« The Editors

Special Episode: Are We Headed for a Depression? [199]

2020-03-25 | 🔗

On this special edition of The Editors, Rich sits down with David Bahnsen to discuss the current state of the economy, the effectiveness of the congressional stimulus bill, and much more.

The Editors is hosted by Rich Lowry and produced by Sarah Schutte.

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
What policies produce a strong economy with widely shared prosperity. George Schulz and John Taylor draw from decades at the forefront of national economic policy, making a show how market fundamentals generate consists. We better outcomes than politically popular government interventions. Choose economic freedom reconstruct the crucial policy debates from the nineteen sixties in the nineteenth century he's under the guidance of Federal Reserve Chair Arthur burns in the face of stubborn inflation present x introduced wage and price controls. Predictably, these policies became a sick. If you drag on the economy and ultimately failed, it was till the Reagan administration that these controls were finally fully reversed, resulting in a vibrant economy, The work of legendary economists Milton Friedman whose free to choose spear inspired the Reagan Economic Revolution along with lessons, show some Taylor, learn from the front lines and form this book and demonstrate that,
current interventions in economy don't work, free markets do What kind of economic recovery will have? Will the congressional damn be effective and what to make of what the Federal Reserve has done, was Gus this more on a special corona virus economy edition. The ETA resembled slurry and I'm joined today exclusively by guru, David Bonds and David, is our friend and colleague. Founded the bonds and group, an co host of the radio Free California, Podcast here at an hour row here, listen by the way, to a national viewpoint, gas real thing on Astro, you D come to I'd. Have you got to be easier if you'd better for us? If you made us part
your feed any of the streaming services out there from Spotify to Itunes. And if you like what you hear here, please give us a glowing five star review on Itunes. If you don't like what you hear here, please forget, I said anything David thanks. So much for joining us. These rehab me rich rights. I thought we'd go through three buckets here, want to talk about, what's been happening in the car, me, what is the fact is and what you're prognosis is going forward than dive a little bit into the stimulus bill, just now officially topped two trillion dollars an thing get into what the fuck has been doing the importance of that. So, as you know David that I rely a lot on people like you when it comes to the economy and fiscal matters cuz, it's it's the very much not in my wheelhouse, but I've just been stunned you have four or five days, you ve had these estimates of of quarterly GDP that that's
seemed to take a jagged down every day when you get the various estimates from rapid bore outside See you not seem stunning, when people talking last week about minus eight someone, I think, had a minus twenty for a day or two a so what what has happened to the economy and how bad is it? why they say the decimation in the economy for marching into second quarter is just severe. It is a little futile. Put a number on on how low it goes as me, it's really well known that it's just gonna be a massive contraction. Of economic activity. I imagine the difference which seventeen percent and twenty percent is kind of irrelevant when you're talking to, every mall and movie theater in restaurants in the country effectively shut down the issue that is important and is variable. Is
their recovery would look like both in magnitude and in timing, so If you just wipe out the second quarter, assume is the worst quarter will have as a blip. We can contraction since the depression, and assume that every man, woman and child in the country knows that the question is, then, what Chu three will look like what you for will look like in the shape, whether it is more v shaped for more you shaped. So am I right in believing that this has to be the most rap economic contraction. In U S, history has entered the depression. Horrifying said Dick somebody's panic, someone eighteenth century read about someone out there just astonishing, but that this happened with. It days and I'm gonna cases just with an hour's, an entire sector the entire areas that economies literally ring often grinding to a halt.
While it is certainly the most rapid, but then the other side of that coin is it. It opens up the equation further recovery to be the most rapid as well there's a lot of unknown zeal, but it is so such an outlier there, such This Craddock events that are playing into this the demand side of the depression was was contracted because of a lack of productive activity in the economy that spy that skyrocketed or reside negative feedback, loop bind with a total lack of credit and liquidity. Well in this Is we didn't wake up at one day and say I dont have faith the economy- I don't want to do something today, we woke up the president who has to stay in our houses. I mean it's just a categorically different events.
And different causation and then naturally differ resolution right? So you would expect once we leave our houses. That's a lot of this war will bounced back, but what's the what's the difference, twenty eight years shaped and envy shaped recovery. How important is the difference between them and what would be the factors determining which we get yet that's a great question, I think it's probably the most operative question I now for us. Economists did some. Obviously, the v shape is more sudden, more more accelerated and one would assume more violent, the upside meaning the magnitude. Not only would it happened at a quicker pace, rich, but it would happen with more force. There would be a larger increased, we cannot activity actively. I, u shape, would largely not only take longer, but it were likely be more muted, any impact. So the factors that was it
Herman, whether its v shape you shape our first of all, the and then this is the most important thing, all of which is unknown right now, which is why I am so credibly. Skeptical people talking with a great deal of certainty, either about really bad scenarios or really good ones, because neither one of them know the answer, and that is where a degree of health data looks like in the weeks I had months ahead, his comrades What one scenario is that you end up with an incredible boy binary, responds to the health data, meaning it is. It is very, very good or very bad right, but not something kind of in between, and then what sort of give you some indication as to what the timeline would look like for recovery? Yes, you're gonna have to twelve more weeks a walk down, I mean that's gonna, be virtually devastating by.
