
A Long Time Until the Economic New Normal - sarapeyton
https://sloanreview.mit.edu/article/a-long-time-until-the-economic-new-normal/
======
throwaway_USD
It seems people don't realize how much $6T is and the effects of that kind of
money being injected into the economy. Consider the 2008 housing bubble and
financial crisis which was ultimately corrected with two stimulus packages
totaling less than $2T...that money turned the economy around, put the economy
into the longest bull market in history, resulting in a record stock market
and corporate profits.

Now its not to make this sound good, the 2008 crisis had real victims,
millions lost jobs, never returned to the workforce and became homeless...but
with the stimulus money in play those people were systematically swept under a
rug and hidden from public. This was done through cooking the unemployment
books (basically if you exhausted your unemployment benefits, the government
no longer counts you as unemployed but removes you from the job market on the
basis that you will likely not become employed again).

$6T is over 3x the 2008 stimulus packages and it will be spread to an even
smaller group of people and a much more significant number of people will
become unemployed (already over 20M) and they to will be swept under a rug in
time and disappear from economic data when they exhaust their unemployment
benefits...the rich will become richer and the government will go on to brag
about the drastically falling unemployment numbers.

~~~
alexilliamson
It's amazing how the unemployment rate gets treated as gospel in the media. I
never see the actual jobless rate reported anywhere. Why is that?

The incentive for politicians to prop themselves up with the unemployment rate
is clear. But why does the media never push back? Does "jobless" data - that
is ACTUAL unemployment- not exist?

~~~
xyzzyz
Of course the data exists. See eg.
[https://fred.stlouisfed.org/series/LREM25TTUSM156S](https://fred.stlouisfed.org/series/LREM25TTUSM156S)

The issue people are talking about unemployment rate and not the joblessness
rate is that people care about ability to get a job if you want one. The
joblessness rate includes people who are looking for job but can’t get any,
but also people who are supported by their spouses, retirees, and people
living on government benefits who are not looking for job, because they are
disabled, too busy with childcare, or care for other people needing it, or
ultimately too lazy and having too little self-respect to stop living on
charity of others.

This wide aggregation makes it very difficult to understand what actually
causes changes in it: are more people jobless because of expansion of
disability benefits? Or maybe there was a surge of people retiring early? You
need to look at other indicators to understand it. For example, good amount of
growth of employment rate in recent years is a result of many people, who
previously drew disability benefits to compensate them for their inability to
work, actually going to work, once the work became better option than
government check.

For this reason, unemployment rate is a better metric to look at, because it
tells you something more useful and has better signal to noise ratio.

~~~
alexilliamson
Sure I agree that the typically reported unemployment measure is best for
measuring how easily people who want jobs can obtain them. However, so often
this is touted not only as an indicator of the overall economy, but even the
well-being of society. The categories of people you mention that shouldn't be
counted... all of those people live in and have an effect on society. If we're
worried about the economy, it seems like we would want to know how much of our
population (not just job seekers) are working, and how many people depend on
the system without employment. And if we're worried about aggregate well-
being, a number that takes into account the massive prison population seems
better.

I'm not saying that the common unemployment rate is useless. Only that it's
over-used, and used to answer questions it has no business answering. It feels
like we're sweeping a lot under the rug and everyone is playing along.

~~~
greglindahl
> The categories of people you mention that shouldn't be counted... all of
> those people live in and have an effect on society.

Those people are counted. I'm not sure why you're flaming someone attempting
to educate you about how they are counted. Hint: it takes more than one
number, and, the government publishes more than one number.

------
fergie
Strapline: "A full economic recovery from the COVID-19 pandemic is unlikely,
and the new version of normal for work and organizations is further off than
we think"

2nd paragraph: "...it is likely that full recovery of economic activity,
including GDP growth, jobs, and unemployment, will take at least a year, and
likely much longer."

