Coronavirus shock vs. global financial crisis — the worse economic disaster?

The coronavirus outbreak, which has put the global economy under a lockdown, is being compared to the 2008-09 downturn. But in some industries, the virus may have already caused the biggest meltdown in history.


The economic upheaval caused by the COVID-19 outbreak has revived memories of the 2008-09 global financial crisis (GFC): recession chatter, bloodbath on global stock markets, governments and central banks loosening the purse strings.

The pandemic, which has claimed thousands of lives across continents, has virtually brought the world economy to a standstill with millions of people placed under lockdown and global supply chains thrown into disarray due to the virus wreaking maximum havoc in China — the world's factory.

While many are already comparing the current crisis to the 2008-09 recession, most experts do not expect it to be as bleak and are forecasting the global economy to swiftly recover in the second half of the year, provided the outbreak fizzles out by then. Yet, the novel coronavirus has dealt historic blows to the airline industry and oil markets. DW asked experts to compare the economic damage caused by the two crises.

Aviation industry

The aviation industry, suffering from cut-throat competition, price wars and poor financial health, has been clobbered hardest by the pandemic, which has virtually ground air travel to a halt and threatens to bankrupt most airlines. British Airways CEO Alex Cruz described the situation as a "crisis of global proportions like no other we have known."

"Some of us have worked in aviation through the global financial crisis, the SARS outbreak and 9/11. What is happening right now as a result of COVID-19 is more serious than any of these events," he said in a memo to staff.

Several prominent airlines are seeking state relief to help them weather the current turbulence.

"When we see well-capitalized airlines like Lufthansa making statements about the need for state support, then we know things must be bad," Rob Morris, global head of consultancy at Ascend by Cirium, told DW. "Clearly, for every airline globally the objective for 2020 will be to survive through this crisis. I fear there are many who will not be able to achieve that, and we will almost certainly start to see some significant airline failures shortly."

Oil industry

The oil markets are in no better shape. Global oil consumption is expected to witness its biggest fall in history, hurt by a temporary ban on travel, factory shutdowns and other measures to contain the virus. The fall in oil demand could easily outstrip the loss of almost 1 million barrels a day during the 2008-09 recession, Bloomberg reported. Compounding problems is an ongoing price war launched by Saudi Arabia which has pledged to flood an already oversupplied market with cheap crude. Oil prices have fallen by more than 50% this year.

"In 2008-09 we had a demand shock, and inventories built. This [current crisis] looks likely to have a bigger impact, partly because there is a lot of uncertainty still around and partly because it is both a demand and supply story," Philip Jones-Lux, energy market analyst at JBC Energy, told DW. "The industry has been supposedly readying itself for a 'lower for longer' scenario, but the current market and outlook are beyond anything that could be reasonably prepared for and we are likely to see some real pain inflicted if prices remain in the $30-a-barrel range."

Financial sector

The housing market, which was propped up by cheap loans offered to households by banks, was the epicenter of the 2008-09 crisis. The bursting of housing bubbles in the US and in other countries such as the UK, Spain and Ireland brought major global banks, which did not have enough capital to withstand the shock, to their knees. The banks paid a price among other things for bundling subprime mortgages into complex, opaque derivatives to maximize profits. This time, the banks are in a much better position thanks to increased regulation.

"The 2008-09 crisis was far more severe because the global financial system was far more fragile. Banks were not as well-capitalized as they are today particularly in the United States," Sara Johnson, IHS Markit executive director, told DW. "While today there are concerns with rising nonfinancial corporate debt, I'd say the magnitude is not as severe as in 2008-09."

But banks, especially the European ones which have been struggling to boost profits at a time in an ultra-low interest rate environment, are nevertheless feeling the heat. They are bracing for further interest rate cuts and loan defaults. Experts are also flagging a possible sovereign debt default by Italy, which is in a state of lockdown to contain the spread of the virus. European banks are holding more than €446 billions ($497 billions) of sovereign and private Italian debt, according to Bloomberg.

Global economy

The collapse of US lender Lehman Brothers in 2008 fueled the most painful global economic downturn since the Wall Street Crash of 1929. The sustained, severe recession saw global output contract by 1.8% in 2009 compared with an expansion of 4.3% in 2007. Millions of jobs were lost, hurting global consumer spending. While the current crisis could cost the global economy up to $2 trillion this year, according to UN estimates, it's still not expected to push the world into a contraction.

"Our view is that this is a much more temporary shock that is going to have less significant and longstanding negative impacts on the global economy than the global financial crisis," Ben May, director of global macro research at Oxford Economics, told DW. "It's not that as if you don't go out today because you're worried about catching the virus, the money that you didn't spend today will be saved forever, it's more likely to be spent in the future unless something dramatic changes...When you look at past episodes of virus outbreaks or natural disasters, you know typically discretionary spending returns at a later point."

International trade

The coronavirus shock could not have come at a worse time for global trade which has been reeling from trade tensions between the US and China, the world's biggest economies. But the current blow is still not a severe as the one dealt by the crisis 10 years back.

"The global financial crisis was kind of endogenous in the economic system meaning that there was a strong capital stock distortion in some countries and there was a problem of over-indebtedness. These two roots of a crisis are much harder to cure than the situation that we are facing today where we have an interruption of production structures, which in principle are fundamentally sound," Stefan Kooths, head of forecasting at the Kiel Institute for the World Economy, told DW.

"So, even if the coronavirus crisis leads to a deep meltdown in terms of production, the chances of getting out of this recession rather sooner than later are much better than in the global financial crisis."

OOPS

Italian ex-premier says French missile downed an airliner in 1980 by accident in bid to kill Gadhafi

FRANCES D'EMILIO
Sat, September 2, 2023 



- An Italian Carabinieri police officer patrols a hangar, in Pratica di Mare, near Rome, Monday Dec. 15, 2003, the reconstructed wreckage of the Itavia DC-9 passenger jetliner which crashed near the tiny Mediterranean island of Ustica in June 27, 1980. A former Italian premier is contending that a French air force missile brought down a passenger jet over the Mediterranean Sea in 1980 and is appealing to France's president to respond. The crash of the Italian domestic airliner killed all 81 persons aboard. What caused the crash is an enduring mystery. 

(AP Photo/Emiliano Grillotti, File)

ROME (AP) — A former Italian premier, in an interview published on Saturday, contended that a French air force missile accidentally brought down a passenger jet over the Mediterranean Sea in 1980 in a failed bid to assassinate Libya's then leader Moammar Gadhafi.

Former two-time Premier Giuliano Amato appealed to French President Emmanuel Macron to either refute or confirm his assertion about the cause of the crash on June 27, 1980, which killed all 81 persons aboard the Italian domestic flight.

In an interview with Rome daily La Repubblica, Amato said he is convinced that France hit the plane while targeting a Libyan military jet.

While acknowledging he has no hard proof, Amato also contended that Italy tipped off Gadhafi, and so the Libyan, who was heading back to Tripoli from a meeting in Yugoslavia, didn't board the Libyan military jet.

