How The Coronavirus Outbreak Is Impacting The Economy

The coronavirus outbreak has devastated financial markets and sent shockwaves across the economy as the nation prepares for negative growth and massive job loss in the coming months. We’ll dig into the causes and how Washington is responding.

Guests

Rana Foroohar, CNN global economic analyst. Financial Times global business columnist and associate editor. (@RanaForoohar)

Michelle Singletary, Washington Post personal finance columnist. Her column, “The Color of Money,” is syndicated in newspapers across the country. (@SingletaryM)

Jack Beatty, On Point news analyst. (@JackBeattyNPR)

From The Reading List

Financial Times: “This is the big one” — “What a week in the Swamp, and the country. As coronavirus spreads, the financial markets go into meltdown and the economy braces for what now looks like a good chance of recession for 2020, there is only one silver lining — we have negative real interest rates on 30-year Treasury bills.

“Let me be clear: that’s not good news for America’s growth prospects. The flight from risk, the fall in the dollar and the fact that the bond markets are telling us that we are not only in the post-American world, but the post-growth world, is all very disturbing news.

“… Financial markets are behaving very much like 2008 — risky bets being called in, and pretty much all assets (except gold!) have fallen. On that note, I have to remind Swampians that I called both the rise in gold and the synchronised fall of the dollar and stocks many months ago.

We all know the central bankers are out of ammunition — interest rates are already so low, they can’t have much more impact, not that this will stop the cuts from coming. What we need now in practical terms is a major public health-related fiscal stimulus, followed by a major bipartisan infrastructure programme. That’s the only thing that I can think of that would calm things.”

The Washington Post: “How do you not panic about what’s happening to your retirement account? Just don’t look.” — “I haven’t looked at my 401(k) retirement account since the stock market began its nose-dive in response to the spread of the coronavirus in the United States.

“With the constant four-digit drops in the Dow Jones industrial average, I’ve been tempted to see how much I’ve lost — at least on paper. But I’m not planning to make any changes, so there’s no reason to check how it’s doing.

“‘I’ve lost $70,000 in the past 20 days,’ a friend wrote after she couldn’t resist looking. She’s several years away from retirement and has a solid financial plan — and savings. She promised to stop checking out her 401(k).

“‘My feet are planted in faith,’ she said after we talked.”

Financial Times: “Bernanke and Yellen: the Federal Reserve must reduce long-term damage from coronavirus” — “Around the world, policymakers are grappling with the effects of the devastating coronavirus.

“Experts on public health are taking the leading role, as they should. For their part, fiscal policymakers are helping to fund the public health response while providing critical aid to people whose lives and livelihoods have been shattered by the virus and its effects. Fiscal policy will certainly have to do more as the size of the hit to economic activity becomes apparent.

“Central banks, like the US Federal Reserve, also have a useful role to play. Some of the actions recently announced by the Fed, including cutting the short-term policy rate nearly to zero and preparing to buy at least $700bn in Treasury debt and mortgage-backed securities, are superficially similar to those taken by monetary policymakers during the 2008 financial crisis.

“However, the underlying challenges today are quite different. Back then, the near-collapse of the financial system froze credit and spending; the goal of monetary policy was to restart both. Now, the problem is not originating from financial markets: they are only reflecting underlying concerns about the potential damage caused by the coronavirus pandemic, which of course monetary policy cannot influence.”

This article was originally published on WBUR.org. [Copyright 2020 NPR]