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.
This was done through cooking the unemployment books ...
That's patently false. BLS reports 6 different "unemployment rates" (1). The media has historically reported U-3. You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked.
>That's patently false...You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked.
Even U-6 removes people after 12 months...so yes there are 10's of millions who have not been accounted for essentially since 2008. These people simply do not exist to the Bureau of Labor. The numbers are right their in your link, under U-6 the unemployment number is under 8% before March 2020...if you believe that is a legitimate number that isn't manufactured, that is fine, but it does not reflect the reality...hell 12.8% of the US is on disability, another hidden group that is accounted for brings the numbers up to nearly 20%.
This would be more relevant is we tallied how much actual credit "money" is getting into the hands of average people. Divide 6 trillion per every person and if that was the extent of the calculation and legislation, we'd be better off. But it's not, the same financial beneficiaries in good times are the ones getting the bailout money in bad times.
>being injected into the economy
Except the crux of the problem is this money, arguably, doesn't "get into the economy", certainly not in any uniform sense.
Big chunks go to bail out large corporate stockholders, bonds, financial assets. Some are funneled through the banks via loans that are hard to come by for some. What is sorta kinda direct payments to people amount to 1 time events, and too small at that. And given no commerce & fixed obligations for many small businesses, what good does debt & "loans" do for them?
The biggest lie in all of this is that the money is actually getting to people that need it. It's not, yet.. and calling it helicopter money doesn't change the fact that many aren't anywhere near the helicopters to get it.
Of course, if it was actually distributed to people who needed it to spend, it would cause massive inflation. This way most of the money never gets spent, and demand never goes up.
$6T has been created, but an unknown $X trillion has also been destroyed by a sharp and sudden decrease in economic activity, including a contraction of credit.
So... who knows. Maybe it's enough, maybe it's too much, or maybe it's too little -- it's too early to say.
This is why I dislike that some have characterized the bill as a "stimulus." The point of stimulus efforts is to stimulate the economy, implying that it's ready to be stimulated. It's not. The $6 trillion is life support. We've put the economy into a medically induced coma. The $6 trillion is what we need to keep the economy alive, barely, while we try to get Covid-19 under control. Once we've done that, we'll need separate stimulus to get out of a depression.
Thank you for pointing this out. Secondly, just what the hell is the central bank supposed to do? Had they not intervened hard in debt markets, we would have seen bank runs and mass chaos in financial markets, making things we take for granted (such as paying for stuff at the grocery store) totally fail over night.
I am wayyyy less worried about the magnitude of the Fed’s intervention than I am about what might have happened otherwise.
Decrease in economic activities = decrease in goods and services offered + increasing amount of Money > Inflation (inevitable?)
Demand should stay the same for many products and services and decrease for some (cyclic) goods like machinery etc.
Time to get into Gold, Bitcoin and (non-cyclic) Stocks?
I'd caution away from comparing the current recession to 2008. There the problem was truly unsustainable economic activity in the runup expansionary phase.
Consumer spending was powered by sub-prime mortgages that let people use hyperbolic housing prices as an ATM. Investment was juiced by an unsustainable expansion in residential construction. The financial markets created a flood of illusory wealth based off credit models that were never tested in production. Even after the initial financial crisis subsided, there was no way to turn the clock back to 2007. You couldn't just go back to AAA-rated CDOs built on NINJA loans to let people speculate on McMansions.
This crisis is very different. Quarantine may last a long time, but eventually it will be over. There's no ostensible reason we can't go back to status quo ante bellum. There was nothing grossly unsustainable about the way the economy was operating in 2019. And once the virus threat is gone, we can just go back to the same economic patterns we were engaged in before the crisis.
Even after quarantine is over, it will be a slow ramp for many sectors. Small (hopefully very small) outbreaks will continue to occur, so people will be afraid. Restaurants will be less than a third full. Nobody will want to go to the movies. Crowds will be avoided.
Having lived through, intimately observed, and now in reflecting on the 2008 situation - Id's say your assessment is fair. That same effect/outcome multiplied this time around, seems to be inline.
While the recovery may miraculously end up more evenly distributed (with Sanders out I don't see enough pressure/leverage) under current administration and potentially four more years, nothing is off limits and this one may in fact become much more concentrated than 2008.
I would wager that most if not all downturns lead to greater concentration of wealth, since they invariably favor those that cover their risks with tail hedges and maintain a cash reserve for these market events. People who do this are far less common than those that don't and ownership will inevitably flow most dramatically to those that are prepared in a downtown.