What caused the crash is one of modern Italy’s most enduring mysteries. Some say a bomb exploded aboard the Itavia jetliner on a flight from Bologna to Sicily, while others say examination of the wreckage, pulled up from the seafloor years later, indicate it was hit by a missile.

Radar traces indicated a flurry of aircraft activity in that part of the skies when the plane went down.

“The most credible version is that of responsibility of the French air force, in complicity with the Americans and who participated in a war in the skies that evening of June 27," Amato was quoted as saying.

NATO planned to “simulate an exercise, with many planes in action, during which a missile was supposed to be fired” with Gadhafi as the target, Amato said.

In the aftermath of the crash, French, U.S. and NATO officials denied any military activity in the skies that night.

According to Amato, a missile was allegedly fired by a French fighter jet that had taken off from an aircraft carrier, possibly off Corsica's southern coast.

Macron, 45, was a toddler when the Italian passenger jet went down in the sea near the tiny Italian island of Ustica.

"I ask myself why a young president like Macron, while age-wise extraneous to the Ustica tragedy, wouldn't want to remove the shame that weighs on France," Amato told La Repubblica. ”And he can remove it in only two ways — either demonstrating that the this thesis is unfounded or, once the (thesis') foundation is verified, by offering the deepest apologies to Italy and to the families of the victims in the name of his government."

Amato, who is 85, said that in 2000, when he was premier, he wrote to the then presidents of the United States and France, Bill Clinton and Jacques Chirac, respectively, to press them to shed light on what happened. But ultimately, those entreaties yielded “total silence,” Amato said.

When queried by The Associated Press, Macron’s office said Saturday it wouldn't immediately comment on Amato’s remarks.

Italian Premier Giorgia Meloni called on Amato to say if he has concrete elements to back his assertions so that her government could pursue any further investigation.

Amato's words "merit attention,'' Meloni said in a statement issued by her office, while noting that the former premier had specified that his assertions are “fruit of personal deductions.”

Assertions of French involvement aren't new. In a 2008 television interview, former Italian President Francesco Cossiga, who was serving as premier when the crash occurred, blamed it on a French missile whose target had been a Libyan military jet and said he learned that Italy's secret services military branch had tipped off Gadhafi.

Gadhafi was killed in Libya's civil war in 2011.

A few weeks after the crash, the wreckage of a Libyan MiG, with the badly decomposed body of its pilot, was discovered in the remote mountains of southern Calabria.

___

Sylvie Corbet contributed to this report from Paris.

Deja Vu

Stephen Harper, Jim Flaherty and Mark Carney assured us that the economic fundamentals in Canada are sound, despite the current meltdown of international finance capitalism. Wearing Bush/McCain like rose coloured blinders they refuse to admit that Canada faces a pending recession and the government will likely incur a deficit. Something Harper and Flaherty denied during the election campaign. Instead they say steady as she goes.

Of all the leaders, Harper was most determined to stay the course.
"What leaders have to do is have a plan and not panic," he said. Revising the plan
based on new data was considered to be a sign of panic, not prudence.Harper, in
the dying days of the campaign, proclaimed that he would not run a deficit,
raise taxes or cut spending. That may be a difficult circle to square, and those
words may come back to haunt him.

Wait I have heard this before...why in 1929 when then PM William Lyon Mackenzie King said he would stay the course.....

October 24, 1929 went down in history as "Black Thursday". On that day, stock prices plummeted on the New York Stock Exchange, creating a domino effect on world stock markets. It signaled the beginning of the Great Depression.

Canada was one of the hardest hit by the economic crisis. The country relied heavily on its exports. Pulp and paper, wood and wheat represented two-thirds of Canadian exports and accounted for much of the country's prosperity.

Governments in Canada were slow to respond to the desperate economic and social conditions. Until the Great Depression, government intervened as little as possible, letting the free market take care of the economy. Social welfare was left to churches and charities.

When the Depression began William Lyon Mackenzie King was Prime Minister in 1930. He believed that the crisis would pass, refused to provide federal aid to the provinces, and only introduced moderate relief efforts.


Although unemployment was a national problem, federal administrations led by the Conservative R.B. BENNETT (1930-35) and the Liberal W.L. Mackenzie KING (from 1935 onwards) refused, for the most part, to provide work for the jobless and insisted that their care was primarily a local and provincial responsibility. The result was fiscal collapse for the 4 western provinces and hundreds of municipalities and haphazard, degrading standards of care for the jobless.


The Depression altered established perceptions of the economy and the role of the state. The faith shared by both the Bennett and King governments and most economists that a balanced budget, a sound dollar and changes in the tariff would allow the private marketplace to bring about recovery was misplaced.



Library and Archives Canada / C-000623
Bennett Buggy in the Great Depression in Canada


October 1929 – Stock Market Crash: Markets Suffer the Worst Losses in Canadian History
In the late 1920s, Canada’s economy and stock exchanges were booming. From 1921 to the autumn of 1929, the level of stock prices increased more than three times. But these heady days came to a swift end with the stock market crash on Black Tuesday, October 29, 1929, in New York, Toronto, Montréal and other financial centres in the world. Shareholders panicked and sold their stock for whatever they could get.
Overnight, individuals and companies were ruined. It was estimated that Canadian stocks lost a total value of $5 billion on paper in 1929. By mid-1930, the value of stocks for the 50 leading Canadian companies had fallen by over 50% from their peaks in 1929.
The stock market collapse affected all investors—individuals who had been persuaded to buy shares as well as speculators looking to make a fast dollar. Despite the market crash, 1929 was a good year for banks, mines, manufacturing and construction in Canada. All reported record profits at year-end.
Although the crash was sudden and deep, there were signs that it was coming. Earlier in 1929, stock prices had been volatile. Economic slowdowns in May and June hinted that the booming economy was heading for a recession. Export earnings were declining and the price of wheat plummeted.
Economists and historians are still debating what caused the crash. At the time of the crash, Canada had no monetary policy or central bank, so there was little government intervention in the market. (See 1934—Bank of Canada.) Canadian firms had healthy profits and did not expect the boom to end. Corporate profit expectations were inflated. Canadian corporations took advantage of the bull market to issue new stock, which overheated the supply. Banks gave out easy and cheap credit, and let people buy stocks on margin: buyers paid only a fraction of the share price and borrowed the rest. Speculation was rampant: bidding drove up the value of stocks as much as 40 times the companies’ annual earnings. Investors seemed to pay less attention to corporate earnings than to how much their shares would appreciate in value.
The economy could not sustain its rapid growth and the bubble burst. Investors lost confidence in the market. In the United States, the government was blamed for not controlling the speculative frenzy. Because Canada’s economy was so closely tied to that of the United States, the New York crash brought down Canadian markets, too.
It is widely felt that the stock market collapse started a chain of events that plunged Canada and the Western world into the decade-long Great Depression, which ended only with the outbreak of the Second World War.

