Are we at the beginning of a depression?

[PDXTabs]

What is that statement based on?  The CDC says that between 9M and 45M Americans get the flu each year.  So why can't COVID spread to 30M people in one season?

And we're really talking about two flu seasons, right? 18 months more of this, another full winter?

[LaineyAZ]

And if more people die from the repercussions of cratering the economy?

Where do you live? What sort of failed state do you think the USA is? Even in the Great Depression life expectancy went up.

Sadly, I think we'll see the suicide rate go up, especially among older working-age males.  It's already been increasing, so now with more jobs disappearing it's almost inevitable.

[ChpBstrd]

And if more people die from the repercussions of cratering the economy?

Where do you live? What sort of failed state do you think the USA is? Even in the Great Depression life expectancy went up.

The US has a much grayer population now than in the 30s, and people are more dependent upon medications with worldwide supply chains. Consider the effects if people can't afford or can't find insulin, antidepressants, thyroid hormones, various heart meds, cancer drugs, etc.

When our politicians say "lock down the borders" that sounds smart, but the secondary impact is pharmacies will start running low.

[PDXTabs]

When our politicians say "lock down the borders" that sounds smart, but the secondary impact is pharmacies will start running low.

Absolutely. The WHO says to never close borders for exactly this reason. But that doesn't mean that you need bars, sporting events, and concerts.

[nemesis]

When our politicians say "lock down the borders" that sounds smart, but the secondary impact is pharmacies will start running low.

Absolutely. The WHO says to never close borders for exactly this reason. But that doesn't mean that you need bars, sporting events, and concerts.

Doesn't border closings exempt important things like medicine, etc?  It seems everything I've read indicate that it does not impede the flow of commerce / goods, just non-essential travel.

[Telecaster]

The good news is that AFAIK, unlike 2008 there is nothing systemically wrong with the economy, so I would expect a fast recovery.

https://www.marketwatch.com/story/why-the-record-12-trillion-pile-of-junk-rated-debt-coming-due-is-a-worry-2020-01-24
https://www.marketwatch.com/story/half-of-investment-grade-bonds-are-only-one-step-away-from-junk-status-2019-01-07

There is an old saying (Warren Buffett, I think) "When the tide goes out, you can see who is swimming naked."  No question a lot of people will get hammered by this. 

[ice_beard]

And if more people die from the repercussions of cratering the economy?

Where do you live? What sort of failed state do you think the USA is? Even in the Great Depression life expectancy went up.

Life expectancy has gone down the past few years, suicide, substance abuse and poor health in general are thought to be the cause. 

[Paper Chaser]

Right, but in the US having a great healthcare system does not imply having a healthy population.  We've got massive amounts of obese people with chronic illnesses.  The coasts are the first to be getting hit with the virus and I'd argue they are generally the healthiest parts of the country.  Here in the midwest, where people need motorized carts to roll around wal-mart, I wouldn't be surprised to see the mortality rates trend higher than what we've seen so far.  And again, my numbers were based on a 1% mortality rate.  And a 10% spread.  16x less than the lowest numbers the experts are putting out.  And it still put us at over a quarter million dead.

A quarter million dead in what time frame? 6 months? 2 years? 10 years? A lot of these studies and estimates offer timelines of several years, but only the total number of deaths is highlighted, which causes panic and leads people to jump to conclusions. There's a big difference between 250k deaths in 6 months and 250k deaths in 10 years once the virus has actually impacted 100% of the population.

It could just as easily be speculated that the denser population and worse air quality in urban areas will put city dwellers more at-risk for transmission and serious impacts of the virus. Nobody really knows how it will work out.

What is that statement based on?  The CDC says that between 9M and 45M Americans get the flu each year.  So why can't COVID spread to 30M people in one season?

Tons of people get the flu because we generally don't take any precautions to lessen the impact. Some people get a flu shot that varies in effectiveness each year, and that's pretty much it. Nothing gets shut down for the flu. Schools, workplaces, large gatherings, etc all go on as normal. COVID could probably infect millions of people if nothing were done to curtail it but that's not what's happening.

Precisely, agree 100%.  But how is an educated choice made based on things that one 'believes' or 'feels' even when they contradict actual projections from experts in the field?  That is what I'm struggling to understand.

I'm not basing it on what I 'feel', I'm looking at reputable data collected thus far from around the globe, and extrapolating that data for the US population. I don't think that's emotional. The reason it's so different from what many experts are predicting is that I'm working with a historical timeline of a few months at the longest, based on what the virus has actually done, while many of the predictions from the experts are using timelines of years into the future, and assuming that nothing will improve during that time.

