The global Coronavirus pandemic has cast many economies into darkness, with the U.S. itself venturing into uncharted waters. Many Federal Reserve economists agree that the United States of America is headed towards a recession thanks to nationwide lockdown and the spread of the novel Coronavirus. The nation has never experienced anything quite like this, with the progression toward recession being compared to the Great Depression. Smaller economies will be much harder hit due to economic limitations doesn’t mean that the U.S. will cope much better.
Coronavirus and the U.S. economy
So what does this mean for the U.S.? A large number of smaller businesses won’t be able to survive the weeks and months ahead. The less cash in the bank and the less access to credit, the harder the impact felt. Exact economic data is almost impossible to predict for the near future because it is going to be so unrecognizable from current estimations. Economists are constantly shifting their models, adjusting daily in an attempt to project the current effect of the pandemic.
How do we handle this as a nation?
When faced with the question of whether or not America should focus on self-preservation or working with the rest of the world in fighting the pandemic and collaborating on a vaccine, one has to remember the global magnitude of this crisis. Local and international action are both essential. Combined solutions to problems faced by the world are the only way to manifest significant change. Just as in 2008’s financial crisis, the U.S. acted on both fronts pouring almost one trillion dollars into saving the monetary system while at the same time working with the world on a joint course of action to stabilize markets and prevent total economic collapse. The Coronavirus may come with its own unique set of implications, but responding as an independent power locally and on the global front will be the only way to win the fight against this dire affliction affecting us all.
Hope for humanity
Even in these dark times, hope prevails. Not all models and economic opinions forecast struggle and recession. Economics Nobel laureate Vernon L. Smith recently shared his views on the U.S. economy in relation to the Coronavirus, published in the Wall Street Journal. After seeing shelves of supermarkets and drugstores emptied over and over again, he feels that this can only indicate that both direct and associated industries are not only surviving but thriving, which should result in a sharp rebound once this is all controlled and over. When one looks at the economy from this perspective, other subtle opportunities arise.
The effect of lock down/shelter-in-place
Quarantine is making declining companies, products & services fall faster, leaving successful products & strong growing brands only. With the impact to certain industries like brick-and-mortar supermarkets, department stores & theaters comes the rise of delivery services, order-in food, and other mail order alternatives to commonly used services. Whether the current economic anxiety is just a passing fear like Smith is convinced of, only time will tell, but he sure makes some valid points. The U.S. may bounce back strong in ways, yet, unsuspected.
Reopening the economy
In a declaration to Fox News, President Donald Trump’s head economic adviser Larry Kudlow expressed a hopeful demeanor regarding the reopening of the U.S. economy. He shared the spread of the Coronavirus drives the economic timeline. In lure evidence showing that the epicenter of the pandemic in New York has reached a plateau, the White House is hoping that a full force reopening is just a few weeks away. One shouldn’t mistake a reopening of markets with recovery, but it will give a little breathing room while making the future of global stabilization & growth clearer as well.
Another positive point to shine light on is the effect of inflation during this time of pandemic. Even though certain isolated areas are seeing a steep rise in price due to the sharp rise in demand, this inflation of just a small number of items cannot tip the scales and push up overall averages. Inflation rates in the U.S. will stay subdued, with perhaps even an opportunity for deflation arising. The demand for over inflated goods is dropping far faster than the supply is climbing. Add to this the diminishing oil price, the sustained drop in travel demand both now and in the immediate future, and reduced overall energy costs, and you’ve got a U.S. inflation rate that’s remaining pretty stable.
When will things be back to normal?
The American economy was a powerhouse building momentum before all this began. One can’t forget just how strong the U.S. dollar and supporting economic structures were, and all that is happening now is that certain parts of the economy are being shut down for public health and safety. This being said, the transition back to whatever the new normal may be is going to take time. It, too, is a global adjustment. The sudden stop to the world’s economy leads most financial analysts to believe that the return to economic normalization could take three or even four quarters.
Opportunity buried under dire unemployment & collapse
In the USA, rebounding from unemployment rates that skyrocketed above 10% in March 2020 from just 3.5% in February is going to take time and a change in the way that we do business. Billionaire businessman Mark Cuban is one of those who feel that this amidst a gloomy global outlook, there is hope for those who innovate. After all, as he says, America is a country of entrepreneurs. Cuban shared in an interview with Yahoo Finance that the pandemic passing and the eventual return from the highly-likely recession will give the business sector a chance to reset paving the way for all-new, “world-changing” companies to arise.
Pacing the return of normality
The more disorganized each country’s response is to the Coronavirus, the longer it will take for global economies to rebound. It is impossible to forecast what is coming, but avenues for new business will inadvertently be created through the fall of others and the changes to how we deal with each other. Millions of people will be without work. Droves of small businesses will close. Education is changing, so are hospitality, tourism, and travel. Many restaurants will never recover, and your guess is as good as mine concerning what domestic and international markets will do until corona is contained.
Navigating a sea of uncertainty
There is a grim reality behind the shift that the Coronavirus has forced, but we cannot allow it to engulf us and cloud our judgment and actions at a time when we need to be as proactive possible. The U.S. government, in combination with the Federal Reserve, has provided a rescue support scheme to the value of $2.2 trillion to keep the economic machine running. Globally, the International Monetary Fund and each individual nation’s federal banking system is creating strings to pull in order to handle the growing pressure of this unprecedented global pandemic. The IMF is ready and willing to dispense loans from its $1 trillion capacity. A short-term Federal scheme has even been created to swap out debt for dollars in order to keep the world economy running.
A time for resolve & innovation
All this shows is that we all need to do everything that we can to continue not just living and surviving, but growing, evolving, adapting, and thriving. It is going to take most of us stepping out of our comfort zone and stepping up to the challenge of changing. From changing the way that we meet, interact, shop, invest and communicate in the most basic sense to changing the way that we conceptual business models and careers – the Coronavirus pandemic calls for initiative on fire, a mindset continually aware of potential and possibilities in a landscape totally reinvented.