Pandemic Shock

By Isaac Cohen*

The pandemic spreading globally is becoming a profound setback to the world economy, worse than the last Great Recession of 2008-2009. In the United States, Treasury Secretary Steven Mnuchin told legislators that unemployment may climb to Great Depression levels of 20 percent. Commodity prices collapsed, with oil prices falling over two thirds, the largest weekly fall in almost thirty years. True, this was aggravated by the disagreement between Saudi Arabia and Russia about production cuts. Meanwhile in Wall Street, since mid-February, stocks have lost a third of their value, wiping out all the gains achieved during the Trump administration.

Some governments have adopted measures to mitigate the impact. Monetary policy reacted swiftly, with the European Central Bank adopting an $800 billion stimulus package. The Federal Reserve in the United States lowered interest rates to almost zero and reactivated some instruments it had used during the Great Recession, to inject liquidity into financial markets, amounting to almost $2 trillion in short term credit and security purchases. Additionally, a major contribution is expected soon from fiscal policy, with the approval of a stimulus package of almost $2 trillion under negotiation between legislators of both parties and the White House. The package includes direct payments to workers and families, support for sanitary infrastructure and for small and big corporations. In the end, the magnitude of the shock and the response depend on the duration of the shutdown of economic activity.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, TELEMUNDO and UNVISION and other media.

About Ramón Jiménez

Ramón Jiménez, Managing Editor de MetroLatinoUSA.Com (MLN). Graduado de la Escuela de Periodismo de la Universidad del Distrito de Columbia (UDC). Email: ramonjimenez169@gmail.com

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