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“We have destroyed the economy” — 45 Comments

1. An observation from personal experience… I was an IT Director in a “sensitive” environment. We had regular issues/problems with some of our core services that, often as not, were out of our control for various reasons. I’ve served twice in this kind of environment and learned painfully the wisdom that sometimes LESS is MORE. I learned the wisdom of minimizing my updates and reports, communicating only what I knew, and restricting public speculation. Business went on as best it could in an environment restricted by circumstances. But it did go on …

   I dearly wish the CDC would contemplate the wisdom in this kind of approach. The painfully long daily updates, constantly shifting instructions, and the increasing severity of limitations work together to create the impression that the CDC is winging it, making it up as they go along. This isn’t helping either the business climate or the popular mood.

   How will we ever know that it’s safe to go back to work? How will business know that it is safe to re-start? Without some kind of yardstick, some kind of measure, it’s hard to imagine any more than a very fitful return to productivity.

2. Frankns,

   Yes, yes, yes. It is the uncertainty. These doctors play a role in this but they should be advising the president and governors not pontificating on what should be done to society. Fauci can’t even keep his story straight from day to day. I’ve had enough of him. Then throw in the models which seem deeply flawed and they need to be more transparent about them. And realize that the whole damn country is not Italy or New York City.

   Some of these doctors and professors are on mega power trips and make ridiculous proclamations (shutdowns for many months as an example). Also notice how they keep moving the goalposts. Social distancing has become synonymous with lockdowns and now the latest is after hearing about when we flatten the curve we can open up some but now some are saying that’s not enough.

   There needs to be a major plan and push to open things up released very soon and if it involves masks fine and if we say no or limited travel to certain areas for a period fine but businesses need to reopen and people need to get to work.

3. The economy may recover. But CV may turn out to be little more deadly than a flu.

   Lockdown aren’t going to save many lives, they’re going to spread them out. It may change what they die of as well. Fewer will die of CV and more from preventable issues that are not being treated.

   So we’re taking an almighty risk with the economy to slightly reduce the risk to our lives.

4. “In many places in the country, businesses were already floundering; people were already not going to restaurants, sports had been canceled as well as concerts and many other gatherings.”

   I wondered when cities and states started with their “mandatory” shutdowns if it wasn’t more because of the money aspect instead of any real scientific evidence behind it.

   What I mean is this. If a restaurant (or any other business) went under because customers stopped coming to it could that business claim that they are entitled to money to help it because of the virus? However, if the business goes under because they were forced to close by the government then there is a more of a justification to give them money because it was clearly due to the shutdown.

5. What the first three commenters said times 1000.

6. Also, economies are cumulative.

   If the US economy drops by 5%, then it will only take a year or two to recover. Except that it will now be two years behind where it would have been.

   Over a ten year period being 5% behind where you would have been means we all lose half a year of wealth creation, on average.

   Then add in the fact that borrowings have to be paid for, so one way or another the current splurge will cost us. It might be more tax. It might be reduced services. It might be poorer schools and hospitals. But eventually the country has to pay it back.

   I would estimate that a good recovery will cost the average person a year of wealth. We might not notice it, because we can’t run the non-crash version, but it will still be a loss.

   A bad crash, like the Great Depression, would cost people ten years of wealth.

   It’s a heck of a gamble.

7. An example of the ridiculousness of so much of this in the south Puget Sound area of Washington I live in they have been working on Interstate 5 for most of the 30 years I have been living here and now they are doing major widening work on it through Joint Base Lewis McChord which is a much needed project but the governor had shut down all work on state transportation construction projects.

   Why?

   It makes no sense as these workers are probably in far more danger of a workplace accident than the virus. I drove through there yesterday and all the equipment was gone it is a half finished job just sitting there. These are high paying jobs that should be working right now.

8. They say timing is everything.

   Before the virus, we were already at the end of a short-term debt cycle, and probably at the end of a long term debt cycle that dates back to the 1930’s. Now, both the virus and the reaction to it, have hit the economy like an asteroid. We’re not going to see a normal recovery from a normal recession.

   So what are we going to see? Well, there’s too much going on for my brain to figure it out. We already have widespread support for socialism. Most people work for small and medium sized businesses. Almost nobody works for the new giants like Twitter, Facebook, and Google. In fact, that’s why they were able to grow so big, so fast. Government regulations and union rules prevent large worker-dense organizations from thriving. If the response to the virus permanently closes many small and medium sized businesses, then unemployment will be high for a long time. As a result, most banks will fail.