[CrankAddict]

A quarter million dead in what time frame? 6 months? 2 years? 10 years? A lot of these studies and estimates offer timelines of several years, but only the total number of deaths is highlighted, which causes panic and leads people to jump to conclusions. There's a big difference between 250k deaths in 6 months and 250k deaths in 10 years once the virus has actually impacted 100% of the population.

I'm not sure why 2-10 year timelines are even coming up.  The flu spreads everywhere in 1 season.  Nobody is catching 2013's flu this month, it's all the new flu.

Tons of people get the flu because we generally don't take any precautions to lessen the impact. Some people get a flu shot that varies in effectiveness each year, and that's pretty much it. Nothing gets shut down for the flu. Schools, workplaces, large gatherings, etc all go on as normal. COVID could probably infect millions of people if nothing were done to curtail it but that's not what's happening.

But COVID is more contagious.  R-0 on the flu is around 1.  R-0 on COVID is thought to be 2.5 - 3.0.  So it is possible that even with social distancing methods it still spreads everywhere in <= 1 year.  The extreme steps we are taking are to ensure it doesn't spread everywhere in <= 1 month.

I'm not basing it on what I 'feel', I'm looking at reputable data collected thus far from around the globe, and extrapolating that data for the US population. I don't think that's emotional. The reason it's so different from what many experts are predicting is that I'm working with a historical timeline of a few months at the longest, based on what the virus has actually done, while many of the predictions from the experts are using timelines of years into the future, and assuming that nothing will improve during that time.

If you could link some of that reputable data that would be great.  Particularly any analysis of the raw numbers.  We are looking at the beginning of potentially exponential curves right now, and I'm not sure how you'd look at the yellow trace in this graph and think "yeah, this will take 10 years to spread"...

[PDXTabs]

Life expectancy has gone down the past few years, suicide, substance abuse and poor health in general are thought to be the cause.

Yes, I was half-joking about the failed state status. But as Abba Eban once said, "[m]en and nations behave wisely when they have exhausted all other resources." We might be getting close to some wise behavior.

[Paper Chaser]

I've gotten my data throughout this situation from the WHO's situation reports:

https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports

(Sorry, they're PDFs)

It covers total populations, number of cases, number of deaths, as well as new cases/deaths.

To date, China has been the most affected country. The first known case of COVID was reported in mid-November 2019:

https://www.theguardian.com/world/2020/mar/13/first-covid-19-case-happened-in-november-china-government-records-show-report

It had gotten bad enough to lock down Wuhan by Jan 23, 2020. That's 2 months for a respiratory virus to spread in a part of the country with poor air quality, a large percentage of smokers, and dense population. The outbreak peaked in mid Feb while on lockdown. To date, they've had 81116 known cases and 3231 deaths in a total Chinese population of 1.38 Billion people. That's 3.9% mortality among cases, but it's also just 0.0058% of the total population contracting the virus.
So, after being caught completely off guard by a brand new virus, and giving that virus a 2 month head start before lockdown, the Chinese still didn't even get to 0.1% of the total population being infected. It's important to note that the lockdown continues in Wuhan, but the virus is barely spreading at all anymore as you can see from the WHO data I linked. They're averaging under 50 new cases per day.

Also, I think your R0 estimate of 2.5-3 is a bit high based on the infected cruise ship they studied:
https://www.ijidonline.com/article/S1201-9712(20)30091-6/fulltext

[atribecalledquest]

There is some great news come out of France that HYDROXYCHLOROQUINE AND AZITHROMYCIN can be used as a treatment for patients, curing them in 6 days.

https://www.mediterranee-infection.com/hydroxychloroquine-and-azithromycin-as-a-treatment-of-covid-19/

[CrankAddict]

Also, I think your R0 estimate of 2.5-3 is a bit high based on the infected cruise ship they studied:
https://www.ijidonline.com/article/S1201-9712(20)30091-6/fulltext

Well let's be clear, none of these are "my" estimates.  I'm in no position to make such claims.  This Oxford review of many studies came up with a mean value of 3.28 and a median of 2.78.  I have seen others suggest as low as 2.25.  But the important point is no matter where it is in this range (and it's probably silly to think we can nail it with enough precision to even be talking about decimal point values at this time), it's significantly above the 1.0 of the flu, no?

https://academic.oup.com/jtm/article/27/2/taaa021/5735319

[TomTX]

Using the same WHO data, there have been 3503 confirmed cases with 58 deaths in the US. That's a mortality rate of 1.6% to this point in the US (Obviously it's currently a limited data set). But the point is that many countries have done a lot less preparation, and have worse health care systems. They're dragging the mortality rate up, while the US is likely to drag it down.
If the current mortality rate in the US continues, then it would mean 68.75 million cases of COVID-19 would have to occur to see 1.1 million deaths from it. That's roughly 20% of the US population. It's going to take more than a couple of months to go from the current 3k cases to almost 69 million cases in the current environment.

