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Could a severe pandemic cause a severe recession?

Unread postPosted: Thu 18 Mar 2021, 14:05:36
by cantonn11
I have an understanding that many recessions are caused by energy price spikes or energy shortages. In the Great Recession/GFC of 2008, the root cause of that crisis was the shortfall in energy supply (particularly oil) to demand which resulted in a huge price spike resulting in a significant increase in energy prices. As energy prices increased, consumers cut back on discretionary spending resulting in lower economic activity which eventually led to the Global Financial Crisis.

I also believe that a severe pandemic could also cause a severe recession or even an economic depression far worse than the 2008 crisis even in an absence of an energy crisis or expensive energy let say in a scenario where the world depends mostly on cheap unlimited from cold fusion. This scenario would happen if the world has no viable plan B to manage this crisis. In the worst case scenario in a severe pandemic, consumers cut back drastically on discretionary spending due to the fear of getting ill and supply chains breakdown. The following effects that would occur are listed below.

-Mass Unemployment at over 30 percent, even at over 50 percent
-Supply chains are disrupted due to pandemic which results in a drastic rise in prices of goods including food or goods being unavailable
-A global financial crisis which could be far worse than what happened in 2008/2009 resulting from debts unable to be serviced due to low consumer spending or unable to conduct business due to severe supply chain breakdown.
-An unprecedented biblical wave of evictions and foreclosures as the unemployed are unable to pay rent or mortgage.
-The severe ongoing economic effects and supply chain disruptions could make it impossible to respond effectively to the pandemic.
-Waves of business failures occur. Even large fortune 500 companies fail.
-Unbound monetary collapse- if currencies lose their value in their nation of origin, they can no longer be exchanged for foreign currency. International value chains collapse as well.
-Disintegration of regional political ties, new alliances, political upheavals, or even dozens of failed nations could result from this crisis.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Thu 18 Mar 2021, 23:47:46
by Outcast_Searcher
cantonn11 wrote:I have an understanding that many recessions are caused by energy price spikes or energy shortages. In the Great Recession/GFC of 2008, the root cause of that crisis was the shortfall in energy supply (particularly oil) to demand which resulted in a huge price spike resulting in a significant increase in energy prices.

No it wasn't. You're on the internet, you can look it up and check what all sorts of very credible economic experts / sources say on that. The 2008 great recession was CLEARLY primarily a real estate disaster causing a big capital dislocation and crisis of confidence in the banking and then the entire financial system. (Facts and expertise are both "things").

No doubt the high energy, especially oil, prices didn't do any GOOD. They were certainly a big inconvenience for many, but they were NOT shutting down the US or global economy at the peak in July of 2008, even though they were causing some people to park their gas guzzlers and drive econoboxes to work to save money on the daily commute. (There were people like that I discussed the issue with as neighbors in my apartment complex, for example). But that was only a secondary issue, and a far distant one compared to the primary one of real estate and financial dislocation from that.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Thu 18 Mar 2021, 23:56:35
by Outcast_Searcher
cantonn11 wrote:I also believe that a severe pandemic could also cause a severe recession or even an economic depression far worse than the 2008 crisis ...

Do you live on planet earth? We're just coming out of what, for at least a good quarter, WAS far worse than the 2008 mess, due to the shutdowns over most of the globe, even though it wasn't as hard on the stock market (which managed to believe in the recovery before it was clear how soon vaccines and effective treatments would be widely available). And that's with a moderate pandemic, re the danger of the disease. Imagine how bad it could get if a bug killed people ten or more times as often and put people in the hospital far more often. Then imagine something that was also far more contagious. Bad as it was, we got pretty lucky this time. (I'm presuming we end up managing the variants reasonably well, even if that means everyone who will take vaccines needs a booster or two a year for X years while Covid-19 greatly dies down globally.)

All you have to do is look at how severely GDP dropped and how bad the unemployment numbers got during the worst of it to see that.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Fri 19 Mar 2021, 18:37:32
by Newfie
Well, we may be testing that theory with Covid. There are some pretty steep financial steps being taken right now, how they play out in the long run is anyone’s guess.

While you have some specifics wrong the idea that a pandemic could drive a recession or depression is pretty accurate, whether this pandemic does or does not.