   The government response will be socialism, and the consequence will be high levels of government spending, as well as high levels of monetary policy support from both the Federal Reserve and the Treasury Department. That will cause systematic price increases. We end up with both depression and inflation. The government will tell us that more government is the solution. We end up looking like Argentina.

   The alternative scenario starts with the argument that the economy was going great. We’ll start it up again after a few months of enforced vacation. The memory, skills, and personal drive haven’t disappeared. Yes, there will be changes in trade and business organization, but that’s just part of the free market’s creative destruction, which is a great virtue of our country.

   So which way will we go? I don’t know know. I can’t even correctly guess election results. But I will say that the deciding factor will be cultural rot. Just how successful have the Marxists been? If we become Argentina, we can thank the usual suspects.

9. The one thing that both houses will agree on is pumping money to anywhere that
   might possibly stimulate. That will probably cause a burst of inflation, if not right away, later when things return to some semblance of normality.

   There is almost no chance that any tightening will be applied. Neither party will promote it until things have gotten serious, and then the chances are small.

   There is a bright spot in this, debtors will find payments much less burdensome.
   Student loan holders and home mortgage holders will do very well.

   Those living on a fixed income will suffer, but since the boomer cohort is so large they will have a lot of political clout. They will get money, making it even harder to tighten.

   Couple this with an explosion of technology during the next decade eliminating many traditional middle and upper middle income jobs. The 2020’s are going to be uncharted territory.

   During the same period technology will cause the costs of basic needs to plummet. The new generation of small nuclear reactors that use spent fuel and can’t melt down will be deployed at every substation, stabilizing the grid and dropping the cost of electricity to almost nothing. The Internet of Things will be commonplace to the Millennials and Gen Z. Musk will certainly have a moon factory and may actually make it to Mars. Riley may marry him a third time.

   There will be flying cars. Virtual reality will provide an endless source of entertainment.

   There may be a realization by a large number that we are, as Elon Musk and Scott Adams claim, living in a simulation.

10. When the government at all levels rescinds their various “close your businesses and stay at home” directives and IF they can keep from imposing new restrictions or rules or laws or directives on our activities whether directly economic or otherwise, the economy will recover. How long will it take? Just as long as it takes and no longer. How long is a piece of string? When will we get there, Daddy? Meaningless questions with an infinity of indeterminate answers. Solution is to rescind all these stifling rules and crap, impose no new ones (and ideally retain some of the waivers and suspensions of older ones) and leave us alone! That’s why it’s called “laissez-faire” capitalism, the core idea is to leave us alone to decide our own lives, our own solutions, our own destinies. We may or may not know “better” that our wanna-be elitist rulers, but we are the ones who will suffer the consequences, not them. Let us go and leave us alone!!

11. A bad crash, like the Great Depression, would cost people ten years of wealth.

    The economic implosion that generated the Depression went on from the fall of 1929 to the spring of 1933 and is attributable to bad monetary policy. The stock market crash was jarring but to be expected in some form due to the market being overvalued in 1929. What was salient was not the 25% loss in equity prices in October 1929, but the 85% loss incurred from April 1930 to July 1932. That was derived from the disappearance of corporate profits and dividends as production imploded. During the period running from the 3d q of 2008 to the 2d q of 2009, the rate at which goods-and-services were produced in this country declined by 5%. During the early years of the Depression, the mean year-over-year decline in production was 9% per annum and summed to 31% when it was over.

12. Solution is to rescind all these stifling rules and crap, impose no new ones (and ideally retain some of the waivers and suspensions of older ones) and leave us alone! That’s why it’s called “laissez-faire” capitalism, the core idea is to leave us alone to decide our own lives, our own solutions, our own destinies. We may or may not know “better” that our wanna-be elitist rulers, but we are the ones who will suffer the consequences, not them. Let us go and leave us alone!!

    I’m recalling the wag who referred to libertarianism as ‘applied autism’.

13. Since Fauci is saying it won’t be over until no one else is dying of the WuFlu, it’s time for Trump to thank him for his effort and replace him.
    Then Fauci can go on CNN and claim that it’s all Trump’s fault.

14. I know some don’t like to hear this hear but if there is not some pretty strong signs of an economic recovery by fall then Trump’s re-election chances will be greatly lessened. Presidents get blame and credit for many things that are not entirely their doing and it’s one thing to say you still support the guy when you are out of work a couple weeks but after few months it becomes a different story.

    Highly doubt Biden will be the nominee but Cuomo or whoever will have a very good chance to beat him.

15. I’d guess that Cornflour’s second mooted scenario is more likely, though there are certainly political interests which will try to wring as much socialism mileage out of the current situation as they can.