1929 - 1939 —The Great Depression.
The Roaring Twenties saw boom times in Canada. Unemployment was low; earnings for individuals and companies were high. But prosperity came to a halt with the stock market collapse in New York, Toronto, Montréal and around the world in October 1929. The crash set off a chain of events that plunged Canada and the world into a decade-long depression. It was the beginning of the Dirty Thirties.
The Great Depression caused Canadian workers and companies great hardship. Prices deflated rapidly and deeply. Business activity fell sharply. There was massive unemployment—27% at the height of the Depression in 1933. Many businesses were wiped out: in Canada, corporate profits of $396 million in 1929 became corporate losses of $98 million in 1933. Between 1929 and that year, the gross national product dropped 43%. Families saw most or all of their assets disappear. Governments around the world, including Canada’s, put up high tariffs to protect their domestic manufacturers and businesses, but that only created weaker demand and made the Depression worse. Canadian exports shrank by 50% from 1929 to 1933.

THE CAUSE OF THE DEPRESSION
Many Canadians of the thirties felt that the depression wasn't brought about by the Wall Street Stock Market Crash, but by the enormous 1928 wheat crop crash. Due to this, many people were out of work and money and food began to run low. It was said by the Federal Department of Labor that a family needed between $1200 and $1500 a year to maintain the "minimum standard of decency." At that time, 60% of men and 82% of women made less than $1000 a year. The gross national product fell from $6.1 billion in 1929 to $3.5 billion in 1933 and the value of industrial production halved.
Unfortunately for the well being of Canada's economy prices continued to plummet and they even fell faster then wages until 1933, at that time, there was another wage cut, this time of 15%. For all the unemployed there was a relief program for families and all unemployed single men were sent packing by relief officers by boxcar to British Columbia. There were also work camps established for single men by Bennett's Government.
The Great Depression, also known as The Dirty Thirties, wasn't like an ordinary depression where savings vanished and city families went to the farm until it blew over. This depression effected everyone in some way and there was basically no way to escape it. J.S. Woodsworth told Parliament "If they went out today, they would meet another army of unemployed coming back from the country to the city." As the depression carried on 1 in 5 Canadians became dependent on government relief. 30% of the Labour Force was unemployed, where as the unemployment rate had previously never dropped below 12%.

It was estimated back in the thirties that 33% of Canada's Gross National Income came from exports; so the country was also greatly affected by the collapse of world trade. The four western prairie provinces were almost completely dependent on the export of wheat. The little money that they brought in for their wheat did not cover production costs, let alone farm taxes, depreciation and interest on the debts that farmers were building up. The net farm income fell from $417 million in 1929 to $109 million in 1933.


Canada suffered a major depression from 1929 to 1939. In terms of output it was
similar to the Great Depression in the United States. However, total factor productivity
(TFP) in Canada did not recover relative to trend, while in the United States TFP had
recovered by 1937. We find that the neoclassical growth model, with TFP treated as
exogenous, can account for over half of the decline in output relative to trend in Canada.
In contrast, we find that conventional explanations for the Great Depression - monetary
shocks, terms of trade shocks and labor market and competition policies – do not work
for Canada.

Our conclusion is that the reason that Canadian output per adult was still 30 percent below
trend in 1938 was that productivity failed to return to trend.

Relative to trend, consumption fell more in Canada, and remained below that of
the United States throughout the 1930s. Investment in Canada fell to 15 percent of its
trend value by 1933, and recovered very slowly in both countries (remaining roughly 50
percent below trend in 1939). Government purchases in the two countries followed a
similar pattern during the downturn, before diverging in the late 1930s when U.S.
government spending remained above trend, while in Canada it fluctuated about trend.

U.S. government output increased more relative to trend
than Canadian government output. A large part of the difference in government
expenditure can be attributed to different government policies towards providing
unemployment relief. In the United States, the government relied much more heavily
upon make-work projects (government relief projects) than in Canada. The fraction of the
workforce employed by the government doubled in the United States, while increasing by
less than 50 percent in Canada. The increase in U.S. government employment was mainly
due to public works, as nearly 7 percent of U.S. employment in the late 1930s was in
relief projects. Relief workers were never more than 1.5 percent of the total number of
employed people in Canada.

Canada was the first country to leave the gold standard, suspending gold
shipments in January 1929 (Bordo and Redish (1990)). Despite the suspension of
convertibility, the Canadian government took steps to prevent depreciation of the dollar,
motivated in part by a wish to maintain access to American capital markets to refinance
Dominion debt (Shearer and Clark (1984)). As a result, the government maintained the
advance rate at its 1928 level throughout 1930, despite the fall in world rates. This policy
was ultimately abandoned in 1931. Despite this, the Canadian dollar did depreciate
relative to the U.S. dollar by approximately 15 percent between 1929 and 1931, before
recovering to its 1929 level in 1935.

The “debt-deflation” view of the Great Depression asserts that deflation and high
private debt levels contributed to the Great Depression by reducing borrower wealth and
constraining lending. Haubrich (1990) argues that the debt crisis was much less severe in
Canada than in the United States. He argues that there is little evidence to suggest that the
debt crisis caused the Great Depression in Canada.

A common view is that banking crisis played a significant role in transforming the
1929 downturn into the Great Depression. For example, Bernanke (1983) states that “the
financial crisis of 1930-33 affected the macroeconomy by reducing the quantity of
financial services, primarily credit intermediation” (p. 262). As has been pointed out by
numerous authors, however, Canada did not experience any bank failures.

Can the usual explanations of the Great Depression account for the Great
Depression in Canada? Our answer to this question is no. As we show, money shocks,
policy shocks and terms of trade shocks cannot account for the 10-year depression.
Explanations based on these shocks fail because their effects are quantitatively too small
to explain the Great Depression.

Our findings in this paper tell us where to go next. Future research into the Great
Depression in Canada should focus on models in which changes in the level of trade
affect the level of productivity. Such models are consistent with the fact that Canada’s
TFP and trade both declined from 1929 to 33. Beginning in 1934, trade began to slowly
recover, and so did TFP. This also matches the fact that the only large shock that hit
Canada but not the United States was trade, while the main difference in macro
performance is the behavior of productivity.

