Goldman sees unprecedented stop in economic activity, with 2nd quarter GDP contracting 24%

[Bullseye]

That is a rather rosy scenario, but the reality may turn out to be quite different. For your "shift into neutral" (or as some say "hitting the pause button") idea to actually play out (without a hitch) assumes that suppliers were paid for any perishable inventory (which is no longer sellable) and all of that is then replaced, business real estate/equipment rent/lease payments (including utility bills) were made and the same experienced workers remain available for immediate reinstatement - all having been paid for with no business income for however long this government mandtated "interruption" ends up lasting.

I didn't say there wouldn't be hitches or difficulties. I'm just giving a broad brush concept. You make some good points. Experienced workers will be in demand, of course. Capital for startup costs and operations could be a hurdle.

 

[Vadinho]

Goldman sees unprecedented stop of economic activity, with Q2 GDP contracting 24%

This is very scary. Even scarier, is that they could still be underestimating the impacts. For example, if foreclosures start to surge. The company I work for, and have worked for over 15 years, has all of us working from home until at least April 3rd. I lead our DevOps group and am a Senior DevOps Engineer. I saw the layoffs during the Financial Crisis / Great Recession. This looks worse in many ways. It's like standing at the edge of an economic void. If we avoid another big financial crisis, the recovery will be much faster, but in the near term, this is literally Great Depression level economic contraction.

When we do get back in the office, I plan on personally talking to the CEO and telling him that in my opinion, if we have to do layoffs in a few months, it would be better to come to everyone and ask them to take a temporary pay cut than to lay people off in an economy that is in free fall.

And they are likely correct. If you voted for Trump, this is on you.

 

[ttwtt78640]

I didn't say there wouldn't be hitches or difficulties. I'm just giving a broad brush concept. You make some good points. Experienced workers will be in demand, of course. Capital for startup costs and operations could be a hurdle.

One can only afford the fixed costs of maintaining a business location for so long without any business income.

 

[MTAtech]

I think we may see a rather rapid comeback. Most recessions are caused by glitches in the economy itself. This one is being driven by exterior forces. We have businesses shifted in the neutral and workers sidelined but ready to work. I think that after these "shelter in place" restriction are relaxed stir-crazy people are going to go out to bars, clubs restaurants. There will be a lot of pent-up demand companies will be competing to fill. It won't be overnight, of course.

That’s very optimistic. Even during the Great Depression businesses didn’t go from 100% to zero. No business can have zero sales and survive an 18 month shutdown. Rent, utilities, debt payments, etc. all need to be paid. Unemployed employees won’t be able to pay mortgages or ordinary expenses.

When a vaccine is found, and business can start again, there will be a significant amount of unwinding. I don’t see a V-shaped recovery but at best a U-shaped recovery. Some say it will be an L-shape, with years of misery.

 

[Bullseye]

There is just a lot of uncertainty though. For one, if this goes on for very long, there will be a classic thrift paradox, but one that a Keynesian Stimulus will not be very effective against because even if you put more money in people's hands, they can't spend it. We also run the risk of exposing issues in the financial sector, and having another financial crisis if foreclosures spike. Then there is the problem of having to go through this again in a few months if cases start to spike again, and of course, lastly, with countries all over the world borrowing a ton of money to stimulate their economies, it may not be so cheap for our government to borrow money.

I am normally a very optimistic person, but this could be Depression era level painful in the short term before our economy rebounds.

Yeah, sure there are risks - always are.

 

[Bullseye]

That’s very optimistic. Even during the Great Depression businesses didn’t go from 100% to zero. No business can have zero sales and survive an 18 month shutdown. Rent, utilities, debt payments, etc. all need to be paid. Unemployed employees won’t be able to pay mortgages or ordinary expenses.

When a vaccine is found, and business can start again, there will be a significant amount of unwinding. I don’t see a V-shaped recovery but at best a U-shaped recovery. Some say it will be an L-shape, with years of misery.

I'm thinking the financial underpinnings are still relatively strong. This isn't that the Great Depression or Great Recession. There may not be a distinct upturn as in a pronounced checkmark - maynot. I'm going to be surprised if the upswing happens as rapidly as the drop so a "U" probably won't happen either. I'm thinking there will be a labor pool of available labor and lots of available business RE. It may not be the SAME business occupying them but businesses will take root and some will grow.

 

[JustHanging]

yea you would think johnson and johnson would be in good shape nope.

i agree though this whole thing has been an exercise in stupid and what mass panic can do.

I know, right? What do all those medical experts know? Particularly compared to you, what with your 50,000 posts on DP dot com.