Aso I think you could expand that a bit. The pandemic could be against humanity directly OR it could attack one of our principal food sources. Just last year China lost about 50% of its pig production IIRC. Chickens, corn, wheat, rice, potatoes are all vulnerable to some new biological attack. If one or more were hit hard there could he strong ripples through the global economy.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 21 Mar 2021, 12:21:30
by Outcast_Searcher
Newfie wrote:Aso I think you could expand that a bit. The pandemic could be against humanity directly OR it could attack one of our principal food sources. Just last year China lost about 50% of its pig production IIRC. Chickens, corn, wheat, rice, potatoes are all vulnerable to some new biological attack. If one or more were hit hard there could he strong ripples through the global economy.

True, and to the extent we keep moving toward broad monocultures for certain foods to make things cheaper and "more efficient", that makes the risk that much worse.

Bananas and the Panama disease (and the race to try to save bananas with technology like gene editing) is a case in point. The reason the problem is so severe is that essentially ALL the normal grocery store bananas in the first world are the SAME plant.

There are plantains, of course, but that's a different species.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 21 Mar 2021, 14:06:56
by JuanP
Outcast_Searcher wrote:
Newfie wrote:Aso I think you could expand that a bit. The pandemic could be against humanity directly OR it could attack one of our principal food sources. Just last year China lost about 50% of its pig production IIRC. Chickens, corn, wheat, rice, potatoes are all vulnerable to some new biological attack. If one or more were hit hard there could he strong ripples through the global economy.

True, and to the extent we keep moving toward broad monocultures for certain foods to make things cheaper and "more efficient", that makes the risk that much worse.

Bananas and the Panama disease (and the race to try to save bananas with technology like gene editing) is a case in point. The reason the problem is so severe is that essentially ALL the normal grocery store bananas in the first world are the SAME plant.

There are plantains, of course, but that's a different species.


All true, but there are many different cultivars of banana plants. I have almost two dozen different varieties at my farms now, and several of them are resistant to Panama disease. And there are many cultivars I don't own.

This has happened before. There was a different cultivar of bananas that was grown commercially decades ago, was decimated by a pest, and was replaced with the specific Cavendish cultivar that we all buy today at supermarkets all over the world. And you are correct in pointing out that they are ALL the same PLANT, not just the same species, because they are reproduced through root or meristem division, by cutting suckers or tissue culture.

The particular cultivar of Cavendish bananas grown commercially today is likely to follow the same road, it will most likely get decimated by Panama disease, or something else, and be replaced by another cultivar, resistant to whatever attacked today's predominant Cavendish cultivar.

This file offers a good basic introduction to the subject of growing bananas, particularly in Florida, but not exclusively. I have known the article's writers for several years, and worked with them on research as a volunteer at the University of Florida Institute of Food and Agricultural Services Tropical Research and Education Center (UF IFAS TREC), associated with the USDA, where we work specifically on this problem, among many others, including dealing with invasive species. I have been mostly volunteering with the mango and avocado programs and some entomological research on invasive species for about five years, but I've helped a little with the banana research, too

Bananas:
https://edis.ifas.ufl.edu/mg040

TREC:
https://trec.ifas.ufl.edu

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Wed 24 Mar 2021, 14:58:20
by diemos
To deal with the pandemic the government ordered certain sections of the economy to shut down. The correct response to this would be to provide support for people in the affected sectors to buy food and pay rent and support for state government lost sales tax revenue and support for the states unemployment fund. Instead there was a general "stimulus", which is like slamming on the brakes and hitting the gas at the same time, giving money to people who don't need it and have nothing to spend it on. A truly bizarre response.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Wed 24 Mar 2021, 17:49:40
by Newfie
And yet just one of several bizarre responses.

The worldwide covid response has me baffled.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sat 27 Mar 2021, 09:46:30
by evilgenius
Outcast_Searcher wrote:
cantonn11 wrote:I have an understanding that many recessions are caused by energy price spikes or energy shortages. In the Great Recession/GFC of 2008, the root cause of that crisis was the shortfall in energy supply (particularly oil) to demand which resulted in a huge price spike resulting in a significant increase in energy prices.

No it wasn't. You're on the internet, you can look it up and check what all sorts of very credible economic experts / sources say on that. The 2008 great recession was CLEARLY primarily a real estate disaster causing a big capital dislocation and crisis of confidence in the banking and then the entire financial system. (Facts and expertise are both "things").