    As far as “the economy” goes, I am no longer able to view it as a simple measure that reflects the well-being and prosperity of the national populace in any distributive manner. We saw this with the finance driven economy, wherein the overall figures looked ok, but where growth in that sector did little good for intentionally displaced industrial workers. We see it also in repeating disputes over the goals that ought to be pursued, where those living on investment income [I should say more or less fixed] will have one view, and those desiring easy money will have another.

    And even in a single sector the figures may be misleading. What does it mean in terms of distributed prosperity, to say for (a very old) example, that “manufacturing orders saw an uptick and category growth in the last quarther’, when it is due solely to some huge order Boeing received from overseas?

    Right now, restaurants are suffering, but because the demand for food is only so elastic, people must eat something, and that is driving supermarket hiring, as people actually resort to buying food they cook themselves.

    But my bias, based as it is on a life spent in manufacturing related business, is to look at tangibles and production as the essential core of economic health. You can try and push it away because it’s not nice and rough and insufficiently sensitive people tend to do it, but once you lose control, and eventually the know how too, you are in one Hell of a spot; just like “King Cotton” learned 160 years ago, and as giddy Sinophiles are learning now.

    In both cases, those peddling the spirit of the age claptrap were warned by their own people of the looming danger. In both cases, there were selfish bad faith arguments dressed up as sound economic ones used in order to justify perpetuating narrow personal advantages in an unbalanced and hence vulnerable political economy.

    We are lucky that it’s not too late for us. We have not been turned into a nation of overlords and peons quite yet.

16. To say that psychology is the sole driver in economic collapse is too simple. But in some circumstances, panic, and loss of faith in the future and one’s self and trust in one’s peers and government, is important.

    The personal answer to the question as to how much worse off you are today than you were the day before, may turn out to be one of perceived relative advantage and the subjective evaluation of the prospect of further progress.

    Of course, the evaporation of partly imaginary wealth by those who have accrued substantial amounts of it and hoped to rely on it as markers against which they could draw in future, is unlikey to be viewed calmly by them. They dont have a factory full of machine tools, 1000 acres of dairy land, or a copper mine to reassure them.

17. As many have pointed out, there is obviously a balancing act that that has to be done between lowering the number of sick, and especially the number killed by the Coronavirus, to the absolutely lowest number reasonably possible while, at the same time, making sure that the steps we take to accomplish this lowering do not disrupt and depress our economy to such an extent—destroy so many formerly viable businesses, drive so many people into joblessness, poverty, despair, and desperation, lay waste to so many families, relationships, communities, and cities, are so economically and socially disruptive–that we can’t resuscitate either our society as generally it was, or our economy, nor successfully get back on the road towards a stable, secure, and prosperous society.

    That balancing act, it seems to me, is not an easy one, is, in fact, a Wallenda walking on a wire stretched across the volcano’s mouth level of precarious balancing act.

    The problem here is, of course, that this kind of fast building/moving Pandemic, and this kind of ramping up, starting to approach WWII level, massive governmental response to it are unprecedented.

    While we as a country have faced various challenges during our history, from what I can see, past history offers no exact parallels and models which can provide us with sure guidance to this Pandemic, and our reactions to, say, the Spanish Flu Epidemic of 1918, were done in a much different economy, society, and world.*

    Thus, while taking note of what lessons they can glean from past history and governmental responses to somewhat similar emergencies, our leaders have to generally make it up as they go along, and employ what tools they now have.

    President Trump has to listen to the advice from epidemiological and medical professionals, these professionals have to base their recommendations on their training, on their experience, and on the information they gather (and, God help us, not on their politics/ideology), and their level of confidence in the validity and comprehensiveness of that information—and, thus, their recommendations—can change day by day.

    Then, as well, the President has to listen to and take in information from business, financial, and economic experts about the state of our economy and information, as well, about the state of the larger society, and to weigh these three competing interests—medical, economic, social—each against the others.

    Then President Trump, as our duly elected Chief Executive, and Commander in Chief–has to make the key policy decisions, and to Act.

    President Trump is the “decision maker”–a “decision maker” who, I would hope, can change and will change his plans of attack depending on the changing information (hopefully as accurate, as complete as possible, and without spin) he gets, and what he himself sees, believes, and intuits about this largely unprecedented, complex, and fast changing situation.

    The President also has a couple of other absolutely vital roles that should not be overlooked.

    One is as a rallying point–corny as the image may seem–as the guy on the Hill, in the midst of the Battle, holding up the Flag, and calling on all of us to rally to that Flag, to the defense, and to its cause.

    The other, vital role, is as a steady hand, as a source of hope, confidence, and inspiration; as an optimist, as someone who will never give up on America.