Journal of Economic Literature Classification Numbers: E30, N12, N42.
Key Words: Great Depression, Canada, productivity, terms of trade, deflation

Community Voices
GWINNETT COUNTY: Depression days brought to mind
By Rick Badie
The Atlanta Journal-Constitution
Saturday, October 25, 2008
Elwood Hart lived in Canada during the Great Depression. He considers himself lucky. A Salvation Army was next to the family’s home in Hamilton, Ontario.
“Maybe it was a bowl of soup or a bologna sandwich, but I got something to eat,” said Hart, now a Lawrenceville resident. “If it weren’t for that, I don’t think we could have ever made it. We weren’t living in the United States, but the situation was the same all over.”
Comparisons and contrasts are being drawn between the current economic crisis and the Great Depression. Conventional wisdom says this is the worst financial crisis since the Great Depression. Generally, experts say the odds of a full-blown depression are nonexistent. Let’s hope they are right.
Not many of us were around between 1929 and 1939, so we can’t compare the impact of that period’s economic crisis to today’s turmoil. Hart is now in his mid-80s, so his take on what he saw then and what he sees now carries weight.
We met years ago at the Gwinnett County Veterans War Museum, where his military career is on display. He served with the Canadian Army in Normandy during World War II. With the U.S. Army, he saw two tours of duty in Korea and Vietnam. He received an honorable discharge in 1967.
As for the Great Depression, “I remember it well,” Hart said. “People don’t realize what it was like back then.”
He remembers people lining up at food banks to get a hunk of cheese and powdered milk. He remembers stuffing newspapers in his shoes because they were way too big. And he remembers a white pet rabbit that just disappeared one day.
“I got up one morning and asked my dad where my rabbit was,” Hart told me. “He said, ‘It’s down your stomach. You had it for dinner.’ You ate anything you could get back then. There was no waste of clothes or food. Today, when I throw out trash, wild animals won’t find any food. I don’t throw it away.”
But how does that compare to today’s economic woes, particularly among everyday people barely making it?
Every Monday, Tuesday and Wednesday morning, Hart drives to a local Publix to load his car with day-old breads, cakes and pastries. When he pulls up to the Salvation Army, where the goods are doled out, people are waiting.
“It’s gotten so bad right now that there are twice as many every day as there were a couple of months ago,” he said. “In fact, it’s so bad that, a lot of time, me or some of the women in the church have to stand there. We have a sign that says everyone is to get two loaves of bread and a pastry. If you don’t watch them, they will fill up on all they can get. That’s why I say things are getting bad, similar to the 1930s, I tell you.”
As a brass collector, Hart routinely visits Goodwill stores in search of treasures. He said he’s seen a noticeable uptick in the number of people buying clothes. And at his church, clothes donations have fallen off considerably.
“It’s not that bad yet now,” Hart said.
“But it’s getting there.”

SEE:

No Austrians In Foxholes
CRASH
Black Gold
The Return Of Hawley—Smoot
Canadian Banks and The Great Depression
Bank Run
U.S. Economy Entering Twilight Zone


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An asteroid the size of a football stadium will blaze past Earth on Friday. Here's how to watch the 'City Killer' pass by live.

Ellyn Lapointe
Thu, February 1, 2024 




A giant "city killer" asteroid will safely shoot past Earth this Friday traveling at 41,000 mph.


Its closest approach to Earth will be 1.77 million miles, over seven times farther than the moon.


You can't see it with the naked eye but you can watch the event live on YouTube.

NASA's Jet Propulsion Laboratory has spotted a giant, "city killer" asteroid in space that's currently flying toward Earth. And this Friday, February 2, it will reach its closest approach to our planet, about 1.77 million miles away.

For reference, the moon is about 239,000 miles from Earth, so this asteroid will be 7.4 times farther than the moon. The speedy space rock is expected to be zipping along at about 41,000 mph and measures roughly 890 feet across or roughly the size of an entire US football stadium, according to NASA.

Experts sometimes call asteroids this size "city killers" because they are capable of destroying an entire city if they collide with an inhabited part of Earth.

Still, this asteroid will be too small and far away to see without a telescope on Friday. In fact, it will be about 10,000 times fainter than the faintest stars visible to the naked eye, Gianluca Masi, an astrophysicist and the scientific director of The Virtual Telescope Project, told Business Insider over e-mail.

But if you want to catch a glimpse of the asteroid as it whizzes by, you're in luck!

Masi and his colleagues at VTP will be recording the event live starting at 1 p.m. ET on Friday. You can watch their livestream on YouTube or in the video below:



The livestream will track Asteroid 2008 OS7 as it flies by Earth. Viewers will be able to distinguish it as a tiny dot moving past other, fixed tiny dots, aka stars, in the background. The livestream will last about 45 minutes, Masi said.

VTP has recorded other flybys like this and it's "something always very fascinating to see," Masi told BI.

About asteroid 2008 OS7

Asteroid 2008 OS7 orbits the sun every 962 days. After passing by Earth, it will continue along its oval-shaped path through our solar system.

Its oblong-shaped orbit means that each time the asteroid approaches Earth, its distance from our planet varies significantly.

For example, according to spacereference.com, upon its next closest approach in July 2037, it will be about 9.7 million miles away from Earth — nearly 5.5 times farther than during Friday's encounter.
Potentially hazardous asteroids

Asteroid 2008 OS7 is what NASA calls a "potentially hazardous" asteroid because of its size and how close it flies past Earth.

An asteroid is considered "potentially hazardous" if it is at least 460 feet in diameter and orbits Earth within a distance of about 4.65 million miles.

Scientists have identified more than 34,000 near-Earth objects. As of August 2023, just over 2,300 have been designated potentially hazardous, Space.com reported.

But NASA suspects there are many more out there that have yet to be discovered. If a giant asteroid was on course to hit Earth, we'd need 5-10 years warning to destroy or deflect it.

NASA JPL is currently working on the Near-Earth Object Surveyor mission, set to launch in September 2027 and send an infrared space telescope into Earth's orbit to expand NASA's search for near-Earth objects that could potentially threaten our planet.


'City killer' asteroid will make its closest approach to Earth for centuries this Friday (Feb. 2)

Harry Baker
Thu, February 1, 2024 

An asteroid floating in space with Earth and the sun in the background.

A "potentially hazardous" football stadium-size asteroid will zip safely past Earth on Friday (Feb. 2), and, in doing so, will reach its closest point to our planet for more than 100 years. It will also be at least several centuries before the space rock ever gets this close to us again.

The massive asteroid, named 2008 OS7, is around 890 feet (271 meters) across and will pass by Earth at a distance of around 1.77 million miles (2.85 million kilometers), according to NASA's Jet Propulsion Laboratory (JPL). For context, that is more than seven times further away than the moon orbits Earth.

You can watch the asteroid flyby for yourself thanks to a live stream from The Virtual Telescope Project, which will begin at 1:00 p.m. ET on Feb. 2.

As it passes by Earth, the asteroid will be traveling at a speed of around 41,000 mph (66,000 km/h), according to JPL.

To compare this space rock's girth to that of other asteroids, it is around half the size of asteroid Bennu, which NASA visited and took samples of, and at least 70 times smaller than the Vredefort meteor — the largest known space rock to ever hit Earth.

Related: 'Planet killer' asteroids are hiding in the sun's glare. Can we stop them in time?

A balck and white image of an asteroid streaking through the stars

Due to its size and proximity to Earth, the asteroid is classified as potentially hazardous despite the fact it will never come close enough to impact our planet, JPL predictions show. If the space rock did ever crash to Earth, it is big enough to wipe out a large city, such as New York.

