Party politics like its 2008

Posted by: Paul Donovan

23 Mar 2020
  • The US Senate, drawing on the experience of its failure to act quickly in the 2008 crisis, has failed to act quickly in the 2020 crisis. The proposed economic stimulus package is large, but the longer the delay, the larger it will need to be. Disagreements focus on unemployment benefits, corporate share buybacks and (critically) guarantees of employment protection.
  • Unemployment will measure the extent of US policy failure. US Fed President Bullard (not a noted optimist) is suggesting 30% unemployment in 2Q. That would exceed US unemployment in the 1930s, though employment rates would be higher, because of social change. Initial jobless claims on Thursday are expected to be high but may still underreport the problem.
  • On Friday, the UK offered a substantial package to protect jobs. This will help workers participate in the economic bounce back as early as possible. Germany is expected to offer discretionary fiscal spending of 3.6% of GDP, with over 17% of GDP in loan guarantees and other measures.
  • Some good news – Korean exports were unchanged on the year (working day adjusted) for the first 20 days of March. That suggests the Asian supply shock was fading – just in time for the global demand shock to hit.

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