    That is why the Left, the MSM, and the Democrat’s unrelenting hatred, their deliberate and constant negativity, their refusal to rally around the President and, in effect, the Flag—around our nation, around us, their constant attacks and sniping against President Trump, and the battle he and his Administration are trying to wage for our country—for each and every one of us–are extraordinarily unpatriotic and destructive.

    The key question I asked at the end of another comment here is, “how much is an individual human life worth?

    At some point President Trump–if he does want us to have a reasonable chance of this country returning to a vibrant society and economy–will likely have to make a decision as to what an acceptable number of deaths is.

    Do we stay in lock down for months and months to try to achieve some particular numbers, some hoped for lower level of infections and deaths, or do we gradually have a likely rolling reopening for business, knowing that some higher numbers of sick and dead will result?

    Will our economy rise from the ashes? It seems to me it will.

    Will it be precisely the same economy, will it be precisely the same society?

    I don’t see how they can be, because the “punches” we have taken will have deformed things, and our nose, perhaps even our face, will never quite be like it used to be.

    We will be battered, but we will survive, and since most of the other countries of the world will have suffered similarly, it seems to me that they, and we, will likely, generally reemerge in roughly the same positions/relation to one another as we were in before the Chinese Coronavirus hit us.

    But, depending on just how hard it was/is really being hit, China may emerge as the biggest loser from the Pandemic that—no matter their denials–originated in China.

    Whatever might be the final outcome, I believe that whatever “level of trust” China might have previously acquired will have been destroyed by the Coronavirus that originated in their country, by their reactions to it, and, once it started, their reactions/actions toward the rest of the world.

    * https://www.nih.gov/news-events/news-releases/rapid-response-was-crucial-containing-1918-flu-pandemic

18. This recession is not a normal one. It is not caused by imbalances in monetary policy, lack of supply or demand., or destruction of infrastructure. 30% or so of the economy is in a suspended state of animation. But a lot of the economy is continuing to run normally. The hospitality and transportation sectors are the worst hit. When the “lockdown” rules are relaxed, people will slowly and cautiously begin normal activities. So, I anticipate that the airlines, hotels, and restaurants will experience a slow return to normalcy. There will be a lot of pent up demand. As people begin to believe it is safe to fly and eat out again things should rev up by Christmas. In the meantime the parts of the economy that are working normally now, will continue to get better. I could see the economy reaching pre Covid-19 levels in 2021.

    Yes, I’m a cockeyed optimist because the slowed economic activity is not caused by the usual suspects and because the government is doing its best to keep the 30% at least semi-liquid until things return to normal. Will the yuge infusions of money into the economy create inflation? That’s entirely possible. If the Fed is nimble it can nip it in the bud. That’s where monetary policy will be very important. They have to walk the line between deflation and inflation. The 2008 crisis created large deflation and only QE saved us from a prolonged deflation. Unfortunately, Obama’s regulations on businesses kept us from recovering as strongly as was possible.

    This is assuming that there isn’t a second wave of the virus this fall. If that happens, all bets are off.

19. Snow On Pine,

    Great comment, very well said.

    J.J.,

    My big fear is in almost every major economic downturn there are unforeseen things that pop up and become issues that deepen or extend the downturn. What are those this time?

20. Wars & bombing “destroys” an economy; and depressions, too. Not pandemics.
    They destroy people.
    Lockdowns are more like a depression EXCEPT that the jobs not being done for a different reason — the potential customers have the money, and the desire, but are not allowed to buy. Or sell.

    The total corporate US profits in last quarter, 2019, were over $2 trillion. Profits are the single best measure of “created net wealth” — where most created value is also consumed. So between 1 and 2 quarters of profit lost will be about $4 trillion in “profits NOT made”.

    The working people keep their working skills, ready to start work when the owners of the capital, like restaurants, are ready to go back to business. But yes, many of the “on the edge” businesses will go under and not open back up. There will be many big adjustments, and even more small ones.

    One huge Great Depression issue was that farming was absorbing fewer and fewer laborers, with automation pushing marginal farmers off of farming. Dust bowl weather was also an issue. And then there were runs on banks (just like in the great, tho socialist, movie It’s a Wonderful Life).

    The point is that the economy is on hold, not being destroyed. Short term plans are being destroyed, like proms and graduation ceremonies, and many business plans. But the buildings and machines remain, waiting for workers to return.

    When there are reasonable “safe enough to work” guidelines. So everybody should check to make sure they’re getting as much of the gov’t pork/ bailout/ virus spending as they can, and lower their own expenses. And complain about the failure to act, as Taiwan seems able to, in a way that allows most work.

    Wear masks. Demand that those on TV wear masks. And do more outside.