Personally, I'm impressed how you became the most informed and knowledgeable person in the world on Covid-19, while spending all your time posting on this forum. You clearly take after Trump.

 

[washunut]

I think it's going to be a deep 'v' of sorts, but more like a 'check mark'.

Not so sure. I was more optimistic a couple of weeks ago. However if the only way the government fights this is by shutting down the country I am afraid this quarantine could last a year or so. If that happens not sure how companies or individuals come back from that sustained period of being down. This practice can lead us into a self-made depression.

 

[Fred C Dobbs II]

If our unemployment number reaches 20% then it's over, we're officially in a depression. With all the restaurants, bars and malls closing down, there could be a million new unemployment filings next week alone.

It's the government that is closing businesses and encouraging people to stay at home. There have been 252 deaths, mostly among the very elderly and infirm, in with 330 million people, and the governments are trying to outdo each other on how they can take steps to ruin the economy for months or years to come. It's a media hyped panic where the disease is worse than the cure.

This is an opportunity for some smart people to buy into the stock market, just as the smart ones bought dirt cheap homes during the government created housing crisis.

 

[Fred C Dobbs II]

I know, right? What do all those medical experts know? Particularly compared to you, what with your 50,000 posts on DP dot com.

Personally, I'm impressed how you became the most informed and knowledgeable person in the world on Covid-19, while spending all your time posting on this forum. You clearly take after Trump.

Yet another lefist who supports mass panic.

 

[HumblePi]

It's the government that is closing businesses and encouraging people to stay at home. There have been 252 deaths, mostly among the very elderly and infirm, in with 330 million people, and the governments are trying to outdo each other on how they can take steps to ruin the economy for months or years to come. It's a media hyped panic where the disease is worse than the cure.

This is an opportunity for some smart people to buy into the stock market, just as the smart ones bought dirt cheap homes during the government created housing crisis.

You're ignorance up to this point was harmless, but now, you're dangerous. And by 'you're', I mean all you people on the right that are trying to downplay this. I predict that in one month, you'll be singing a different tune.

 

[marke]

Goldman sees unprecedented stop of economic activity, with Q2 GDP contracting 24%

This is very scary. Even scarier, is that they could still be underestimating the impacts. For example, if foreclosures start to surge. The company I work for, and have worked for over 15 years, has all of us working from home until at least April 3rd. I lead our DevOps group and am a Senior DevOps Engineer. I saw the layoffs during the Financial Crisis / Great Recession. This looks worse in many ways. It's like standing at the edge of an economic void. If we avoid another big financial crisis, the recovery will be much faster, but in the near term, this is literally Great Depression level economic contraction.

When we do get back in the office, I plan on personally talking to the CEO and telling him that in my opinion, if we have to do layoffs in a few months, it would be better to come to everyone and ask them to take a temporary pay cut than to lay people off in an economy that is in free fall.

I agree. This panic is causing widespread economic devastation and will likely make the 1929 crash seem like a minor setback. How do businesses start back up without capital if they are forced to close down due to falling sales? It will not be easy. How is the US going to be able to stand the current fall in IRS revenues if small cuts in taxes have done so much damage in the past like democrats like to claim?

 

[Torus34]

What a wonderful opportunity for President of the United States of America Donald Trump to proclaim another tremendous first of his presidency.

Way to go, President Trump! Stock market daily drop first, too. Is there no limit to the peaks of greatness you'll stand atop? How about the greatest annual deficit ever?

 

[ALiberalModerate]

Not so sure. I was more optimistic a couple of weeks ago. However if the only way the government fights this is by shutting down the country I am afraid this quarantine could last a year or so. If that happens not sure how companies or individuals come back from that sustained period of being down. This practice can lead us into a self-made depression.

I don't think the government can shut things down for a year. 4 to 6 weeks, maybe 8 weeks, sure, but after that the economic damage caused from the shutdown will cause more deaths than Covid-19 would. Plus people are social animals, you are only going to keep them socially isolated for so long.

What I think is probably more likely is that you have 4 to 6 weeks of self quarantine now. The outbreaks get tamped down, people got back to work / semi-normality, and then the outbreak starts to ramp up again after a few weeks and we do this again, and we have this cycle, again and again, until we get a vaccine.

As a side note, I think this worldwide pandemic that we are currently awaiting a vaccine for will be the death knell to the idiot anti-vaccine movement. Once people deal with what its like to live in a world with a high communicable and potentially dangerous disease for which we are desperately awaiting a vaccine for so that life can return to normal, they simply will not tolerate people going without vaccinating their kids anymore. After we get past this, I think the vast majority of Americans are going to be like "you don't want to vaccinate your kids, get the **** out of this country then.."