No doubt the high energy, especially oil, prices didn't do any GOOD. They were certainly a big inconvenience for many, but they were NOT shutting down the US or global economy at the peak in July of 2008, even though they were causing some people to park their gas guzzlers and drive econoboxes to work to save money on the daily commute. (There were people like that I discussed the issue with as neighbors in my apartment complex, for example). But that was only a secondary issue, and a far distant one compared to the primary one of real estate and financial dislocation from that.


I like the way your argument has developed. You can acknowledge what certain people went through when you make your argument now. I agree that, overall, the reason for 2008 was that too many people reneged on their debts. That caused an immediate collapse of the money supply.

An expanded money supply was necessary for various groups, such as independent contractors in construction, to function. They made a profit because of the weird way that the US understands the role of oil in its economy. The US does not have European style high taxes upon petroleum products.

For those in those sectors of the economy where low gas prices were like a government subsidy, high gas prices were a death knell. Because it is an economy that we are talking about, people had different reasons for going under. Their individual reasons weren't made invalid by the overall reason being more influential across more groups of people in their own situations.

I used to argue with you over this, before I understood I ought to acknowledge how right you are. I used to cling to seeing the thing that happened that way because I viewed it from that sort of situation myself. But my own thing, delivery driving, was merely a piece of the puzzle. My own group, those who took advantage of the ordinary situation with gas prices within the US economy, failing would not have brought the whole thing down.

The worst thing that it did was to restrict the number of contractors in the building trades who could have competed for work. If it had occurred alone it may have acted differently within the economy but, there was not an oversupply of construction workers driving wages down enough to allow builders to adjust for what was happening. The high gas prices made sure of that, at the wrong time. Those construction workers for whom simply driving the F-350 around would have been cost prohibitive were not included in the conversation. There were a lot of them, but not so many as to economically drive the situation.

No amount of worker over supply could have changed what was in store. At that point in time, I think construction work could have paid $5 an hour at beyond peak employment and it still wouldn't have mattered. It wasn't any deal with wages that would fix this. People were levered for multiple years worth of even good wages. Low cost make work wasn't going to fix that, not even at scale. You are so right, the shrinkage of the money supply was not something we could overcome so easily.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sat 27 Mar 2021, 15:41:37
by Sys1
2008 so called "crisis" is the first step of our civilisation's collapse.
147$ a barrel triggered :
- Expensive energy for gas guzzling american SUV which hurted severly average families living in suburbia, places where folks are far away from everything they need just to live.
- Real estate variable rates went north because central banks had to increase main rates in order to cool down oil inflation. Oil with which everything else is tied closely or not.
- Too many people figuring out they couldn't pay bank because of increasing rates decided to sell their houses... but as millions made the same decision in the same time, the market collapsed. Banks who played fire with subprimes assets collapsed. Countries all other the western world and beyond saved the day with massive public debt in which we drown like in the rabbit hole for more than 10 years.
- Lack of investments in companies, aka lack of jobs or loosing job just because of FED increasing rates.

Since 2008, rates are locked around 0 and our economy is becoming virtual, meaning you feel rich because you can watch hundred of movies on netflix or download incredible video games, while you are actually poor because you work for uber/amazon in your miserable apartment and can't buy a car or holidays a bit far away.
Everything will look fine as long as oil doesn't go up again. Because when it will occur, central banks will have to seriously increase rates for the first time since 2008 which will trigged a full collapse of world economy.
We are check mate, one or two moves to play, we just earn time. As an optimistic, I guess we can postpone end of the world as we know it somewhere around 2030, just in time to validate Olduvai Theory.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 28 Mar 2021, 02:28:14
by StarvingLion
Sys1 wrote:2008 so called "crisis" is the first step of our civilisation's collapse.
147$ a barrel triggered :
- Expensive energy for gas guzzling american SUV which hurted severly average families living in suburbia, places where folks are far away from everything they need just to live.
- Real estate variable rates went north because central banks had to increase main rates in order to cool down oil inflation. Oil with which everything else is tied closely or not.
- Too many people figuring out they couldn't pay bank because of increasing rates decided to sell their houses... but as millions made the same decision in the same time, the market collapsed. Banks who played fire with subprimes assets collapsed. Countries all other the western world and beyond saved the day with massive public debt in which we drown like in the rabbit hole for more than 10 years.
- Lack of investments in companies, aka lack of jobs or loosing job just because of FED increasing rates.

