Federal Reserve Cuts Rates by Half Percentage Point to Combat Virus Fear

The Fed has cut rates once again by a half percentage point due to recessionary pressures resulting from the coronavirus. The federal funds rate is now between 1%-1.25%, however, the stock markets fell anyway. While this shock is considered temporary, there is no way of telling how long this might last and how much output will decline. While an interest rate cut doesn't address the cause of the downturn, Jerome Powell said he hoped it would soften damage to spending and confidences, stem financial-market disruptions and speed a recovery once any epidemic is under control.

Do you believe this is the best method of action by the Fed to address a potential recession? If not, what could they do to make a bigger impact rather than just adjusting interest rates?

Economists Slash Global Growth Forecasts as Coronavirus Spreads

https://www.nytimes.com/2020/03/02/business/economy/global-economy-coronavirus.html

The Organization for Economic Cooperation and Development says that economic growth will be cut in half as the coronavirus spreads to the world outside of China. It is hard to tell because of our lack of information on the effect on the businesses in China. The predicted decrease in growth in the United States is 1.5%. Recessions are looming all over the world. It is suggested by the OECD for countries to invest in health care early and start preparing ahead of time. Some of these preparations include decreasing unnecessary travel, shorter workdays, delay tax days for small businesses, lowering interest rates, and stronger government policies.

What are some other preventative measures that can help our economy once the recession and coronavirus hits?

Goldman Sachs Warns of Recession Risks From Coronavirus

Financial analysts have predicted that the United States will avoid an outright recession, but the risks have clearly grown over the past few weeks. The outbreak is weighing down more meaningfully on economic data, and investors are expecting volatility to increase in the coming days.  Goldman Sachs has predicted that the U.S would only grow 0.9% in the first quarter, and not grow at all in the second quarter - the worst six month growth predictions since the Great Recession. Central banks are aggressively intervening in order to prevent negative fallout due to the virus. Anticipation grows to see the next direction of interest rates when the Fed meets next on March 18th. The U.S is no longer immune to the virus, nor to the effects of the global economy. There is a growing threat to investment, jobs, growth, and lives all over the world, and there is no clear distinction on how severe the impacts of this virus will be.

https://www.usnews.com/news/economy/articles/2020-03-02/goldman-sachs-warns-of-recession-risks-from-coronavirus

Are we near a recession?

If the coronavirus becomes pandemic, as it spreads exponentially, then a global recession is likely. While a great percentage of manufacturers live in China, and the Corona virus has been a huge blow to the Chinese economy, it is quite possible that the global economy will tank following the Chinese economy.

Chinese business travel and tourism is very low, and the amount of goods being shipped in and out of China has decreased substantially as fears of the spread of the virus rise. If China does not produce, then the consumers who rely on their products will suffer, along with the economies that they affect.

Do you believe that the Coronavirus will be influential enough to cause a global recession? Will we cure it in time?

World Economy is in Survival Mode

 The coronavirus has certainly been a huge focal point in economic news lately, and rightfully so. The early optimism for the economy in 2020 is now virtually wiped away as the pandemic has halted all economic momentum early on in the year. Experts believe that the global economy is completely in survival mode amidst this tremendous economic shock. Travel, trade and supply chains are taking the largest hits worldwide rather quickly. Just last week the U.S. stock markets had one of their worst days ever as now a major sell off is fully underway.

Knowing the financial markets are sensitive to swings like this, do you think this latest swing is out of line given basic economic theory, or is the coronavirus on a trajectory to make 2020 a terrible year for the global economy?

Trump Administration Sees No Threat to Economy From Monopolies

This article's talks about the Trump administration denying the fact that monopolies are going to hurt the U.S. economy. The democrats have proposed that big companies need to be split up to keep the economy growing and to keep competition alive. Main companies they talked about were communication and tech companies and they said that they think these type of monopolies are hurting competition and consumers. In the annual economic report of the President, Trump and his administration dismissed the research on how some companies are dominating the industry and said that the info is flawed and that the rise of large companies may not be bad for consumers. They also mention that it is important that antitrust enforcement and competition policy doesn't punish firms for their success.

https://www.nytimes.com/2020/02/20/business/trump-economy-monopoly.htmlDo you think that the Trump administration is right or wrong?

Coronavirus Impact

As we progress farther into the cycle of the Coronavirus it's important to look at facts to truly estimate how much we have/will be affected by this epidemic. Stock markets are feeling the impact and investors have their tails tucked in-between their legs, but just how far will this virus take the world economy? We see that stack markets worldwide have suffered and we also see that major conferences have been halted in the fear for the safety of corporate employees.

