What happens if the economy is cut in half and the fed balance sheet is doubled?
— Marrrk J. Valek (@MarkValek) May 29, 2020
Fact Danielle. I run 90% margins (yes no joke I found the golden key$ I went from having a/r of 2.5mm in next 60 days to 100k overnight. And I’m in BANKING. Economy is going to hell. Small biz has 0.0 access to capital. I have no access. No bailout. And I know the system!
— FEDUPBIZOWNER (@HRGPFOREVER) May 29, 2020
(Bloomberg) — Nearly two-thirds of publicly traded restaurants are at risk of bankruptcy as the Covid-19 pandemic batters the industry, according to a new study.
The concern is higher for small companies and restaurants that specialize in dine-in, consulting firm Aaron Allen & Associates said in an analysis. It identified Bloomin’ Brands Inc., Potbelly Corp. and Chili’s owner Brinker International Inc. among those at greater risk.
“It’s really the full-service model that’s in the biggest danger,” principal Aaron Allen said. “Some of those that are in casual dining — a lot of those had already been bleeding cash, bleeding locations.”
“You feel this overwhelming pressure to not be wrong.” A South Carolina restaurant owner reopens, anxious to protect his business, customers and staff. t.co/AAsRcytBYj
— Real Time Economics (@WSJecon) May 29, 2020
Pardon the interruption, gentlemen. The Fed's Main Street Lending program is misnomer. $500k-$100M loan program will launch in a few days for mid-to-large businesses. The SBA's PPP program (most loans <$150k) separate part of CARES. Small co layoffs that don't make it start 7/1. t.co/rDGUboWRwg
— Danielle DiMartino Booth (@DiMartinoBooth) May 29, 2020
— Invariant Perspective (@InvariantPersp1) May 29, 2020
The idea has taken hold that once the shutdowns are lifted the economy goes right back to where it was in February.
— Jeffrey P. Snider (@JeffSnider_AIP) May 29, 2020
The Fed can electronically print money, but it can’t print jobs.
It can buy bonds, but it can’t cure a virus.
— Nomi Prins (@nomiprins) May 29, 2020
Musing: The economy is like watching a scene from Grey's Anatomy where the patient's heart has been stopped 5 minutes.
The docs know it is over… but CNBC still believes that the patient will rise and run a marathon in a couple months.
— Market Musings (@AndysCycles) May 29, 2020
“We’re going to keep giving the patient
medicine that isn’t working”
– Dr Fed
Perfectly said!! 😉 t.co/2ub7YWzJa0
— Reminiscences of an American Capitalist (@4Awesometweet) May 29, 2020
PERSONAL CREDIT PLUMMETS pic.twitter.com/BaksWNqUqp
— Win Smart, CFA (@WinfieldSmart) May 29, 2020
The Great Depression of the 1930s was an economic downturn that became a prolonged malaise. The economist Robert Shiller asks whether that pattern might be repeated. t.co/NDZ7l5gWkY
— NYT Business (@nytimesbusiness) May 29, 2020
In 1929 many people expected the stock market to bounce right back and that decline was short-lived, in one sense: The market rose almost half the way back to its 1929 peak by April 1930. But it fell sharply again, and the crash set in motion a train of powerful narratives that resemble some of the popular notions that are circulating today.
Much as President Trump dismissed the seriousness of the Covid-19 pandemic in its early days, President Herbert Hoover made optimistic forecasts that proved to be wrong.
Much as people fret these days about extreme polarization between Democrats and Republicans, so too were people of that era concerned about extreme political divisiveness. After losing the 1932 election to Franklin Delano Roosevelt, for example, President Hoover, by then a lame duck, called F.D.R.’s plans a “march to Moscow.”
Much as people today have experienced long lines and empty shelves at supermarkets, in the Great Depression people fretted about long lines and empty cash registers at banks.
There are other troubling parallels: Fear of long-term unemployment and a never-ending depression was rampant back then, leading people to restrain spending, thus prolonging the downturn. This may not happen now, but it is a danger.
Much as now, in the Great Depression people were very focused on maintaining a “fair wage” in the face of economic distress. But this led to nationwide resistance to nominal wage cuts for anyone, even when retail prices were falling rapidly.
This appears to have had the unintended result of inducing employers, who could not afford to keep everyone working at their former wages, to lay off many people. The economists Harold L. Cole of the University of Pennsylvania and Lee E. Ohanian, of U.C.L.A., have shown that this may explain some of the extreme duration of Great Depression unemployment.
Another development back then may have resonance today. Faced with widespread poverty, even people with money voluntarily embraced austerity, saying they no longer needed to “keep up with the Joneses.” Their reduction in consumption helps to explain the severity and duration of the Depression. If contemporary culture shifts in a similar way, it could limit the economy’s ability to bounce back.