation from spiraling as hard
as it otherwise would.

The crux of the issue is that economic activity is severely hampered due to
the paralyzing fear of the coronavirus. Even if the government pays out
benefits as though everyone remained employed as they were a few months ago,
that's not truly economically productive activity. It's an economically-
neutral but socially-positive action.

Economic value is generated when people exchange goods (in a better example to
reflect modern life, money for goods and vice versa) such that every party is
better off. Shuttered businesses prevent this value generation. I live in NYC
and most non-food/beverage stores are closed.

------
filleokus
I have no expertise in any area, but I would like to put down my thoughts for
posterity (and feedback).

I think we will see governments in the coming week or two start doing broad
randomised samples of the population for antibodies and realise that many many
more people have been infected than previously thought.

Meanwhile fears for the economic consequences will grow larger. Also
(hopefully) countries like Germany and the UK will not see Italy levels of
death and misery.

Around the mid of April when spring in the Northern hemisphere is really
kicking off people will have been socially distancing/quaranting for 4-6 weeks
and will be really tired of it.

These factors will start to lessen the public support for social distancing
and life will start to return to normal. Big events will probably still be
canceled, people will not travel for holidays etc but economic activity will
start to pick up in some sectors.

Some sectors like hospitality (which employs many low skill workers) will
continue to see very low demand until July/August (or possibly even longer).
If the important summer season doesn't deliver, these industries will be
doomed. While many other sectors will get a swifter recovery.

A litmus test for the general economy will be sales of new iPhones this fall.
I suspect it will be slightly below last year, but not like 50%. If it is, my
predictions were completely wrong and we are probably much worse off than I
expected.

~~~
biolurker1
How can UK see less numbers than Italy when they imposed a cuarantine much
later at the exponential curve? It's just impossible mathematically

~~~
user5994461
These are very different cultures. London allows to work from home, or to be
off work when sick, and does not force employees to shake hand or hug as a
matter of courtesy.

Besides, the UK didn't quarantine officially much later than Italy. Not to
mention that the the larger corporations instructed employees to work from
home week(s) before the official lockdown.

~~~
biolurker1
nice story, take a look at the London subway today around the news and social
media that falsifies all your hopes. Welcome to the harsh reality and good
luck.

~~~
OJFord
The tube (subway) has been at half capacity for weeks.

If you're seeing photos of it being busy 'around the news and social media',
it's either false, or TfL has overdone it in reducing service and so caused
usual levels of crowding.

Excerpts from most recent service update email:

> Ridership on our services has fallen dramatically over the last few weeks.

> Some Tube stations that do not interchange with other lines will have to
> close until further notice

> From today, Friday 20 March, the Waterloo & City line will be closed and
> there will be no Night Tube or Night Overground services until further
> notice. Emirates Air Line will have a reduced service until 20:00 today

> From tomorrow, Saturday 21 March, Emirates Air Line will be closed until
> further notice

> From Monday 23 March, we will also gradually reduce other services across
> the TfL network

More here: [https://tfl.gov.uk/campaign/coronavirus-
covid-](https://tfl.gov.uk/campaign/coronavirus-covid-)

------
rubidium
We of working age need to be thinking of ourselves a the rebuilders.

Let’s get through this, support each other, and be doing everything we can to
be ready to spring back into economic action when COVID gets under control.

I think it’s entirely up to the people’s response. The spirit of the country
(and govt policies) will determine more about what happens after then pure
economics can tell us.