At this point we are used to shoddy economic analysis and predictions that are
so woolly as to be meaningless, but this article is in direct contradiction
with itself. Surely MIT of all places could place a bit more rigor on its
output.

~~~
vanniv
To quote Randall Munroe ([https://xkcd.com/1052/](https://xkcd.com/1052/))

By dubbing Econ "Dismal Science"

adherents exaggerate;

The "Dismal"'s fine -- it's "Science" where

they patently prevaricate."

------
lend000
If you're in the fortunate position to have some capital during this crisis,
this is an ideal time to start a soft-tech or low cost R&D intensive startup
that can be seeded remotely. Competition will be largely wiped out relative to
supply of dollars and plenty of market share will be there for the taking when
the world opens back up for business. I imagine there will be a
disproportionate number of big winners that were founded in 2020.

~~~
sails
> to start a soft-tech or low cost R&D intensive startup that can be seeded
> remotely

Can you unpack what you mean by that? I get the general gist of investing in
the future, but think those are some interesting thoughts to explore.

~~~
lend000
I basically mean a tech product MVP that can be built from your garage (or a
few remote garages) in a few months without a huge amount of capital.

So I'm not talking about hard-tech startups where social distancing and less
investment capital will be affecting you, too (like automobiles or nuclear
reactors), although if you are well positioned to build something in the
crisis, then why not? But specifically, this is a tremendous opportunity for
new software startups or hardware startups that can be built from off the
shelf components.

------
JackFr
The points made are fine insofar as they go. At the same time, the current
economic situation is, very literally, unprecedented. It has aspects of a war,
a natural disaster and a secular recession. Economists should try to estimate
its effects, but in this case their predictions need to be taken with an extra
large grain of salt.

~~~
twelve40
How is it very literally unprecedented? Spanish flu had much deadlier
properties, "work from home" wasn't even possible, there were no antibiotics
and almost none of the modern med tech, yet there is no mention of a "1919
economic collapse". Death toll in the US was <700k, which is not great, but
actually less than some of the insane apocalyptic predictions you hear about
this time around, especially considering that in 100+ years we probably
improved just a bit.

So I'd say it looks very much "precedented", and during the last precedent the
situation was much much worse, and the world moved on just fine for another
decade after that.

~~~
Jagat
Spanish flu was very closely intertwined with the war, because of which people
were kept in the dark almost everywhere. Lack of reporting translates to lack
of awareness of the pandemic which translates to people working and shopping
fearlessly.

The difference now is that people know there's a pandemic, and many would be
averse to go out working, or shopping even though the scale is much lower than
that of Spanish flu.

Random tidbit:. It's named Spanish flu because that's one of the few places
where it was reported, because it wasn't involved in ww1 and had no reason to
shut down the press. Everyone thought the flu epidemic was in Spain.

~~~
hilbertseries
During the Spanish flu pandemic, entire cities and towns would get sick and
everything would stop. There were also shelter in place orders given during
this time. 1918 wasn’t the dark ages, we had telephones and radios. People
knew what was happening.

~~~
credit_guy
> and radios

According to wikipedia first news on radio came in 1920.

"The first radio news program was broadcast August 31, 1920 by station 8MK in
Detroit, Michigan."

[1]
[https://en.wikipedia.org/wiki/History_of_radio#20th_century](https://en.wikipedia.org/wiki/History_of_radio#20th_century)

------
_curious_
It's a succinct and plausible set of positions held by the author, but I'm not
sure this one holds up:

"The disruptions in face-to-face work will be a drag on economic efficiency,
leading to slower growth in revenues, lower profit margins, and reduced cash
flow."

Maybe I've been doing business remote/virtual for so long already that I see
actual face-to-face as the economic inefficiency more often than not. Earlier,
the author espouses the obvious benefits of being in person, but I think those
have been outweighed by the trade-offs for many years already. What many will
simply need to adapt to going forward is the type of communication differences
required for successful remote/virtual/verbal interactions.

Quality listening skills and straight talk are more important than ever!

~~~
ska
I suspect that we here on HN may suffer from selection bias, in that many of
us do work that is most amenable to moving to remote.

