Illustration: Eniola Odetunde/Axios
While you might be tired of all of the doom and gloom that's been written about the economy over the past two weeks amid the coronavirus outbreak, there's an even more depressing fact to consider: there is nothing bright and hopeful to say right now.
The state of play: Congress' failure Sunday night to pass a major stimulus program illustrates once again how dysfunctional our government has become and how at risk the world is for catastrophe.
Threat level: Lawmakers weren't able to get the trillion-dollar proposal passed despite St. Louis Fed president James Bullard warning that U.S. unemployment could rise to 30% and GDP (overall, not growth) could decline by 50% in the second quarter.
- "Millions of people are going to lose their jobs," Minneapolis Fed president Neel Kashkari said on "60 Minutes."
What's happening: Wall Street traders and money managers are scrambling for cash like nothing I have ever seen before, fire selling even safe assets like U.S. and German government bonds, and economists are throwing out and rewriting their economic projections on a near daily basis.
- The National Association for Business Economics even scrapped its first quarter projection altogether, noting that "the effects of the pandemic are currently making a timely and accurate forecast impossible."
Between the lines: "The bigger concern here is that you have all these small- and medium-sized businesses which will be under extreme stress and forced to shut down, and we don’t have a benchmark for how to recapitalize them or to keep them in business," Matt Luzzetti, Chief U.S. economist at Deutsche Bank Securities, tells Axios.
Small business owners seem more scared than the stock traders.
- I've spent the past week talking to restaurant and bar owners who are literally in tears because they are certain that the businesses they've spent their lives building are about to be torn apart.
- As a result, we are in the midst of the worst wave of job losses in U.S. history — and a majority of Americans have no savings and nearly half were making just enough to survive before.
The big picture: Over the past few years, I have written about a lot of things that could go wrong:
- The bad loans companies have taken out, overleveraging themselves with debt they can’t ever afford to pay back.
- The steadily increasing mountain of government debt and the decreasing effectiveness of government spending.
- The lack of real investment in employees and major projects by big businesses that has declined consistently over the past year.
- The nation's pension funds that are overstretched and underfunded, already choking state budgets.
- And the "zombie companies" that have survived only because of low interest rates and a rapacious debt market hungry for just about anything.
What it means: I have feared for some time that all of those chickens were due home to roost, but thanks to coronavirus they could now all hit home at once.
The bottom line: From a Slack conversation I had with Axios Pro Rata editor Dan Primack on Wednesday:
- Me: "You know this is gonna be way worse than everyone realizes, right? That's the thing I realized today. Way worse."
- Dan: "oh yeah. worst of my lifetime. by a lot."