Update for today: US has 6519 confirmed cases and 115 deaths.

Keep in mind that death is a seriously lagging indicator. It's 24 days from infection to half of the deaths (median time to death)



https://covid19info.live/

I've intentionally only used data from the WHO as it's generally a trusted source, and their data represents the whole globe.
The downside is that their data lags as it's based on the previous day's numbers. Obviously, the numbers for both cases and deaths are likely to climb and do so quickly at this point as testing becomes more widespread and results are compiled. The promising thing with the data you presented is that he mortality rate is still just 1.7%

Have a look at the second sentence.

[Paper Chaser]

Also, I think your R0 estimate of 2.5-3 is a bit high based on the infected cruise ship they studied:
https://www.ijidonline.com/article/S1201-9712(20)30091-6/fulltext

Well let's be clear, none of these are "my" estimates.  I'm in no position to make such claims.  This Oxford review of many studies came up with a mean value of 3.28 and a median of 2.78.  I have seen others suggest as low as 2.25.  But the important point is no matter where it is in this range (and it's probably silly to think we can nail it with enough precision to even be talking about decimal point values at this time), it's significantly above the 1.0 of the flu, no?

https://academic.oup.com/jtm/article/27/2/taaa021/5735319

R0 might be about twice as high as typical influenza, which according to most articles that I can find is around 1.3. Lots of uncertainty about both to be honest. Like you said, the seasonal flu changes yearly and R0 for any virus varies by location.

Still not sure how anybody can use the spread of seasonal flu under normal conditions to try and predict the spread of COVID-19 under severely restricted conditions. Trying to predict the future in a scenario that we've never faced before is pretty difficult and requires assumptions that potentially introduce error. I think it's much easier to look at what the virus has actually done in other locations and assume that it's behavior will remain pretty similar if the environment is pretty similar.

[Paper Chaser]

Using the same WHO data, there have been 3503 confirmed cases with 58 deaths in the US. That's a mortality rate of 1.6% to this point in the US (Obviously it's currently a limited data set). But the point is that many countries have done a lot less preparation, and have worse health care systems. They're dragging the mortality rate up, while the US is likely to drag it down.
If the current mortality rate in the US continues, then it would mean 68.75 million cases of COVID-19 would have to occur to see 1.1 million deaths from it. That's roughly 20% of the US population. It's going to take more than a couple of months to go from the current 3k cases to almost 69 million cases in the current environment.

Update for today: US has 6519 confirmed cases and 115 deaths.

Keep in mind that death is a seriously lagging indicator. It's 24 days from infection to half of the deaths (median time to death)



https://covid19info.live/

I've intentionally only used data from the WHO as it's generally a trusted source, and their data represents the whole globe.
The downside is that their data lags as it's based on the previous day's numbers. Obviously, the numbers for both cases and deaths are likely to climb and do so quickly at this point as testing becomes more widespread and results are compiled. The promising thing with the data you presented is that he mortality rate is still just 1.7%

Have a look at the second sentence.

Yeah, I get that. Just for total transparency of the data, I think it makes sense to get the info from a consistent, trusted source instead of jumping around from one source to another. Any spike in deaths will show up in the WHO data, it may just be later as it's compiled less frequently.

[dragoncar]

I wouldn’t be surprised to see the Dow below 10,000 in the next couple of months.

Holy!!!! Now that is a low guess! I was considering leveraging my paid off house and backing up the truck if it got below 20k!

Backed up the truck yet?

[Buffaloski Boris]

There is some great news come out of France that HYDROXYCHLOROQUINE AND AZITHROMYCIN can be used as a treatment for patients, curing them in 6 days.

https://www.mediterranee-infection.com/hydroxychloroquine-and-azithromycin-as-a-treatment-of-covid-19/

That does look very promising. We’ll see if it plays out.

[HPstache]

There is some great news come out of France that HYDROXYCHLOROQUINE AND AZITHROMYCIN can be used as a treatment for patients, curing them in 6 days.

https://www.mediterranee-infection.com/hydroxychloroquine-and-azithromycin-as-a-treatment-of-covid-19/

That does look very promising. We’ll see if it plays out.

I have heard that it is already being used in the US.  Its purposely not being talked about to reduce the hoarding tendencies.

[Buffaloski Boris]

"Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product."

https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q?srnd=premium

Wel,l that doesn't sound good. 

[fattest_foot]

"Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product."

https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q?srnd=premium

Wel,l that doesn't sound good.

