| I just don't see how these closures aren't going to ripple through the global economy. The market is down 25% YTD after two desperate stimulus measures - $1.5T injection and interest rates cut to zero. What are you going to prop up when world travel and trade is shut down? And domestic regions are locked down too? The kicker is that we had been seeing negative long term indicators for a while before this - inverted yield curve, and long overdue for the approximately 7 year recession cycle, among other indicators. I would love to be convinced otherwise but, regardless of the outcome of the 2019ncov situation, this is shaping up to be a trigger for a global recession, possibly a depression. Modern society cannot sustain itself indoors without radical measures. The vast majority of people probably work at jobs that cannot be performed remotely. |
It almost certainly will. But there's a reason virtually every macro-economist is forecasting a rapid V-shaped recovery after the quarantine eventually ends.
At the end of the day, 90% of the population will still be working through the quarantine. And most of the rest will still receive unemployment benefits. Think about all those people collecting a paycheck, and just sitting at home. Now what happens when the quarantine ends?
They take all that money they've built up, and unleash it all at once. All those big-ticket purchases, vacations, and events, that got deferred happen in a short burst. All those people cooped up at home, will flood into restaurants, stores, and concerts. Think Chicago on the first warm day of spring. It's likely to be the greatest one-time surge in consumer spending in all of recorded history.
That's virtually guaranteed to jump-start the economy near instantaneously. And unlike 2008, the chance of systemic financial contagion is extremely low in today's environment. Banks are extremely well capitalized, and the vast majority of risky investment has been moved to non-bank entities, like corporate debt markets, private equity funds, and CLOs.