That is quite the wide range, but please consider the Centre for Risk Studies analysis of the Economic Impact of Covid-19.
The GDP@Risk over the next five years from the coronavirus pandemic could range from an optimistic loss of $3.3 trillion (0.65 per cent of five-year GDP) under a rapid recovery scenario to $82.4 trillion (16.3 per cent) in an economic depression scenario, says the Centre for Risk Studies at the University of Cambridge Judge Business School.
Under the current mid-range consensus of economists, the GDP@Risk calculation would be $26.8 trillion or 5.3 per cent of five-year GDP, says a “COVID-19 and business risk” presentation prepared by the Centre for Risk Studies.
Under the Risk Centre’s projections, the GDP@Risk in the United States would range from $550 billion (0.4 per cent of five-year GDP) to $19.9 trillion (13.6 per cent), in the United Kingdom from $96 billion (0.46 per cent) to $3.5 trillion (16.8 per cent), and in China from $1.03 trillion (0.9 per cent) to $19.2 trillion (16.5 per cent).
The full report from the Cambridge Business Risk Hub requires a sign-in.
Four Scenarios
- L1: An Optimistic Recovery Path scenario in which pent-up demand fuels a rapid economic recovery with overshoot on the rebound, with short-term results better than currently expected
- L2: Consensus Economic Forecast – the mid-range of forecasts by economic experts, now calling for a slow recovery curve with some period of economic growth before the recovery process
- L3: Pessimistic Outlook of structural damage to the economy and a lengthy period of recession
- L4: Economic Depression Scenario of a long-term recession with the economy tipped into depression, with “worst-case” estimates by economists and negative assumptions such as severe second waves of infection or protectionist politics.
Global Covid-19 GDP at Risk
Too Early to Call
I am inclined to toss L1 and L4.
Note that that the consensus forecast of a 5.3% hit to GDP is not a V-Shaped recovery.
It is still too early. We do not know if Covid-19 will return in the fall, if a reliable vaccine is around the corner, or the results of early end of lockdowns.
There is also mutation risk that could later nullify even a successful vaccine.
Powell Warns Recovery May Stretch to the End of 2021
Meanwhile, please note Powell Warns Recovery May Stretch to the End of 2021
No Shocker
This is not a shocker although it is unusual for the Fed chair to be this blunt.
The message is warranted as the economic data has been nothing but grim.
- May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
- May 15: Retail Sales Plunge Way More Than Expected
- May 15: Industrial Production Declines Most in 101 Years
Fed Promotes More Free Money
The Fed cannot directly give money away so that burden falls on Congress.
In additional unusual moves, Fed Chair Jerome Powell and Minneapolis Fed President Neel Kashkari both asked for Congressional Action.
This is a sign of panic. I commented on May 14, Panic Sets In: Fed Promotes More Free Money.
The Fed seldom steps in with fiscal recommendations, especially more deficit increasing measures.
Mish
great data. what is the math and assumptions in the 5 year baseline for GDP ? the expectation is that the curve shifts down and grows without interruption at some rate ? thanks
The economic calamity is only partly the fault of Covid. The economy was heading south long before the virus started. The root problem is debt, not that people missed a couple of months work and shopping.
We were well on our way to recession before this virus started, as studying the data will show, but the virus and the problems associated with it are supercharging the situation.
In a few months, the news will forget about the virus, and the top headlines will be bankruptcies and unemployment. Deflation is coming, and it is as they say, it is bringing hell with it.
Looking back, the MSM drumbeat about deaths, deaths, deaths is certainly going to be recognized as a factor that ramped up the fear level for many! This is an excellent article.
Deaths vs. Economic Pain: Cable News’ Imbalanced Picture
ANALYSIS
By Kalev Leetaru
May 20, 2020
Almost three months ago, COVID-19 became an inextricable part of American life. As the economy ground to a halt and unemployment soared, television news channels have focused the majority of their attention on the health impacts of the disease, while paying far less attention to the devastating economic harms, including historic job losses. A closer look at how channels are presenting the coronavirus crisis reveals stark differences, from CNN’s ever-present infections dashboard to Fox News’ periodic scrolling updates, offering clues to the increasingly partisan reaction to the pandemic.
What life event is not recoverable from … other than death? Ask most people if they would rather lose their job, their home, their _______, or their life and what answer would you expect?
I think we will know about additional waves sooner than Fall.
I think the headline is misleading, though maybe Mish himself believes it accurate. But clearly the major damage that Covid19 will cause – possibly for years to come – is not from the virus infection but from the unwise, panic-stricken, politically corrupt responses to it. Far too many in the political class are salivating at the opportunities political restructuring due to economic collapse will engender and so are backing policies that will bring that happy event about – suffering of millions of ordinary people be damned.