There is also an issue of transition, where there plausibly is quite an
efficiency lag (months, at least) before people become get really set up, even
assuming they are able to be as (or more) efficient.

~~~
nitwit005
When it comes to actually building a product there is definitely face to face
benefits.

However, I'd point out that many software companies have far more sales people
than engineers. There has been this expectation that salespeople should fly
out, and have meetings, meals, and expensive drinks with the companies they
sell to. Now magically that's all vanished, but sales are still happening. The
cost of some sales efforts has presumably plummeted.

~~~
oblio
The problem with your comment is that you're forgetting all sales are remote
now.

Once the lockdown is over, I wouldn't bet on the company that keeps doing
remote sales versus the company doing normal face to face sales.

~~~
nitwit005
I'm not forgetting. That's my point. The sales are remote, and thus cheaper.
No plane flights, no crazy expensive wine at dinner with customer.

And sure, they'll revert back, losing the efficiency gains once the government
stops accidentally intervening in sales practices.

------
xwdv
IMO things aren’t that bad. Yes restaurants and some small businesses are
suffering, but look, people are cooking at home more, spending time with
family, being healthier.

People don’t need cosmetics or new clothes or cars or gasoline, and some
luxury flashy items take a hit because there’s no way to really flaunt your
wealth inside your own home. People aren’t traveling as much, tourist hotspots
that were getting trashed from so much traffic are getting a reprieve. People
take joy in simple mundane things like boiling some tea or tending to some
house plants instead of enduring a miserable struggle chasing their wildest
ambitions fueled by what they see on social media. People who work from home
or remote are no longer second class citizens, they are now first class
citizens just like everyone else who is also working from home. And a result
of this, I find people are more tolerable, and I even find myself caring more
about the plight of homeless people, because these are the times when one
really needs a home more than ever.

Not every business can survive this, but most can if they are built with the
assumption that this is the new normal. That’s how you protect yourself.

Fuck man, this is a way better world, and frankly I’m not sure I really want
to go back to what we used to have. I actually get depressed thinking this
will all go away and I’ll never experience anything like this again in my
life. I hope the pandemic lasts long enough to make some of these things
permanent.

~~~
Invictus0
> I hope the pandemic lasts long enough to make some of these things
> permanent.

PEOPLE ARE DYING. This is A DISASTER. Have some fucking compassion, good
grief.

~~~
arbitrary_name
People die every day. Malnutrition has killed more people this year than
covid. Where's your perpetual handwringing for those in impoverished far off
countries? Or are you just emotional because it's YOUR people dying right now?

Keep your myopic melodrama to yourself.

~~~
24gttghh
This is the most out of touch, bizzare, sad, and disgusting comment I have
read yet regarding this pandemic. You should be ashamed of yourself.

~~~
dang
Please don't do this here.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
SimeVidas
My stupid country just went back to pre-2008 levels, and now this. My entire
adult life is basically one long period of stagnation.

~~~
ipnon
The US spends $7 for seniors for every $1 they spend on minors.[0]

[0] [https://www.brookings.edu/wp-
content/uploads/2016/07/1_how_m...](https://www.brookings.edu/wp-
content/uploads/2016/07/1_how_much_isaacs.pdf)

~~~
danbolt
I’m not an expert, but I’d imagine that’s related to seniors voting much more
reliably than the youth.

~~~
Ancalagon
Darn those millenials, they shouldn't have had a smaller voting-block,
shouldn't have spent so much time in low paying hourly positions with no time
off, and should have voted before they were 18! /s

------
dustingetz
We could be about to see a massive re-pricing in goods & services, salaries,
rent, commodities with disrupted supply chains, food, wipe out of businesses
no longer viable, new business models suddenly viable

Or not, but if not, why not?

~~~
joncrane
I am tempted to think of crises like these to be the economic equivalent of a
forest fire. It makes way for new vegetation to grow and is part of the normal
cycle of many forests.

~~~
numakerg
I disagree. It's more of a drought where the smaller trees with low reserves
die out, and in the recovery the large trees grow even larger and take up the
remaining canopy space.

