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USA is in Economic Depression. Why fix COVID to fix economy!

Until the fear of this virus subsides the economy will not return to "normal" GDP levels, regardless of whether the economy is open or not. Necessarily therefore, to get the economy back to "normal", COVID-19 must be under control - contained and manageable, via vaccines or otherwise.

In effect, this is one of Dave Rosenberg's key points. You can open the economy (like the USA largely has), but that does not mean that people will resume "normal" activity. In the USA, where at 23/10/20 there have been officially so far 228,000 COVID deaths, 65000 new COVID infections per day and 1100 new COVID deaths per day, many people are living in fear of COVID and simply will not resume going about their "normal" daily activities because of COVID fear. And while that COVID fear continues, the economy will not return to "normal" GDP levels - that is, the economy will remain depressed until COVID is under control.

This is the same point as that made by the Bank of England:

This is precisely the same point that was made by Imperial College London, based on their research back in March 2000.

Martin Wolf makes a similar point (among other things) in this article.

30/Oct/20 Europe going back into lock-downs to prevent hospitals being overwhelmed with COVID-19.

And it is not just the risk of death from COVID that is causing fear, there is growing worry about the long-term side effects of COVID.

Dave Rosenberg:

  • 'You tally up these sectors and before the crisis, they supported 32 million jobs, or about a third of the private sector workforce, and it looks to me as though half of them are not going back to their old jobs.

  • And I’m not sure many people understand that amusement parks, airlines, hoteliers and restaurants cannot stay in business at 50% capacity (or even 75% in the case of restaurants).

  • …As it stands, the US Chamber of Commerce said that 25% of small businesses have already shut down. Another survey by Ipsos concluded that two-thirds are still nervous about leaving their homes; 59% say they intend to remain locked down on their own until signs emerge that the virus is “fully contained.” A YouGov/CBS poll concludes that 85% of American households say they wouldn’t get on an airplane even if they could. That’s why the industry needs a bailout!

  • A Washington Post/University of Maryland poll shows that only 56% of consumers across the nation intend to shop at the supermarket, which I suppose is a continuous bullish data point for delivery services but that’s about it. Just 33% say they are comfortable entering a retail store. And a mere 22% say they are willing to dine in a sit-in restaurant.

  • All these polls say basically the same thing—it will not be “business as usual,” as the bulls will try and convince you, and the best we can hope for is a partial recovery. I mean, at best. What we had on our hands was a vertical down economic decline with job losses an order of magnitude higher than anything we have witnessed since the Great Depression. So, even as the stock market is telling you it has it all figured out, I can assure you that what we face at this very moment is a very uncertain economic future. And unfortunately, most of the longer-term risks are to the downside.

  • We are in a depression—not a recession, but a depression. And I think the dynamics of a depression are different than they are in a recession because depressions invoke a secular change in behavior. Classic business cycle recessions are forgotten about within a year after they end—the scars from this one will take years to heal.'

from a Dave Rosenberg letter , via John Mauldin 2/October/2020

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