I personally don’t think there’s a good economic analogy so everyone is just
guessing.

~~~
vickychijwani
Yes. I guess the post-WW2 rebuilds of Germany and Japan are good examples of
this.

------
thoughtstheseus
U.S. focus: Right now the biggest issues are demand and liquidity. Demand fell
off a cliff. When demand falls off like that it screws up working capital
flows so now there’s a huge demand for cash. That’s why the fed stepped into
the treasury, money market, commercial paper and municipal bond markets. It
also looks like they may try to step into the corporate bond market to keep it
functioning. Prior to all this the general consensus was that markets were
priced to perfection, highly priced but not unreasonable given growth. The
market needed growth to function. The risk of defaults will be delayed a bit
but severe when if/it hits. Much of the market is covenant lite so by the time
you report financials, break covs, get through the cure period many businesses
will have the entire capital structure wiped out. Events like this tend to
have lasting impacts on people, it changes their consumption and savings
behavior. People will demand that certain industries have more resilient
supply chains and larger economies will take protectionist stances in those
industries. There’s so much to unpack here...

------
bufferoverflow
It's going to be bad for the following reasons:

1) Governments are not shutting everything down fast enough. Many countries
are in the phase of _" oh, we only have 200 cases, not a problem, look at
Italy"_. They are just a few weeks behind Italy.

2) Some people, especially young ones, are not following quarantines. All it
takes is one super-spreader to start another wave of infection.

3) People will run out of money soon. Governments will have a choice of either

    
    
        a) printing money
    
        b) distributing food and meds to everyone
    
        c) letting people work in masks / googles / gloves
    

4) Not nearly enough testing is done. South Korea and China are the only
countries that did it right. Italy is not testing everyone suspicious (though
more than other countries).

5) Most countries are not ready for thousands of patients requiring an ICU. No
country is ready for a million ICU patients.

I think our only hope at this point is one of the drugs works very well.
People suck.

~~~
IanSanders
> 1)

I'm just a rando from the internet but my suspicion is that governments could
be intentionally trying to slow the infection rate down rather than stop it
completely. If you perform a perfect shutdown with 200 cases, lets say another
400 are identified since, all 600 recover/don't make it, but once you stop the
quarantine everything will be back to square one - someone will spread it
again eventually.

On the other hand if you let it spread a bit, then shutdown, high but
manageable number of people will get sick and recover. (I will be less
efficient so some transmission will still occur, eventually ensuring everyone
either recovered or died, with as many as possible getting the medical care)

~~~
harambae
>intentionally trying to slow the infection rate down rather than stop it
completely

The individualistic attitudes in the US (and probably Europe, although I'm not
an expert there) were never going to lead to the infection being stopped
entirely. I can't imagine anyone was actually worried about being too
effective in containment.

~~~
IanSanders
>I can't imagine anyone was actually worried about being too effective in
containment.

It could have been when we had just a few cases, but you're right.

The more effective the quarantine is, the longer it will take, creating more
stress on the economy.

------
_nalply
There are some trends since the seventies: higher productivity per employee
and for marginal groups more and more difficulties to get a job. The pandemic
economic crisis accelerates these trends.

Let's have a look at company A and company B. Company A employs many people
and is not able to offer remote work. Company B doesn't employ many people and
can offer remote work. If these companies compete it is clear that company B
will grow during the crisis, and company A won't.

In other words, we have structure change bombed upon us.

CEOs and owners say, let's see, a pandemic and suddenly labor disappears. How
can we mitigate such problems in the future?

My hunch is that after the crisis is contained economy returns, however it
will be even more difficult for people to have a job than before. If the state
doesn't help the people, economy will stay depressed because people are laid
off and just don't have the money to buy things.

Edit: many little improvements.

------
sfusato
We are in uncharted territory. At this point it's just guesses (educated or
not).

~~~
smitty1e
Either this thing is "The End of the World As We Know It", or it is not.

Give it another week or so.

~~~
mpodlasin
This advice does not work.

I have been "giving it another week" for 3 weeks now, trying to figure out
which direction it is going to go.

~~~
smitty1e
It's unknown at the moment, but I doubt the bad guys win.

Pessimism isn't my style.

~~~
robjan
Who's the bad guy? Viruses don't have intentions

~~~
smitty1e
Some spreading them may.

------
friendlybus
It won't crash now, we are just weeding out the companies that aren't working.
Real estate will drop, the money men will become king for a while,
manufacturing pulled most countries out of the Great Depression after sometime
of struggling trying to get it started.

Save emergency funds and in the next decade of growth and stockpile for the
30s, when we hit real trouble. Find a currency or commodity that won't be
washed out, silver kept China out of trouble in the 30s until the US raised
demand for it so much that they got dragged in too.

------
chewz
It doesn't have to be bad, on the contrary. Black Death in XIV century have
invigorated European economy.

Think of it as much needed reset on multiple levels. New supply chains will be
created, new business opportunities. Capital re-allocated. It is going to be
wonderfull times.

Also historically plagues allow for great upward social mobility which is
kick-start for the economy.

~~~
qubex
Oh yes, that’s a great example: “so many people died that the two-thirds that
survived enjoyed benefits for generations”.