I mean, what do you expect when you forcibly close everything?

That our leaders don't understand that businesses don't keep months of cash on hand to float their business is also kind of concerning, and further, that supply chains that rely on each other will then close because our economy is inter-dependent. Not even going to get into the amount of people here on MMM that think this is no big deal. We're doing irreparable harm to our economy. Businesses aren't going to magically re-open once the states end their quarantines. They're going to cease to exist.

[Kronsey]

"Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product."

https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q?srnd=premium

Wel,l that doesn't sound good.

I mean, what do you expect when you forcibly close everything?

That our leaders don't understand that businesses don't keep months of cash on hand to float their business is also kind of concerning, and further, that supply chains that rely on each other will then close because our economy is inter-dependent. Not even going to get into the amount of people here on MMM that think this is no big deal. We're doing irreparable harm to our economy. Businesses aren't going to magically re-open once the states end their quarantines. They're going to cease to exist.

I was about to share what @Buffaloski Boris shared and then was going to comment pretty much exactly what @fattest_foot said.

In reading and participating on these forums the last few days, it is abundantly clear that many MMMers are completely clueless on what this is going to do to our economy and clueless on the state of most small businesses in the US.

I've been saying on other social media platforms that we (USA) have chosen the worst possible option. We either needed to go full draconian and close everything down for 2-3 weeks Nationwide with no exceptions similar to what China did, or we should have instructed the vulnerable on how to quarantine and let the economy keep chugging.

I'm not convinced we've flattened the curve at all due to the irresponsible actions from most Americans who are paying no attention to the suggestions. I guess that is the American way of thinking for you.

We're going to wind up with a world wide depression, and if you look at the hockey stick charts from Covid 19 cases in USA, we're going to end up as bad or worse than Italy.

[dividendman]

"Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product."

https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q?srnd=premium

Wel,l that doesn't sound good.

I mean, what do you expect when you forcibly close everything?

That our leaders don't understand that businesses don't keep months of cash on hand to float their business is also kind of concerning, and further, that supply chains that rely on each other will then close because our economy is inter-dependent. Not even going to get into the amount of people here on MMM that think this is no big deal. We're doing irreparable harm to our economy. Businesses aren't going to magically re-open once the states end their quarantines. They're going to cease to exist.

I was about to share what @Buffaloski Boris shared and then was going to comment pretty much exactly what @fattest_foot said.

In reading and participating on these forums the last few days, it is abundantly clear that many MMMers are completely clueless on what this is going to do to our economy and clueless on the state of most small businesses in the US.

I've been saying on other social media platforms that we (USA) have chosen the worst possible option. We either needed to go full draconian and close everything down for 2-3 weeks Nationwide with no exceptions similar to what China did, or we should have instructed the vulnerable on how to quarantine and let the economy keep chugging.

I'm not convinced we've flattened the curve at all due to the irresponsible actions from most Americans who are paying no attention to the suggestions. I guess that is the American way of thinking for you.

We're going to wind up with a world wide depression, and if you look at the hockey stick charts from Covid 19 cases in USA, we're going to end up as bad or worse than Italy.

I agree.

[Mighty-Dollar]

I wouldn’t be surprised to see the Dow below 10,000 in the next couple of months.

That would take us to 1999 levels. Do you really think that the last 20+ years were all for not?

[Buffaloski Boris]

People have a normalcy bias because they’re used to things being normal. Essentially closing down your economy for 2 or 6 or 12 weeks not normal. This is going to cause a heck of a lot of damage. As other posters have noted, a lot of small businesses are simply not going to reopen. That’s particularly problematic given that they’re the primary employers in our country.

I believe a depression is probably a foregone conclusion. The question is the length and the lasting economic damage it does. And then there will be the cultural repercussions. I do believe that there will be some silver linings with some very dark clouds.

[Kronsey]

This is going to cause a heck of a lot of damage. As other posters have noted, a lot of small businesses are simply not going to reopen. That’s particularly problematic given that they’re the primary employers in our country.

+1

I'm an accountant by trade. I serve the accounting, tax, payroll and general biz consulting needs of my small business clients. I completely quit doing taxes this week to make myself available to my small biz clients to try to help with planning to weather this storm. I was on back to back phone calls for 3 days straight, and I don't even have that large of a practice.

About 1/3 of my clients have already laid off all of their employees and basically shut down. A few may reopen, but most are probably done for good. If my state goes the route of shut down for non-essential businesses, I'd guess I'll be closer to 50% of clients closed.

And my practice is about 50% online entrepreneurs. If it was all small, typical local businesses, I'd probably be looking for work myself because what would be left of the client base wouldn't be enough to pay biz expenses and feed my family.

