“It’s going to get worse” Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told lawmakers Wednesday. He was talking about the infectious disease COVID-19, what we commonly call coronavirus.
But what about the economy in the US? What about the world economy? We saw almost an entire Provence in China brought to a grinding halt as the government there quarantined thousands in an effort to quell the spread of the virus.
Between illness caused absences from work in China, and the quarantine the impact to the world economy was as far flung as ports in San Pedro. There are not enough containers for dock workers in San Pedro so dockworkers are already being furloughed and laid off. This is one sliver of the economy where we have seen effects of the virus. And we are seeing it all over the world now in myriad ways.
The stock market has been as volatile as we have seen in recent years and fear that a bear market is upon us is growing.
What can we do?
Central banks can decrease interest rates – this has, or should have the effect, of infusing cash into the market by making it easier for business to borrow. If businesses have cash on hand they can do things like hire, remodel, introduce more product lines, giving a boost to the economy.
Governments and banks can push cash into the medical industry to make sure that things like testing for the virus, setting up emergency care centers, hiring medical staff will not be hindered because of cashflow.
Governments and organizations can provide funds directly to individuals and businesses. The World Bank Group has pledged billions of dollars to help with the outbreak but those funds go generally to emerging markets. What of the rest of the world? Italy has just pledged to spend millions in response to help their economy recover from the impact of the virus. But in almost the next breath has ordered all non-essential businesses to close in an attempt to slow the spread, essentially bringing the country’s economy to a halt.
Government infusions of money by “paying” citizens affected by the virus to help them pay their mortgage or simply makes ends meet if they have been laid off due to the downturn – like those dockworkers – may help in the long run but timelines for these sorts of payments can be long.
The US government has pledged billions to increase the medical response and has promised that no one will receive surprise medical bills or be charged for testing. The UK has decided to tackle the crisis with both support for individuals and businesses impacted by the economic downturn and shore up funds for the medical response.
Governments can also take non-monetary measures like creating a containment zone, as they city of New Rochelle recently did, or prohibit large gatherings which is beginning to happen all over the country. However, these measures have the effect of slowing the economy. The virus may not have overwhelmed us yet as a country, but we are already feeling the effects of the containment efforts on economies on micro and macro scales.
The smaller the globe market-wise the more difficult the recovery. This virus has already directly economically impacted China, Italy, and some parts of the US with decreased productivity due to employee absence, cancellations of events, travel being restricted, etc. the domino effect has already begun around the world.