The numbers are out with Covid19; thus far it’s debatable if it’s all that much worse than a bad flu year. It’s certainly not many orders of magnitude greater. The shut-downs will ill-advised, but certainly they are borderline criminal at this point with in some cases no real end in sight. Criminal.
They want increased control, yes, but definitely not collapse. Not only were they winning before the virus anyway, collapse would turn the country into a powder keg once regular people no longer have anything to lose. Ruling over a bunch of rubble is not the goal.
As for Covid deaths, we still have no idea how bad things are in China (they locked down over 100M additional people last weekend despite tiny official numbers) and the toll is still rising everywhere. The whole “just the flu, bro” take has already aged poorly and will only look worse over time.
Perspective re ‘just the flu’ :
(It doesn’t say on that page, but pneumonia thus far this season still is a bigger killer, but nobody writes about it.)
And about Sweden, whose reported death per million rate doubled overnight on one site from 4.6 to 8.7 per million:
I guess my main point with the statistics on this is they are ALL very suspect, either because there are great variations in standards and definitions (i.e. dying OF covid vs dying WITH etc.) and also some studies are clearly biased in favour of one agenda or another (anything from NYT, WHO, UN etc. is better not to read, and so forth).
Only epidemiologists and modelers funded by Gates and the WHO count as experts. All the others (98%) are obscure…
Thanks for the laugh. The raw weekly death data for 2020 (through April) from the CDC is lower than that of 2019.
Here’s the data through mid April.
The Wu Flu seems to have a discernible minor effect. The financial incentives for maximizing the reporting of the virus: $13k on hospital addmittance, $39k if placed on a ventilator have corrupted the numbers to the point where the drunk falling off the ladder and dying in come died of the disease because he tested positive the previous week. In London it’s seen as a universal cure; it’s been 6 weeks since anybody has died of a heart attack.
The financial risk may well be $82 T but it is all caused by the Political filth.
The first quarter of the twenty-first century will be noted by historians as the roll-back of the gains of the Enlightenment. On top of Bush the lessors crimes and Barry the Kenyans “Terror Tuesday’s” time set aside to decide who to murder this week, we have seen the return of Lese Majeste as a jail-able offense.
The destruction of the scientific method: Ferguson’s IC model produces different results with identical imputs, and no- you can’t see the code. The Replication Crisis in that are laughingly called the “Social Sciences” has been roundly ignored by all but a few.
The Cult of political correctness holds full sway- California arrests surfer while freeing felons, San Francisco houses the homeless and provides their drugs and alcohol, the liquor stores are open AA meetings are closed. As are churches. Cuomo slaughters thousands by deliberately introducing the disease to nursing homes full of the most vulnerable.
And the are still stunningly stupid clowns who think authorizing the State tracking the movement of all people is a good idea.
Truly astonishing.
And crazies are quoting crazies on internet message boards.
I presume you realize those CDC numbers are preliminary numbers, and that CDC continues to update their numbers for a year. Thus, to do any sort of comparison, you’d have to find out what the numbers CDC had reported for 2019 as of May 2019.
There are no published CDC death rates for 2020 that I can find………
Try link to cdc.gov
for weekly stuff from Jan 2017 to now (with caveats dealing with how they don’t get death counts until a loooong time after one might like so numbers for the last several weeks and months are guesses. Maybe good guesses, but they don’t want to stamp ’em as “correct”.).
Also, you can see visuals at
Scroll down. Those pages have death numbers from all causes in .csv form.
They put things in perspective.
First, 8 deaths so far among workers in one Greeley CO meat-packing plant.
You may want to pretend that this only affects the unloved, forgotten and disposable oldsters and crips in nursing homes tottering with one foot in the grave and one foot on a banana peel, but it ain’t so.
This should and will have an effect on plant management and labor relations, and will cause portions of the economy to blink on and blink off until a solution is found.
Second, Sweden, Spain and Italy have only had about 5% of people exposed to the coronavirus as of this week as a result of a systematic test for antibodies. Their toll from the virus has not been insignificant, but still, 5% is a long way from “herd immunity”.
This clearly means that for everyone, everywhere there is a LONG way to go until we can say this is behind us.
A gloomy scenario is pretty much baked in, despite what hopium salesmen and quack doctors will tell you in the coming weeks.
