Years ago, during the Great Financial Crisis and the European Sovereign Debt Crisis. I used to do a daily news round-up with links to some of the day’s must-read articles. So I thought I would start up that practice again today.
Let me say first that acknowledgement of the severity of the economic crisis caused by the coronavirus pandemic deepens every day. I think back to March 6, when I first asked if we were already in a recession. At that time, it was a legitimate question. And I remember that another analyst asking that question around the same time was pilloried for being a doomsayer. But here we are.
The scale, scope, and speed of the coronavirus economic shutdown is breathtaking. It’s like nothing we’ve seen outside of war. And I think – without wanting to be a doomsayer – we have to be thinking of this as a potentially becoming a Depression, not a recession. As with my March 6 question, it’s not clear today it has to become a Depression given the firepower policy makers are throwing at this economic slump. But by next week, it will be.
I am writing this at just after 7:30AM. In less than an hour, we’ll get the first semi-post-coronavirus US jobless claim number. I expect it to be elevated. But the full scale of the impact won’t come until next week and the weeks after. Be prepared for unemployment to skyrocket right across the advanced economies. And there’s only so much even a robust policy response can do. After all, what are you going to buy when you’re locked up in your home? Stimulus is just a means of preventing deprivation and homelessness, of keeping the wheels turning until the acute phase of this crisis is over.
May 15 is my bogey right now. That’s the earliest we can expect daylight. I don’t reasonably expect us to see daylight at that juncture. But, still we can hope.
Here are the links. I will usually add a blurb to each one to show why it makes sense except where the headline says it all.
Links 2020-03-19
Live Updates
Personal toll
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Coronavirus Patient Recounts Coming ‘One Inch From Death’ – “Rhode Island vice principal in intensive care unit after chaperoning school trip to Italy”
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‘Dad, are you okay?’: Doctors and nurses fighting pandemic fear infecting their families – “Dozens of U.S. health-care workers have already fallen ill in the early days of the pandemic, some seriously. This week, the American College of Emergency Physicians announced two member doctors were in critical condition after contracting the coronavirus: a Washington state ER doctor in his 40s and a 70-year-old physician in New Jersey.”
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Meet the Americans still going out and gathering in large groups
Stimulus
- World leaders rush in to shore up panic-hit global financial system – this is a good synopsis of all the efforts policymakers around the world are making both to stem the real economy fallout and to prevent a financial crisis.
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Federal Reserve announces it will backstop the U.S. money market industry, its seventh major emergency action this week – “By establishing the Money Market Mutual Fund Liquidity Facility, the Fed is reprising another weapon from its 2008 arsenal. During the financial crisis of a dozen years ago, there was great concern that these money market mutual funds would not be able to make investors whole.”
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U.S. lawmakers pushing ahead with third coronavirus aid package
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Lagarde’s Bazooka Isn’t Big Enough for This Crisis – “The problem is that sending checks to people takes much more time than cutting an overnight interest rate. Even once agreed by all the necessary politicians, recent exercises in disbursing money directly have taken months, rather than weeks. As this is a profoundly new direction for policy, lawmakers on both sides of the Atlantic could be excused for wanting to take some time to discuss the precedents they are setting. But time isn’t on their side.”
Job loss and consumption decline
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Biggest Factory Shutdown Since World War II Hits U.S., Europe
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With Oil at Record Low, Canada Is First Price-War Casualty – “Hit by unfettered supply from the world’s top two crude exporters and reduced demand from the coronavirus, the benchmark blend of crude produced from Canada’s oil sands plunged to a record low of $7.47 a barrel on Wednesday. The fallout: Virtually every barrel of oil produced there will come at a loss at a time when the energy industry generates 10% of Canada’s gross domestic product and a fifth of its exports.”
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I own a small business. The CDC order is a death sentence. – “Most businesses — big and small — have a profit margin of roughly 10 percent to 20 percent (if they are lucky). A two-month hiatus means their profit is gone for the year. So, say we aim to break even. But to break even, we must rebound fully after the two-month “hiatus.” Who believes that will happen? None of my small-business CEO friends.”
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For U.S. small restaurants, coronavirus impact is swift and brutal
- UK luxury group Burberry says sales plunge as much as 50% on coronavirus hit – ” drop-off in demand due to coronavirus had intensified, pushing comparable retail store sales between 40% and 50% lower over the last six weeks. “
- Airline industry turmoil deepens as coronavirus pain spreads – “Airline industry turmoil deepened on Thursday as Qantas Airways told most of its 30,000 staff to take leave and Lufthansa said the industry may not survive without state aid if the coronavirus pandemic lasted a long time.”
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Exclusive: China to ramp up spending to revive economy, could cut growth target – sources
Markets
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Credit markets flash red as coronavirus hits corporate America – “The premium investors demanded to hold riskier junk-rated credit rose to 904 basis points over safer Treasury securities on Wednesday, its highest level since 2011, according to the ICE/BofA high-yield index…The premium for safer investment-grade credit rose to its highest since 2009, at 303 basis points over Treasuries, based on the ICE/BofA investment-grade index. The risk premium for both has roughly tripled since the start of the year.”
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Emerging Markets Are in the Fastest Collapse in a Generation