Leading economists still seem unwilling to confront the blunt reality of the current economic crisis.
James Bullard, president of the St. Louis Federal Reserve Bank, told CBS’s “Face the Nation” audience on 12 April that he didn’t believe the U.S. jobs market was in “free fall,” despite 10 percent of the American workforce suddenly becoming idle.
“The uptake on the unemployment insurance program is a good thing because it means you’re getting the transfers to the people that are being disrupted by this health-ordered shutdown,” Bullard said.
On 22 March, Bullard refused to call the shutdown of the U.S. economy a path to recession but instead spun it as “a massive investment in public health.”
This crisis “isn’t the same story as the Great Depression,” claimed Nobel Prize-winning economist Robert Schiller in a 9 April CNBC interview. “People are scared by the talk of really high unemployment numbers that might be coming fairly soon – like 20 percent. It puts a whole psychological framework onto this that may be a self-fulfilling prophecy.”
Schiller, a Yale professor, was award a Nobel Prize for his research into the ways in which emotions drive economic decisions.
Schiller tried to coax his audience away from thoughts of a depression.
“The Great Depression lasted ten years,” he noted. “They didn’t have an unemployment rate under 12 percent until the decade was over.
Talk of a depression “is a popular narrative. But this is a pandemic. It shouldn’t last ten years” as the Great Depression did. “It should be over in one or two years.”
Then Schiller made comments that seemed to contradict his reassurances.
“We may not be up to our previous peak for a long time,” he said, adding it’s possible “people won’t go to restaurants or sporting events in good numbers for years… the disease might not well be eradicated for several years from now.”
“The unemployment rate tends to shoot up and then only gradually come back down,” he said. “It may take years for employment to come fully back.”
Neel Kashkari, president of the Minneapolis Federal Reserve Bank, was more frank in his appraisal.
Kashkari sees “a long, hard road” to recovery, seeming to dismiss the cheery claims of others that the U.S. and global economy will soar in the second half of this year.
“It would be wonderful if some new therapy were developed in the next couple months,” he said. “Then potentially we would have a V-shaped recovery” in which the current plunge would be followed by an equally quick and dramatic rally.
“Barring some health-care miracle, it seems we’re going to have various phases of rolling flare ups,” he added, with “different parts of the economy turning back on, maybe turning back off again.”
Kashkari also said that Congress’s allotment of $350 billion in aid for small businesses is inadequate, but he expressed optimism Congress will allot more as the lockdown and its after-effects continue to decimate those enterprises.
“If we need to have different phases of shutdowns for the next several months or until we have a therapy or vaccine, we’re going to need more help than that,” he said.
TREND FORECAST: Calling an economic shutdown an investment in public health doesn’t change the economic destruction it leaves.
Painting rosy pictures and refusing to acknowledge harsh realities makes it harder, not easier, to convince the public, and reluctant politicians, to take hard decisions and do the work needed to turn this crisis around.
We don’t see an economic recovery taking a V shape or U shape but a country-road shape: full of ruts and potholes, some crests, and you don’t know when you’re going to get to pavement until you’re almost there… and the ride has just begun.
In addition, as we have noted since the COVID-19 media hysteria began and politicians across the globe exerted their dictatorial powers to lock down businesses, the Trends Journal was the first news source to identify, analyze, and forecast the economic implications of the actions.
Furthermore, what all the above analysts and others are focused on is America’s economic future, while ignoring the global ripple effect that will escalate and prolong the “Greatest Depression.”