A very reasonable perspective. One caveat, though: for reasons epidemiologists themselves cannot explain, although some viruses do have secondary waves, most don’t. They blow through, usually with a 2-4 week initial intense phase, and then taper off. It’s quite possible that even though we haven’t got to herd immunity (though testing is not an exact science and varies from country to country) yet, nevertheless the virus may have run its course for the most part. Certainly the way the curves look very similar no matter what the approach taken (slow take-off, rapid exponential rise, then steady decline after a peak). They seem to reach some sort of crescendo and then die down, much like a wave crashing onto a shore.
Let’s hope that’s how this plays out. We’ll know in another month or so. Meanwhile, if opening up doesn’t accelerate, we know pretty much for sure that far more damage will be sustained for far longer. The cure must not be worse than the disease, although too many now are seemingly obsessed with making it turn out that way.
….the cure must not be worse than the disease…
This phasing is bothersome. There is no cure, there is a lowering of the rate of infection and the resulting hospitalizations and deaths.
In the absence of “it’ll just go away”, it’d continue to burn through the population until enough have developed antibodies.
The key still is is to keep the rate of infection low enough to ensure the continuing function of medical systems for pandemic and normal medical needs. The current functioning of the medical system has happened with the brute force of the shutdown, but none of the required PPE production, testing, tracing, isolation and quarantine process have been brought into place. We’re in the same place we were before but have wasted the enormous costs of the shutdown by not preparing for the almost certain continuation of the pandemic.
This is what is so maddening about the current re-opening. Nothing is really solved. The wearing of masks should be accepted as a price of normalized life and business. As much fresh-air ventilation as possible should be provided in any gathering place. Avoidance of crowds, isolation of the ill with the necessary support mechanism. All of this would allow much of life to continue with a slow rate of infection. See Taiwan for their methods of containment and their ability to keep their economy functioning.
I
Yes, some countries did squash Covid19, but that couldn’t happen in the US. We wasted the enormous cost of the shutdown because not everyone believed in it. and therefore we had some people trying to contain it, others actively trying to promote the spread so as to achieve “herd immunity”, and still others simply trying to “flatten the curve”. The net result, in the absence of a specific national policy that everyone agreed on, was high cost, and little accomplished other than flattening the curve.
As for the question of a “second wave”, it appears that we won’t have waves at all. Instead we will just have continuous cases all summer long, perhaps accelerating a bit more when it gets cold. The good news is that as the medical system has more cases to experiment on, clinical options are improving, and hopefully, by fall, the death rate will be significantly lower.
“but none of the required PPE production, testing, tracing, isolation and quarantine process have been brought into place..”
I think that’s not quite right. No doubt more could be done, but there are now plenty of masks, a surplus of (not needed and mainly useless) ventilators which Trump goes on and on about like a broken record, far more testing capabilities. I agree with you on isolation and quarantine but since Fauci et al opted for mass quarantine, the more normal approach (isolating the sick) hasn’t been developed. In any case, staying at home ain’t a bad approach. Another big failure – finally being addressed in UK this week – is absence of proper prophylaxis for health care workers, let alone higher risk citizens. Finally, following the example of several smaller countries who have enjoyed far better outcomes, they are giving HCQ + Zinc to 40,000 healthcare workers. They say it’s a trial, but they are doing it.
So I think some has been solved, but the underlying problem is that the big decisions chose a wrong direction ab initio. Even if the lockdown was helpful, its goal was just to avoid swamping the healthcare system. That never came close to happening. The peak was in mid-April and before that peak the lockdown should have ended, or at least very soon after. It is now getting towards the end of May and large swathes of rural America still remain frozen for no reason, not to mention thousands of small towns. And some might argue that the big cities should open up again already and let people get more exposures, with high risk people continuing to lay low. But the country isn’t able to consider these things well any more and it’s down to individual governors to call it. Some of them are so politically partisan that their decisions, though espousing ‘health and safety’ are rabidly anti-Trump and they are willing to ruin lives in order to push their agenda.
A lot of damage is being done:
“Doctors at John Muir Medical Center in Walnut Creek say they have seen more deaths by suicide during this quarantine period than deaths from the COVID-19 virus.
The head of the trauma in the department believes mental health is suffering so much, it is time to end the shelter-in-place order.
“Personally I think it’s time,” said Dr. Mike de Boisblanc. “I think, originally, this (the shelter-in-place order) was put in place to flatten the curve and to make sure hospitals have the resources to take care of COVID patients. We have the current resources to do that and our other community health is suffering.”
The numbers are unprecedented, he said.
“We’ve never seen numbers like this, in such a short period of time,” he said. “I mean we’ve seen a year’s worth of suicide attempts in the last four weeks.”