Yes, it’s accurate... but I think it also somewhat misses the point. The
unexpected consequences of a mass culling several years down the line probably
is of the “extremely bad” persuasion.

~~~
impendia
According to some historians, OP is right about the Black Death. For example,
it has been suggested that it led to the Renaissance. See for example here:

[https://dailyhistory.org/How_did_the_Bubonic_Plague_make_the...](https://dailyhistory.org/How_did_the_Bubonic_Plague_make_the_Italian_Renaissance_possible%3F)

The Black Death was horrific, but had what I would argue were some very
positive long-term consequences.

~~~
qubex
I am absolutely certain that the OP is correct, I don’t dispute it

But telling somebody who is managing a 40-people firm facing 20x revenue drop
that “it might work out as well as the Black Death did” is... kind of missing
the whole point, to be perfectly accurate.

------
jasonv
I live in SF. The company I worked at, which you’ve heard of, shed all its
contractors on Friday. One week into the shelter in place. i just moved back
here to take the gig a few months ago. Now I have a Bay Area rent obligation
with little probability of finding a job until this is over, and then some.

I keep saying wait one or two “1st of the month” milestones, see how things
look. That’s where my own decisioning is headed.

------
nopinsight
Chance of 1929-style Economic Depression: ~60% (Recession chance: >95%)

Make sure you have the cash to live properly and satisfy urgent needs if
necessary over the next 6-12 months or longer. Only invest the remaining in
highly-rated bonds or great stocks with long-term resilience.

The world is facing a liquidity crisis, along with both demand & supply shocks
that can’t be easily fixed by governments.

We are in a war with the virus and, in most of the world, we are losing.

Global economy can be rescued only if we can mostly mitigate the virus impact.
The other 40% is for the case where we found a way to do that and the
liquidity injection & fiscal measures are sufficient.

~~~
adrianmonk
You've called it a war, which is just an analogy, but aren't actual wars
sometimes good for the economy in certain ways, like generating economic
activity? Is there a chance that could apply here?

Though maybe the work of fighting a medical war is more narrow and specialized
than the work of fighting a literal war. For example, you cannot institute of
draft and make people into doctors in time to fight this. Whereas with an
actual war you can stick people on the front lines with a few months of
training or put them to work in a factory.

~~~
polishdude20
Problem is that in war, you can still go outside in your home country and do
work.

------
rdthree
Way too early to tell what’s going on but worse than 2008. Everyone is too
busy writing bullshit about covid to see the 2nd and 3rd order effects.
Italian and Spanish banks have been near insolvent for a good part of a decade
they are going to completely blow out. A lot of other Banking institutions
will fail as well because levered bets got blown out and we had a 3 or 4 sigma
event nobody headges for not to mention lack of payment that will show up on
balance sheets 4-6 months from now.

I doubt anyone is going to be super keen on investment in that money loosing
miracle startup now money will dry up soon it’s just been so sudden people
haven’t really adjusted yet. I don’t think it will be as bad as the depression
of 29 though. There is plenty of food available and some limited safety nets
will keep people from starving. The gears of forclosure are so slow many will
stay in “free” houses for 2-3 years. The real question is jobs, will Americans
work the fields? Or Will they just sit on government benefits? Will
manufacturing come back? How do we deal with global labor and ecological
arbitrage. Honestly I don’t think trump or Biden are going to be capable of
addressing these Structural issues so we’re gonna loose 4 more years and risk
a second smarter and more dangerous Trump in 2024

------
jacobwilliamroy
The Big One is coming. This is just gonna be a recession, no one is going to
lose their retirement or social security this time. Still, big banks like
American Savings and Chase are going to be buying up lots of property
("seizing" is probably a better word for it). When The Big One comes, we will
all have to forfeit our property to the Federal Reserve, and they will start
the cycle all over again.

I think the cycles are getting shorter, because of computers and the internet
which allows this manipulation of the economy to literally happen at the speed
of light.

