Policy makers often describe their approach to the COVID-19 crisis as placing the economy in hibernation or an induced coma. In that sense, the restoration of normal functioning after the patient is revived will be the true measure of success.
Read: One $1,200 stimulus check won’t cut it. Give Americans $2,000 a month tax-free to fire up the economy Low rates and central bank funding via quantitative easing will enable governments to increase debt. However, with debt likely to reach 150% of GDP for many countries, it will retard growth, reduce spending flexibility and crowd out other borrowers from capital markets. Low future growth rates and high debt levels are incompatible and will ultimately create destabilizing currency pressures.
Changes in consumer demand from the crisis may affect the level of activity and certain businesses. Business travel may be substantially replaced by teleconferencing. Growth in working remotely, online shopping and entertainment may change demand for real estate. People may eschew cruising. They may be reluctant to travel overseas fearing future lockdowns.
4. There will be persistent negative effects in the labor market: Lacking any realistic prospects of getting work, many will leave the workforce. A core of long-term unemployed with depreciating job skills are unlikely to be ever reemployed. This will increase the demand for welfare and incur large social costs. Employers will recalibrate their workforce for greater flexibility to shed costs quickly in future shocks.
Governments can minimize some of these effects by facilitating investment and offering retraining facilities. However, many of these consequences are outside of their control. This points toward a slow recovery and lower economic growth.
Yeah, no shit...
No shit