Sunday, March 15, 2020
The Economic Crisis The Pandemic Will Cause Is NOT a "Recession," It Is Altogether Different
The usual goals for addressing a Recession are to create more jobs and more spending. However the economic problem caused by the pandemic is not too few jobs, but essentially too few workers, in the sense that the jobs are still there, but many workers are not able to perform those jobs - in some cases because that are actually sick, but in many more cases because a societal lockdown prevents them from leaving their homes to travel to a job. So the idea of creating more jobs to address the economic crisis of the pandemic is simply meaningless.
As to spending, it will generally decline greatly during the pandemic. Other than food and rent, most purchases will be put on hold for the duration. Why would anyone even think of buying a new home or car or fancy clothes when they are in lockdown at home? All restaurants and all retail stores other than food and medicine will likely be closed. Nothing, and certainly not lower interest rates, will (or should) cause people to spend beyond the basics of survival.
What the pandemic WILL REQUIRE is that the government provide sufficient immediate cash to everyone to make up for the lack of a regular paycheck.
We need to simply forget about the usual metrics like "Recession," and just focus on surviving both medically and economically during the pandemic.