It is possible to maintain our current standard of living without the work of
the Federal Reserve, but such would require drastically cutting military
spending and other uneccesary expenses (conversation for another time). One
way to cut the military budget, without actually reducing our firepower would
be to merge all branches together into one command structure to facilitate
interoperability between machines. For example, military contractors will sell
the DoD 3 different copies of the same helicopter with slight differences
which make it hard for them to interoperate; you would need 3 different
mechanics/computer techs, with 3 different sets of parts and tools.

~~~
_bxg1
Specifics about how to make the military more efficient are probably out of
scope (and out of depth for anyone here), but I agree we should spend less on
it (and I think we could, without making any other changes, and still remain
the dominant power by a wide margin)

~~~
jacobwilliamroy
I think there are a lot of ex-military, active duty, and military contractors
using HN at the moment.

------
hnarn
If I was running a company of any size and revenue dived by 20x I would
probably consider emergency measures. Skeleton crew of only the most essential
employees, unpaid leave for the rest (that will accept it) and underline that
these are temporary measures to keep the company alive.

Some will inevitably look for and find other work, but if the whole company
goes under everyone will be in the same boat. I'd say this is not going away
in the near term and if you're not acting like it's a crisis now you may be
unprepared for a sustained or even worse drop in revenue.

Just my five cents, obviously noone can predict this with any certainty.

------
rihegher
I expect things to get much worst before it gets better, but I do believe some
industry will profit of the situation, like food delivery, some will adapt
like services switching to remote ans some will strugle and eventualy die.

------
chollida1
Well the stock market is now down below what it was when Trump took office, so
we've already lost 3 years worth of gains in one month, which is pretty poor.

Goldman put out a note saying the GDP would dip about 9-10.5% over the first
quarter of the year, which is almost the worst we've ever seen. And that's a
single quarter, a single quarter. US GDP maybe down 20% by the time this is
over.

And keep in mind no doctor that I've talked to thinks this will be over any
time before mid 2021.

And probably the worst news is that this is the type of drop that won't be V
shaped, for all the talk of 2008, atleast it went down and then went right
back up.

Most recession affect a specific geographical area or market sector, This
pandemic affects the entire world at the same time, which hasn't really
happened since the 1970's gas shortages.

The recovery here will not be V shaped, it will take years and years to
recover. People have spent their savings just to survive, governments are
delaying tax payments and throwing money at the problem.

This recession/depression will be with us for years to to come and will be the
worst thing that anyone alive can remember.

Can anyone make the case that the recovery will be quick? Because I haven't
seen anyone make that case yet in a believable way.

~~~
incompatible
The US stock market always seems wildly optimistic. It was still near its all-
time highs while it was already seeming quite likely that the virus would be a
serious problem. The Australian stock market is now at 2013 levels.

On the other hand, once there's a sign that the end of the pandemic may be in
sight, I expect that the US markets will overreact on the side of optimism,
regardless of the actual economic damage that has been done. Bear in mind that
governments are adding to the vast stockpile of paper "wealth" that's already
out there, and that tends to cause asset inflation.

------
apinstein
My view is that this isn’t an underlying financial crisis. However, of course
the temporary disruptions will be of such magnitude that they will create one.
Worst case IMHO is that it could be way worse than the Great Depression due to
the very tight coupling, high leverage, high overhead and JIT nature of the
global economy today. There will be a huge cascading failure effect.

That said, interventions can have a huge impact on the extent of that.
Interventions that delay/defer/mitigate economic damage at the entity and
individual levels I think can do the most to simply “pause” the economy and
prevent underlying degradation while we deal w the pandemic.

Imagine the benefit of just all debt being rolled over month-by-month to the
end of the loan term, and similar for renters. Defer irreversible economic
decisions and go into subsistence mode. I think that will be the best best for
the maximal eventual recovery. That will be the difference in a return to
prior levels taking 6-12 mo vs 5-10 years.

Sadly I don’t think the US is heading in this policy direction. I half wonder
if we should just do it grassroots and then there will be ample support to
reimburse it via tax or other incentive.

That’s how I am thinking about it anyway.

~~~
apinstein
I realized I didn’t answer your specific q. Whatever impact you see in your
business, assume it will continue for at least 3-4 months. If that is
unsustainable then the sooner you deal with it the better.

Not sure how unemployment insurance works in your country but in the US I
spoke to restaurants and they just terminated people so that they could
collect unemployment at a higher level than the business could provide income
(salary or tips). Do what you have to do fast, and do it empathetically and in
a way that preserves your options for restarting / re-hiring when things
eventually improve.