The question that stands at the end of all of this turmoil is how far will this go? How much will not only the US be affected, but the world economy as a whole? While Asia has taken the blunt end of the impact is it only a matter of time before the US is to come to the same fate or are we going to be able to stick it out until a solution is found? What do yo think? How do you think is everyone going to be affected and how long do you think it's going to take us to recover?
https://www.nytimes.com/2020/02/28/business/stock-market-today-coronavirus.html

The Fed Can't Stop Coronavirus From Slamming the Economy, but it Could Ease Pain.

The market has dropped by 300 basis points since the first coronavirus death. The fed is considering doing multiple stages of rate cuts. The hope is that rate cuts will ease the mind of investors and help to stimulate economic growth. The Fed can only help so much though, they wouldn't be able to prevent a supply shock, which is still a possibility.

https://www.marketwatch.com/story/the-fed-cant-stop-coronavirus-from-slamming-the-economy-but-it-could-ease-the-pain-2020-02-28

U.S. Incomes, Spending Rose in January Ahead of Coronavirus

Personally, I haven't noticed many changes in popular areas or people avoiding being in public spaces. In fact, I would agree with the article that spaces are actually getting more crowded. 

For instance, I traveled to Indiana this weekend and it was so hard to find a parking spot at the mall there and traffic was extremely backed up (on a Saturday!). 

People receiving tax refunds could be part of the reason but I really just don't think that the Corona Virus is as complex as the media is making it. 

In both Ohio and Indiana I observed a lack of urgency or concern. Kids are still running around in crowded public places like schools of fish. 

What have you observed in regard to changes in population in public areas? Do you think that people will start avoiding public spaces once they spend all of their tax refunds? 

Global Economy Headed for Worst Year Since Financial Crisis

Economists predict that certain factors such as the coronavirus will lead the global economy to have its lowest level of growth since the Great Recession. GDP growth is currently predicted to be around 2.8%, which would be the first year to come in under 3% since the financial crisis in 2009. GDP growth in China alone is expected to drop .7% due to the impacts of the virus such as decrease in trade and tourism. Other Asian countries are also expected to see a decline because of the dramatic drop in tourism that is currently being seen. Some of the key factors that are predicted to decrease GDP and growth besides the coronavirus include the U.S.-China trade war, political uncertainty, and weakness in Japan and certain South American countries. The upcoming U.S. presidential election also casts uncertainty for the end of 2020, as their trade war with China could greatly change under democratic leadership. Despite the hit to global economic growth, economist do not see a recession occurring as a result of this.

Do you agree with the prediction that a recession is unlikely in the upcoming future or do you believe that it is still possible due to the current and future struggles of the global economy?

https://www.cnbc.com/2020/02/27/worlds-economic-growth-could-be-worst-since-financial-crisis-bank-of-america-says.html

Coronavirus Fears Are Driving Interest Rates Down, a Bad Omen for the Economy

The emergence of the coronavirus has had a severe detrimental effect on the global and the American economy, and this has correspondingly led to a drop in global interest rates. The drop in global interest rates specifically “reflects expectations that the Federal Reserve and other central banks will cut interest rates or take other actions to try to contain the economic damage” of the coronavirus. As the article notes, continually decreasing the rate of interest also leaves the global and the American economy “vulnerable if things were to really take a turn for the worse,” and it will also limit the ability of the Federal Reserve to pursue effective monetary policy. Overall, economists and investors are expecting two to three more interest rates cuts, and this leaves little room for further economic stimulus.

https://www.nytimes.com/2020/02/28/upshot/coronavirus-interest-rates-economy.html

The World's Most Famous Economist Sets Out the Case for Socialism

Thomas Piketty, author of Capital in the 21st Century, has a new book coming out; Capital and Ideology. This work is largely a sequel to his last entry, but with a different twist; his earlier novel was focused more on the logic of the economic mode of capitalism that Karl Marx's Das Kapital focused on.

The newer entry is a sociological analysis of how the capitalists maintain power over the lower and middle classes. It is essentially a social study of the wealthy and their influence on the economy, and by extension, the world as a whole.

Why is this relevant? For one, Piketty has one of the economically-soundest arguments for socialism in the 21st Century; he has been commonly referred to as the "21st Century Marx". Therefore, his books are typically highly commended and criticized by those on the opposing ends of the economic ideological spectrum. His book overall is highly critical of exorbitant personal wealth (who does that sound like), but he uses historical data to back his claims, which is accurate and yet dated all at once.

 In a world where redistributive populism looks to take from the uber-wealthy and give to the less fortunate, a study focusing on the critical aspects of the wealthy and their power could certainly spark a debate in any country currently in the midst of an election year. Bernie Sanders. anyone?

https://www.economist.com/books-and-arts/2020/02/29/the-worlds-most-famous-economist-sets-out-the-case-for-socialism