Once COVID-19 passes I would expect more of the same. For reasons that aren't entirely understood, inflationary effects of monetary stimulus are highly attenuated, at least for the average consumer, although they clearly contribute to the ever increasing wealth of top earners, not to mention financial assets. Who knows how long we can keep going down this road.
In the 1929 crash there was a run on the banks because there was no confidence in their survival. The world going to a wartime economy and increasing public spending reinvigorated things but it eventually caused high inflation in the US by the 1960's - one of those factors in the country's "1970 turning" in many policies. Fear of the balance sheet getting out of control again created the strategy of huge bailouts in the latter part of the 20th century, but a downside of doing it just through lending is the "crowding out" of those actors who aren't given bailouts - which in prior recent crashes were generally individual workers, homeowners and retail investors who just took it on the chin and were told to lower their expectations.
This time is different. The attention is on individuals and their problems, and I'm seeing an uptick in discussion of UBI and benefits beyond the existing trend. There isn't faith in this crisis being solved through the existing toolset.
https://www.washingtonpost.com/business/economy/corporate-de...
We can’t go back to the way things were if the global supply chain is damaged or completely stopped. And that’s not even considering local businesses that may never come back after this is over.
Public spaces on the other hand (retail, restaurants/bars, travel destinations), are just totally infeasible to make safe until things are fully over with. That's a serious cut to demand that just has to be waited-out.
This to me is more akin to a natural disaster which wipes out large amounts of our economic infrastructure in the form of consumer spending. How do people and businesses bridge the gap? Businesses are already over-leveraged due to incredibly cheap debt. Some have good balance sheets and will survive, but many many will not. Most small businesses cannot survive 2 months without being in business, let alone 6. The solution can't be for them to take out loans which they'll never be able to pay off.
The thought that this is just an acute problem that will go away is wishful thinking. The effects will be further and wider than many of us can imagine right now.
China printed money in the past 10 years on a scale we've never before seen in history (300% Debt-to-GDP). They remain in a trade war with the US, are being blamed for the virus and their economy has shut down. Things aren't "going back to normal".
You claimed the the GFC and dotcom bust "revealed fundamental problems in the marketplace", but "In this case...the primary mechanism is "people can't work/aren't going out and buying things". That's..going to "go back to the way things were"
To which I explained to you there are fundamental issues with this as well, mainly the world's second largest economy is messed up, royally. What context did I miss?
> the primary mechanism is "people can't work/aren't going out and buying things"
As soon as it's safe, people will very quickly start working and consuming again. The world around that mechanism will have changed - some businesses will have closed, some jobs will have been lost, some personal finances will have taken a hit - but people's desire to work for income and spend money on goods didn't break. It's only being blocked for a little while. The circumstances around that are an independent question.
Your premise is at fault ("this is about buying goods"). The virus is a catalyst, not a cause.
Do you know if the Chinese economy will ever recover in the way you claim? Are you even considering the world outside your country? This is bigger than a few people not going out to bars and restaurants. Industrial production has been slowing for months, global debt was increasing exponentially for a decade, political tensions are rising globally, people are dying around the world because of government mismanagement of a pandemic.
You can keep repeating that things will go back to normal when people start shopping again, but if that's the extent of how you view what's happening now, you're likely wrong.
Disproportionately affecting people outside of prime working ages.
> political tensions are rising globally
For now, and they will eventually subside. Because they always do. And always will.
> Do you know if the Chinese economy will ever recover
Why wouldn't it (eventually)? Demand will change, but people aren't going to forget how to work, how to buy, or how to build. There is a _ton_ of cultural infrastructure that goes beyond physical infrastructure and ultimately, unless we were all building stuff nobody actually wanted or could use (e.g. dotcom bubble) the economy will eventually recover.
We don't know the timing, or the extent that bad assets will be kicked out (e.g. mortgages), and we also don't know to what extent money printing has erased savings, but ultimately there's a tremendous amount of cultural and physical infrastructure that will continue to exist, and a tremendous amount of demand that will return.
In this case, on the other hand, the primary mechanism is "people can't work/aren't going out and buying things". That's absolutely going to "go back to the way things were", in some sense. It's just a question of how long it will take, and how much damage will be dealt in the meantime. But it feels very different from those other ones, which could be good or bad.
Put differently, the GFC was like organ failure: things couldn't just heal, they had to be reworked and replaced. The current crisis is like a knife wound: the basic problem will heal on its own, but in the meantime you have to keep from bleeding out and hopefully avoid necrosis.