21. Many great comments above… IMO once ‘normal’ returns the DJIA will boom, but Main Street will be in shambles because small and mid sized businesses, and unemployed wage earners will be in dire straits.

22. Snow on Pine. Well said.

23. Briefly, one good measure of economic pain is unemployment.

    Here is a chart of unemployment in the great depression.

    The numbers in the peak seem a little higher than I thought, but my point with this is that there was much pain for about a decade.

    In terms of unemployment, many people are saying the depth of this downturn will as bad, possibly worse (not sure if I buy that), as the great depression. But, my belief or faith is that the duration will be very much shorter. Perhaps a factor of 15 or 30 shorter. What made the great depression (actually the 2nd great depression in the U.S.) great was the length of it.

24. One thing the first commenter on this thread mentioned was ‘painfully long daily updates’ and I also think they are losing there appeal. These are where we get so much of the inconsistencies where Birx and Fauci seem to completely change their stories from day to day which leads to some of the uncertainty.

    There is such a thing as too much information.

25. TommyJay,

    1893? I actually took an economic history class in college long ago about the period between like 1873 or so and 1897 which some claim was a big long recession/depression.

    And I also think whatever this is or how bad it is it will be shorter than the Great Depression (which was a double dip actually). Probably. Hopefully.

26. Griffin: “My big fear is in almost every major economic downturn there are unforeseen things that pop up and become issues that deepen or extend the downturn.”

    Well, as the saying goes, “Only when the tide goes out is it apparent who isn’t wearing a bathing suit.” The overleveraged are the ones who will be exposed. The stock market sell off was much worse because there were too many using leverage. Bonds and other income instruments sold off as well because people had to raise cash to meet margin calls.

    Hopefully, since this crisis is short-lived and the government has told lenders and landlords to be lenient, there won’t be a raft of foreclosures and evictions. My bank has offered me 120 days of leniency on both auto and home loans. I don’t need it, but I assume they are offering the same to all their borrowers.

    The SBA is going to lend our daughter money to pay her overhead while her business lags. She is doing some skype sessions with clients but many don’t have that capability, so her practice has shrunk. In time, God willing, it will return to normal.

    I watched a bar owner on the local news last night. He owns his building and all the equipment. So, he is applying for an SBA loan to keep paying his employees. When the time comes he will be able to pick right up and go back to normal.

    There are small businesses that will not be able to come back, and that’s a tragedy, but the damage shouldn’t be nearly as bad as in a normal recession.

    Man, I can’t wait for the barber shop to re-open. My hair is hippy length and it’s destroying my self image as a squared away sailor. 🙂 I’m sure the barbers, hairdressers, and many more small service businesses will have customers lined up when things go back to normal.

    I can’t control anything except my attitude. I’m wary of what may go wrong, but still hopeful this will not be as crippling as many seem to think. (Or as the Democrats hope.)

27. “My big fear is in almost every major economic downturn there are unforeseen things that pop up and become issues that deepen or extend the downturn.

    1. [Insert Yogi Berra quotation]

    2. Define ‘major’.

28. J.J.

    ‘My hair is hippy length’

    I have the advantage of being bald so my barber is in my bathroom in a drawer.

    One of the kind of under the radar things is the oil industry. When the stock market drop started back in February it was two things; the virus and plummeting oil prices brought on by a feud between Russia and the Saudis. That combined with no demand has caused oil to drop to around $20 or so. The Saudis were to increase production on April 1 but Trump apparently brokered some kind of deal on cuts between Putin and the Saudis and oil went up like 30% last week but now the word is the deal is off or at least in jeopardy so in the short term oil is going to drop big time Monday.

    But the bigger issue is apparently US producers have kept on pumping even at the lower price to the point where I saw someone saying that they are running out of storage space for all the oil.

    If major bankruptcies and job losses come to the energy sector that is going to be rough on states like Texas. Always something.

29. Art Deco,

    I actually went back and edited in ‘major’. Totally subjective I agree but would say severe recession to depression.

30. Totally subjective I agree but would say severe recession to depression.

    You have 15 or 16 to choose from over the last century. Draw a line.

31. Art Deco,

    I’m sure you’ll pick this apart so I’m not going to get in some back and forth. I would say 1907, 1929-1933, 1937-1938, 1973-1975, and 2007-2009 would be my line.

    Have fun picking away.

32. A long term recovery will depend greatly on who wins the election for President and if the Senate flips to Dem. Having a total Dem admin would not be good for a recovery.