“
It’s time to get beyond largely fruitless debates about the medicine. People in charge have already chosen their paths. It’s time to focus firmly on avoiding a major worldwide depression and literally hundreds of millions more deaths than the barely a million that covid looks quite unlikely to cause when it’s all over.
Well some people may have cross immunity, and it is also possible that a lot of people are not susceptible — the human immune system is variable enough that for every pathogen there is a proportion of the population that is insusceptible.
“The Fed cannot directly give money away so that burden falls on Congress.”
…
The $600 / week on top of normal state UE benefits INSANELY stupid (thru July 31st) … how is business with low wage jobs to compete??
It is a de facto increase in the Minimum Wage.
The 38 million + are getting a taste of $20 / hour (or more) … will be hard to put that toothpaste back in the tube … the foundation of the economy (business) bears the brunt.
Splendid. Well Done Congress.
And yet you don’t rail against the majority of the package that went to corporations.
Many people have railed against corporate charity for decades. Just look at all the hollering back in 2008/2009. Did it do any good? Nope.
As long as politicians can rake in gobs of campaign money form corporations, the gift giving to corporations will not stop.
Money needs to be removed from politics and that means 90% public funding, tight limits on amount that any one entity/person can give and significantly shortened campaign seasons.
What do you think the odds of this happening are? About zero, yes? Corporations, wealthy power-broker donors and the American media (which gets huge advertising revenues from political campaigns would scream bloody murder).
So meanwhile, keep railing/ranting. It isn’t going to do any good.
“Money needs to be removed from politics and that means 90% public funding”
Public funding keeps money in politics. Not to mention that politicians promise to spend your money in order to gain or retain public office.
Or you could get politics out of everything in which it should not be involved…
The reality is that the ability to decide the fate of a business or group of businesses is leverage – and it runs both ways.
Businesses and business groups want government to act to close down the market to smaller competitors so they encourage government to “regulate” them. In return, they sponsor politicians by feathering their nests – campaign donations and straight up cash payments or the good old tried and true “hookers and blow” routine.
And that’s just the surface – it doesn’t cover all the blackmail and leverage that occurs behind the scenes involving bureaucrats, law enforcement agents, and other government lackeys.
It’s a perverted symbiotic relationship.
Sever government’s ability to use that leverage and you sever that relationship.
I have railed against both, because there was no excuse for either. Of all the parts of the bill, PPP was the part that made the most sense, and I opposed it, too. (PPP gave money to employees by giving it to small businesses for the purpose of having it flow through the small business to workers, keeping the workers employed, and off of unemployment.) I wouldn’t have opposed a boost to unemployment payments, had it been capped at something like 80% of their former wage, so they would have enough to live on, but also have an incentive to return to work when possible.
“An Optimistic Recovery Path scenario in which pent-up demand fuels a rapid economic recovery with overshoot on the rebound, with short-term results better than currently expected”
…
Nonstarter. Massive debt overhang precludes. Economy was getting mighty wobbly PRIOR to virus … past year or two a bug looking for a windshield.
“Pent-up Demand” faced with the cruel reality of “Zero Purchasing Power”.
The result is pretty easy to predict.
Yesterday I read that Ford closed some plants a few days after reopening because a couple of workers tested positive.
Sorry, but if we have to close entire production facilities down because a couple of people get sick, we are in for a very long and very difficult “recovery” that could last years.
Maybe you need to re-think tossing out L4…
This is the price of government fear mongering over the virus. Cooler heads use data rather emotions to make decisions. The people will suffer for our leaders incompetence.
When you start seeing a reactor core heat up, being too slow to fearmonger is an awful lot costlier than being too quick.
Exponentials always work that way. Cumulative costs are (comparatively) much, much lower, if the runaway is decisively contained early. As will become increasingly evident, as Asian countries get back to higher rates of productive resource utilization, faster than the comparative dullards in most of the rest of the world.
Of course, since any government powerful enough to give you everything you want, is also powerful enough to take away everything you’ve got, there are definitely trade-offs wrt pandemic responses which are less troublesome wrt reactor core runaways. In China, the “lessons learned” seem to be not that anyone overreacted. But rather that the government should have nailed the entire population of Wuhan and surroundings into their apartments indefinitely even earlier, on even less certain grounds. Which may have turned out to be a good thing in this specific instance, but is certainly an authority ripe for abuse.
Most people can’t do fractions. Exponential functions are beyond their grasp.
It was amazing how the press and government simply ignored it and downplayed it all through February, forcing more drastic action. Meanwhile Brazil is now paying for ignoring it.