A tale of two economies: Stephen Roach

‘As financial markets celebrate the coming vaccine-led boom, the confluence of epidemiological and political aftershocks has pushed us back into a quagmire of heightened economic vulnerability. In Dickensian terms, to reach a “spring of hope,” we first must endure a “winter of despair.”...

‘With COVID-19 still raging – and rates of infection, hospitalization, and death now spiraling out of control (again) – the near-term risks to economic activity have tipped decidedly to the downside in the United States and Europe. The combination of pandemic fatigue and the politicization of public health practices has come into play at precisely the moment when the long anticipated second wave of COVID-19 is at hand.

‘Unfortunately, this fits the script of the dreaded double-dip recession that I warned of recently. The bottom-line bears repeating: Apparent economic recoveries in the US have given way to relapses in eight of the 11 business cycles since World War II. The relapses reflect two conditions: lingering vulnerability from the recession, itself, and the likelihood of aftershocks. Unfortunately, both conditions have now been satisfied.’

Read here (Project Syndicate, Nov 24, 2020)

Will the economic and psychological costs of covid-19 increase suicides? It is too early to say, but the signs are ominous

‘When America’s Centres for Disease Control and Prevention (CDC) carried out a survey this summer, it found that one in ten of the 5,400 respondents had seriously considered suicide in the previous month—about twice as many who had thought of taking their lives in 2018. For young adults, aged 18 to 24, the proportion was an astonishing one in four.

‘The survey, published in August, was one of a growing number of warnings about the toll that the pandemic is taking on the mental health of people. For legions, the coronavirus has upended or outright eliminated work, schooling and religious services. On top of that, lockdowns and other types of social distancing have aggravated loneliness and depression for many.’

Read here (The Economist, Oct 5, 2020)

One-two punch of protests, coronavirus playing havoc with mental health in Hong Kong, study finds

‘Some three-quarters of Hongkongers are harbouring negative thoughts in the aftermath of last year’s social unrest and amid the ongoing coronavirus pandemic, with young people suffering significantly more from post-traumatic stress disorder (PTSD) and depressive symptoms, a new study has found.’

Read here (South China Morning Post, August 6, 2020)

Only governments can prevent Covid-19 recessions becoming depressions

‘In March, French economists Emmanuel Saez and Gabriel Zucman, both at Berkeley, proposed that governments help ease pain and disruption with payer-of-last-resort programmes, with adversely affected businesses reporting unavoidable monthly overhead and maintenance costs to qualify for government aid.

‘Such a payer-of-last-resort programme would reduce hardship for workers and businesses. It could enable businesses to temporarily suspend or scale down operations, to limit haemorrhage and avoid insolvency, and to pick up quickly as conditions improve. It would maintain ‘cash flow’ for families and businesses, minimising Covid-19 shocks’ adverse secondary impacts on demand (e.g., due to fired workers spending less on consumption), while enabling more rapid recovery as demand resumes.’

Read here (ksjomo.org, July 30, 2020)

The end of tourism?

‘Coronavirus has also revealed the danger of overreliance on tourism, demonstrating in brutal fashion what happens when the industry supporting an entire community, at the expense of any other more sustainable activity, collapses. On 7 May, the UN World Tourism Organisation estimated that earnings from international tourism might be down 80% this year against last year’s figure of $1.7tn, and that 120m jobs could be lost. Since tourism relies on the same human mobility that spreads disease, and will be subject to the most stringent and lasting restrictions, it is likely to suffer more than almost any other economic activity.’

Read here (Guardian, June 18, 2020)

UrbanFutures: The marathon fight against Covid-19 and beyond

• ‘By all accounts, it looks highly probable that the pandemic and its direct consequences will be with us for a while, possibly for another 12 to 18 months, and its social, cultural and economic impact will be felt many years after...
• ‘To face this challenge, unified public health strategies should be implemented so that risks can be managed and, with a degree of regularity, brought into everyday life...
• ‘The Covid-19 crisis is going to redefine our lives, our economy and our future. We are in the early phase of a protracted slowdown and there is discussion in the international media about the possibility of global depression. The challenge is managing the economic shock and slowdown...
• ‘We should all be thinking about and having conversations around the type of future we want — not just for ourselves and our children, but for our friends, neighbours and fellow humans. More importantly, we need to have this conversation today, even as we manage the complexity of the first wave and its fallout.’ 

Read here (The Edge, April 23, 2020)

Ray Dalio discusses depression economics and what to expect

Ray Dalio, "Global Macro Investor", philanthropist and founder of the world's largest hedge fund, understands deeply the inner workings of the world economy. In this 52-minute interview with Corey Hajim and Chris Anderson of TED, he mentions the following:

1. The world is going through a massive stress test, akin to the 1930s, when there would be widespread economic collapse, money printing and subsequent restructuring. Wealth will be redistributed but the levers of power will decide how it would be (within nations and internationally). This will cause a lot of friction, even wars.
2. Even today, there is demonisation of "others" even if they are being helpful. For example, while China is helping many countries, anyone holding such views can be ostracised in the US.
3. It is an opportunity to reform capitalism to create more equal opportunities, greater harmony, more innovation and more productivity via universal education.
4. Companies that win will be those that provide basic needs and those that are adaptive and creative. Algorithmic thinking, especially in investment, will give way to more human interventions and creative input.
5. For the individual investor, he calls for humility and diversification, and not to try to time the market. Cash, he stresses, is not good investment.

View here (TED, April 9, 2020)

Paul Krugman: ‘We really are talking about a depression level event’

‘Nobel Prize-winning economist Paul Krugman tells Lawrence O’Donnell that Trump and his allies in Congress are “balking” at the things that need to be done to support parts of the economy that need the most help, like small businesses, hospitals and local governments: “We are at risk of turning this into even worse than it has to be… the administration is refusing to acknowledge the depth of the problem and is trying to pursue an ideological agenda that is getting in the way of dealing with this”.’

View here (MSNBC, Youtube, April 15, 2020)