The economic consequences of the pandemic will make things fundamentally worse
for the average person. The wealthiest entities will accumulate even more
wealth, because they have the resources to survive, to petition the government
for assistance over smaller players, and to buy out the leftover pieces of
those who couldn't survive. In the end, the majority of the bailout will go to
the rich, because they are the ones with the bargaining power. The result is
lower competition, which is worse for almost everybody.

The only upside could be a shifting technological landscape. Work-from-home
and physical distancing could create demand for new solutions which would be
capitalized by smaller, agile companies, creating new competition. That's what
I'm hoping for anyway.

EDIT: I don't know if that's how a drought actually works. The demand for new
tech is already here, it's a question of whether it will stay long-term.

~~~
joncrane
In many forest fires, the underbrush burns but the canopy remains intact.

------
DoreenMichele
If you would like to try to get "the new normal" to show up faster, I suggest
you focus on solutions.

If you want to be part of the solution and are looking for a startup idea, I
have tried repeatedly over the years to suggest that we can try to develop gig
work platforms that are actually a good deal for the worker. I work for such a
platform and I've written about that (again) here:

[https://writepay.blogspot.com/2020/03/the-textbroker-
solutio...](https://writepay.blogspot.com/2020/03/the-textbroker-
solution.html)

Discussed on HN and some of the comments there are important:
[https://news.ycombinator.com/item?id=22734447](https://news.ycombinator.com/item?id=22734447)

Edit: And if you do create a gig work platform based roughly on the Textbroker
model, you are invited to post the announcement to r/GigWorks. I'm the mod
there.

------
smdz
"Everyone" says and knows it is going to be bad economically. But thats
typical behavior when problems are coming to an end. Is it so? I don't see how
we are at the end of those unrealized problems.

Or may be we are looking at an upcoming false silver lining before the real
economical problems show up.

------
pengaru
TFA ignores how much shorter everyone's attention span is in 2020 vs. 1930.

------
dfilppi
Predictions are hard. Especially about the future.

------
pdr2020
The source is credible, but looking rationally at this, the cause of the
interrupted economic flow was not some underlying or unstable monetary/country
factor.

This is a self-induced economic freeze.

Yes, an unfreeze won't immediately revive the world, because some capacities
will have been lost along the way. But once demand ramps back up, you'll have
entrepreneurial individuals and companies findings extraordinary ways to meet
that rising demand, including who knows, repurchasing/rebuilding the required
capacities :)

------
amelius
> The first is that it overlooks the negative impacts on consumer sentiment
> and spending, which are likely to persist for many months, if not years.

I sense a kind of broken-window fallacy here. If consumers want to spend less
on things they don't essentially need, then why is that a problem? Isn't that
a net-win for everybody (since what people don't want doesn't need to be
produced) and the planet (for obvious reasons)?

~~~
thundergolfer
That’s getting at fundamental problem in our economics, where it’s considered
a good thing that some wealthy people will buy over a 100 pairs of sneakers
and 3 or more IPhones in only a few years. Buying lots of things, barely using
them, and then sending it all to landfill is fantastic for GDP.

------
rdtwo
People saying 6 trillion should remember that the assets being bought are
probably worth more than zero but less than one so actually amount is in
between the two

------
empiricus
Regarding the economy, we are basically in the woods. It can go either way,
the economy might recover or it may not, we have limited understanding and
control. Same regarding the pandemic: we might find a vaccine or another
solution, or the virus might mutate into something more deadlier. Again,
limited control. We should be more scared about this. Despite our degree of
civilization development, we are still clowns pretending we understand and
control what happens around us.

------
nabnob
I think it's incorrect to blame the current depression entirely on Covid-19.
Economists have been predicting a depression by the end of 2020 or 2021 for a
while - on HN I remember lots of discussions around the inverted yield curve.
There's been a tech bubble for the past couple of years, and covid was just a
catalyst for this bubble popping.

~~~
blast
Even if there was a tech bubble, what's the evidence of that bubble having
affected the entire economy to that degree? This sounds exaggerated.

