“[The International Air Transport Association] is now predicting that, globally, [airline] carriers will lose between $63 billion and $113 billion in passenger revenue this year… declines in travel are a pretty reliable leading indicator that a downturn is on the way. It’s a sign that something is wrong (in this case, an almost-pandemic that’s keeping people home). And when people don’t fly, they don’t spend money on hotels, or rental cars, or restaurants in destination cities either, which deepens any economic pain.”
Jordan Weissmann, Slate

“Silicon Valley’s top investing firm has a stark message on coronavirus: prepare for the worst… Calling coronavirus ‘the black swan of 2020,’ Sequoia predicted that the global economy could be dislodged by the virus, and the firm told its portfolio companies, ‘We suggest you question every assumption about your business’… Specifically, Sequoia is telling its founders to question how much cash it has before running out of money ‘to avoid potentially painful future consequences.’”
Theodore Schleifer, Vox

“Many observers have emphasized the adverse impact of the virus on supply (especially in the global chains that play such a crucial role in manufacturing). The shock obviously has a supply element. But it seems clear that much of the impact of the virus is in the form of uncertainty, as households and businesses struggle with the question of where the disease will hit next, and how bad it will be when it does hit. This uncertainty is a drag on demand in the many communities throughout the country and world that have no cases of the virus. But that drag can be offset, as usual, by stimulus from the Fed and other policy makers…

“Given the demand nature of the shock, the Fed can and should do more when it meets again in a couple of weeks… [And] Congress has to step up to show its willingness to systematically insulate the economy against aggregate demand shocks by, for example, using a combination of tax cuts and increases in infrastructure spending. Without a much clearer strategic commitment to fiscal policy support of the economy, we can expect further declines in long-run expectations about growth and inflation — and that will make the current aggregate demand shortfall even worse.”
Narayana Kocherlakota, Bloomberg

Others, however, point out that “Before [last week’s] rate cut, the Fed only had around 1.5 percent [of ammunition], leaving far less room to cut [than in 2000]. And the Fed’s counterparts abroad are in even worse shape: short-term interest rates in Europe are actually negative, so the European Central Bank has basically no room at all to cut further… When it comes to the underlying economics, we know two things. First, the coronavirus is looking more and more like a serious blow to the economy. Second… the Fed and its counterparts don’t have much room to respond. I’ve been saying for a while that I didn’t know when the economy would next face a serious bump in the road, but I did know that our shock absorbers were pretty much shot. Well, here comes the bump. Brace yourself.”
Paul Krugman, New York Times

“Nothing says ‘Don’t panic’ quite like an emergency interest rate cut by the Federal Reserve… The problem is, it’s really hard to tell from Powell’s comments exactly what motivated the cut, why the Open Market Committee decided to cut by half a percentage point instead of the usual quarter, how the rate cut is expected to ameliorate the situation, and how this meshes with the Fed’s statutory mandate to promote maximum employment and keep prices stable. The lack of clarity just makes it harder for people to decide which signals from Washington and the media to follow — the ones telling them to freak out, or the ones telling them not to?”
Jon Healey, Los Angeles Times

“We need to get ahead of the crisis through rewriting the rules of financial markets and making major investments in domestic manufacturing capacity. The coronavirus, [author and Open Markets Institute fellow Matt Stoller] argues, is making the argument for antitrust — single sources of supply for all kinds of suddenly essential medical needs are leading to shortages and could cause huge price jumps. In other words, the coronavirus is exposing a major foundational myth at the heart of Chicago School thinking: that efficiency, maximalist free trade policy, and the consumer welfare standard are stable systems. All lead to short term profits and long term risk. We should replace those with a more diverse and stable set of economic values: redundancy in supply chains, diversity in production locations, productive capacity, and universal programs…

“‘It’s not just tweaking trade policy, or doing some antitrust, or doing some federal spending. You need all of the above. You need another New Deal.’”
Zephyr Teachout, Jacobin Magazine