I'm in quite a few Facebook groups for accounting firm owners. 100% of them are struggling and scrambling both to try to help their clients and keep the lights on themselves.

To anyone reading who thinks this is all going to be over towards the end of April, think again. If you have small biz owners as friends, reach out and check on them. Many of those phone calls I was on this week had biz owners on the other end who were sad, shocked, and some even seemed suicidal. Imagine working your entire life to build something that was suddenly gone in a few weeks time due to no fault of your own.

[Steeze]

Definitely sweeping the country. Couple friends of mine from Denver, one told me today the they were having their hours cut to 3 days a week and the other that their employer was asking for people to take a voluntary leave of absence. Not fired or quit, just off the schedule, they are all hourly there.

My mom in MA is a house cleaner in a seasonal area that serves NYC and CT. Many of her clients are canceling for the summer already.

My own office I can see 2-3 weeks of work in our system before people are idle. Projects are getting canceled already. How long can we burn through cash? Couple months best case? Who knows. I wouldn’t be surprised if we had to drop 25-50% of the team before this is over. So much for my yearly raise on in April - I’m assuming that and the yearly bonus are history. That’s about 30% of my expected wages this year gone.

[Kronsey]

Forget depression - it's not even as scary as 2008.

LOL. Most of the first page comments didn't age well.

Just goes to show how this caught all of us off guard. This comment was just 10 days ago.

In less than 2 weeks, the collective thought has moved from "this will blow over in a few weeks" to "what the hell have we gotten ourselves into?!?"

[John Galt incarnate!]

"Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product."

https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q?srnd=premium

Wel,l that doesn't sound good.

Yes, Bullard's predictions are baleful.

I do think an economic depression is inevitable.

There is a limit to seasoned, retail investors'  acceptance of portfolio reductions below  what "I put in." 

It's one thing to "lose" all of a portfolio's appreciation and quite another to start "losing the money I invested."

What retail investors'  limit is I do not know.

Nevertheless, I've been thinking that a wholesale, retail investors' capitulation is nearing that will plunge DJIA   ~50% from its recent high, perhaps this  week or this week + next week.

If selling continues, and DJIA  sinks ~90% from  its all-time high to ~2950, I think it will occur much  quicker than the <3 years it took in the early 1930s at the beginning of the Great Depression.




Wikipedia

Wall Street Crash of 1929

The Dow then embarked on another, much longer, steady slide from April 1930 to July 8, 1932, when it closed at 41.22, its lowest level of the 20th century, concluding an 89.2% loss for the index in less than three years.

[dividendman]

Forget depression - it's not even as scary as 2008.

LOL. Most of the first page comments didn't age well.

Just goes to show how this caught all of us off guard. This comment was just 10 days ago.

In less than 2 weeks, the collective thought has moved from "this will blow over in a few weeks" to "what the hell have we gotten ourselves into?!?"

I am, however, convinced that the world will not end.

[theolympians]

Possibly.

And the sad part is it'll be totally self inflicted this time.

Assuming we actually believed these measures would stop a pandemic, they're both too late and not extensive enough. We're basically destroying our economy for something that's going to happen regardless of our actions at this point.

Japanese couldn't do it, the soviets couldn't do it, al queda couldn't do it, only we could do it by committing economic suicide. Unbelievable.

[Paper Chaser]

We're going to wind up with a world wide depression, and if you look at the hockey stick charts from Covid 19 cases in USA, we're going to end up as bad or worse than Italy.

I think Italy and the US are very different situations for many reasons:

https://www.telegraph.co.uk/global-health/science-and-disease/have-many-coronavirus-patients-died-italy/

"According to Prof Walter Ricciardi, scientific adviser to Italy’s minister of health, the country’s mortality rate is far higher due to demographics - the nation has the second oldest population worldwide - and the manner in which hospitals record deaths."

“The age of our patients in hospitals is substantially older - the median is 67, while in China it was 46,” Prof Ricciardi says. “So essentially the age distribution of our patients is squeezed to an older age and this is substantial in increasing the lethality.”

“On re-evaluation by the National Institute of Health, only 12 per cent of death certificates have shown a direct causality from coronavirus, while 88 per cent of patients who have died have at least one pre-morbidity - many had two or three,” he says.

"But there are other factors that may have contributed to Italy’s fatality rates, experts say. This includes a high rate of smoking and pollution - the majority of deaths have been in the northern region Lombardy region, which is notorious for poor air quality."

[chairman5]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

[Tyson]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

Agreed.  The demand for services and goods are not going away.  People still want to go to restaurants and to the grocery store and the dentist, etc.... That demand won't go away.  In fact it will be even stronger in a few months of being pent up. 