However, the object isn't hefty enough to be considered a "planet killer" asteroid, such as the Vredefort meteor or the space rock that wiped out the dinosaurs 66 million years ago.

NASA has identified around 25,000 potentially hazardous asteroids, although a significant percentage of these are not as large as the impending space rock. One of these deadly asteroids is expected to hit Earth every 20,000 years, Live Science previously reported.

An orbital diagram showing the asteroids trajectory through the solar system.

2008 OS7 has a highly elliptical orbit, meaning that it does not orbit evenly around the sun. Because of this, the distance between it and Earth varies wildly whenever the space rock makes a close approach to our planet. For example, when the asteroid approached us shortly after its discovery in 2008, it was around 55.9 million miles (90 million km) away from us, which is more than 30 times further away than it will be this week, according to JPL.

related stories

—The 8 most Earth-shattering asteroid discoveries of 2023

—How long can an asteroid 'survive'?

—NASA's most wanted: The 5 most dangerous asteroids in the solar system

Scientists have only directly observed the asteroid fly by Earth twice before. But based on the space rock's orbital data, JPL has simulated every close approach the asteroid has made since 1900 and predicted every close approach it will make until 2198. At no other point in this nearly 300-year dataset is the asteroid expected to be closer to our planet than on Feb. 2 this year.

Several other asteroids have made close approaches to or directly hit Earth in the last few weeks.

On Jan. 27, an airplane-size asteroid passed by Earth at a distance of just 220,000 miles (354,000 km), which is slightly closer than the moon is to our planet. And on Jan. 21, a child-size asteroid was discovered by astronomers around 3 hours before it exploded in the atmosphere above Germany.

Mapping the COVID-19 Recession
Until there is a better sense of when and how the COVID-19 public-health crisis will be resolved, economists cannot even begin to predict the end of the recession that is now underway. Still, there is every reason to anticipate that this downturn will be far deeper and longer than that of 2008.

Apr 7, 2020 KENNETH ROGOFF

CAMBRIDGE – With each passing day, the 2008 global financial crisis increasingly looks like a mere dry run for today’s economic catastrophe. The short-term collapse in global output now underway already seems likely to rival or exceed that of any recession in the last 150 years.


Even with all-out efforts by central banks and fiscal authorities to soften the blow, asset markets in advanced economies have cratered, and capital has been pouring out of emerging markets at a breathtaking pace. A deep economic slump and financial crisis are unavoidable. The key questions now are how bad the recession will be and how long it will last.

Until we know how quickly and thoroughly the public-health challenge will be met, it is virtually impossible for economists to predict the endgame of this crisis. At least as great as the scientific uncertainty about the coronavirus is the socioeconomic uncertainty about how people and policymakers will behave in the coming weeks and months.

After all, the world is experiencing something akin to an alien invasion. We know that human determination and creativity will prevail. But at what cost? As of this writing, markets seem to be cautiously hopeful that a recovery will be fast, perhaps starting in the fourth quarter of this year. Many commentators point to China’s experience as an encouraging harbinger of what awaits the rest of the world.

But is that perspective really justified? Employment in China has rebounded somewhat, but it is far from clear when it will return to anything close to pre-COVID-19 levels. And even if Chinese manufacturing does rebound fully, who is going to buy those goods when the rest of the global economy is sinking? As for the United States, returning to 70% or 80% of capacity seems like a distant dream.

Now that the US has failed miserably to contain the outbreak despite having the world’s most advanced health system, Americans will find it exceedingly difficult to return to economic normalcy until a vaccine becomes widely available, which could be a year or more away. There is even uncertainty about how the US will pull off its November 2020 presidential election.



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For now, markets seem to be comforted by massive US stimulus programs, which have been absolutely necessary to protect ordinary workers and prevent a market meltdown. Yet it is already clear that much more will need to be done.

If this were just a garden-variety financial panic, a massive injection of government demand stimulus would absolve a lot of sins. But the world is experiencing the most serious pandemic since the 1918-20 influenza outbreak. If another 2% of the global population were to die this time, the death toll would come to roughly 150 million people.

Fortunately, the outcome probably will not be that extreme, given the radical lockdowns and social-distancing measures that are being adopted worldwide. But until the health crisis is resolved, the economic situation will look exceedingly grim. And even after an economic restart, the damage to businesses and debt markets will have lingering effects, especially considering that global debt was already at record-breaking levels before the crisis began.

To be sure, governments and central banks have moved to backstop broad swaths of the financial sector in a fashion that seems almost Chinese in its thoroughness; and they have the firepower to do a lot more if necessary. The problem, however, is that we are experiencing not just a demand shock but also a massive supply shock. Propping up demand may contribute to flattening the contagion curve by helping people stay locked down, but there is a limit to how much it can help the economy if, say, 20-30% of the workforce is in self-isolation for much of the next two years.

I have not even touched on the profound political uncertainty that a global depression can spark. Given that the 2008 financial crisis produced deep political paralysis and nurtured a crop of anti-technocratic populist leaders, we can expect the COVID-19 crisis to lead to even more extreme disruptions. The US public-health response has been catastrophic, owing to a combination of incompetence and neglect at many levels of governance, including the highest. If things continue the way they are, the death toll in the New York City area alone could rival that of Northern Italy.

Of course, one can imagine more optimistic scenarios. With extensive testing, we could determine who is sick, who is healthy, and who is already immune and thus able to return to work. Such knowledge would be invaluable. But, again, owing to several layers of mismanagement and misplaced priorities stretching back many years, the US is woefully short of adequate testing capacity.

Even without a vaccine, the economy could return to normal relatively quickly if effective treatments can be swiftly implemented. But, absent widespread testing and a clear sense of what will constitute “normal” in a couple of years, it will be difficult to persuade businesses to invest and hire, especially when they are anticipating higher tax bills when it’s all over. And it is possible that stock-market losses so far have been less than those of 2008 only because everyone remembers how values shot back up during the recovery. But if that crisis does turn out to have been a mere dry run for this one, investors shouldn’t expect a quick rebound.

Scientists will know a lot more about our microscopic invader in a few months. With the virus now racing across the US, American researchers will have direct access to data and patients, rather than having to rely only on Chinese data from Hubei province. Only after the invasion is beaten back will it be possible to put a price tag on the economic cataclysm it left in its wake.


KENNETH ROGOFF
Writing for PS since 2002
Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly and author of The Curse of Cash.


Will ‘The Great Cessation’ be worse than the Great Recession? Here’s what we can tell so far

BY SHAWN TULLY March 25, 2020 FORTUNE

Which is moving faster: the spread of the coronavirus, or the damage to the U.S. economy?

That’s the question on the minds of tens of millions of American workers, small-business owners, managers, and investors. And as the economic effects pile up, many are wondering: Are we on the cusp of the kind of yearslong descent that began in 2008?

