Left out of this most articles and pundit analysis is the fact that the Fed has been pumping 100s of billions into the Repo market for bank reserves since September. The markets and economy in general were a lot weaker than the goosed-up stock market made it appear. The Fed and Treasury Secretary know this, even if Trump does not, and that is why there will be unprecedented money-pumping in 4-letter Fed programs and Congressional stimulus bills.
The problem is not the virus. The virus, at worst, will kill a million mostly unproductive elderly and immuno-compromised adults (children are mysteriously under-effected). From a cold economic view, that would actually benefit the economy. (There are many good reasons to believe the result will not be nearly that bad, from China's and South Korea's experience, to the demographics and recent semi-cures, to the warming weather, but that is beyond the scope of this article).
The problem is the across-the-board shuttering of the economy. The economy can't take more than a couple of months off before we slip into a depression, not just a recession. Only, unlike the deflationary Great Depression, this depression will be inflationary, with too much government supplied money chasing too few goods and services in an artificially supply constrained economy.
It
will get even worse. People will not just sit back and allow
themselves to go hungry and homeless. You're gong to see the Mother of
All Black Markets, something that would make Ayn Rand blush in the later
chapters of Atlas Shrugged.
The depression will kill more people and ruin more lives than the virus ever could, even if we did nothing.
If
it goes on long enough, America is finished permanently. China is
already making inroads into countries, recovering from its own early CV
episode, and providing a lifeline while America fumbles and missteps
everything. China actually makes stuff, e.g. they ramped up N95 mask
production from 20m/day to 100m/day in just days.
America over-reacts in hysteria, then under-reacts in actual production and industrial response. I don't know if there is even institutional knowledge anymore on how to do anything more than rent-seek. We've lost core competence in almost everything.
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