33. The current panic (“panic” used to be the common name for these periodic economic disturbances, and I like it) has got me thinking about the ones of the past. They have happened as long as people have been trading things they have for things they’d rather have. Usually the disturbance lasts for a year or so, until the assets that were misdirected are discounted and resold to people who can put them to profitable use. Then activity starts to build again, and continues to build until the next contraction. A useful comparison is the collapses of 1920 and 1929. Although we had a Federal Reserve in 1920, it didn’t have as much influence as it did later on. The president who was responsible for the recovery from the 1920 crash, Warren Harding, was not a progressive, and so did not advocate any massive stimulus spending program. Instead, he cut government spending and taxes drastically, while increasing support for state-run unemployment compensation programs. The panic blew over in about 16 months.
    In 1929, progressive Herbert Hoover was president, and saw this crash as a chance to push the government in a more progressive direction, but was thwarted by a vestigial respect for the rule of law by some in congress and the courts. This respect was swept away in the 1932 elections, and FDR was able to push through his new deal. The HooverVelt program managed to extend the period of suffering beyond the traditional 1-2 year time frame until the middle of WW2, approximately 10 times the historical average. There seems to be a lesson there, if anybody’s interested.

34. It is very difficult to predict. A few things seem very likely.

    As mentioned above, hospitality will likely be slow, and perhaps permanently damaged. The cruise industry, air travel, hotels… And the locations that depend on them; Venice, Prague, New Orleans… Large concert venues? It seems likely there will be an age factor in how quickly certain things recover. The old will be more risk averse. Burning Man may have as big a crowd as ever. Cruise ships, especially longer, more expensive cruises?

    This will almost certainly accelerate the nailing of the coffin for many brick and mortar business. My 80+ year old folks ordered groceries on-line for the first time in their lives and don’t intend to go into a store or restaurant for the rest of the year, at least, since this thing will be in the wild for at least that long. As more people have had to resort to on-line shopping, many will not return to brick and mortar. I agree with those who predict this will hurt main street even more than it had been suffering.

    This will also likely exacerbate the commercial real estate slump. Many companies will realize it’s cheaper to keep employees at home, using their own kitchen counters for work space and paying their own utility bills than providing offices, desks, coffee, heat, air-conditioning, parking spaces…

    It could also be a boon to homeschooling. Companies that market materials and resources. And it could be a bust for teachers and brick and mortar schools. This could accelerate the trend we’ve been seeing in College closures, especially small, private Colleges.

    An outlier, but interesting; professional sports. I forget the numbers, but ESPN has been bleeding viewers every month for several years, as more people “cut the cable” and they lose revenue from folks who paid for expensive cable plans but were not particularly interested in sports. Now that more folks are growing accustomed to not watching televised sports (there are no live games to watch), won’t that trend accelerate? And if it does, what will happen to players’ salaries. Have we finally reached a peak?

    And what of crowded cities? This has to hurt New York residential real estate, and that has to be long term. Will the wealthy continue to live in crowded buildings and ride the subway to work? Will this hurt car/ride sharing? Will car sales go up?

    There is a lot of talk of pulling more production from China to the U.S. Will that happen?

    I can envision a time, not long from now, when President Trump is on TV announcing, “America is open for business again!” And a lot of pent up consumerism exploding, resulting in a rebound of optimism and consumer spending (I can also envision that not happening), but even if that is how this plays out, some things will take a long time to recover, and some may go away.

    I think we are fortunate to have a carnival barker like Donald J. Trump in office as opposed to a soft spoken pessimist like Jimmy Carter. Trump will do what he can to promote the economy and inffuse optimism, but that will only take us so far.

35. 1893? I actually took an economic history class in college long ago about the period between like 1873 or so and 1897 which some claim was a big long recession/depression.

    See the Maddison Project compilations. They report that real per capita product increased by 45% during that 24 year period. There were periods where the economy was on balance stagnant (1873-1877 / 78 and 1882-1890, 1892-97), one of which incorporated a period (1892-94) of acute economic contraction (on the order of a 12% decline in per capita output). In general, prior to the Depression, cyclical flux had a higher amplitude than it’s had in the post-war period, but that particular contraction sufficed to leave the federal Democratic Party in wrecked condition for the succeeding 20 years.

36. The president who was responsible for the recovery from the 1920 crash, Warren Harding, was not a progressive, and so did not advocate any massive stimulus spending program. Instead, he cut government spending and taxes drastically, while increasing support for state-run unemployment compensation programs. The panic blew over in about 16 months. In 1929, progressive Herbert Hoover was president, and saw this crash as a chance to push the government in a more progressive direction, but was thwarted by a vestigial respect for the rule of law by some in congress and the courts. This respect was swept away in the 1932 elections, and FDR was able to push through his new deal. The HooverVelt program managed to extend the period of suffering beyond the traditional 1-2 year time frame until the middle of WW2, approximately 10 times the historical average. There seems to be a lesson there, if anybody’s interested.