The converse, where everyone is prepared, at best would lead to maintaining the status quo, since everyone is ready and willing to pick up the few assets that are forced into a firesale if any.
we're about to witness another, and probably the greatest to date, round of wealth redistribution. There is going to be a lot of distressed assets at the bottom while the well connected top will have unlimited (my mind needs some time to make distinction between unlimited and $6T :) access to money. From the heights of the Pareto of 5-10 years down the road the today's Pareto will look indistinguishable from a uniform distribution.
"it will be spread to an even smaller group of people"
I'll point out, the Democrats are fighting hard to ensure that the rescue money is spread to a very broad section of the public. With enough public pressure, Congress can be pushed to ensure that there is more rescue money made available, and also that the money should be distributed to the broadest possible spectrum of the public. We can look at the mistakes made during 2008 and promise ourselves that this time we will get things right. We all have the moral responsibility to fight and ensure that our government helps everyone through this crisis.
Meanwhile, the Fed has an obligation to make sure that there is no absolute breakdown of the credit markets. The Fed felt it necessary to inject some money into specific markets to ensure they continue to function (the repo market, in particular). But to whatever extent that money might help a narrow section of society, Congress can offset any unfair benefits granted to participants in those markets, by ensuring that money is also given to other sections of society.
The fed has stepped into the repo market, commercial paper, money market, primary corporate bond, secondary corporate bond, consumer ABS, they're backing payroll lending through banks, direct lending to sub 10,000 employee companies through banks, municipal debt, treasury market, MBS market, expanded swap lines and foreign bank repos to provide dollars internationally all to ensure financial markets function. They're busy.
World GDP is $80T. An important fact: USD is world reserve currency. So no, I don't think that injecting, $6T is going to be super big deal. Just like in 2008, this additional money gets dispersed in to world economy or in other words the burden of US action gets transferred to other countries. This is precisely the reason why $2T injection has almost no effect on inflation within US but if any other country had dared to inject same proportion, it would have faced about 10% inflation making most of the imports pretty expensive for them.
This is the good old trick often done by startups: founders & investors create and generously give themselves a lot of shares, diluting the share of rank-and-file employees to zero.
Here's some deep analysis from a armchair economist. $6T goes to the US "board members": their share of the company (I mean, the planet's resources) grows, but the share of rank-and-file American employees (I mean citizens), probably shrinks. My guess: $5T will be hoarded by the US elites, $1T will trickle down to citizens, the world's GDP will shrink from $80T to $50T and the US's GDP will shrink from $20T to $15T. If these hand wavy assumptions are correct, the US citizens' share will grow by 5%, from 20/80=25% to 15/50=30%, while the elites will get an extra 5/50=10% share of everything. Everybody outside the 12 mile zone around the US land is going to lose.
Whatever the truth may be it is certainly interesting how 20 million people can lose their jobs simply as a result of their employer reducing or stopping its operations for a few weeks. Regardless of the previous unemployement figures it raises the question of how secure were these "jobs". Is job security worth measuring.
It's "surprising" that people lose jobs when businesses stop functioning? I can't think of any interpretation of that sentence which makes any sense at all.
I don’t understand the theory for why injecting money into the economy is supposed to work. They’ve forcibly shut it down. The point of injecting money is to stimulate the production of goods and services. If you can’t make goods and services all it’s going to do is generate a lot of inflation.
Here's another observation from an armchair economist. Money flow upwards by forces of debt and contracts. If we short circuit the very top with the very bottom, money will start flowing inside this loop. If we don't form this loop, the powerful vacuum cleaner at the top will break this mechanism. In other words, the amount of money in the system doesn't matter much. What matters is that money form a steady flow pattern.
> ... it will be spread to an even smaller group of people...
Last time, the package was given to mostly big banks and GM. This time most qualified Americans are getting a check and small businesses are getting sizable support as well. In what way is the base of support smaller than in 2008?
I've been bombarded by a popular "stimulus for the rich" from everywhere. Please describe what would happen if stimulus did not pass and there was no assistance from the government.
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?
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.
There are 6 official measures of unemployment in the USA (see https://www.bls.gov/news.release/empsit.t15.htm), and most people get confused when presented the distinctions all of them. In general, the number that is reported on the most is U3, but U6 includes a lot of people stuck in part time employment when they really want full time.
I think the big problem is who do you count? Probably not children under 18, or the elderly (starting at what age?), and what about stay at home parents?
