U.S. Jobless Rate May Soar to 30%, Fed’s Bullard Says
bloomberg.com
bloomberg.com
Suppose the government does a massive bailout of everyone. They guarantee jobs, they give everyone money so they don't run out.
And it works. In a few months from now, the economy turns out to have just hit a speed bump and everything is back to how it was.
What does that say about the economy? I mean if we can stop working and basically just lend ourselves money, and we're fine, what else is fine?
Why don't we borrow some money to fix climate change?
What about poverty, why would that exist at all?
Should we have a reckoning with all the people who said austerity was a good idea?
The only ways to get out of that number are defaulting on the debts, which would greatly harm pension plans and other countries, or inflate our way out it, which could easily lead to hyperinflation, which would ruin pension plans and the world economy.
If I spend more than I earn, sure it goes on a credit card. I have to find a way out.
If a country that prints money spends more than it makes... it can print more.
What we need to do with coronavirus lockdowns is essentially to pause the economy. Cut all social contact off, let the virus run its course, develop a treatment or vaccine, and then reboot the economy. If the economy was healthy before (and most people say it generally was, despite a few doomsayers), that shouldn't be impossible. You could do it either by guaranteeing basic needs for the duration of the crisis, or by lending money on a short-term basis for the duration of the crisis, or by pausing all time-based payments like rent and debt.
Other economic recessions have had different causes:
2009 and 2001 were because the financial sector invested lots of money in unproductive sectors (real estate and dot-coms, respectively), and then that malinvestment needed to be written off and reinvested in more productive sectors of the economy before it could return to normal. That takes time, and it takes capital, and for people in the unproductive sectors it never happens. Tech started recovering in about 2011, while folks in coal mining or steel milling will probably never get their jobs back.
1973 was a supply shock. The price of oil went up rapidly. Everything else in the economy depends upon oil, or transportation using oil. Therefore, the price of everything else went up, and many marginal sectors of the economy were eliminated. All the massive bailout managed to do here was increase the price of everything.
1929 was a combination of everything going wrong. There was a speculative bubble during the 1920s which meant that a lot of capital was invested in Florida real estate, rum runners, consumer fads, and other unproductive sectors. There was a contraction of the money supply from 1929-1931 because the Fed screwed up. And then there was the dust bowl in 1931, which was a force majeure that added a supply shock.
Climate change is a much broader problem that affects the whole world. It'll likely result in massive migrations and productivity differentials across nations. If you have a free global market with porous national borders, the global economy will likely adapt, but there will be massive regional winners and losers. If you close the borders and try to deal with it on a national level, you'll probably get war.
Poverty is a consequence of liberty. If you let individuals make their own deals, some will inevitably make bad ones. Totalitarian regimes often have much lower inequality (excepting the ruling class), at the expense of everyone being poor. On an absolute level, even the poor in America are much better off than the rich in say the DRC.
Note that if the coronavirus isn't contained - if we just let people die instead of stopping it - we're likely to end up with a 1973-style supply shock rather than a graceful reboot. Except much worse. Labor is a factor of production for everything, and if people are dead, they can't work. When this happened after Black Death, the whole feudal system collapsed and we got the Rennaissance and modern market economy.
My comment is not intended to be a value judgment on either poor people or rich people, just a description of why things are the way they are.
The problem is that we have stopped making stuff.
Once the warehouses all empty, there will be no more products. All those nice things you are used to buying to make your life nice and safe and clean and fun will be gone.
The infrastructure to even make the stuff will decay and be gone.
Printing money doesn't make products. It doesn't repair factories. It doesn't prevent the coming collapse of the prosperity we have enjoyed these last 100 years.
lots of people are tweeting that they are 3-4 weeks from disaster. that's some very special definintion of prosperity. These are numbers that come to mind when you think about middle age peasant.
This is why it's essential that relief go to directly to people, and that we free those people up enough from expenses that aren't directly economically productive (things like rent, say) as we can. We want people to have money to spend, so producers will have a reason to go on making things to sell them.
It produces immediate demand at the cost of reduced future investment -- which could potentially keep suppliers afloat temporarily in a crisis.
But while the problem today is a demand problem, we are really only days-to-weeks away from a supply catastrophe unlike anything seen in two centuries or more.
Basically, no new stuff is being made anywhere right now -- because it is illegal to do so most places -- we are all locked in our houses on threat of arrest (or worse in some countries)
Right now, the local warehouses are still full, so the stores get restocked. Those warehouses will get restocked from regional ones.
But, we are draining all of the buffers in all of the supply chains of all of the products. Once it all drains, there is no more supply.
Climate Change says tick tock tick tock
Rest assured your pop culture of choice is just as odious to someone as Honey Boo Boo is to you.
We need a few people to actually do work, but it's hard to figure out how to make that happen in a way that is fair.
The entire economy is built around people doing things and making things for other people. If that stops happening, the whole system falls apart.
We can tell ourselves a different story about what's important..
We certainly haven't been optimising for anyone's well being in a holistic sense, so maybe we should try telling ourselves that is important. You know, basic food, clothing, shelter, medical care for all. Maybe even some serious discussion on where we are and where we want to be 10, 50, 100 years from now.
If everything is pitched as a competition, as it has been, of course there's going to be losers and winners. I'm not convinced it has to be that way.
