We Will Handle The Corona Crisis, But Will We Handle The Economical Crisis?

Perados

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I'm not gonna say we will face a collapse of 25%, but I guess a lot of people underestimate what will come...

At first we have China.
The shut down their country for 8 weeks, but it's still now over. While 70% of the people returned back to work, a large part isn't and their wont...

While we worried that we will run out of production parts made in China, we start to notice that we won't need them. Now do we shut down large part of our economies.

Chinese export won't recover and the economical crisis will continue.



In the USA and Europe more and more areas shot down the public life. Companies stop their production. Many small companies, artists and what ever experience a decline of income by 100% within days.

If we expect that it will last just as long as in China, it will last 8 weeks.

It total would it be 8 weeks for "the west" and 8 + 8(export only) weeks for China.

Consume, Restaurants, cinema, theatre you name it... even automobile and mobile companies reduce or shut down their production.
This could be around 20 - 30% of the GDP. Depending how much can be compensated by online delivery.

So, let's say 20% for 8 weeks. That's like 3.5% of our annual GDP.
For China most likely higher.


Anyway, that's not the end... a decline by 3% could be handled, if it hits the whole economy. But concentration on a small part, it could be devastating. These parts of the economy could go broke within weeks. They wouldn't recover, create mass unemployment and increase the decline of GDP.



Simple tax reduction, or helicopter money wont help.

We need something more. The state will have to provide every company with free money. Not the consumer, but the companies (the employers) have to be in focus. They have to survive the crisis and keep their people employed.



What are your thoughts?

Are we prepared, or not? Or do you think nothing will happen at all?
 

d3ofol_griffin

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Some parts of the US economy have gone through the floor for the First Quarter. Second Quarter starts in April so we'll have to wait and see. Of course, some parts of the economy are doing quite well. The price of gas in my neck of the woods is a jaw dropping $1.87/gallon. If China says, "We're not making shit for your country anymore." we'll for sure have some real old fashion inflation. If the coronavirus disappears for the summer and then reappears in the fall like the Spanish Flu did about a hundred years ago that would be terrible. We'll all be dealing with more disruption, but then we're getting pretty good at that.
 
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ColonelLingus

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depends on the job you have but alot of people will be fine. However small businesses will be essentially crushed and have to start over. One of the benefits when you work at a major company is that you'll be alright during an economic issue. Thats the risk you take when you open your own biz.
 

kidfresh512

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depends on the job you have but alot of people will be fine. However small businesses will be essentially crushed and have to start over. One of the benefits when you work at a major company is that you'll be alright during an economic issue. Thats the risk you take when you open your own biz.
The airline industry, the oil and gas industry right now is in line for massive layoffs and reductions. Airline employees are being asked to take voluntary unpaid leave due to all the travel bans for 3-6 months in some cases. Or reduced hours, which my cousin has accepted for now. All prior to layoffs without some kind of bailout if it goes much longer.

And Oil and gas industry getting crushed under the Putin MBS dick measuring contest for oil prices. Travel bans/Covid also making it hard to support international operations on rigs and drillships globally. Industry was already in a slump this has pushed many drillers and support companies into bankruptcy prep mode and pending layoffs and restructuring which will effect thousands of workers.

The entire workforce big and small will be effected unfortunately
 
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wallyj84

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Most reports I've heard have said that this could be significantly worse than the great recession. We aren't prepared for that at all and I don't think we have the tools in our toolbox to really handle a problem of this magnitude. The source of this problem isn't some kind of abstract economic issues, like mortgage backed securities being given inaccurate ratings, but a real health danger that our society just isn't designed to handle.

I don't know what needs to be done, but I do support a UBI being given to EVERY American citizen. I also think we need to put a freeze on evictions and foreclosures. If we're essentially freezing society for everything except essential businesses and services, we need to freeze everything that isn't essential and that includes a lot of the stuff that is just moving money around like rent/mortgages. I think this might be controversial, but we need to put a freeze on the collection of student loans. I have no idea if all of those solutions are correct, but I think they're a good start at protecting the people and laying a foundation for rebuilding afterwards.

I think we need to make sure that after this crisis is over that people have access to credit and funds in order to start new businesses. This crisis is going to put some companies out of business and that is OK. Businesses aren't supposed to last forever. The important thing is to make sure that we have mechanisms in place to help people replace the businesses that do disappear. We need to make sure that everyone is in a position to hit the ground running and fill out any holes in the market that pop up.
 

ColonelLingus

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The airline industry, the oil and gas industry right now is in line for massive layoffs and reductions. Airline employees are being asked to take voluntary unpaid leave due to all the travel bans for 3-6 months in some cases. Or reduced hours, which my cousin has accepted for now. All prior to layoffs without some kind of bailout if it goes much longer.

And Oil and gas industry getting crushed under the Putin MBS dick measuring contest for oil prices. Travel bans/Covid also making it hard to support international operations on rigs and drillships globally. Industry was already in a slump this has pushed many drillers and support companies into bankruptcy prep mode and pending layoffs and restructuring which will effect thousands of workers.

The entire workforce big and small will be effected unfortunately
I am being facetious because my post was a general statement without any reasearch, my bad. BUT police jobs, delivery jobs, essential store jobs, online stores, tv companies, hospitals- it would appear they are all high demand right now considering the call for increase. I am being optimistic and can admit when a post i make isnt fact based. Mere observational. Thank you for responding though. Side note people out of work are said to be paid under state by state difference. Remember this is all temporary.
 

keenobserver

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I am being facetious because my post was a general statement without any reasearch, my bad. BUT police jobs, delivery jobs, essential store jobs, online stores, tv companies, hospitals- it would appear they are all high demand right now considering the call for increase. I am being optimistic and can admit when a post i make isnt fact based. Mere observational. Thank you for responding though. Side note people out of work are said to be paid under state by state difference. Remember this is all temporary.

