The Coming Greater Depression?

Popular Economics Weekly


Minnesota Fed Governor Neal Kashkari believes the COVID-19 pandemic doesn’t have to bring on another Great Depression. But it will still take some 18 months to recover, and only if Americans are able to cooperate in protecting themselves and each other.

There were 20.5 million jobs losses in the just released April unemployment report, and the unemployment rate rose from 3.5 percent to a rate of 14.7 percent in just one month. 

“We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future,” Kashkari said in a recent CBS Sunday interview.

“This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It’s hard for me to see a V-shaped recovery under that scenario.”

The letter that best describes how long the depression will last can be either a ‘V’, ‘U’, or ‘L’ shape.

Most economists say there will be at least two quarters of negative GDP growth, which means a very steep drop and sudden recovery—the ‘V’ shape. But some economists like Nouriel Roubini, the NY University economist, see a much more prolonged recovery, the ‘L’ shape, which means no recovery for several years.

Professor Roubini raises the possibility of “mass defaults and bankruptcies. Together with soaring levels of public debt, this all but ensures a more anemic recovery than the one that followed the Great Recession a decade ago.”

Why wouldn’t he believe this, as New York has suffered the most because of its dependence on crowded subways to move its millions of workers and proximity to Europe that probably brought COVID-19 to its shores?

That’s why New York Governor Andrew has been exorting New Yorkers to behave as if “It’s not about you or me, it’s about we,” to bring down their infection rate.

Job losses were heaviest at restaurants, retailers and hotels, but every major industry suffered, per the Labor Department. The health-care sector even lost 1.4 million jobs amid the worst health crisis in American history.

This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948), said the BLS. The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.

The real question is what Nobel Laureate Robert Shiller predicts will be the resultant anxiety pandemic.

“It is not good news when two pandemics are at work simultaneously. One can feed the other. Business closures, soaring unemployment, and loss of income fuel financial anxiety, which may, in turn, deter people, desperate for work, from taking adequate precautions against the spread of the disease.”

We want to also watch consumer sentiment, since there is no central message coordination from the federal government. Even the CDC, as well as the NIH and other government health agencies have been muzzled by the Trump administration in reporting consistent facts due to Trump’s fear that it hurts his reelection chances in November.

It is truly a sad spectacle to see what years of attempts to discredit scientific knowledge have done to one political party, now that it’s in the White House and faced with a virus that doesn’t differentiate between red and blue states, Democrats and Republicans.

It is an even greater tragedy to see the confusion this engenders among Americans needing to cope with this epic natural disaster that only a belief in scientific knowledge can mitigate.

Harlan Green © 2020

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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