Economy 2020?

APRIL 2020 – As I write this, we are a few days from the projected peak day of death from the pandemic here in the United States. With that “light at the end the tunnel” economists are starting to predict what comes next for the economy.

McKinstry this week published a prediction. TL;DR: U.S. GDP drops by 8%-13% in 2020. Personally I don’t understand how 15%+ unemployment only leads to at most a 13% drop in GDP, but McKinstry wasn’t clear on how long they expect the lockdowns to last. History says it’ll be longer than people think.

In any case, even 8% would be the biggest drop since the Great Depression. And even more interestingly, the above graph is the first I’ve seen showing all of the panics, recessions, and depressions in the 20th and 21st Centuries graphed in a cohort analysis form.

ASIDE: I’ve spent a lot of words on this blog talking about economic history, about the reason why we have a Federal Reserve and other central banks, and this one graph answers that question in a far simpler form. Look at how frequent and deep the downturns used to be prior to the Great Depression, before the Fed was formed and its powers figured out. If we had a graph of the 19th Century, we’d see more of the same. Compare that to post-WWII and how the Panic of 2007-2008, as big as that felt, was a run of the mill panic from 100 years earlier.

McKinstry isn’t the only prediction I found today. PIMCO, the global investment management firm is predicting a deep, but hopefully, brief recession. A -30% drop in Q2 GDP (annualized) but only -5% for the year.

They too don’t explain how exactly the economy will go back to normal in the second half of the year.

Lastly is a prediction from famous hedge fund manager, Ray Dalio. He’s predicting another Great Depression.

Three predictions from three corners of the financial world. Three predictions ranging from a quick, short, -5% recession to Great Depression II, or something in between.

Who do you think is right?

Despite the fact that stock markets have been operating for over 400 years, how exactly they work at the level of individual participate and individual role is rarely documented. Here in the 21st Century most of the accounts are how to make money as an investor, two or three steps away from the actual transactions taking place within the exchange. Which is why it was so fascinating to find and...

The Visual Capitalist comes though again with an animated tale of the last 120 years of world reserve currencies. Some screen shots and commentary below: The start of the 20th Century is the end of the British Empire. The USD is a minor currency. The British Pound is by far the world’s most popular reserve currency and the world’s international trade settled in London, not New York...

In the fight to eliminate global poverty, a statistic often quoted is the World Bank’s claim that the poverty rate is below 10%. True, but only when measured against a global poverty line of $2.15 per day. $2.15 is about the same as American’s spend per day on their dogs and cats. Progress is still positive if you pick a more realistic poverty line, but at $3.65 there are nearly 2...

Hans Rosling was an impressive public speaker, with not just an ability to distill complex topics into easy to understand stories, but to do so with a flair of showmanship. One of the many lessons in those stories was the fact that the world is no longer divided into “developed” and “developing” economies, but is instead is now a world with a continuum of incomes. What...

The biggest employer in your neighborhood is likely not one big factory or hospital, nor the government or military. It’s unlikely any one corporation at all. The biggest employer nearly everywhere are the multitude of small businesses that operate the plethora of services needed to make up the modern lifestyle. Share this:Click to share on Twitter (Opens in new window)Click to share on...