What Will Fill a $4 Trillion Hole in the Economy?

March 23, 2020
Business

Cover your eyes: Here come the latest economic forecasts

Most economists agree that a coronavirus-induced recession has probably already begun and that its scale will be devastating.

You’ve probably seen the chart about “flattening the curve.” The economist Richard Baldwin has added some lines to illustrate how policies to limit the spread of the virus also make the subsequent recession worse.

• As the NYT’s Jim Tankersley put it, “The American economy has stopped working. We’re going to try turning it off and back on again.”

One of the scariest forecasts to date comes from the president of the St. Louis Fed, James Bullard, who told Bloomberg that G.D.P. growth in the U.S. could drop by 50 percent in the second quarter, pushing the unemployment rate up to 30 percent. It’s currently at 3.5 percent.

• Morgan Stanley thinks that second-quarter growth will fall by 30 percent; Goldman Sachs says 24 percent; and JPMorgan Chase — for now — is “only” at 14 percent.

Will the cure be worse than the disease? Speaking of Goldman, both Lloyd Blankfein, its former C.E.O., and Gary Cohn, its former president (and former economic adviser to President Trump), posted concerns on Twitter about when businesses would be allowed to return to something resembling normal. Late last night, Mr. Trump tweeted, “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” and suggested that current measures to contain the outbreak would be re-evaluated in 15 days, setting up a showdown between epidemiology and economics when that time comes.

Article source: https://www.nytimes.com/2020/03/23/business/dealbook/coronavirus-congress-bailout.html