Or do you survey people and ask them if they are not worrying, would they rather be working?
And how do you count people in the gig economy? Or folks who used to have professional jobs but are now making do with a service job because they can't find something like what they had before?
>The incentive for politicians to prop themselves up with the unemployment rate is clear.
One of the funny things is when Trump ran in 2016 a big part of his campaign was acknowledging the fact that the unemployment numbers were a lie and being fudged. He made major promises, which I am sure appealed to a lot of people, he would shine a light on the unemployed workers who were not counted in the workforce...of course, then he got elected and began taking credit for the best unemployment numbers ever using the same accounting methods.
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.
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.
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.
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.
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.
Another feature of the 1918 economy in most of the world was it was a lot less global, a lot more localized. There was a lot more regional self-reliance, which meant that the nature of the impact on the economy looked very different.
One of the biggest differences is the enormous growth of what is not very usefully termed "the service economy" since 1918 (really, since maybe 1960 or so). A huge percentage of the population now gets paid to do things that had no real equivalent in 1918, things that you can simply stop doing (at least for some period of time). Restaurants, hotels, therapists of many different kinds, artists, musicians, retail .... these have all exploded, emply lots and lots of people and are all inessentiall to basic living (though essential to meaning for most of us).
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.
> 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.
The US population was also only ~103 million in 1918, compared to ~327 million today. Proportionally, we should expect about 2 million deaths from coronavirus to be merely "as bad" as the Spanish flu.
There was a depression in 1920/21. Of course, there were multiple factors that led to that not the least of which were lots of soldiers returning from WWI.
Also, lots of people worked from home in 1918. 40% of people lived on farms in 1900 so probably not much change from that by 1918.
I think you misunderstand me. I’m not claiming that a pandemic is unprecedented. I’m claiming that a pandemic in the post modern economy is unprecedented, as is a prophylactic shutdown of 1/3 of the economy.
That being said, my point is that economic predictions are especially difficult given that we’ve never seen this before.
For comparison, consider the many economists who at the time expected the depression to reappear after the demobilization following WWII. Despite their good intentions and good data, they too were dealing with a unique situation, and they turned out to be very wrong.
> "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"
Probably because there was no choice but to barrel forward towards herd immunity and deal with the suffering and loss of life.
In 2020, we're delaying and dragging out the tragedy at the cost to the economy.
On top of that, the economy was far more distributed and local. With globalization, things are much more interconnected and interdependent.
Antibiotics aren't actually useful against viruses. We are currently in roughly the place with antiviral drugs that we were a century ago with antibiotics: the first clinical and theoretical hints are there, and a few things have been tested and found to work in isolated cases, but there simply is no systematic, industrial-scale way to pump out (antiviral) pills or syrups that can be thrown at whatever new (viral) pathogen comes out of the wilderness this year.
This. It's pretty clear some aspects of the economy could suffer permanently. For example restaurants may reopen and decide they no longer need service staff. Or maybe warehouses accelerate the shift to automation to prevent closures due to illness. Perhaps commercial real estate will suffer, too.
But other areas of the economy could take off just as quickly and in unexpected ways.
It's not completely without precedent, in that the 1918 flu pandemic was only a century ago. We don't have a ton of good data, but some researchers are looking at its effects in the US:
Were virtually all businesses shut down for weeks or months during the 1918 flu pandemic? All I can find is reports of localized shutdowns in certain cities.
If not, I don't think you can say it's comparable.
If you look at stock market data from the 1910s, when spanish flu ripped everything and everyone apart, the economy then dropped in a similar way today, well, until the Fed started pumping trillions into the market, and now the market is looking different then than today.
The economic collapse from the Spanish Flu was so devastating it was used as a selling point to create the Federal Reserve, which was sold to help a situation similar to today. Today, the Fed's marketing is on the line.
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!
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.
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.
I strongly agree. This extends to reddit as well. Whenever it comes up, there is the overwhelming consensus of "I love WFH/dumb middle-managers are wasting everyone's time to feel useful". And while I agree there is definitely a bias towards demanding in-office working which is probably excessive, and that many people can be very successful working remotely, I feel like much of this attitude is romanticization.
Personally, I struggle to focus at home, and I have a pretty ideal WFH situation. I am fortunate enough/foolish enough to pay for a trivial commute, but I'm simply more productive in-office. And I don't think it is just me, many many problems can be solved in-office quickly without having to set up online calls (or letting an email thread drag on for weeks).
