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April 2020 Economic Roundup


20Q2 growth will probably be dismal: much depends on how fast the virus goes away, how deep the decline in economic activity is, and how large the fiscal stimulus ends up being. Lots of unknowns. With that in mind, we expect -5.75%! Sorry.


The chances of a recession have meaningfully risen. Driving the rise: an inevitable European recession, soaring Italian fatalities resulting in a rich western democracy locking down all of its population, and a sudden steep decline in oil prices. While the decline helps consumers, it will precipitate a huge number of energy firm defaults and hammer corporate investment. Looser monetary and fiscal policy now!


While our debt is painfully high at slightly over 100% of GDP, now isn't the time to start worrying about it! Give the healthcare sector whatever it needs, giving everyone $1,000 is a decent idea given the immense time crunch we are under, ensuring that the Fed can act as a lender of last resort is crucial, and pursuing policies enabling people to afford to shelter in place is imperative. 


Epidemics and disease have impacted human development since mortals first roamed Earth. The impacts have been spectacularly broad-based including demographic, cultural, political, financial, and of course biological. COVID-19 will be no different. At first glance this new coronavirus will vastly increase telecommuting, by demolishing the argument that it doesn't work. It will cause firms to rethink supply chains and speed up the introduction of (epidemic and disease resistant) robots. 


Despite rates at zero, and having rejected negative rates, the Fed is not out of ammunition. Keeping rates low lets the government borrow at minuscule rates thereby encouraging much more fiscal stimulus. The Fed can also better utilize forward guidance by now promising not to raise rates for X months/years. This would improve the recovery as investors will know rates will stay down even if the recovery is surprisingly robust. 


The average American flushes 57 sheets of of toilet paper/day, almost 21,000 sheets/year, slightly over 100 rolls/annum. That works out to 384 trees over a lifetime! US spending on toilet paper rolls up to $9 billion/year; $27.70/person. For the week ending 3/7/2020, US retailers cleaned up; toilet paper sales jumped a remarkable 60%. Despite the Coronavirus showing no sign of increased runs, households want to cover their backsides. 

Source: Elliot Eisenberg, PhD is Chief Economist for consulting firm GraphsandLaughs, LLC, serving a variety of clients across the United States. All rights reserved.

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