Coronavirus Squeezes The Economy

Jennifer Keiper
March 18, 2020 - 7:59 am
Coronavirus Economy

(WBBM NEWSRADIO) -- How long can the U.S. economy and consumers and others hold out? WBBM Newsradio's Jennifer Keiper takes a look at the latest issues surrounding COVID-19.

Economies around the world are feeling the direct impact of the fast spreading coronavirus. The markets have been a mess. What are we looking at? What can we expect in the weeks to come?

"I think what the market really didn't like was the press conference, again, giving us an understanding of where the federal government stands on the coronavirus, and I think particularly, what they didn't like what President Trump had to say when he was - I have a feeling, very honest - his appraisal of how long this is going to go on for, because they asked him when they think it is going to be over, and he said July and August. Now that is much different, than where I think most of the market was looking at. Typically when it comes to the financial markets, especially with stocks, when you are looking at earning stream of a company trying to figure out what it's worth, you are usually looking at 5-10 years with that arrow, now it's almost hour to hour on what's going to happen with that company, so it's super volatile in today's a wonderful example of that. Overall I would say most of the estimates I am starting to see when you shut down an economy, or at least try to limit interactions of people to just 10 people as a group, you are going to see a significant contraction in the United States, in the second and third quarter now," economist Andrew Busch said.

That's pretty late. How do you recover from something like that? How long does it usually take? When we go through a bare market like this, how long does it usually take to recover and get things back to what we would like to see?

"What I would say is this, is that people need to start to think about how this is going to dramatically change the way they do business and how the economy looks, because I don't think we are going back to the old way any time soon. So what does that mean? Just start to think about how you are going to change your behavior, because I think this coronavirus is going to be around for some time. It will be 12-18 months, maybe it will be shorter, that would be great, before we get a vaccine. But even if you get a vaccine, then how many times are we going to go through something like this? I don't know, but my guess is, the initial reaction from one to three years out will be a significant change, and a significant change in the way society operates in an economy. There's a lot of opportunities that are going to come from this. I hate to be kind of crass about this, because it is so scary right now, but keep your head up. There are things that are going to come and change, that you are going to have the opportunity either as an investor to make more money, or as a business to create something of value," Busch said.

What do you think of the Fed rate cut? What other tools does the fed have at this point?

"Well as most people have said, rightfully so, that the Fed cannot cure a healthcare crisis, but it can sure increase the amount of liquidity into the financial system," Busch said. "Now there have been problems in the commercial paper market and some of the bond trading markets, as well. The Fed flooding the markets with that will help, but if you go back to 2008, the Fed stepped in at one time and back-stocked all the commercial paper market in the United States and people forget that they did that. It's just one other tool that the Fed can use to calm people down in this time of stress. So just when people say, oh the Fed can't solve this, or the Fed can't solve do this, the Fed can do a lot to get the markets to be functioning and moving forward."