Since 2008, rates are locked around 0 and our economy is becoming virtual, meaning you feel rich because you can watch hundred of movies on netflix or download incredible video games, while you are actually poor because you work for uber/amazon in your miserable apartment and can't buy a car or holidays a bit far away.
Everything will look fine as long as oil doesn't go up again. Because when it will occur, central banks will have to seriously increase rates for the first time since 2008 which will trigged a full collapse of world economy.
We are check mate, one or two moves to play, we just earn time. As an optimistic, I guess we can postpone end of the world as we know it somewhere around 2030, just in time to validate Olduvai Theory.


Courtesy of Sys1, "I'm a "doomer" but it won't collapse for another 10 years", of course.

Gee Sys1, if oil price has to go up but it obviously can't then how can this SHITSHOW make it through this year nevermind 2030? Afterall, any uptick in inflation literally destroys the debt structure immediately. And do you really think this intentional culling with "vaccines" is indicative of 10 years still to go?

Unbelievable.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 28 Mar 2021, 09:59:09
by AdamB
StarvingLion wrote:Courtesy of Sys1, "I'm a "doomer" but it won't collapse for another 10 years", of course.



As compared to "I stake my entire reputation on the world ending".....last year? And then being stupid enough to pretend to forget they said it? You aren't even a doomer PuutyTat, just some Canuck playing the Ground Hog day game.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 28 Mar 2021, 14:40:21
by Outcast_Searcher
diemos wrote:To deal with the pandemic the government ordered certain sections of the economy to shut down. The correct response to this would be to provide support for people in the affected sectors to buy food and pay rent and support for state government lost sales tax revenue and support for the states unemployment fund. Instead there was a general "stimulus", which is like slamming on the brakes and hitting the gas at the same time, giving money to people who don't need it and have nothing to spend it on. A truly bizarre response.

I absolutely agree that at least for the US, there was a lot of giving money to people who don't need it. If the major issue was unemployment (through no fault of the vast majority of the suddenly unemployed in this case), then helping those folks out until such jobs come back would be the obvious thing to do. Especially for low income folks who likely had little chance to build meaningful savings to hedge against unexpected events. Giving money to couples making up to $150K, for example, who have Social security and/or Medicare and/or their pensions and/or their investments is just BIZARRE in a country already endlessly piling up LOTS of debt.

The other thing I found bizarre was how they handled the "folks can't pay their rent" issue. Without helping out the landlords (who are NOT all rich corporations) to at least some extent, just saying nonpaying tenants can't be evicted if they fill out a form is DISASTROUS policy.

The lack of respect for private property in this country just gets worse and worse, and then they wonder about why people don't want to work as hard to be successful.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 28 Mar 2021, 14:43:08
by Outcast_Searcher
AdamB wrote:
StarvingLion wrote:Courtesy of Sys1, "I'm a "doomer" but it won't collapse for another 10 years", of course.



As compared to "I stake my entire reputation on the world ending".....last year? And then being stupid enough to pretend to forget they said it? You aren't even a doomer PuutyTat, just some Canuck playing the Ground Hog day game.

And yet, we're supposed to respect the pronouncements of folks of his ilk, regardless of how often and how blatantly he plays such games. Shorty and Armageddon are two more flagrant examples.

They can stay legends in their own ignorant minds, but they sure as hell don't deserve the respect of folks who value truth and data and trends and credible analysis vs. a constant stream of conspiracy drivel and misinformation, and lies about the "success" of predictions of such nonsense.

Re: Could a severe pandemic cause a severe recession?

Unread postPosted: Sun 28 Mar 2021, 16:06:48
by diemos
Outcast_Searcher wrote:The other thing I found bizarre was how they handled the "folks can't pay their rent" issue. Without helping out the landlords (who are NOT all rich corporations) to at least some extent, just saying nonpaying tenants can't be evicted if they fill out a form is DISASTROUS policy.


The famous "unfunded mandate" ... terrible policy. A $2T stimulus divided among 30m unemployed is enough to just give them $67k each which should keep them afloat for a year while sitting at home twiddling their thumbs. If we had a working press corp there should be exposes all over the place about where all of those stimulus packages actually went.