------
ceilingcorner
The individual countries of the EU have not coordinated on this whatsoever and
I can't see it remaining in its current form post-crisis. We're probably
looking at a more loosely-defined trade union and a trend away from further
integration. I'm not sure if this will be good or bad for the European
economy, but it will certainly affect it in the short-term.

~~~
CaciaraAsAServi
I am of opposite opinion. Being a strange unprecedented political lifeform,
the EU might be further defined in some of its instituions after this crisis.
After the collapse of the USSR and German reunification they defined one
piece, after the 2008 crisis some other piece, and so on.. maybe the EU can
only be shaped crisis after crisis, being so particular a political entity.
Look for example at how they are now discussing the Eurobond issue (means:
moving a bit toward fiscal integration).

It seems IMHO that such a historically new process cannot proceed linearly but
only via sudden accelerations determined by the occurrence of crises (and
talking about crises, I guess that in the next decades there will be enough of
those)

Or maybe not.

------
majjam
I found this article to be insightful re the economic impact:
[https://www.economist.com/business/2020/03/21/much-of-
global...](https://www.economist.com/business/2020/03/21/much-of-global-
commerce-has-ground-to-a-halt)

------
sergiotapia
What I want to know: With all this god damn quarantine and stay at home,
what's to prevent one sick person to go out after the all clear and just
reinfect everybody. This stay at home situation is not sustainable. Is this an
economic war from China?

~~~
jrockway
Everyone is going to get sick unless we find a vaccine or a cure. That is
inevitable. The idea behind isolation is to spread out the cases in time so
that supplies/treatment are available for you when you get it. If you get sick
right now and need an ICU, you might just flat-out die because there aren't
any ICU resources for you. If you get sick 6 months from now, there will be
more resources.

------
generalpass
Just focus on the strength and depth of the government responses, most
especially the establishment of martial law. No sector is actually an island
because the economy is an abstract concept used to describe certain types of
interactions that impact resources. It isn't like you can just turn the A/C in
a car off to make the gas last a little longer because it isn't a singular,
engineered thing with clear systems. It is a system more complicated than
anyone understands.

------
gmuslera
It may depend on the time frame. The markets were inflated, with a lot of
voices telling how unsustainable things would be soon enough, and then this
black swan happened.

The current situation will last at least a month (and how bad it will be while
it lasts is yet to be seen), and after that keeping social distances, and
closed borders will remain for many months.

The rules will be just different. It may be very bad for some old industries
(travel, tourism, are easy ones), and good for some of the emergent ones.

------
danielTheM
I have been wondering: Isn't this (likely) downturn a chance? Don't we need to
rebuild our economies anyway given climate change? Maybe it is a good thing
that airlines are going away because you shouldn't be able to fly from Paris
to New York for 400€. It seems that we now have a chance to build something
new so instead of rescuing these companies we should let them shrink and
support former employees to transition to less carbon intensive sectors.

------
cynusx
Last crisis (Spanish flu) caused a 5% decrease in global GDP and that was
without widespread shutdowns and an already depressed GDP from the first world
war.

I think realistically the drop in demand, the onslaught of bankruptcies, the
stopping of lending and the depletion of consumers' and corporate cash savings
will lead to a prolonged recession of at least 5% GDP decrease.

On the upside, climate change is now within bounds for the coming years.

------
idlewords
The crisis is tied to an ongoing pandemic whose scope and consequences are
global, but not predictable. No one can credibly claim to know the extent of
the disruption, other than the simple observation that large parts of the
economy have stopped and might not come back for a while. Anyone who claims to
know more is guessing.

------
tarsinge
I'm not well versed in economy and I have a maybe dumb question: how would
large public infrastructure projects financed by the government in the post-
crisis period help with keeping people employed and help the economy spring
back? Edit: are there historical examples relevant?

------
m0llusk
This crisis will be very large and also very drawn out because of all the debt
and other economic overhang. The thing to focus on the most, though, is that
there will be recovery and with that great opportunities for buying stocks and
lows and expanding into markets as they regrow.

------
iamgopal
If we look at previous five years, basically there was constant increase in
consumer demand and the supply did reflect to fulfill the same. To come back
to that condition will take another five years.

------
_bxg1
> Our revenue this week is down 20x compared to the average of the past 4
> weeks

What industry are you in that things are this bad? Surely it must be one
that's directly impacted by people not going out?