And the larger attitude among my office was that working from home is a burden. We're all software devs, we all have no strict barriers to WFH, but most people prefer going into the office most of the time.
Businesses that require face to face contact (ie. the service sector) employ the most people of any sector in the economy. And then there's manufacturing, resource extraction, construction, etc..., which all can't be done remotely. The amount of jobs which don't require physical presence or face to face contact are a minority of the workforce.
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.
I appreciate your perspective, but regarding things not being that bad, it depends on your vantage point. I have a few friends with established restaurants in town. As you can imagine, this is pretty dire for them.
They're looking at losing everything they've built up slowly over a matter of years being completely destroyed in the matter of a few months--with ripple effects to dozens of employees that are essentially "family".
It's brutal.
I agree that there are a lot of silver linings, which you've outlined pretty well, but for some folks, it is REALLY bad.
It sucks for your friends yes, but to be honest most restaurants fail and the only thing notable about the present situation is many of them are failing all at once.
It’s not like a restaurant failing and putting entire families out of business is some surprising event. I’m sure it happens everyday.
You have to look at the other side, when your friends restaurants fail and move out, new ones will move in with the same optimism as your friend originally had, except this time it may be better equipped to survive social distancing by adopting a “take-out first” approach.
It's pretty bad. Actually, I would say it is the worst time period I have ever personally experienced. This feels worse than 9/11 because it is so drawn out, both physically and time wise.
I am mostly introverted, have some hermit like tendencies, and can't wait for this to all be over. I can't imagine how terrible the more extroverted, social folks feel. The mental toll of this is going to be enormous for many of us.
It's a dystopian nightmare... or at least the beginning of one. People are afraid to leave their homes. When you do leave your house, you can't go and relax anywhere anyway. Nothing's open obviously. Even a simple walk around town is depressing as hell. All the closed shops and restaurants, people in masks looking scared, worries if you're walking to close to someone... both for them, and for you.
Many people, who work in those industries you list as things "you don't need" are without work and health insurance (if they had in the first place).
16 million more people are out of work in the US [0].
Those out of work cannot get care for usual issues that would normally be provided by their employer, and are now unable to get care for issues related to COVID.
They are going to struggle to pay rent next month (like 40% of New Yorkers by some estimates) much less food, utilities, and other necessities.
People who are able to work from home are in a tremendously better places than blue collar or service workers who make up a great deal of the economy. I suppose in office politics a remote worker might have felt like a "second class citizen." In comparison with many workers who risk being laid off if they are even a few minutes late to their shift, remote workers had things very good.
I think you need to expand your view a little. It sounds like many in your life are not affected by this situation. Many of us, or those close to us, are struggling immensely right now and there is not a clear path out.
For what it's worth, I agree with what you're saying about how this could refocus the economy on things other than luxury goods. I just think we need more support for the people losing jobs than a ¯\_(ツ)_/¯
You are and always were free to be a hermit yourself. Rooting for this medical, economic, and psychological catastrophe to continue so that people are forced to adopt your preferred lifestyle is bordering on psychotic.
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?
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:
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.
Readit News
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.
That's patently false. BLS reports 6 different "unemployment rates" (1). The media has historically reported U-3. You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked.
1 - https://www.bls.gov/news.release/empsit.t15.htm
Even U-6 removes people after 12 months...so yes there are 10's of millions who have not been accounted for essentially since 2008. These people simply do not exist to the Bureau of Labor. The numbers are right their in your link, under U-6 the unemployment number is under 8% before March 2020...if you believe that is a legitimate number that isn't manufactured, that is fine, but it does not reflect the reality...hell 12.8% of the US is on disability, another hidden group that is accounted for brings the numbers up to nearly 20%.
Just spiced enough to make them taste better.
This would be more relevant is we tallied how much actual credit "money" is getting into the hands of average people. Divide 6 trillion per every person and if that was the extent of the calculation and legislation, we'd be better off. But it's not, the same financial beneficiaries in good times are the ones getting the bailout money in bad times.
>being injected into the economy
Except the crux of the problem is this money, arguably, doesn't "get into the economy", certainly not in any uniform sense.
Big chunks go to bail out large corporate stockholders, bonds, financial assets. Some are funneled through the banks via loans that are hard to come by for some. What is sorta kinda direct payments to people amount to 1 time events, and too small at that. And given no commerce & fixed obligations for many small businesses, what good does debt & "loans" do for them?