In the meantime, the strong/flexible organizations will survive, the others won't.  When people start going out again, there will be a raft of new businesses rushing in to fill that void.  In fact, if a person ever had a desire to strike off onto their own in a business that interests them, now might be the time to start preparing to do it. 

One thing I do wonder is, how much "working from home" will stick.  I hope a lot.  There's a lot of jobs that can be done from home perfectly well.  There's a lot of advantages to working from home, as well as being one of the most environmentally friendly things you can do.  Anyway, I hope more people/companies realized that WFH actually kind of rocks and they stick with it over the long term.

[chairman5]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

Agreed.  The demand for services and goods are not going away.  People still want to go to restaurants and to the grocery store and the dentist, etc.... That demand won't go away.  In fact it will be even stronger in a few months of being pent up. 

In the meantime, the strong/flexible organizations will survive, the others won't.  When people start going out again, there will be a raft of new businesses rushing in to fill that void.  In fact, if a person ever had a desire to strike off onto their own in a business that interests them, now might be the time to start preparing to do it. 

One thing I do wonder is, how much "working from home" will stick.  I hope a lot.  There's a lot of jobs that can be done from home perfectly well.  There's a lot of advantages to working from home, as well as being one of the most environmentally friendly things you can do.  Anyway, I hope more people/companies realized that WFH actually kind of rocks and they stick with it over the long term.

Yes, this.  One thing that people are not factoring in is that in "dire" times like this drives INNOVATION.  New technologies, which will make many areas of our lives more efficient (not necessarily better, but more efficient) will be created and fast tracked.  Unless there is some kind of mutation that raises the mortality demographics exponentially toward the young, our lives in March 2021 will look much like in December 2019, but with some new cool technologies and more healthcare preparedness for future illnesses.

[John Galt incarnate!]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

 My understanding is that the general definition of an  economic depression is a reduction of GDP of ~10% or more that lasts for 1 year or more.


If I were a man who prayed (I am not) I would pray that my outlook is wrong and your outlook it right.

[vand]

You're all wrong.
A recession is when you neigbour loses their job.
A depression is when you lose your own job.

[chairman5]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

 My understanding is that the general definition of an  economic depression is a reduction of GDP of ~10% or more that lasts for 1 year or more.


If I were a man who prayed (I am not) I would pray that my outlook is wrong and your outlook it right.

I think there are a lot of definitions in the financial world, all revolving around things being "really really bad", but the kkey is duration.  I don't think anyone thinks that if the statistics are dire, it will be for a prolonged duration - more than say 6 months - before you see substantial improvement, and likely back to original levels in 2-3 years.  Depressions are usually thought to be 5-10 years till return.  Again - duration.

[John Galt incarnate!]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

 My understanding is that the general definition of an  economic depression is a reduction of GDP of ~10% or more that lasts for 1 year or more.


If I were a man who prayed (I am not) I would pray that my outlook is wrong and your outlook it right.

I think there are a lot of definitions in the financial world, all revolving around things being "really really bad", but the kkey is duration.  I don't think anyone thinks that if the statistics are dire, it will be for a prolonged duration - more than say 6 months - before you see substantial improvement, and likely back to original levels in 2-3 years.  Depressions are usually thought to be 5-10 years till return.  Again - duration.

Duly noted.

[Kronsey]

We're going to wind up with a world wide depression, and if you look at the hockey stick charts from Covid 19 cases in USA, we're going to end up as bad or worse than Italy.

I think Italy and the US are very different situations for many reasons:

https://www.telegraph.co.uk/global-health/science-and-disease/have-many-coronavirus-patients-died-italy/

"According to Prof Walter Ricciardi, scientific adviser to Italy’s minister of health, the country’s mortality rate is far higher due to demographics - the nation has the second oldest population worldwide - and the manner in which hospitals record deaths."

“The age of our patients in hospitals is substantially older - the median is 67, while in China it was 46,” Prof Ricciardi says. “So essentially the age distribution of our patients is squeezed to an older age and this is substantial in increasing the lethality.”

“On re-evaluation by the National Institute of Health, only 12 per cent of death certificates have shown a direct causality from coronavirus, while 88 per cent of patients who have died have at least one pre-morbidity - many had two or three,” he says.

"But there are other factors that may have contributed to Italy’s fatality rates, experts say. This includes a high rate of smoking and pollution - the majority of deaths have been in the northern region Lombardy region, which is notorious for poor air quality."

I don't care about the semantics. That wasn't my point. I don't pretend to be a medical expert keyboard warrior.

My only point was this:

Most people did not listen to the suggestions regarding quarantine and social distancing. Because most people did not listen, I am not convinced that we've actually done anything that will flatten the curve. So we ended up not accomplishing what was supposedly intended and at the same time birthed the worst economy in many of our lifetimes.