------
jpxw
It’s probably going to be worse than the Great Depression.

~~~
fennecfoxen
Unlikely. One reason the Great Depression was so bad because there was an
environmental catastrophe (the Dust Bowl) which made agriculture very hard at
a time when agriculture was still a really, really big deal. The virus does
not make normal economic activity particularly hard; we are avoiding economic
activity for mostly humanitarian reasons, and we can resume economic activity
either when everyone gas been infected anyway (yay pandemics), or when testing
and treatment is more readily available.

Another reason the Great Depression got worse than a normal depression was
that the Hoover administration unwisely decided to make money and credit
_less_ available during the crash. Today's policy response is more about
throwing money at people (sometimes just at the politically connected,
sometimes fairly). One can and should question many specifics (the response is
not super coherent) but at least it is the opposite of fiscal and monetary
tightening.

Another reason the Great Depression stayed so very bad for so very long was as
a consequence the FDR administration's unprecedented intervention into the
economy. I don't mean Social Security, either, I mean things like the National
Recovery Administration, which explicitly sought to turn the US into a planned
economy, with minimum and maximum prices for everything, run by local
politically-connected cartels with their own police powers.

When the NRA was declared unconstitutional, its practices were shifted into
other places. A few of the more ridiculous practices led by other agencies are
still around. For instance, the Supreme Court only killed the USDA's Raisin
Board in 2015 when a raisin farmer objected to them seizing 89,000 tons of
raisins (30% of his crop) to give away for free in school lunches. (The USDA
of that time was also great at encouraging the big agribusiness factory
farming and pushing out what small farmers were still able to operate.)

None of this planned-economy stuff is on the table today — not in the US, not
with this administration anyway, and not with the current US senate. There's
an outside shot of a fully nationalized health system if Bernie Sanders wins
and Democrats take the Senate, and that's the most ambitious plan, and even if
we assume the taxes to fund it were quite stultifying indeed, it's unlikely to
be as harmful. No one is coming for our raisins.

~~~
graeme
The Great Depression was global. It affected much more than the US. The dust
bowl was local colour. The premise of your entire analysis is faulty.

~~~
fennecfoxen
The Great Depression was global, but much of the damage was US-led, so the
factors that made it a _great_ depression, not just another footnote in
economic history, are relevant worldwide. The world economy was already
integrating, particularly in the areas of banking and finance, so US monetary
tightening affected many European economies and currencies, causing crises in
European banks and currencies worldwide. Meanwhile foreign direct investment
from the US dried up, neutralizing what had been a major source of European
productivity growth in that era.

Today, everyone's quit the gold standard and the forex situation is very
different, blunting impacts of wild currency movements. US and European banks
are not at risk of bank runs (as they are stabilized by general government
policy and specific interventions), and whatever chaos we see, a ~35%
contraction in the supply of USD is not on the table. If we _are_ beset by
deflation it's going to be puny in comparison.

It _is_ worth mentioning that the Depression was also associated with major
breakdowns in international trade, in part due to lots of tariffs. The bad
news is we're tariff-happy again, but not as bad as Smoot-Hawley for now? The
protectionist impulse bears monitoring.

And I'll finally clarify that we _will_ still have a recession, and it might
be pretty nasty. It's just not going to be Great Depression bad where we can't
recover for a decade, not with just what's happened so far.

------
CyanLite4
I’m betting on a V-shaped recovery. Reasons:

1\. There’s so much friggin stimulus coming that something big will happen.
The (U.S.) Fed is buying trillions of anything resembling bonds at the moment.
Treasuries, commercial paper, muni’s. And doing a trillion PER DAY in the repo
market. Plus $2+ trillion coming from Congress, which includes checks directly
to consumers and also up to $4 trillion more in direct lending to small
businesses with forgivable loans. Not to mention interest rates at 0% and gas
prices at $1.50/gal. The financial sector is healthy. Big tech companies are
still sitting on a few trillion in cash.

2\. Everyone has cabin fever and missed their spring breaks and perhaps summer
vacations. Prices on travel and leisure are at an all time low. A weeklong
trip to Hawaii for a family of 5 is down to like $1500.

3\. At some point (I believe in days/weeks) there will be a medical
breakthrough. Hydroxychloroquine+Azithro has had stunning results in South
Korea, China, and France. Many US docs are already prescribing now. Even if
this works only 40% of the time, that’s significant enough to flatten the
curve and most importantly lower the death rate around the seasonal flu. Early
anecdotal evidence suggests it’s been effective in 90%+ of cases.

4\. I think by mid-April folks especially in the U.S. are gonna say enough is
enough and break containment. The rest of the 80% of America isn’t willing to
shutdown the entire economy for the 1% who face almost certain death from this
disease. I know that’s crude and sounds cold-hearted, but Fox News is going to
be very convincing that we should just resume our normal way of life and let
the chips fall where they may. Election season starts in earnest in mid-Spring
and Trump I believe will end the shutdowns and tell us to go back to living
our lives. Biden will almost certainly do the same with a focus on rebuilding
America. People can shut down for a week or two, anything longer than that and
you face rebellion. School has been out since early March and the soccer moms
here just want to go back to being normal. Expect a presidential candidate to
jump out first with a “let’s get America back to work” strategy and end the
shutdowns and maybe only recommend quarantines for the at-risk population.

------
mam2
What about putting everyone in chômage technique ?

------
bashwizard
Oh it has just started. 2008 will be a fart in the wind compared to the
shitstorm we're heading towards.

------
throwVKPPQHQZ
It would be wise for mostly everyone in the West as an investment for the
medium and long term status post the pandemic to start learning Chinese.

------
bashwizard
Oh it has just started.

The Buffett Indicator.

------
aussiegreenie
It will be as bad as 1974.

------
brown9-2
Why are you posting this question as if anyone here knows the answer?

