Key Highlights

  • Fears growing that global economic downturn could be deep and lengthy
  • March 2020 alone saw S&P 500 drop -12.5%

Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crises entitled This Time is Different: Eight Centuries of Financial Folly, said this week, “I feel like the 2008 financial crisis was just a dry run for this. This is already shaping up as the deepest dive on record for the global economy for over 100 years. Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.”

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Other economists are much more hopeful. They say that as soon as the COVID-19 pandemic is contained, whenever that is, there will be a robust and speedy economic recovery. People will return to their normal lives and jobs and industries will again be thriving.

Peter S. Goodman, the global economic correspondent for The New York Times, wrote differently this week. Quoting Charles Dumas, chief economist at TS Lombard, a London-based investment research firm, “The psychology won’t just bounce back. People have had a real shock. The recovery will be slow, and certain behavior patterns are going to change, if not forever at least for a long while.”

The current downturn, according to Goodman, has quickly morphed into “a worldwide emergency with no safe havens anywhere.” With the US now leading, Europe, Latin American countries, Canada, Japan, South Korea, Singapore, etc. and China (the world’s second largest economy expected to grow just 2% in 2020 under the best scenario) are “almost certainly” in recession. “Now, anywhere you look in the global economy we are seeing a hit to domestic demand on top of supply chain impacts,” said Innes McFee, managing director of macro and investor services at London’s Oxford Economics. “It’s incredibly worrying.”

And the above paragraph says nothing of the $2.7T debt developing countries, where economic and public health consequences are already “severe,” are “supposed” to repay this year nor the some 10M now jobless people in the US who have filed unemployment insurance claims within the last two weeks.

The United Nations Conference on Trade and Development claims that foreign direct investment worldwide is likely to decline by 40% this year. A research note from IHS Markit indicates, “It will likely take two to three years for most economies to return to their pre-pandemic levels…”

And then there are the psychological aspects involved with these health-crisis-induced economic nightmares. Will the Millennials, now our largest demographic, already tarnished in many ways by the financial crisis of 2008, ever slough off the severe job losses, insecurities, fears and anxieties of this immediate and however long lasting economic upheaval to embrace the can-do-whatever-it-takes American spirit so ingrained in our psyches, aspirations and culture?


Thanks to The New York Times’ Peter S. Goodman.

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