[John Galt incarnate!]

 I am not convinced that we've actually done anything that will flatten the curve.

Neither are the stock markets and so, their yo-yoing continues.

[Kronsey]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

Man... Some of you guys/gals must be living under a rock... Where do you get the idea that "once Covid shows signs of peaking, it is back to work..."? Do you not understand that the majority of businesses do not have the capital to weather this storm? There is no magical re-opening if the owners are broke, with no capital, and no way of easily attaining said capital. Where are these employees going to go back to work to? Or maybe you're one of those who honestly thinks the government is going to wave a wand and magically fix everything. Yes, there will be bailouts and stimulus that will help some, but if you think that every business is going to bounce back in the near term you are dreaming.

And let me clue you in on another over looked but very important fact - when the economy is tanking (or has tanked), people become extremely risk averse. You think in the midst of a recession or depression people are going to be excited about risking the little they do have left to start a business?

I understand my view is jaded because I work with this market segment every day of my life. But it shouldn't be too hard for the rest of you to understand why your flowery views of the near future are not the likely outcomes.

[Tyson]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

Man... Some of you guys/gals must be living under a rock... Where do you get the idea that "once Covid shows signs of peaking, it is back to work..."? Do you not understand that the majority of businesses do not have the capital to weather this storm? There is no magical re-opening if the owners are broke, with no capital, and no way of easily attaining said capital. Where are these employees going to go back to work to? Or maybe you're one of those who honestly thinks the government is going to wave a wand and magically fix everything. Yes, there will be bailouts and stimulus that will help some, but if you think that every business is going to bounce back in the near term you are dreaming.

And let me clue you in on another over looked but very important fact - when the economy is tanking (or has tanked), people become extremely risk averse. You think in the midst of a recession or depression people are going to be excited about risking the little they do have left to start a business?

I understand my view is jaded because I work with this market segment every day of my life. But it shouldn't be too hard for the rest of you to understand why your flowery views of the near future are not the likely outcomes.

Not at all.  For people on THIS forum, I would expect most of us have dialed down our expenses, have a nice big stash to fall back on, and are less likely to lose our jobs than the general population.  If we have a mortgage, we have enough saved to pay it for quite a while.  I mean, this is MMM, isn't it?

So for people like us, what does it matter if it's only a few months or a couple of years before recovery starts?

Unless you are saying we'll NEVER recover?

[ChpBstrd]

FRom Wiki "In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.

Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, more bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession."

No - we are not going to go into a depression.  While we will have the individual characteristics, they were not be "long".  Once the Covid shows signs of peaking, it is back to work and while the tmp unemployment will be massive, it will not be sustained.  Gov will back loans, no bank failures will occur.  This is painful, but even if in the "early innings" the end is in sight.  Talk to your great grandmother who went through the Great Depression - there was never an end is sight when they were in the middle of it.  That is the difference.

Abnormally large increases in unemployment: Bullard Says Jobless Rate May Soar to 30%   https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-u-s-jobless-rate-may-soar-to-30-in-2q

Falls in the availability of credit: Markets for junk bonds freezes up: https://www.bloomberg.com/news/articles/2020-03-18/leveraged-loan-market-freeze-risks-35-billion-banker-headache

Shrinking production / investment: US GDP projected to shrink 13% in Q2: https://ihsmarkit.com/research-analysis/covid19-impact-update-us-gdp-to-plunge-to-13-q2.html
Auto industry and Boeing shutting down production: https://www.cnbc.com/2020/03/23/boeing-plans-two-week-shutdown-of-factories-in-puget-sound-area-because-of-coronavirus.html   https://www.nytimes.com/2020/03/18/business/economy/gm-ford-fiatchrysler-factories-virus.html

Bankruptcies / defaults: Data is mostly N/A, but commercial bankruptcy filings in Jan + Feb were already 12% over 2019 before the market collapse. https://www.abi.org/newsroom/bankruptcy-statistics The odds of default by Italy and Greece have increased greatly.