Yes, it is temporary, but as the saying goes, "It's hard to remember your job is to drain the swamp when you're up to your ass in aligators." The damage from this is going to be long term for many people.
 

Perados

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depends on the job you have but alot of people will be fine. However small businesses will be essentially crushed and have to start over. One of the benefits when you work at a major company is that you'll be alright during an economic issue. Thats the risk you take when you open your own biz.
In every crisis you have some who differ more and some who suffer less.

The question is, how much will the average suffer.

To make it more simple:

1. Will we have a crisis like in 2008? Will it be bigger? Will it be smaller?

2. Will we recover just as "good" as after 2008, or will we slide in a recession like in the 1930s?
 

Perados

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I am being facetious because my post was a general statement without any reasearch, my bad. BUT police jobs, delivery jobs, essential store jobs, online stores, tv companies, hospitals- it would appear they are all high demand right now considering the call for increase. I am being optimistic and can admit when a post i make isnt fact based. Mere observational. Thank you for responding though. Side note people out of work are said to be paid under state by state difference. Remember this is all temporary.
The problem is, cities won't hire more police just because of a crisis that will last a few weeks/month - or they would fire them if the crisis is over.
Same counts for TV or Hospitals. Online shops will hire for a short period - counts for any kind of shop...

On the other hand, not a single company that goes bankrupt will come back after the crisis. Many of these jobs will be gone for a long time.

The risk in this case is that such a shut down of large parts of the economy will infect other parts as well.
 

Perados

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Most reports I've heard have said that this could be significantly worse than the great recession. We aren't prepared for that at all and I don't think we have the tools in our toolbox to really handle a problem of this magnitude. The source of this problem isn't some kind of abstract economic issues, like mortgage backed securities being given inaccurate ratings, but a real health danger that our society just isn't designed to handle.

I don't know what needs to be done, but I do support a UBI being given to EVERY American citizen. I also think we need to put a freeze on evictions and foreclosures. If we're essentially freezing society for everything except essential businesses and services, we need to freeze everything that isn't essential and that includes a lot of the stuff that is just moving money around like rent/mortgages. I think this might be controversial, but we need to put a freeze on the collection of student loans. I have no idea if all of those solutions are correct, but I think they're a good start at protecting the people and laying a foundation for rebuilding afterwards.

I think we need to make sure that after this crisis is over that people have access to credit and funds in order to start new businesses. This crisis is going to put some companies out of business and that is OK. Businesses aren't supposed to last forever. The important thing is to make sure that we have mechanisms in place to help people replace the businesses that do disappear. We need to make sure that everyone is in a position to hit the ground running and fill out any holes in the market that pop up.
To freeze nearly the whole flow of money could be really dangerous.

The flow of money guarantees that salaries get paid, for example.
If you want to freeze, you will have to freeze every loan repayment and salaries.

Now you will have to solve the problem that people run out of money and can't buy food... the government will have to provide everyone with money.


Britain has a slightly similar solution. They don't want to stop the flow, but offer every company in trouble to pay their salary payments.

In Germany we offer every company in trouble free money - it's a program of around €550 billions. Next to this the public bank KfW offers free loans.

The idea is to keep the money flowing and the people hired, the government will pay for everything. Everyone can get back to work, instantly, if the crisis is over and the economy recovers.
If people would get fired, or companies goe bust, it would take way longer to recover.
 
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Perados

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Then what do you think will work?

Was sollen wir machen?
First of all I would like to say why I think simple helicopter money is useless. This will get us to the reason why we need a different solution.


Simple helicopter money mean everyone gets a certain amount of money. No matter if he needs it or not. It would include private persons, but no companies.

Some people will need way more than 1000$ (for example), while others don't need money at all, or not so urgent.
The idea of helicopter money is to push the consume, but this crisis isn't about a lack of consume, or not from its inner core.
And that's why this solution will fail.

If I'm an independent artist (for example) and every public show has closed, I will miss all of my income for about 2 month. In this case a single payment of $1000 wont help me much - it's not enough to buy food, pay my rent and maybe buy medicine.

On the other hand you have those you still have an income and could use this money for consume.
But we will have two problems here.
1. Right now the show in the mall suffer, because they are closed. They won't open, just because you got $1000 to consume. This means these shops wont profit from the helicopter money, even if they need it. - online shops will profit, but they profit from the crisis anyway, so why supporting them even more?
2. Many factories are closed. They wont produce right now. Similar problem as with the shops... a factory only can sell what they produce. Those who are closed right now suffer the most and just like the shops they won't profit from the helicopter money.


That's why we have to think the other way around.

We have to make sure that no company goes bust, just because of Corona. This means we will have to supply companies with money, IF they are in trouble because of corona. On the other hand is no company allowed to fire people because of corona.

How you supply them is up to you...
But that's the way to solve the crisis. Support who are affected the most and do it fast.
 

halcyondays

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After cutting interest rates and making $1.5 trillion available to banks/corporations in the last two weeks the Federal Reserve today announced "unlimited Quantitative Easing" which means they will print (electronically) all the money they want to buy up corporate bonds, mortgage backed securities (2008 anyone?) and US treasuries (Federal debt) to help stabilize the stock/bond market (read: stabilize the wealth of the rich).

With trillions going to prop up corporations whether they need it or not it's entirely appropriate for Congress to send checks to all Americans whether they need it or not. One check for $1600 isn't going to be enough for the 80% who live paycheck to paycheck.
 

Thikn2velvet1

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