 

[washunut]

I don't think the government can shut things down for a year. 4 to 6 weeks, maybe 8 weeks, sure, but after that the economic damage caused from the shutdown will cause more deaths than Covid-19 would. Plus people are social animals, you are only going to keep them socially isolated for so long.

What I think is probably more likely is that you have 4 to 6 weeks of self quarantine now. The outbreaks get tamped down, people got back to work / semi-normality, and then the outbreak starts to ramp up again after a few weeks and we do this again, and we have this cycle, again and again, until we get a vaccine.

As a side note, I think this worldwide pandemic that we are currently awaiting a vaccine for will be the death knell to the idiot anti-vaccine movement. Once people deal with what its like to live in a world with a high communicable and potentially dangerous disease for which we are desperately awaiting a vaccine for so that life can return to normal, they simply will not tolerate people going without vaccinating their kids anymore. After we get past this, I think the vast majority of Americans are going to be like "you don't want to vaccinate your kids, get the **** out of this country then.."

Perhaps you are correct. If we go through this for another 6 or 8 weeks then repeat in a few months not sure people will stand for that. Many will come out of quarantine and find they don't have a job. Others will come out of quarantine and not go back to their normal activities for the reason cited. The possibility of catching the virus.

A vaccine will tamp down the infection rate, not stop it. We may have permanently destroyed the America we once knew. Perhaps this is just cabin fever depression you are reading. I certainly hope so.

 

[Fred C Dobbs II]

I agree. This panic is causing widespread economic devastation and will likely make the 1929 crash seem like a minor setback. How do businesses start back up without capital if they are forced to close down due to falling sales? It will not be easy. How is the US going to be able to stand the current fall in IRS revenues if small cuts in taxes have done so much damage in the past like democrats like to claim?

We can see how easy it is in today's world of instant communication how easy it is to bring economic devastation. You get an aggressive media campaign, one side of governments insisting the other side isn't doing enough to stop the "pandemic", goading them to do more, throw perspective out of the bus, and you can shut down the world's most successful economies.

If this is a 'pandemic' then so is athlete's foot.

 

[Chomsky]

Not so sure. I was more optimistic a couple of weeks ago. However if the only way the government fights this is by shutting down the country I am afraid this quarantine could last a year or so. If that happens not sure how companies or individuals come back from that sustained period of being down. This practice can lead us into a self-made depression.

Yes, it depends on the depth of the quarantine & social distancing. A month or two, leaves the country's business & employment infrastructure intact. 6-8 months would several damage those infrastructures, requiring repairing them.

I'm torn on the prognosis, because while the economy was otherwise moving along reasonably, the recovery was extremely long-in-the-tooth and was being greased and (IMO) extended by the Fed rate cuts & Trump-GOP tax cuts. In addition, many believe the market was overbought & overvalued. And finally, the global economy seemed to be slowing down, while we were adding tariff taxes.

So I was expecting an end to the current expansion for quite awhile, even though it continuously surprised me with its legs, even if they were occasionally wobbly!

My fear today, is that end-of-the-run downturn I've been waiting on - finally was precipitated by the pandemic. Then we would be facing two major economic calamities, not one. So while I posited a 'checkmark' recovery in this post at the time, as I'm watching this thing continue to unfold I'm having further concerns.

 

[washunut]

Yes, it depends on the depth of the quarantine & social distancing. A month or two, leaves the country's business & employment infrastructure intact. 6-8 months would several damage those infrastructures, requiring repairing them.

I'm torn on the prognosis, because while the economy was otherwise moving along reasonably, the recovery was extremely long-in-the-tooth and was being greased and (IMO) extended by the Fed rate cuts & Trump-GOP tax cuts. In addition, many believe the market was overbought & overvalued. And finally, the global economy seemed to be slowing down, while we were adding tariff taxes.

So I was expecting an end to the current expansion for quite awhile, even though it continuously surprised me with its legs, even if they were occasionally wobbly!

My fear today, is that end-of-the-run downturn I've been waiting on - finally was precipitated by the pandemic. Then we would be facing two major economic calamities, not one. So while I posited a 'checkmark' recovery in this post at the time, as I'm watching this thing continue to unfold I'm having further concerns.

The recovery is/was long in the tooth. That being said it was a very slow recovery. Not sure people could point to a reason for a recession other than it has been "due" for some time.

You may want to remember prior to this virus Fed tax cuts only undid some of the raises made during the Trump administration. Rates were much lower during the Obama administration.