Reduced Trade/Commerce, Especially International: Most numbers not yet available, but the January trend was already down.  https://tradingeconomics.com/united-states/balance-of-trade

Currency fluctuations / deflation: The trade-weighted USD index dropped to a one-year low on March 9, and then shot up to an almost 3 year high by March 13. Numbers still being posted, of course. https://fred.stlouisfed.org/series/DTWEXAFEGS Also the price of oil has plummeted 64% YTD. Copper is down 21%. Coal is down 23% Gold is down 1.6%. Corn is down 11%. Cotton down 23%. Etc. https://markets.businessinsider.com/commodities

Financial crisis / failures: Waiting to see how many banks fail in the next few months, but it seems likely considering the employment/income loss situation. Watch the FDIC: https://www.fdic.gov/bank/individual/failed/banklist.html
FWIW, the government is about to bail out a number of industries (coal, aviation, airlines, hotels, cruise ships, etc.): https://www.politico.com/news/magazine/2020/03/22/bailout-coronavirus-congress-crisis-142961

Meanwhile, my neighbor made $40 waiting tables yesterday and gave $20 of that to a babysitter. Like most people, she's paycheck to paycheck. The government is planning for the crisis to last 18 months if a vaccine is developed as quickly as possible: https://www.livescience.com/coronavirus-pandemic-could-last-18-months.html

Basically, the "no depression" case rests on "well, those final pieces of data haven't been published yet."


 

[Kronsey]

Not at all.  For people on THIS forum, I would expect most of us have dialed down our expenses, have a nice big stash to fall back on, and are less likely to lose our jobs than the general population.  If we have a mortgage, we have enough saved to pay it for quite a while.  I mean, this is MMM, isn't it?

So for people like us, what does it matter if it's only a few months or a couple of years before recovery starts?

Unless you are saying we'll NEVER recover?

What does dialing down your expenses and having a nice EF have anything to do with losing your job?!?

It matters because a deep recession or depression for a prolonged period of time means that the idea of FI is much farther away than it was just a few weeks ago.

Of course I think we will recover at some point. Of course I think most MMMers will be ok. None of that was the point of the thread though. "Are we at the beginning of a depression?"

If your point is that a depression or recession won't effect any of us, I'm afraid you belong in the crazy person quarantine as well.

[Mighty-Dollar]

This pandemic, like all pandemics before it, will run its course over a few months.  It's not a zombie apocalypse.

With any of the past viruses, I don't remember the economy being shut down, sports seasons being cancelled, restaurants closed,  empty streets, etc

[Bloop Bloop]

Not at all.  For people on THIS forum, I would expect most of us have dialed down our expenses, have a nice big stash to fall back on, and are less likely to lose our jobs than the general population.  If we have a mortgage, we have enough saved to pay it for quite a while.  I mean, this is MMM, isn't it?

So for people like us, what does it matter if it's only a few months or a couple of years before recovery starts?

Unless you are saying we'll NEVER recover?

What does dialing down your expenses and having a nice EF have anything to do with losing your job?!?

It matters because a deep recession or depression for a prolonged period of time means that the idea of FI is much farther away than it was just a few weeks ago.

Of course I think we will recover at some point. Of course I think most MMMers will be ok. None of that was the point of the thread though. "Are we at the beginning of a depression?"

If your point is that a depression or recession won't effect any of us, I'm afraid you belong in the crazy person quarantine as well.

I think the point is that a lot of MMM forumites will be economically sheltered from most of the terrible head winds, and the effects will be mitigated. E.g. I am fortunate to work in a job (I'm self-employed) that is close to being an essential service. I can see my revenue going down but I can't see it drying up completely. I also have enough savings to last me 5 or 10 years in a pinch if I really need it. So my FIRE timeframe won't necessarily blow out since a lot of it is relative, i.e., if everyone loses 40% in the stock market but you're able to keep buying in, some day when it recovers, you'll be right. In fact if anything I think this might lead me to FIRE earlier since I have a lot of cash to keep throwing at equities. I think that was the point of the person you were replying to: "So for people like us, what does it matter if it's only a few months or a couple of years before recovery starts?"

[dragoncar]

.

And let me clue you in on another over looked but very important fact - when the economy is tanking (or has tanked), people become extremely risk averse. You think in the midst of a recession or depression people are going to be excited about risking the little they do have left to start a business?

Lol even in a pandemic have you seen the spring break crowds?  People are not risk averse when it comes to going out and having fun.  If nobody wants to invest in that business after this is over, then I will and reap all the profits!

[American GenX]

if everyone loses 40% in the stock market but you're able to keep buying in, some day when it recovers, you'll be right.

If you're within about a year of FIRE, and that "some day when it recovers" is years down the road, that would cause you to have to work a few times as long as you otherwise needed to.   So instead of retiring in one year, it could be three, four, or more years.

[Bloop Bloop]

if everyone loses 40% in the stock market but you're able to keep buying in, some day when it recovers, you'll be right.

If you're within about a year of FIRE, and that "some day when it recovers" is years down the road, that would cause you to have to work a few times as long as you otherwise needed to.   So instead of retiring in one year, it could be three, four, or more years.

Yes, no doubt, that is true. But the reverse applies for someone who is 10 or 15 years from FIRE.