Why a failed opening today may lead to a slower recovery when the epidemic has faded
Matt Yglesias has a good piece up explaining why “opening” the economy now won’t save the economy. The reason is that people will continue to avoid contact with others until the epidemic is brought under control. Simply allowing restaurants, theaters, and workplaces to open will not change this basic fact. Indeed, airlines are still open for business, but the demand for air travel has nosedived as people (understandably) avoid being sealed in a poorly ventilated metal tube for several hours with dozens or hundreds of potentially infected fellow travelers.
In fact, a failed opening now may make it harder for the economy to recover after the epidemic is under control. Right now, many people probably expect a V-shaped recovery, with rapid growth when the virus is contained. All else equal, this belief will tend to produce a quicker recovery when social distancing ends by giving consumers confidence to spend and businesses confidence to gear up production. By making people doubt that the economy will rebound sharply when the virus is contained, failed attempts to open the economy now may lead to self-fulfilling expectations of a prolonged depression.
A V recovery is very unlikely. Credit markets have been damaged and it will take time to recover. Even with no state/city shutdowns this was going to happen as more and more people got sick. Much like the crisis of 57.
More likely you get a J recovery.
I am 71 years old.
I am fat. BMI = 33.3
I have no underlying conditions.
I walk 2 miles a day.
I am not going into a restaurant until it is safe for me.
I have no desire to visit an ICU and die a painful death.
I am with you Davebarnes although I am 3 years younger, have a BMI around 25 and walk closer to 4 miles a day—and jog, ride a bike and used to swim and row. And I have enough assets that I can spend money on restaurants and travel and even sporting events. None are on my horizon for 2020 and 2021 depends on getting some leaders in place who are not f***ing morons
The “All Clear” will sound for me when I see that man in the Offal Orifice out and about in crowds of worshiping followers shaking hands, giving hugs and kissing babies. Not likely that any politician will be doing that in the next 5 years.
I am 72, overweight and fighting cancer. I am with the sentiments expressed here.
Dan:
You are really old. 🙂 Still 185# and doing squats at 300#, bench 255#, and run 3 miles before each workout. I wish! Funny how time plays tricks on your eyes and body. I still look the same in the mirror. My wife of 49 years says we should market those mirrors. It only works for me.