~~~
seanmcdirmid
There are lots of bubbles going on all at once. The tech bubble is one thing,
but the bubbles in China being popped right now are much more significant, on
the scale of the great Japan bust that set the world into recession in the
late 1980s. It isn't weird that many bubbles would pop during the same
incident of stress.

------
analog31
I'm beginning to think about it in a new way. The economy hasn't changed since
we were all OK with it six months ago:

* No surplus sufficient to ride out a crisis

* No safety net

* Barely functioning public health system

* No preparation for a major disease outbreak

* Etc.

It's the same economy today, but slightly different operating mode, like a car
with the same engine but in a different gear. I'm certainly hoping for a new
normal.

------
coldcode
While I agree that it will take longer (and wind up different looking) to full
recovery, having governments and business plan for the next pandemic will not
happen. Short sighted people do not waste time on long term thinking.

~~~
bwb
I'd also point out that planning for "high risk" events like this is not
something small to medium size businesses should be doing. Government yes, but
I don't expect my mexican restaurant to have a plan in case of a global
pandemic :). Just like I don't expect them to hedge pork futures so my pork
tamales don't go up 8 cents.

Gov is insurance and I want them to be building resilience into the system.
That is done with proper unemployment systems that can help people get back to
work, but also are ready to go in cases like this or recessions. The delay to
pay people is crazy. The EU and Canadian unemployment systems are designed for
this more than the American system and it is showing.

~~~
sremani
A Global Pandemic is NOT A BLACK SWAN. As matter of FACT, it was predicted by
Taleb and according to him it is a WHITE SWAN.

The true problem here is the so called Risk "experts" do not understand Risk,
and that is the core problem.

~~~
toomuchtodo
The CDC had a pandemic team, they were let go. California had a reserve of
ventilators, which were liquidated due to “budget reasons”.

The problem isn’t risk experts; the problem is that government representatives
elected have no domain expertise nor leadership fortitude to put domain
experts into the driver’s seat when the situation dictates.

China, for all its failings, gets this right. Their leadership is more STEM
and less lawyers and politicians.

~~~
maxerickson
China spent 3-4 weeks covering up evidence of human to human transmission of
the virus (Singapore started screening travelers Jan 3 due to a pneumonia
cluster in Wuhan; China started acting Jan 22...).

That's not getting it right, it's a different type of shit show.

~~~
bigfudge
Something doesn’t stack up here. If China’s response is such a shit show why
don’t they have widespread transmission around the country? The US and Europe
have had more warning than Chinese regions, but have been far less effective
at managing the disease.

~~~
maxerickson
Their reaction to the massive outbreak has been effective.

My point is that they reacted the second half of January, after trying to
cover up the outbreak for weeks/months. If the local and regional officials
had acted effectively in late December, there might not be a global pandemic.

------
adammichaelc
How can they say nobody knew? 170+ CEO’s of major corporations resigned right
before the outbreak.

Something is fishy with the current narrative.

~~~
24gttghh
Not that I find that comment totally unbelievable, but citation please?

~~~
listenallyall
He is correct. "October’s 172 departures is the most in any month in the last
15 years." (that's Oct 2019, article from Nov)

[https://www.nbcnews.com/business/business-news/why-have-
more...](https://www.nbcnews.com/business/business-news/why-have-
more-1-000-ceos-left-their-post-past-n1076201)

------
frockington1
The articles states as fact there will be negative impacts on long term
consumer sentiment and spending without really providing any evidence.

Most Americans are about to receive a $1200 check and unemployment benefits
that pay more than their job did for the next 6 months. I don't think consumer
spending is going anywhere soon.

~~~
coldcode
How many people on a single $1200 check and unemployment will go out and buy a
car, a house, a washing machine or visit a Disney park?

~~~
rwmj
For many people outside the highly paid HN reading bubble that's a huge
windfall.

~~~
jointpdf
It’s really not. Even in a low cost of living area, $1.2K is about one month
of basic living expenses.

