Well, here we go. Considering China is the United State's biggest global trading partner, it's pretty unsurprising that the effects of the Coronavirus would bleed into the economy as well. On top of that, consumer activity has also dropped drastically due to the increasing mania. Such a decline in the economy hasn't been accounted for since the 2008 financial crisis, with numerous juggernauts like Microsoft and Apple bearing the biggest brunt of it. Essentially, the market profitability is currently in the gutter and people’s wallets are being absolutely murdered as a result. Considering the vast macro-economic instability of the country at the moment, it’s unsurprising that the government is being called upon to intervene.
However, President Trump has recently pinned much of the economic despair upon other issues, such as Boeing’s recent production woes and the Federal Reserve’s refusal to cut interest rates. Generally, the White House seems to not yet have formed a proper fiscal response to the outbreak’s effects. As of this morning, Nancy Pelosi and Chuck Schumer have called upon the President and Congress to create a spending bill which addresses the economic effects of the coronavirus outbreak. Additionally, there has yet to be an open dialogue in Congress covering any potential spending increases or tax cuts to stimulate the economy, and overall, a solid plan does not appear to be in order or on immediate horizon. Many are also speculating the massive implications of the virus beyond just China and the United States, as if the pandemic continues to grow at an unforeseen rate, it could potentially lead to a global recession. Overall, the complete impact of the outbreak on both the US and global economy have yet to be fully realized, although many are continuing to call for action sooner rather than later.
- How do you think the government should respond to the effects of the outbreak on the United States economy?
- How large of a priority do you think the economy should be the outbreak? Do you think the White House is treating the issue with the appropriate amount of urgency?
- To what degree should the government intervene with the economy to maintain stability?
2 comments:
I think the government is currently not taking the coronavirus seriously enough, as President Trump is politicizing the issue, claiming that it is a "hoax" created by Democrats in order to stall the economy and make him look bad (https://www.nbcnews.com/politics/2020-election/democratic-candidates-hit-trump-s-coronavirus-hoax-claim-n1145911). I feel like he is too preoccupied with getting people to rally behind him and against the Democrats to treat the virus seriously. I'm not entirely sure how government can help by intervening in the economy (considering we haven't really been over that in class yet), but they should at least follow the suit of San Francisco, which has declared COVD-19 as a "state of emergency" and has publicly advised people to maintain cleanliness by washing their hands, covering their coughs or sneezes, and staying home if they are sick, despite 0 confirmed cases of coronavirus in the city. Meanwhile, even though there has been the first confirmed death in the US due to coronavirus, the national government has simply put out an advisory to avoid traveling to places with known virus outbreaks and has (slowly) rolled out test kits.
The current drop in the stock market reflects concerns about the economy, but the actual economic impact of COVAD-19 on the US is still to be determined. The hardest hit areas in terms of work shutdowns have been in Asia and this can impact the supply of goods to US manufacturers. However many companies keep an inventory of important components. The more telling situation will be consumer demand, which has fueled the recent economic expansion. As long as people continue to eat out, shop and purchase goods and services, the economy will not be severely impacted. The first sign of weakness could be in the travel industry with people forgoing vacations and business travel.
The stock market was at a very high level before the outbreak, but COVAD-19 became a trigger for a correction to bring it more in line with historical valuations. However these evaluations are based on the earnings of companies and should there be a more significant economic slowdown, then earnings will come down resulting in lower valuations and more trouble for the stock market. A good example is the Walt Disney Company which has had to shut down three theme parks in Asia due to tot he COVAD-19 outbreak. Theme park revenue makes up a significant part of Disney's earnings, so the stock has taken a big hit recently. If more companies become similarly affected, the downturn in the stock market could be more severe.
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