But that's the problem: our economic system has to be a system, and arbitrary exceptions have to be... er... the exception, not the norm. What's hard (though not nearly as hard as certain politicians would tell you) is creating a system that allows for both proper creation and distribution of wealth, and works in all cases. The right-wing tends to write off the second objective as intractable (not always in good faith) and focuses on the first one. The left-wing tends to neglect the third objective (being systematic/working in all cases).
Think of it this way: it's easy to write a piece of code that does one exact thing. It's hard to create a system of code that does the right thing in all possible cases, including ones you haven't thought about.
All of that said: we have plenty of resources and ingenuity to solve this problem and build that system. We're just hampered by some incompetent actors and by other bad-faith actors who don't want it to exist because they benefit from the one that we have.
That’s the consequence. But it’s been so long, everyone who fought the last war is dead or retired.
If we keep demand the same, by paying a quarter of GDP, but supply contracts....same dollars of demand for less quantity.
Like the cost of face masks or paper towels, but for all the other stuff that doesn’t get made.
People keep saying "that's not possible" but there are already a lot of companies working on it.
Show me a place I can make $300,000 working on curing diseases and I'd happily spend my life working on it. At the moment making websites pays better.
https://www.schrodinger.com/careers
But you're right that you won't get $300k. Even $200k is a reach. Funding for drug discovery can't match making websites yet.
If I could take a pill and get an extra year of healthy life, I would pay a lot for that pill.
If I could take a pill (or vaccine, or whatever) and never get sick again, I would pay a lot for that pill.
If you could make 7.5 billion people never get sick, I assume that would make you far richer than Jeff Bezos.
Surely these solutions and others are worth more than a lot of the other things we buy. But our system isn't set up to develop them, it seems. We're set up to pursue quarterly earnings statements, rather than 10 or 20 year goals that would dramatically improve our lives.
Also, I'm not sure that our current meaningless software jobs are actually completely meaningless. We are actually making tasks easier and faster, which in some way does contribute to society advancing faster and maybe someday being better able to pursue other goals.
Life is significantly different and at least in some ways better thanks to Amazon (get anything anywhere), Google (search everything), Wikipedia (basic knowledge about almost anything), the internet (communicate with anyone), Coursera (learn basic skills on many topics), and so on. And even the simple e-commerce websites for some family business, made by a "web developer" for $500 in 1998, helped push us a little bit toward a more discoverable and efficient economy. Which does help us get a little bit more efficient overall, for goals we might pursue later.
Or at least that's how I convince myself to keep doing what I'm doing.
Growing up a poor person going to the city was a real trip.
Life’s exciting things are very different emotionally when you accept Switzerland isn’t an option.
Not having health insurance didn’t stop us from playing with rockets.
Words and feelings are not necessarily a connection to reality. Internal anxiety isn’t truth.
Western culture seems addicted to the notion the world needs it to spread its gospel across the globe, or life isn’t worth living.
Consume in accordance with the demands of high finance!
An exceptional nation brought to its knees by the idea iPhone 2021 not being released is a sign of the end times.
There's simply no way someone in Bullard's (or Mnuchin's) position would say anything as dramatic as the article implies as categorically as the article implies.
There is no corroboration that I could find. Everything else references the Bloomberg article, which, in turn, references nothing at all.
I hope that on the reboot we require some "social security" in businesses; healthcare benefits, 2 weeks severance, and retirement savings seem like minimums; Frankly, these requirements should have been included in the 21% tax cut.
after last crisis it took 7 years for unemployment rate to recover: https://irle.berkeley.edu/the-post-recession-labor-market-an...
there is more data going back 100 years.
Consumption will suffer. When foreign tourists stop booking rooms in Copenhagen hotels, how/why keep people on the payroll? Also, isn’t it dangerous to distort the market to such a level? Maybe there are more productive activities for those employees to engage.
There will be dislocations of the workforce. Considering the ongoing crisis I would take official statements with a grain of salt also. They need to convince people to comply with the rules.
What it stops is "I need to perform some trivial make-work job because the hotel/bar/unessential retail I used to work at shut down, and otherwise I starve and get evicted, so I'm going to traipse around and weaken quarentine procedures."
Calling for an immediate federal hiring surge at all levels of the newly implemented public health services, President Biden said “This act will restore salaries, dignity, and comprehensive health coverage with sick leave to our nation’s brave citizens who have by no fault of their own been left out to dry during the initial response to the pandemic. Employing many of the currently unemployed to operate our fast turnaround testing clinics and disease screening centers will drive our economy and our continued fight against this disease.”
he’s been pretty against medicare for all on grounds it “costs too much” just as one example, and just recently called for companies to stop stock buy-backs during covid-19 [0] but nothing like that ↑ afaik...
[0] https://www.bloomberg.com/news/articles/2020-03-20/biden-cal...
“ Giving Americans a new choice, a public health insurance option like Medicare. If your insurance company isn’t doing right by you, you should have another, better choice.”
“ A decisive economic response that starts with emergency paid leave for all those affected by the outbreak and gives all necessary help to workers, families, and small businesses that are hit hard by this crisis. Make no mistake: this will require an immediate set of ambitious and progressive economic measures, and further decisive action to address the larger macro-economic shock from this outbreak. Biden believes we must spend whatever it takes, without delay, to meet public health needs and deal with the mounting economic consequences.”
that most appreciated, and a little encouraging (as much as a campaign page can be i suppose, caveat emptor and all that)