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A Long Time Until the Economic New Normal

sloanreview.mit.edu

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Re: A Long Time Until the Economic New Normal

#31

Post by danielfoster »

JackFr wrote: post #9

The points made are fine insofar as they go. At the same time, the current economic situation is, very literally, unprecedented. It has aspects of a war, a natural disaster and a secular recession. Economists should try to estimate its effects, but in this case their predictions need to be taken with an extra large grain of salt.

This. It's pretty clear some aspects of the economy could suffer permanently. For example restaurants may reopen and decide they no longer need service staff. Or maybe warehouses accelerate the shift to automation to prevent closures due to illness. Perhaps commercial real estate will suffer, too.

But other areas of the economy could take off just as quickly and in unexpected ways.

Re: A Long Time Until the Economic New Normal

#32

Post by taneq »

dlp211 wrote: post #29
david_w wrote: post #19

From the article: "The first is that it overlooks the negative impacts on consumer sentiment and spending, which are likely to persist for many months, if not years. " Yeah, right. Citation needed. My to-buy list of pent-up demands grows longer by the hour.

You are likely not the average American consumer.

From everything I've read, I'm amazed the average American has enough spare money to consume non-essentials.

Re: A Long Time Until the Economic New Normal

#34

Post by meddlepal »

tarr11 wrote: post #26
david_w wrote: post #19

From the article: "The first is that it overlooks the negative impacts on consumer sentiment and spending, which are likely to persist for many months, if not years. " Yeah, right. Citation needed. My to-buy list of pent-up demands grows longer by the hour.

They are not talking about electronics or haircuts. For example, many people have vowed never to step on a cruise ship after this and attending large scale events in person will probably give a lot of people anxiety for some time.

Heck even a crowded bar or restaurant is going to give people pause.

Re: A Long Time Until the Economic New Normal

#35

Post by kristianc »

bwb wrote: post #12
coldcode wrote: post #3

While I agree that it will take longer (and wind up different looking) to full recovery, having governments and business plan for the next pandemic will not happen. Short sighted people do not waste time on long term thinking.

I'd also point out that planning for "high risk" events like this is not something small to medium size businesses should be doing. Government yes, but I don't expect my mexican restaurant to have a plan in case of a global pandemic :). Just like I don't expect them to hedge pork futures so my pork tamales don't go up 8 cents. Gov is insurance and I want them to be building resilience into the system. That is done wi…

> Gov is insurance and I want them to be building resilience into the system.

This is kind of one of those ‘Hindsight is 20-20’ things. During the good times, building resilience means buying extra capacity that you do not need, and answering awkward questions about empty wards and hospital beds.

In good times, the demand from the people is that every dollar is spent well, which is usually defined as meeting demand in the here and now. Real life doesn’t have auto-scalability.

Re: A Long Time Until the Economic New Normal

#36

Post by LeifCarrotson »

londons_explore wrote: post #18
vikramkr wrote: post #10

Earlier quoted context omitted.

I also think a lesson people might have learned on the business side is that theres almost no point planning for something like this - how is a small business supposed to have enough cash on hand to make it through something like this? This is just so bad for so many restaurants/small businesses etc that it's not really something you can overcome with some planning if you own a small margin small business

The same is true of a fire in your small restaurant. Yet people buy insurance for that. Pandemic insurance could exist, and a massive fund could be built up over many decades to pay out when a pandemic does occur. It would be expensive though. If a pandemic occurs every 100 years, and cuts revenue to zero for 6 months, that means the average cost is 0.5% of revenue...

Whether pandemic insurance exists or not doesn't change the average cost (except for the insurance company's profit margin). The average cost to society will still be 0.5% even if no one carries insurance for it.

Re: A Long Time Until the Economic New Normal

#37

Post by drocer88 »

david_w wrote: post #19

From the article: "The first is that it overlooks the negative impacts on consumer sentiment and spending, which are likely to persist for many months, if not years. " Yeah, right. Citation needed. My to-buy list of pent-up demands grows longer by the hour.

A lot of folks are going to take the traditional advice of having 6 months of living expenses in emergency savings seriously this time.

Re: A Long Time Until the Economic New Normal

#38

Post by lmm »

bwb wrote: post #13
londons_explore wrote: post #11

Earlier quoted context omitted.

> Short sighted people do not waste time on long term thinking. ... unless there is profit to be made! What financial instruments could be made to give massive payouts in case of a future pandemic? If enough of those instruments existed, there would be financial skin-in-the-game for preventing pandemics.

Check out pandemic bonds, they aren't working :)

They're working pretty well, the funds have been made available for relief efforts. They were maybe not as hedged as people wanted.

Re: A Long Time Until the Economic New Normal

#39

Post by dustingetz »

rwmj wrote: post #8
coldcode wrote: post #4

Earlier quoted context omitted.

How many people on a single $1200 check and unemployment will go out and buy a car, a house, a washing machine or visit a Disney park?

For many people outside the highly paid HN reading bubble that's a huge windfall.

Realistically if you're poor with credit card debt, $1200 adds two months runway from default dead state of losing your housing, (so at least you're not instantly wiped out as of April's eviction notice date)

Re: A Long Time Until the Economic New Normal

#40

Post by beamatronic »

jointpdf wrote: post #25
rwmj wrote: post #8

Earlier quoted context omitted.

For many people outside the highly paid HN reading bubble that's a huge windfall.

It’s really not. Even in a low cost of living area, $1.2K is about one month of basic living expenses.

...which is a huge windfall.

Has anyone on here ever actually been poor before? Genuinely curious.

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