Never in recent decades has America suffered a deterioration in our economic outlook as swift and shocking as the tremors of the past five weeks caused by the coronavirus crisis. The 30% drop in the S&P 500 since its all-time high in mid-February is the fastest slide on that scale in its history; since Valentine’s Day, $10 trillion in shareholder wealth has vanished. The short-term funding that’s the lifeblood of corporations is freezing up as folks withdraw cash from money-market funds to pay for rent and groceries. An economy that was rebounding a few weeks ago after President Trump called a trade war truce is now universally viewed as heading for what could be the steepest one-quarter contraction in history.

Why 2008 was so terrifying

Americans are looking to crashes of the past for a prognosis on how sick the coronavirus will make our economy. And the one that’s top of mind is the most recent, the Great Recession, or what I'll simply call “2008.” The Great Recession is such a terrifying precedent because it was both extremely deep, and it was long—a full recovery took not a quarter or two, but years.

GDP shrank by 4% over six quarters, bottoming in mid-2009, and national income didn't rebound to late 2007 levels for 14 quarters, until mid-2011.

In the depths, unemployment spiked to nearly 10%. Yields on investment grade debt hit 9%, and junk bonds fetched 13.4%. The S&P 500 plunged 58% by the spring of 2009; it took five years, until the close of 2012, for equities to regain the summit of late 2007, the level first reached in 1999.

So far, it appears that the U.S. isn't threatened by a fundamental fissure that will crack and wrack the economy for years to come, like the housing bubble that caused the Great Recession. “This doesn’t seem to be another Great Depression or Great Recession,” economist and Nobel laureate Robert Shiller told Fortune. “The story isn’t the same. It seems to be a virus story and a stock market story, not like the housing story of 2008.”

But in some ways, this crisis is more serious than 2008. That’s because the early devastation hit much faster, and caused far more damage, than in 2008. To prevent an economic contagion that parallels the virus’s rampage, the federal government needs to provide emergency funding for beleaguered businesses at a speed, and size, never before achieved. The paramount threat isn't the kind of ticking time bomb—the subprime mortgage crash—that caused 2008. It’s the danger that America’s credit markets, already under severe stress, freeze up, sending cash-strapped companies into bankruptcy and causing cascading layoffs that deprive workers of cash, triggering more failures and layoffs. If the Fed, Treasury, and Congress don't deliver a gigantic package within days making the government the lender of last resort, America could experience another Great Recession even in the absence of a ticking time bomb like the subprime craze.

Mark Zandi, chief economist for Moody's Analytics, compares the current shock to a heart attack. “The heart of the economy is the credit markets, and it’s under attack because of the fear of lending,” he says. “We've got to do an angioplasty or valve surgery, or the heart will shut down.” He says that what makes this crisis so dire is the lack of time. “In 2008, it took months for the credit markets to dry up.” Now, he says, the U.S. has only days to act before the economy goes into cardiac arrest.

The Fed and Treasury have already taken important steps to bolster short-term funding. But the failed Senate vote on a $1.7 trillion package on March 22 undermined confidence and sent debt markets into a tailspin. We could be facing another onslaught of volatility in the quicksilver credit markets if Congress doesn't quickly pass the emergency funding measures in the augmented, $2 trillion bill agreed to by the Senate and White House on March 24.

That’s because America is experiencing a completely new phenomenon, the nearly total shutdown of large swaths of the economy. It’s as if the 9/11 attack that brought America to a standstill for a few days has morphed into a kind of Groundhog Day in which Americans awaken to the sight of empty streets and shuttered stores that shows no signs of ending. “In 2008, it wasn’t as if we didn’t go to restaurants and the gym,” says Jared Franz, an economist at asset management giant Capital Group. “People went about their daily lives. Now, businesses are completely shut down, or close to it.”

Franz notes that the virus is attacking the backbone of the U.S. economy, services that account for over two-thirds of GDP. He points out that around half of the 20% economic activity contributed by restaurants, airlines, in-store shopping, live entertainment, and hospitality is totally shuttered. “If you had to invent the perfect takedown of the U.S. economy, this would be it,” says Franz.

Delta Airlines predicts that its second-quarter revenues will drop by $10 billion, or 80%. JetBlue collected $4 million from customers in March, versus its average of $22 million. Marriott’s global hotel business has dropped 75% below normal, prompting CEO Arne Sorenson to label the current situation “worse than 9/11 and the financial crisis combined.” Analysts predict that Nike's sales will drop by one-third in its Q4 ending in May, and the suspension of the NBA and English Premier football league schedules is depriving the footwear colossus of crucial promotions. On March 19, GM and Ford shut down all production in the U.S., Canada, and Mexico until further notice.

The economy was already fragile when the coronavirus hit

To understand where we are now, you have to go back to the aftermath of the Great Recession, when the U.S. economy shifted into a slogging new normal, delivering slower growth and fewer new jobs than in the preceding decades. That trend reversed in Donald Trump’s first two years as President. Business confidence revived, and growth jumped to over 3% from mid-2017 to mid-2018. But although job growth remained robust and the stock market notched peak after peak, the economy entered 2020 back on its heels. The pandemic that would have weakened a strong economy is decimating a weak one.

To assess where the economy is headed, it’s crucial to review its more than yearlong downshift. Fearing that that overheating would stoke inflation, the Fed lowered its benchmark rate four times from December of 2017 through September of 2018. But a signature Trump onslaught was already tapping the brakes: the trade war. Starting in early 2018, Trump slapped tariffs on over $300 billion of U.S. imports from China, raising prices for consumers and businesses. “It was the trade war that was mainly responsible for sucking out growth,” says Zandi. Nevertheless, in December, the Fed made the mistake of imposing yet another rate increase, an ankle weight that further slowed the already halting jog.

Through much of 2019, big parts of the economy, notably farming, energy, and manufacturing, all hit by the trade conflict, sat mired in a downturn. By midyear, the U.S. seemed headed for recession. In July, the Fed reversed course, slashing its benchmark three times through October. “Then Trump connected the dots and called a truce,” says Zandi. Late last year, Trump announced a deal that would roll back some duties on Chinese goods and suspend other planned tariffs.

The gambit worked, at least in part. In January and February, business and consumer confidence was rising. The Fed forecast mediocre expansion of 2% for 2020, slowing to 1.8% by 2022, but no recession. The 10-year Treasury yield had fallen from 3% in mid-2018 to 1.5%, a signal that GDP could well wax more slowly than the Fed predicted. “If not for the pandemic, we might have muddled through,” says Zandi. “But it would have been a struggle. Manufacturing was still in recession. The economy was already fragile, and vulnerable to a shock that could send it into a tailspin.”
How deep will the next recession be?

Experts’ predictions on how deep this recession will go must be setting records given the distance from the depressing best to the previously unimaginable worst. What most economists at the banks, brokerages, and research firms have in common is that they’re positing that the shutdown lasts another nine to 12 weeks or so, and that a sharp recovery begins in the third quarter. Once again, that “this isn’t 2008” scenario hinges on heroic action to keep credit flowing.

