Coronavirus

Trump’s Call to Restart Economy Could Prolong Economic Fallout

SK Ashby
Written by SK Ashby

It's abundantly clear that near-term economic reports are going to be very grim and that's why Trump and the GOP are now calling for human sacrifices, but prematurely declaring victory could be just as if not more damaging to the economy than self-isolation and lockdowns.

Economists at Morgan Stanley say that while the near term damage of isolation will be severe, it won't lead to a depression. But something close to if not a full-blown depression is not out of cards if this continues beyond the second quarter of the year.

In our call of the day, Morgan Stanley said U.S. GDP growth would plunge 30% in the second quarter, hitting a 74-year low. The forecast is worse than that of Goldman Sachs, which predicted a 24% drop, but more optimistic than Federal Reserve Bank of St. Louis President James Bullard’s 50% drop forecast.

While Morgan Stanley’s economists, led by chief economist Chetan Ahya, predicted a deeper recession, they said a repeat of the Great Depression in the 1930s would be avoided.

The bank’s economists said the virus would peak by April or May, in its base case, with growth beginning to recover from the third quarter. However, a later peak and disruption into Q3 would see U.S. GDP fall 8.8% in 2020, bringing it down to levels last seen in the early 1930s.

The scenario outlined by Stanley's chief economist wherein the pandemic does not peak until later this year is what could happen if Trump gets his way and we prematurely declare victory before infections have peaked.

Calling it 'ironic' feels both too generous and callous somehow, but Trump wants to restart the economy by sending people back to work during a pandemic when doing so could actually further smother the economy.

There may only be a couple of voices near Trump that will tell him this. I would guess Dr. Fauci and Mnuchin are it.

The mess the next president is going to inherit is staggering. It could be worse than what President Obama inherited in 2009.