    All of the foregoing is fictional.

    Appropriations for federal agencies did decline in nominal terms by about 40% between FY 1921 and FY 1922. Over 90% of these cuts are attributable to the last leg of winding down the war effort (distributed between the War Department, the Navy Department, the Veteran’s Bureau, and the Bureau of War Risk Insurance). The cuts to these agency appropriations were about $1 bn in nominal terms, or roughly 1% of the period gross domestic product.

    The salient features of the Hoover Administration had flat nothing to do with the president being a ‘progressive’ or with ‘respect for the rule of law’. From October 1929 to March of 1932 there was a rapid rise in the demand for real balances not met by monetary authorities. The monetary base declined slightly during those years. The result was abnormal deflationary pressure and double-digit real interest rates. That put a damper on economic activity and also induced defaults as people were unable to service their debts. That induced two waves of bank failures which further reduced the quantum of M1 as demand deposits were extinguished or locked up in bankruptcy court, so you intensified deflationary pressure. It was only in the spring of 1932 that the Federal Reserve attempted open market operations to attempt to stabilize price levels and the Congress incorporated the Reconstruction Finance Corporation to provide credit to industry. It was at that point that the rapid economic implosion came to an end. There was little or no growth in the latter half of 1932, but at least the economy was not contracting. Note, Britain devalued the pound in September 1931 and it’s recovery began almost immediately. The economic contraction in Britain over the 2-3 year period in question was on the order of 6% rather than 30%.

    As for the Roosevelt Administration, they had salutary and unsalutary policy measures. Most salient among them was a series of measures enacted in the spring and summer of 1933: the bank holiday, the devaluation of the currency and the institution of mildly inflationary monetary policy, the construction of a revised architecture of federal banking regulation which included deposit insurance, and the incorporation of the Home Owner’s Loan Corporation to promote work-outs of sour real estate loans. For all the unsalutary policies the Administration followed, these measures had a tremendous tonic effect, Per capita product grew a mean of 7.3% per year during the years running from 1933 to 1941 was was by the latter date about 20% higher than what it had been in 1929. The labor market remained dysfunctional, with a great deal of labor stashed in the Works Progress Administration and residual unemployment a great deal higher than it had been in 1929, but that’s another issue. The country as a whole was more affluent.

37. AOC (Deeply DEEP) said yesterday that our country is being “barbaric” to its Working Class.

    Uuuuummm… Lemme ask you a what’cha call a Rhetorical Question, Dear Blathering NY Genius: Are you talking about the same American working class who will hugely support the president’s re-election in November??

    DUuuuhhh…

38. Griffin,
    I meant the depression from 1837 – 1844. I read a book about that period by an historian, Alasdair Roberts, a political moderate or liberal and not an economist. I think the level of social unrest, aside from the civil war, was unique.

    Ten state govs. defaulted on their debt, extreme (non-violent) hostilities with the creditors in the U.K., rioting in the streets with rebels in Philly firing canon at gov. troops, rebels seized control of the Rhode Island government, and so on.

    It’s just my opinion that what makes a depression great is the amount and duration of social pain.
    ______

    Art Deco on April 5, 2020 at 7:20 am said:

    “the construction of a revised architecture of federal banking regulation [under FDR] which included deposit insurance, and the incorporation of the Home Owner’s Loan Corporation to promote work-outs of sour real estate loans.”

    Good stuff Art. I’ve read a few pieces that imply that real estate wasn’t an issue, which always struck me as extremely unlikely. My guess is that it was more commercial real estate rather than homes. Also, maybe farm real estate was a big problem with wheat farming going through perhaps a 50 year cycle of declining wheat prices.

    Most of the little I learned about the banking reforms under FDR’s first term I’ve forgotten, but I thought there was something like good bank/bad bank resolutions in order to get rid of the junk loans and restore confidence.

    But I do think looking a net or per capita wealth or income in the late 30’s is cold comfort to the 10 to 15% unemployed, and misses a big part of what makes a depression great.

39. It is probably too late to get into this conversation but have you noticed that more people are shopping at small Mom and Pop shops now? It’s happening here north of NYC.

    I talk to people. They say that they are shunning the big grocery stores due to (a) the peer pressure to wear a mask and gloves (one guy came in a hazmat suit!), (b) the social distancing boxes taped to the floor at the checkout lanes, (c) the limitations on purchases of paper products, and (d) the feeling that we are all extras in a B movie contagion film.