~~~
meva
How would anyone check if there's an answer to a question without posting the
question?

------
throwaway29358
The more the economic crisis worsens, and the more people have to watch their
parents and grandparents die prematurely, the more virulent the global anti-
China sentiment will get. The #fuckchina hashtag is really popular (not
trending though, probably due to censorship) on Twitter:

[https://twitter.com/search?q=%23fuckchina&src=typed_query&f=...](https://twitter.com/search?q=%23fuckchina&src=typed_query&f=live)

I don't think the CCP realizes yet just how harsh the backlash is going to be.
China has zero soft power now. Expect to see supply chains being rerouted.

~~~
mrich
Don't think that will happen. China will clean up the root cause of the virus
quickly (wild animal markets). They seem to have the outbreak under control
now, are ramping up production again and are in excellent position to help
other countries dealing with the crisis now, which is exactly what they are
doing:

[https://edition.cnn.com/2020/03/16/africa/jack-ma-donate-
mas...](https://edition.cnn.com/2020/03/16/africa/jack-ma-donate-masks-
coronavirus-africa/index.html)

[https://www.wsj.com/articles/chinese-doctors-and-supplies-
ar...](https://www.wsj.com/articles/chinese-doctors-and-supplies-arrive-in-
italy-11584564673)

[https://www.reuters.com/article/health-coronavirus-serbia-
ch...](https://www.reuters.com/article/health-coronavirus-serbia-china/china-
sends-serbia-help-to-halt-coronavirus-spreading-idUSL8N2BE0W2)

~~~
JoeAltmaier
The Chinese have apparently quit testing, so naturally it seems they have it
'under control' since they report zero new cases (detected).

And the live-animal markets have produced disease before, every year in fact
for decades, and not been 'cleaned up' so far. I have little confidence in any
of that happening.

I have no problem with the Chinese as people, but their current government is
not to be admired.

~~~
berdario
> The Chinese have apparently quit testing, so naturally it seems they have it
> 'under control' since they report zero new cases (detected).

That's patently untrue

[https://www.nbcbayarea.com/news/coronavirus/bay-area-
woman-f...](https://www.nbcbayarea.com/news/coronavirus/bay-area-woman-faces-
covid-19-testing-govt-monitoring-upon-landing-in-china/2258934/)

~~~
JoeAltmaier
Foreigners only?

~~~
berdario
No, here's a report of an indigenous case:

[https://www.shine.cn/news/nation/2003224819/](https://www.shine.cn/news/nation/2003224819/)

This is exactly what you expect to happen when efforts at containing the virus
have been successful: the number of new cases gradually tapers off, until it
reaches 0 or almost 0, and most new cases are due to people coming from areas
of the world in which it's still raging.

The outbreak started earlier in China, and it's thus unsurprising to see that
they reached this point earlier than in other countries.