As to tax cuts. The high number we have heard is about 1.5 trillion over 10 years or 150 billion annually. That equals something less than 0.5% of GDP so not sure that is the reason we did not see recession sooner.

 

[Chomsky]

The recovery is/was long in the tooth. That being said it was a very slow recovery. Not sure people could point to a reason for a recession other than it has been "due" for some time.

You may want to remember prior to this virus Fed tax cuts only undid some of the raises made during the Trump administration. Rates were much lower during the Obama administration.

As to tax cuts. The high number we have heard is about 1.5 trillion over 10 years or 150 billion annually. That equals something less than 0.5% of GDP so not sure that is the reason we did not see recession sooner.

I believe that 2nd year 6-8 month deviation from the 2% GDP trendline I've been seeing, where the economy bumped-up to a little over 3%, was due to the tax-cut sugar-high.

 

[washunut]

I believe that 2nd year 6-8 month deviation from the 2% GDP trendline I've been seeing, where the economy bumped-up to a little over 3%, was due to the tax-cut sugar-high.

Clearly the economy got a bump due to the tax cuts. However as you said we were probably on a track to do the 2% we had been experiencing for years. With growth in employment and wages, and no bottlenecks in supply hard to see what would have caused a recession other than a war or something like this crisis.

 

[Chomsky]

Clearly the economy got a bump due to the tax cuts. However as you said we were probably on a track to do the 2% we had been experiencing for years. With growth in employment and wages, and no bottlenecks in supply hard to see what would have caused a recession other than a war or something like this crisis.

You know, you may be approaching this more objectively than I. I think I'm being influenced by the record length of the recovery. I just kept waiting for the show to drop on it. Because, well, no other has gone this long!

 

[washunut]

You know, you may be approaching this more objectively than I. I think I'm being influenced by the record length of the recovery. I just kept waiting for the show to drop on it. Because, well, no other has gone this long!

You are correct that the length of time of the recovery had many people saying it could not go on much longer. I just looked at it and said we never had a recovery that did not see a big upswing,then leveling off then a recession. So the economy grew for a long time but did not grow as much as would have been expected over those 10-11 years.

That being said I am afraid we are headed for very bad times. I look at this quarantine to last for many months not weeks. Hope I am wrong. My thinking is that if you look at this like a war,we are in tactical retreat. We don't have what it takes to defeat the enemy so we are trying to flatten the curve. To me that means keeping deaths to as low a level as possible. Only when we have a medicine and/or vaccine to fight this thing would calling off the quarantine make any sense.

I don't want to get political about this BUT no one wants to say you did not take every drastic step possible to control this thing. Even though we know that a large portion of the population will be infected regardless,and that for some/many this will be a bad flu.

I am not smart enough to think I know the right answer. Problem is I do NOT have confidence that the people in charge at the state,local and federal levels are smart enough either.

 

[Chomsky]

You are correct that the length of time of the recovery had many people saying it could not go on much longer. I just looked at it and said we never had a recovery that did not see a big upswing,then leveling off then a recession. So the economy grew for a long time but did not grow as much as would have been expected over those 10-11 years.

That being said I am afraid we are headed for very bad times. I look at this quarantine to last for many months not weeks. Hope I am wrong. My thinking is that if you look at this like a war,we are in tactical retreat. We don't have what it takes to defeat the enemy so we are trying to flatten the curve. To me that means keeping deaths to as low a level as possible. Only when we have a medicine and/or vaccine to fight this thing would calling off the quarantine make any sense.

I don't want to get political about this BUT no one wants to say you did not take every drastic step possible to control this thing. Even though we know that a large portion of the population will be infected regardless,and that for some/many this will be a bad flu.

I am not smart enough to think I know the right answer. Problem is I do NOT have confidence that the people in charge at the state,local and federal levels are smart enough either.

Well, let's face it - it's beyond bad. Depressingly bad. So let's do what we've got to do as individuals to stay safe.

BTW - to add insult to bad news - futures opened limit-down immediately out of the gate ...

 

[washunut]

Well, let's face it - it's beyond bad. Depressingly bad. So let's do what we've got to do as individuals to stay safe.

BTW - to add insult to bad news - futures opened limit-down immediately out of the gate ...

Yes, when congress could not agree on a relief package this evening they crushed the market. Something similar happened in 2008 before congress finally agreed to TARP.

 

[Chomsky]

Yes, when congress could not agree on a relief package this evening they crushed the market. Something similar happened in 2008 before congress finally agreed to TARP.

Good point.

Thanks for the good conversation. Have a good night!