Yet our most are expecting an end. Is it possible that, in two to three weeks the largely most of America's able to reopen. I think that sets the table for greater vitiate. Bounced back but then the variable that I think is becoming more possible is did that I ve shape, recoveries in certain geographical territories, and you shape recoveries and others, and primarily New York City, obviously aware where you live and where I spend over half my time and where major portion of America's economic activity takes place. I think its report. Possible that you see a good portion of America go back a business in a couple weeks, sped places like maybe New York, San Francisco and other large density areas do not so That would be a bit more ambiguous in the economic data. Obviously
that enormous factor of his at how quickly how much of the country gets get back to normal did this does the does the question of whether this interlude has actually destroyed? Businesses are not playing to the vitiate. You shaped question just that cookies at a time. Another system. Another warning about this about that is not just the euro that workers can be going to be. Businesses are going to disappear in and I think I d camped out it. New York and in a little less town here I assigned the city, and is it there's a coffee shop, I've loved little talent, coffee shop? Never did you know huge amount of business, for, as I could tell I just Canada, there's anyway that that businesses surviving this. So
but whenever the order comes, oh you can go about your business again. That just gonna, be, you know, boarded up space, doesn't matter how hum how much there happens to various businesses culture or certainly does where I really do think. This is where the fiscal stimulus package comes in is to a degree that you have, it's hard for weeks of the of the little Betty coffee shop? That's closed down and they don't have the ability to do take out delivery service. They dont have to pay their employees, for those weeks, but they just don't have any revenue, so they still have some fix, cost Deferral on payments to land wards forgive a boar small business loans that put cash in the bank to allow payrolls to be re. Ignited Anne and rents to be paid and, of course, a small degrees of cash to individual proprietors like that payroll tax relief
that sort of the intent of some of these cumulative effects and there far more money in the facilities remember that of the small business side of it. This is long forgiveness. This is not working ready to get him to a tough stretch like will be extended, a merry on hotel chain and american airlines. This is money that doesn't have to be paid back so the rapidity with which they can implement this stimulus and the degree to which people choose to access. It is opposed to throwing the tao. Those are important variables, but I actually think there will be ample liquidity and resources available to help those boutique kind of mom and pop coffee shops? and then, as you go upstream in terms of the size and scale of business, there's even more more resources. It's really interesting. When you look at some of the businesses stating a going to continue paying employs, I'm starved
today, announcing they're gonna pay all their employers even in the downturn and employs it don't work. I will come back to work, still have access to pay and health benefits Walmart doing bonuses to live employees that or that are out right now I accept the premise that rich there are small businesses that don't show up and data as easily that are gonna, be hurt, but I Actually believe we at this point in time still have the potential to give Relief to those- and I that the unemployment insurance and the other, a cash liquidity mechanisms can upon the individual basis, because what is definitely not coming back is the law wages that people awash with weeks or so that those that's where this
leaf is going to be very important, so let's then get to get into the stimulus bill a little bit more first just brought us question the scale two point two now two point: two trillion is that an appropriate scale too much just right, enough for now. I don't think that there's a hard science to it, although I certainly respect that people have to pretend there is and have to kind of use a back of napkin to quantify IRA Call Secretary Paulson back at tarp. Telling us where he got the number four seven hundred billion, and I asked him about it. A couple years later, at a private dinner, I was out with them and remember. And tell him he basically just sort of in his head assessed what he thought of it, but a whole was it. You know the total amount of mortgage defaults and just set out. That was a good round number and it was than a trillion, but it was near a trail. Yet that's what they went with. I think this case
They tried to use a multiplier gdp that they're looking at, like. We need this person vintage of GDP in total stimulus and then how do you go about carving up that pie I will look to the individual ingredients which ends up resulting in the sum of parts, but I would say you know, just as does the five hundred billion to households does the three hundred and fifty four hundred billion the small business five hundred billion the corporate liquidity facilities. All these things are they adequate numbers and then, of course, you end up with the sum total from there. If all the individual pieces were adequate than you concluded, the sum total was my own gas is it. The number is, is adequate and then some for now, but that there's gonna be a fool. Is for I'm calling this met this bazooka stimulus phase three and in the face for will end up being a waiter, the summer when they do a full payroll tax cut
gonna give a lot of employ ease incentive to keep bon payroll into even do read more hiring and I dont mean, deferral of the payroll tax, which this bill has. I mean absolute cut and what come at a cost of their publicans you're, not gonna, get that without giving policy something else in the stuff. I'm hearing is a daily. Actually trade federal minimum wage for a tax caught for six months like the permanent permanent increase in that for a minimum wage. Well, that pussy is gonna, have the leverage. So I would think that that's very possible. Yes, and and and ironically, I would be very rural economy longer term and is apparelled tax cut. At least that circumstance a little later is that good policy too, dress that address this crisis, because when was initially flooded,