    The little Mom and Pop deli around the corner is doing bang-up business. The shelves are stocked with paper products, no limits, though not the brands I normally buy but heh beggars can’t be choosers. Lot’s of Boar’s Head deli meats, freshly baked bread, etc. On top of that someone who knows my name!

    One gentleman walked in and said he is closing his auto repair shop. His business went from 5o-70 cars a day down to 10. He has to lay off all his mechanics, and he’s now unsure if he’ll be able to reopen again. Many business owners do live on the margin.

    Another fellow walked in looking depressed. When asked he said his wife was not feeling well but he confided that she’s been watching a lot of television news which is non-stop negative in the State of New York.

    I gave up on television three years ago. My wife watches but mostly Hallmark Channel. She will turn on the news for 10 minutes each evening, making sure that she turns off the volume. She looks for the daily tallies and then turns it off.

40. If I understand correctly, prior to the Depression, insurance companies were the modal source of home mortgages. It was typically a five year loan with a balloon payment at the end. These were commonly renewed. One byproduct of the system was the promotion of three-story townhouses. You lived in the first two floors and your rental income from the third floor was a source of funds to pay off the mortgages. After 1929, people could not get their outstanding loans renewed. Megan McArdle has written about this phenomenon.

41. Brian Morgan,

    Yeah, we have decided to just go to locally owned restaurants like burger places or pizza (for carry out obviously). They need all the customers they get while the big guys are better equipped to take the hit (hopefully). Just ran to the grocery store and they were a virtue signaling show if I’ve ever seen one. People had to line up outside and they were letting people in every 30 seconds or so but once you got in people were walking along passing each other on aisles like normal. I would say half the people were wearing masks some quite elaborate looking which I don’t have a problem with I guess but the entry policy was pure show.

42. Inspired by yesterday’s kerfuffle over a Michael Lewis article I linked, I watched a movie based on “The Big Short,” Lewis’s book based on the 2008 financial meltdown and those who profited by shorting the debacle.

    Here’s the Brad Pitt character remonstrating his younger friends who just pulled down a big short which would make them millions. They are dancing and jiving to each other, but Brad Pitts, looking about as cool as a retired investment banker who gave it all up for Colorado granola can be, reminds them:
    ______________________________________

    Do you have any idea what you just did? You just bet against the American economy.

    Which means … if we’re right, people lose homes. People lose jobs. People lose retirement savings, people lose pensions.

    You know what I hate about f*cking banking? It reduces people to numbers. Here’s a number: every 1% unemployment goes up, 40,000 people die, did you know that?
    ______________________________________

    That’s my concern too, along with Griffin and others here. It’s not my only concerrn, but it’s a serious one.

    I’m not the only one to catch the echo from today to 2008. Here’s a blogger who got there over a week ago with a YouTube link to the film:

    https://www.rebellionresearch.com/blog/economic-depression-will-destroy-more-lives-than-coronavirus

    Michael Lewis is damn good at getting the inside story, and mostly, in my experience, he has been right.

43. huxley:

    I’m curious whether you’re familiar with this book of Lewis’, and if so, what you think of it. I have not read it, but from the description it seems like pretty standard anti-Trump and pro Deep State stuff to me.

44. neo: Yes, I know Lewis is a liberal-Democrat-ish cove and he’s on that side of the teeter-totter when it comes to Trump.

    I’ll still take his non-political opinions over yours, since you seem to be setting me up that way.

45. huxley:

    An interesting way for you to put it [emphasis mine]: “I’ll still take his non-political opinions over yours, since you seem to be setting me up that way.”

    I’m going to try to make myself very very clear: you can take ALL his opinions over mine, if that seems correct to you. But after commenting here all these years, I would hope that you realize I’m not setting you up “that way.” I couldn’t care less about Lewis’s opinion vs. mine, or who wins the contest. I care about what seems reasonable, logical, and true.

    I tried to point out why his point of view didn’t seem to me to fit the facts. I haven’t read much by him and maybe all his other stuff is great. But even if I had, and was familiar with his work and admired his work tremendously, if on a particular topic he didn’t make sense to me I would disagree with him and have no hesitation to say it, even if I had previously trusted him. Of course, if I previously liked his work, I would be more inclined to really really try hard to find a flaw in my own argument if it disagreed, but in the end I would stand by my own logic no matter what his previous reputation and my previous experience with him.

    To me, his argument on what we were talking about in the other thread just didn’t conform to the facts. That’s all.

    You keep saying you trust him, which is fine. I neither trust nor distrust him – as I said I barely know the guy. I could only find one previous post of mine that mentioned him. I have no dog in the Michael Lewis race.

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