According to most forecasts, the deep devastation hits in the second quarter. Just about the most optimistic outlook comes from Steven Blitz of TS Lombard, who foresees a fall of 8.4% in Q2. At the other extremes, Goldman Sachs sees a 24.5% drop in the three months from April through June, and Bank of America is just as pessimistic at 25%. Jim Bullard, president of the St. Louis Fed, warned GDP could crater by 50% without drastic emergency action from Congress, the Fed, and the Treasury. The contractions predicted by other notables: UBS at 10%, Oxford Economics at 12%, and JP Morgan Chase at 14%. Here’s a guide to how fast the numbers are deteriorating. On March 16, Goldman called for a decline of 5% in Q2 and four days later upped the number almost fivefold.

With the forecasts worsening so rapidly, it’s hard to find a middle range that could provide a reasonable view of how much the economy could shrink. Right now, the median appears to be around –15%, and that’s optimistic, since it’s been heading lower. Most banks also expect shrinkage in Q1 in single digits—a ballpark number would be 2%. Goldman is typical in projecting a strong rebound in the second half, foreseeing plus 12% in Q3 and 10% in Q4.

Where do those negative 3% and 15% predictions, followed by the Goldman-posited rebound, take us by year-end? By Fortune’s calculations, GDP for 2020 would shrink by over $1.3 trillion to $20 trillion, and decline 6.3%. As we’ll see, that’s more than half again the total shrinkage in the Great Recession. The difference is that the Q2 fall would be a passing hangover, since the economy would be recovering strongly moving into 2021.

The rolling lockdown of businesses, however, is already creating a job crisis. The week beginning March 3, 211,000 Americans filed unemployment claims. Just two weeks later, the number, by Goldman’s estimates, jumped to a staggering 2.25 million. Morgan Stanley predicts an average unemployment rate in the April to June period of 12.8%, more than triple today's 3.6%.

Aid to families and industry

On March 25, the Senate and the Trump Administration reached agreement on a colossal relief package providing $2 trillion in aid to businesses and families, and make as much as $4 trillion in emergency loans available for all types of large businesses from brokerages to automakers. Single adults making up to $75,000 a year would get a one-time payment of $1200, and couples making $150,000 or less would receive $2400, as well as $500 per child. Those amounts would be reduced for earnings above the $75,000 and $150,000 thresholds. On the business side, the bill earmarks $58 billion in aid for airlines. A crucial plank is a $367 billion infusion targeting America's 30 million small businesses that account for half our economy and employ 58 million workers.

The plan would provide “retention loans” available to all enterprises with 500 employees or fewer. Restaurants, flower shops, printing outfits, and the like would deploy the funds to pay their employees wages for the next two months. If they meet that test, the Treasury would forgive the loans. The program provides a crucial bridge so that small businesses can keep employees on the payroll so they’re ready to go when folks can finally get back to shopping. Right now, a long extension to prevent a cycle where wave after wave of workers lose their paychecks and clamp down on spending, causing big-company revenues and capital expenditures to keep shrinking, triggering still more layoffs that send us into another 2008.

Fortunately, the Senate and the White House also moved to forestall a credit crisis that would unleash armageddon. The Senate bill provides a $500 billion facility that would cover losses on loans provided by the Federal Reserve. The Treasury's backstop would enable the Fed to lend as much as $2 trillion to corporations that either can't obtain loans or refinance bonds in the private markets, or could only borrow at super-high rates.

Still, it's unclear when a final bill will pass so that the sorely needed cash will start flowing. In the House, Speaker Nancy Pelosi in championing a substantially different, $2.5 billion measure. It's unclear if she'll put the Senate version to a vote that would probably assure quick passage, or demand a compromise that would prolong getting that sorely needed cash to families and businesses. The stock market's 10% plus leap on March 24 was a reaction to the a huge infusion of liquidity was on the way. More days of squabbling in Congress could kill that show of confidence.
Growing risks in repos and commercial paper

What could turn a damaging but temporary storm into a hurricane requiring years of rebuilding is that aforementioned lockdown in credit. The danger lies in both of two distinct sectors of the credit markets. The first is the short-term financing provided by two types of vehicles: repurchase agreements, known as repos, and commercial paper. Repos aren't exactly a household name, but they constitute one of the world’s biggest debt markets; the average amount of repos outstanding stands at $3.9 trillion, one-fifth the size of the U.S. economy.

Repos are ultra-short-term loans, usually asset-backed, mainly provided by money-market mutual funds. The borrowers are financial institutions that aren’t funded by deposits like the big banks, nor do they rely on those banks for quick financing; the money market’s chief customers are brokers and hedge funds. The broker, say, sells the money-market fund, which has lots of cash to invest, a contract enabling it to borrow $100 million overnight, and the next day buys back the contract at a slight premium, giving the fund a fraction-of-a-basis point return. The brokerages use the cash to back equity and bond trading, and the hedge funds can deploy the funds to quickly acquire securities without selling parts of their portfolios.

As security, the hedge fund or broker furnishes Treasuries or Fannie Mae or Freddie Mac “agency” bonds. The major commercial banks do a thriving “clearing” business ferrying contracts, cash, and collateral between lenders and borrowers, and handling custody.

In almost all periods, repos are a supersafe vehicle for the money-market lenders. But in rare times of extreme volatility, they turn away borrowers, and the market seizes up. The money-market funds fear that hedge funds are taking big losses, are desperate for cash, and that the value of even the Treasuries supplied as collateral is fluctuating so fast that they may not get repaid. That’s what’s been happening intermittently for the past few weeks. In addition, money-market fund customers are taking out the cash, creating a shortage of funds available to borrowers.

If hedge funds and brokers face a liquidity crunch, the former will dump their Treasuries and other bonds to raise emergency cash, and the latter won’t have the funds to ensure a smoothly working fixed-income market. The freeze will send prices plummeting and yields soaring, further tightening the vise on credit.

A second critical source of funding is commercial paper, short-term IOUs that all kinds of companies obtain to finance inventories or receivables. That flow of ample, cheap cash enables the likes of automakers or restaurant chains to pay bills without liquidating their fixed-income holdings, and once again, the fear contagion virtually shut down the market briefly in mid-March.

It’s the Fed’s role to keep the repo and commercial paper markets liquid, and so far, it’s stepping up. In mid-March, the Fed stood in for the money-market funds and purchased $1 trillion a day in repos, averting a cash crunch for brokers and hedge funds. The Fed also is dusting off the Commercial Paper Funding facility from its 2008 playbook, agreeing to buy up to $1 trillion in the IOUs from corporations, bolstered by a big backstop from the U.S. Treasury, that can't get funding from money markets. Keep an eye on these two crucial funding sources. Only if the Fed continues to fill the role of the fleeing lenders, and only if the Fed pledges to keep doing so no matter how bad it gets, can America weather the crisis without a catastrophe.

