This is the perfect macroeconomic storm — a tremendous supply-side shock due to inability to work compounded by threats to the global supply chain and a tremendous demand-side shock due to people being afraid or ordered not to congregate and shop.
, that the economy, full of companies with huge amounts of triple-B rated debt, is heading toward a massive recession if not a depression. This will drive the stock market further south. Indeed, I think we'll see the market drop 50% or more from its peak in a few days. That's an S&P Index value of roughly 1700.
To get a sense of what might happen to our service sector as well as industrial production, digest the latest figures from China.over just the past two months. China's decline in industrial output was 13%. To put these reports in perspective, the drop, from peak to trough, in US total real GDP in the Great Recession was only 3%. The peak to trough reduction in output in the Great Depression was 25%. Hence, the service sector in China is already in depression territory.
The real question about a potential depression is how long it will take to control the virus. There are four methods. Method 1: Tell the president to use his magical powers. He says he has control of the virus. Let him show us. Method 2: Let it run wild. Have as many vulnerable people die as needed, leaving survivors with herd immunity. That's inviting a holocaust, make no mistake. But so far that's this is the President's plan.
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