The biggest lie in all of this is that the money is actually getting to people that need it. It's not, yet.. and calling it helicopter money doesn't change the fact that many aren't anywhere near the helicopters to get it.
Not that it's a good thing, just saying.
So... who knows. Maybe it's enough, maybe it's too much, or maybe it's too little -- it's too early to say.
I am wayyyy less worried about the magnitude of the Fed’s intervention than I am about what might have happened otherwise.
Consumer spending was powered by sub-prime mortgages that let people use hyperbolic housing prices as an ATM. Investment was juiced by an unsustainable expansion in residential construction. The financial markets created a flood of illusory wealth based off credit models that were never tested in production. Even after the initial financial crisis subsided, there was no way to turn the clock back to 2007. You couldn't just go back to AAA-rated CDOs built on NINJA loans to let people speculate on McMansions.
This crisis is very different. Quarantine may last a long time, but eventually it will be over. There's no ostensible reason we can't go back to status quo ante bellum. There was nothing grossly unsustainable about the way the economy was operating in 2019. And once the virus threat is gone, we can just go back to the same economic patterns we were engaged in before the crisis.
While the recovery may miraculously end up more evenly distributed (with Sanders out I don't see enough pressure/leverage) under current administration and potentially four more years, nothing is off limits and this one may in fact become much more concentrated than 2008.
The converse, where everyone is prepared, at best would lead to maintaining the status quo, since everyone is ready and willing to pick up the few assets that are forced into a firesale if any.
I'll point out, the Democrats are fighting hard to ensure that the rescue money is spread to a very broad section of the public. With enough public pressure, Congress can be pushed to ensure that there is more rescue money made available, and also that the money should be distributed to the broadest possible spectrum of the public. We can look at the mistakes made during 2008 and promise ourselves that this time we will get things right. We all have the moral responsibility to fight and ensure that our government helps everyone through this crisis.
Meanwhile, the Fed has an obligation to make sure that there is no absolute breakdown of the credit markets. The Fed felt it necessary to inject some money into specific markets to ensure they continue to function (the repo market, in particular). But to whatever extent that money might help a narrow section of society, Congress can offset any unfair benefits granted to participants in those markets, by ensuring that money is also given to other sections of society.
Here's some deep analysis from a armchair economist. $6T goes to the US "board members": their share of the company (I mean, the planet's resources) grows, but the share of rank-and-file American employees (I mean citizens), probably shrinks. My guess: $5T will be hoarded by the US elites, $1T will trickle down to citizens, the world's GDP will shrink from $80T to $50T and the US's GDP will shrink from $20T to $15T. If these hand wavy assumptions are correct, the US citizens' share will grow by 5%, from 20/80=25% to 15/50=30%, while the elites will get an extra 5/50=10% share of everything. Everybody outside the 12 mile zone around the US land is going to lose.
The government literally said “stop what you’re doing” to 80% of the businesses out there.
I’m honestly surprised it’s only 20M people unemployed.
Last time, the package was given to mostly big banks and GM. This time most qualified Americans are getting a check and small businesses are getting sizable support as well. In what way is the base of support smaller than in 2008?
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Comparing their $1200 checks with no strings attached to other money in the stimulus being lent is apples and oranges.
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?
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.
Or do you survey people and ask them if they are not worrying, would they rather be working?
And how do you count people in the gig economy? Or folks who used to have professional jobs but are now making do with a service job because they can't find something like what they had before?
Counting unemployment is not straightforward.
https://www.bls.gov/lau/stalt.htm
One of the funny things is when Trump ran in 2016 a big part of his campaign was acknowledging the fact that the unemployment numbers were a lie and being fudged. He made major promises, which I am sure appealed to a lot of people, he would shine a light on the unemployed workers who were not counted in the workforce...of course, then he got elected and began taking credit for the best unemployment numbers ever using the same accounting methods.
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.
By dubbing Econ "Dismal Science"
adherents exaggerate;
The "Dismal"'s fine -- it's "Science" where
they patently prevaricate."
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.
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.
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.
One of the biggest differences is the enormous growth of what is not very usefully termed "the service economy" since 1918 (really, since maybe 1960 or so). A huge percentage of the population now gets paid to do things that had no real equivalent in 1918, things that you can simply stop doing (at least for some period of time). Restaurants, hotels, therapists of many different kinds, artists, musicians, retail .... these have all exploded, emply lots and lots of people and are all inessentiall to basic living (though essential to meaning for most of us).
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.