~~~
beamatronic
...which is a huge windfall.

Has anyone on here ever actually been poor before? Genuinely curious.

~~~
frosted-flakes
I grew up in a poor family. Not poor enough that we ever went hungry, but that
was partly because of the generosity of friends/family who would sometimes buy
us groceries. Us kids certainly never got new clothes (there was a steady
stream of hand-me-downs from the older kids and other families we knew).

Being self-employed, my dad's income was irregular and often came in $5000
chunks. You might call that a windfall, but my parents were disciplined enough
with their money that it automatically went into a savings account for the
next mortgage payments, or to pay off credit card debt[1]. We weren't suddenly
going out to eat when a cheque came in (in fact, when I was 10 or so, I
remember helping my mom enter receipts into her big accounting book, and the
total restaurant expenses for the entire year was something like $30).

I don't think we were ever officially under the poverty line, but with a
family of 11 in a high cost of living area, the money had to go a lot farther
than normal.

[1]: Unfortunately, they weren't disciplined enough to build up and maintain
an emergency fund to carry them through rough times, so they relied on a low-
interest credit card for essentials way too often.

------
david_w
From the article: "The first is that it overlooks the negative impacts on
consumer sentiment and spending, which are likely to persist for many months,
if not years. "

Yeah, right. Citation needed. My to-buy list of pent-up demands grows longer
by the hour.

~~~
tarr11
They are not talking about electronics or haircuts.

For example, many people have vowed never to step on a cruise ship after this
and attending large scale events in person will probably give a lot of people
anxiety for some time.

~~~
meddlepal
Heck even a crowded bar or restaurant is going to give people pause.

~~~
amiga_500
Pause? There is no way I'm taking my family to a crowded restaurant until
either full scale frequent testing (with intra-region travel quarantine)
proves it's gone or an effective vaccine is deployed at scale, or lastly if
some medicine which means you get mild symptoms and no after-effects is
developed.

~~~
meddlepal
Exactly, this a whole new ballgame in terms of what kind of businesses are
going to be viable.

The restaurant and bar industry might be toast and that's going to have big
social and cultural impacts.

~~~
david_w
Man I do not believe this. The restaurant and bar industry cater to the
reckless youth segment. Seeing "nothing bad happened" to people you know who
are less risk-averse than you is enough to coax people back into herding into
bars and restaurants. We herded for a century before anything happened and
those are clear memories everyone has, too.

What is going to change is the world's attitude toward the Communist regime
currently running China. I feel pretty confident in saying that that regime is
slated for death, even as public officials and famous people act, in public,
like they're willing to get back to normal.

This is where some of us have been for a long time. You cannot permit an
intolerant, racist, minority persecuting, citizen murdering, dictatorial,
totalitarian government armed to the teeth with the latest in biowarfare who
is inclined to make aggressive noises towards everyone who is not like them
and some who are (Taiwan) to exist, period.

I think COVID-19 finally brought that home to everyone who is not just
outright anti-Western in their outlook.

People are going back to bars and restaurants and jobs, the stock market is
going to go up, but the Communist regime in China is going down.

That's what the near future looks like.

~~~
pinkfoot
> that regime is slated for death

Care to put a date to your prediction?

~~~
david_w
Sure. Communists gone from China by 2035. Latest. 15 years across multiple
administrations across multiple nations.

It's just like before WWII. Some people see the mortal danger and realize by
hook or by crook something HAS to be done. Some people are suing for "peace in
our time". Only one of these camps is right. Guess which one.

Say what you want, this is something we DID learn from WWII. Know the signs
and don't kid yourself about them. However bad your situation is now, it will
only get worse in the future.

Covid-19 onboarded the majority of the population in all nations to this
little project. Have no doubt.

~~~
amiga_500
The USA won't even have most of its supply chain under domestic control by
2035.

The response to the virus was typically disorganized and indicative of wider
issues. The last 40 years have seen a huge slide in power and credibility,
what is going to stop that?

~~~
david_w
I don't agree with any of your characterizations.