Looming stress in corporate bonds and loans

In the recovery from the financial crisis, U.S. companies steeply increased their leverage and shrank their safety cushion. “For 11 years, everyone had a big appetite for risk,” says Alicia Levine, chief economist at BNY Mellon. “Companies gorged on debt. In 2008 the banks’ balance sheets were at risk. Now, corporate America’s balance sheets are threatened. We have a potential liquidity crisis not in the banks, but in the corporate sector.”

The jump in leverage was especially pronounced in such sectors as energy, notably fracking, utilities, and materials. Franz of Capital Group reckons that U.S. enterprises have borrowed a total of $5 trillion in high-yield, leveraged loans used in LBOs, and BBB-rated corporates, the lowest Moody's level above junk status. That’s an increase of well over 100% in the past decade, says Franz.

The junk bond market is already flashing red: Yields have catapulted from under 5% to around 6.1%. Companies are constantly refinancing the waves of maturing corporate debt. As the business lockdown raises the risk of defaults, yields could rise so high that companies can borrow only at ruinous rates, if private lending doesn’t shut down altogether.

To make matters worse, big asset managers are banned by their charters from holding bonds rated lower than BBB. So if those securities are downgraded to junk, mutual funds will dump them in bushels, once again, sending yields skyward.

It now appears that over the next few months, the shrinkage in cash flows will become so severe that private lenders retreat from the market or demand rates that drive corporate America to even deeper losses, causing a spillover into job losses and bankruptcies.

Once again, the government needs to provide credit that will bridge corporate America through the crisis. The Fed is barred from taking credit risk, so it’s the Treasury that must take the lead. Fortunately, the Senate bill allows Treasury to partner with the Fed to provide that $2 trillion in liquidity.

But that $2 trillion still isn't available. That's because the House has yet to pass the Senate bill, or a comparable measure, that includes that relief. Time is short. Any surge in bad news could spook the debt markets. More delays in Congress could provide just that disastrous shock.
The outlook beyond the crisis

Of course, it’s unknowable at this point whether the U.S. will emerge from this dark tunnel into the sunlight by spring or summer. Keep in mind that even the forecasts that get us to a shrinkage of 6% of GDP by year-end, a figure seldom seen, assume that folks will be back on the streets and offices by late spring or early summer.

Assuming we get to the other side, the outlook, frankly, isn’t great. Since stocks looked wildly overpriced prior to the crisis, it’s likely that a lot of the wealth families had in stocks isn’t returning. High tariffs that weren’t hurting us two years ago will probably be a permanent feature—no matter who’s elected President. That’s a major negative for growth. The exploding public deficits and debt can only be addressed with much higher taxes that would impose still another burden.

So the best bet is that we’d return to the same old, same sub-2% growth we were expecting before the crisis hit. It’s not the animal spirits of the early Trump days.

But it’s sure a lot better than 2008.

Massive risks to world economy as virus battle rages

AFP / Tolga AKMEN

The current crisis is likely to be more severe than the 2008 financial 

crisis crash because it affects the entire economy

The coronavirus outbreak and resulting lockdown of billions of people threatens the global economy to the point where economists are predicting the most violent recession in recent history, perhaps even eclipsing the Great Depression.

The crash will almost certainly be accompanied by a surge in unemployment, especially in countries with weaker worker rights, such as the United States.

Ahead of Thursday's emergency virtual G20 meeting, here are the key concerns.

- RECESSION OR DEPRESSION? -

"The G20 economies will experience an unprecedented shock in the first half of this year and will contract in 2020 as a whole, before picking up in 2021," economists from the rating agency Moody's wrote on Wednesday.

Angel Gurria, head of the Organisation for Economic Co-operation and Development (OECD), told the BBC the world economy would suffer "for years".

AFP/File / Angela WEISS, Nicholas KAMM, Johannes EISELE, Frederic J. BROWN, Mandel NGAN, Eric BARADAT, MEGAN JELINGER, Saul LOEB, Andrew CABALLERO-REYNOLDS

The crash will almost certainly be accompanied by a surge in unemployment, especially in countries with weaker worker rights, such as the United States

The current crisis is likely to be more severe than the 2008 financial crisis crash because it affects the entire economy, with a collapse in supply due to the shuttering of factories and a similar crash in demand with billions of people in lockdown.

The transport and tourism sectors have been the first to feel the pain, although some such as pharmaceuticals, health equipment, sanitary products, food and online trade have seen a boost.

The collective GDP of the G20 countries is predicted to contract 0.5 percent, according to Moody's, with the US down 2.0 percent and the eurozone losing 2.2 percent.

China is expected to buck the trend and grow, but at a much-reduced rate of 3.3 percent, according to Moody's.

Most major banks believe the US has already fallen into recession, with Goldman Sachs forecasting a contraction of 3.8 percent this year and Deutsche Bank predicting the worst US slowdown since "at least World War II".

In Europe, where the PMI business activity studies for March were the worst ever recorded, the German economy minister warned of a contraction of "at least" 5.0 percent in 2020.

France's economy could shrink by 1.4 percent, according to Moody's.

Britain could fare worse, with KPMG predicting a fall of 2.6 percent, but that loss could double if the pandemic lasts until the end of the summer.

Capital Economics paints the darkest picture, warning of a possible 15 percent contraction in the second quarter, almost twice as bad as during the Great Depression of the 1930s.

- UNEMPLOYMENT -

Unemployment rates are expected to soar, particularly in countries where levels have recently been at historic lows, such as Britain and the US.

These economies have relied heavily on the boom in jobs in the "gig economy", such as taxi drivers and delivery workers, which offer little or no social protection.

Even employees on long contracts can be fired easily in the US, with economists predicting a dramatic increase in unemployment claims of between 1.0 and 3.0 million when data is released on Thursday, compared to 281,000 at present.

James Bullard, president of the St Louis Federal Reserve, has predicted unprecedented unemployment rates of 30 percent, while Europe can also expect to suffer.

"We think the unemployment rate in the eurozone will surge to about 12 percent by the end of June, giving up seven years' worth of gains in a matter of months," said David Oxley of the London-based Capital Economics, adding they expected some rebound by the end of the year.

- INFLATION -

The effect the crisis will have on prices is the source of great uncertainty, with deflationary pressure due to a collapse in demand on the one hand and potential inflationary pressure caused by devalued currencies and possible shortages on the other.

Inflation rates are low for the moment, and generally below central bank targets, particularly in Britain.

- DEBT -

Britain's current national debt of 90 percent of GDP is high, but reached "nearly 260 percent after the Second World War," Carl Emmerson of the Institute for Fiscal Studies (IFS), told AFP.

But leaders "really shouldn't be worried" by debt and deficits for the time being with financing rates at historical lows, Jonathan Portes, professor of economics at King's College London, told AFP.

They appear to be heeding the advice, with leaders from Washington to Berlin consigning fiscal orthodoxy to the dustbin and announcing budget-busting rescue plans for the economy.