The US population was also only ~103 million in 1918, compared to ~327 million today. Proportionally, we should expect about 2 million deaths from coronavirus to be merely "as bad" as the Spanish flu.
Also, lots of people worked from home in 1918. 40% of people lived on farms in 1900 so probably not much change from that by 1918.
Yes, life will go on. But it's worth trying to minimize the misery in the meantime.
That being said, my point is that economic predictions are especially difficult given that we’ve never seen this before.
For comparison, consider the many economists who at the time expected the depression to reappear after the demobilization following WWII. Despite their good intentions and good data, they too were dealing with a unique situation, and they turned out to be very wrong.
Probably because there was no choice but to barrel forward towards herd immunity and deal with the suffering and loss of life.
In 2020, we're delaying and dragging out the tragedy at the cost to the economy.
On top of that, the economy was far more distributed and local. With globalization, things are much more interconnected and interdependent.
Restarting local commerce is much much easier.
What's unprecedented is the reaction... some might say overreaction.
But other areas of the economy could take off just as quickly and in unexpected ways.
https://www.bloomberg.com/news/articles/2020-03-27/pandemic-...
But I do agree 100% with taken current economic estimates with a huge brain of salt, as our economic machine is far different from the past.
If not, I don't think you can say it's comparable.
The economic collapse from the Spanish Flu was so devastating it was used as a selling point to create the Federal Reserve, which was sold to help a situation similar to today. Today, the Fed's marketing is on the line.
"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!
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.
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.
Personally, I struggle to focus at home, and I have a pretty ideal WFH situation. I am fortunate enough/foolish enough to pay for a trivial commute, but I'm simply more productive in-office. And I don't think it is just me, many many problems can be solved in-office quickly without having to set up online calls (or letting an email thread drag on for weeks).
And the larger attitude among my office was that working from home is a burden. We're all software devs, we all have no strict barriers to WFH, but most people prefer going into the office most of the time.
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.
They're looking at losing everything they've built up slowly over a matter of years being completely destroyed in the matter of a few months--with ripple effects to dozens of employees that are essentially "family".
It's brutal.
I agree that there are a lot of silver linings, which you've outlined pretty well, but for some folks, it is REALLY bad.
It’s not like a restaurant failing and putting entire families out of business is some surprising event. I’m sure it happens everyday.
You have to look at the other side, when your friends restaurants fail and move out, new ones will move in with the same optimism as your friend originally had, except this time it may be better equipped to survive social distancing by adopting a “take-out first” approach.
I am mostly introverted, have some hermit like tendencies, and can't wait for this to all be over. I can't imagine how terrible the more extroverted, social folks feel. The mental toll of this is going to be enormous for many of us.
It's a dystopian nightmare... or at least the beginning of one. People are afraid to leave their homes. When you do leave your house, you can't go and relax anywhere anyway. Nothing's open obviously. Even a simple walk around town is depressing as hell. All the closed shops and restaurants, people in masks looking scared, worries if you're walking to close to someone... both for them, and for you.
Those out of work cannot get care for usual issues that would normally be provided by their employer, and are now unable to get care for issues related to COVID.
They are going to struggle to pay rent next month (like 40% of New Yorkers by some estimates) much less food, utilities, and other necessities.
People who are able to work from home are in a tremendously better places than blue collar or service workers who make up a great deal of the economy. I suppose in office politics a remote worker might have felt like a "second class citizen." In comparison with many workers who risk being laid off if they are even a few minutes late to their shift, remote workers had things very good.
I think you need to expand your view a little. It sounds like many in your life are not affected by this situation. Many of us, or those close to us, are struggling immensely right now and there is not a clear path out.
For what it's worth, I agree with what you're saying about how this could refocus the economy on things other than luxury goods. I just think we need more support for the people losing jobs than a ¯\_(ツ)_/¯
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[0] - https://www.theguardian.com/us-news/live/2020/apr/09/coronav...
[1] - https://www.nytimes.com/2020/03/31/nyregion/coronavirus-land...
(Apologies for being overly USA-centered, that is where I live and am most familiar with)
too soon, man, too soon
Give it forty or fifty years before you say shit like this out loud where people can hear you.
PEOPLE ARE DYING. This is A DISASTER. Have some fucking compassion, good grief.
https://news.ycombinator.com/newsguidelines.html
Dead Comment
Keep your myopic melodrama to yourself.
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...
Discussed on HN and some of the comments there are important: 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.
[0] https://www.brookings.edu/wp-content/uploads/2016/07/1_how_m...
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