Four weeks ago we had a lot of people even on our own side and a shooting at it, and saying that. That's not that's just not not right. Many for what's going on now, ya think most of the criticism from the right a couple weeks ago was based on how it was a lower priority relative to lick corporate lending getting money to cash, starved businesses that had not done anything wrong, and the leverage and they are able to read on liquidity they can feed into the corporate economy now is better addressed with stimulus it they're getting ready to pass laws? the term, though, on the supply side. I definitely think apparel tax cut is efficacious, but it's not but I dont say that, for the reason that George Bush Junior did or Brok Obama did leaves repulsing defended it as a keynesian demand side stimulus. Having does not, I think it's me
on the supply side. The way it benefits- employers, not employees, arrogant, forgets the Paypal MAX cut is fifty percent paid. By the employer or directly, and the other fifty percent is it had he employer indirectly, in the form of of how it cuts and about profits and our wages that they pay so ultimately I think it. The employers believe that they have extended relief, it adds to their margins and a name. Under reinvest into their businesses, so I do think it would be supply side stimulative. But I asked I agree with the criticisms or a couple weeks ago that it was not the lowest hanging fruit as a priority here. So Let's dive into more specifically, I e to these aspects of the stimulus code that the payments to individuals there's a big debate about that. Whether just do it blanket,
one gets a check or to do a little more complicated the day they have little more complicated scheme in there. What would you make that aspect of it As far as the direct money, too, to individual s- yes, take. The final deal has come to an end. Fifty billion, an expanded unemployment, insurance and so I think that is unfortunately necessary. It certainly more humanitarian what I hope it does. Not become, which is what it became post financial crisis. I think Obama extended it for over two years and an absolute We became a sort of Gore Fide unemployment incentive there were people there were willing, did not go back in the workforce cause they knew they can continue getting paid, not you
this was going to be three months. Humor got an extra mop tokay. I was one of the whole doubts here, the last few days of clownishness, so for Mines is not going to motivate people to stay on the couch forever and I and I think that most of the product or part of the economy really wants to go back to work, but there's a star yep emergency there. That's that's pretty beneficial depart your PA. Asking about that are much more, so to go on is the direct payments five hundred dollars in direct payments to adults. The additional five hundred per child for income. Was going up to seventy five thousand single and a hundred and fifty thousand married couple. It starts to face down just don't see a multiplier effect to that Are there bar tenders in vain? and valet part drivers and and
service economy, people who gone without pay the now we're going to get a couple thousand bucks in their pocket that they need. Yes, I think so, and I and I think that's a good thing, but I'm I am sure that is ultimately the biggest She'd ass, you pardon the economy by police, Luckily, there was no way any of this was to get done without direct payments, and so who had had to happen, but far as where you're gonna get the most v shape economic recovery back to our prior conversation. This would be I think less stimulative and is more on the humanitarian side, and then how about the the corporate in This is another major point of contention with cried saying whether not enough controls on this and you can, just as I did lavish relief money on Trump properties and golf courses in and what not and they did get more controls. But there there's big is a big kitty there for
for America yeah. Well again I mean it's there's two pieces, there's the corporal lending facility and then there's the small business facility and on the corporate side they have to suspend stock by backs with entire time they receive aid with an additional year tapped on there is severe restrictions on employment cuts. I mean they basically agreeing did not let people go, and very severe restrictions on ceo compensation. No, he's. Gonna wanna tat this facility, it they don't have to. They know they'll be under a microscope, and they know that left wing media will be just chopping at the bed. To catch some ceo, fine on a private jet or doing a corporate and did a resort, or you know those types of things: the people there taking it would be airlines and hotel chains that have been ravaged by this, so the Google com make. I think you and I talk about this on the phone the other day.
It is a significant important point. Distinction between people who were for writer for wrong perceived in the financial crisis as the perpetrators of what went on on receiving aid verses this situation whereby any rational persons understanding they are victims of what happened nobody in their right mind, Belize, Delta Airlines or carnival crews lines did something the caused this an I am very sympathetic to the argument that particular the airline side. They may be for profit enterprises and they are by is vitally important to the national economic engine, that travel resume. And so it having a lending facility that has to be paid back as restrictions around it, I think, is very important
I think that anyone really cared ever Trump hotels and get a, but all that stuff was political, cosmetic posturing. It was still for the Trump administration to not need with it. I mean what kind of such small ball stupid stuff, but why not just get in front of it and make clear on? talking about any my properties benefit so that they could take that talking. Point away from the Democrats, but I guess I'm here to economics more than politics. And the small business element It's a really big deal that there's a lot of leverage that can go into this system. The way in which the FED interacts with white the Treasury facilities will be but in terms of their ability to access grants, a man. This is so important, and I hope our listeners don't mind me going in the weeds, but you can't just a clog up the bank
the system with these loans. Banks have, incredibly strict guidelines about regulatory capital. The way in which its being done where the business can go to the bank, The bank obviously right now, would not be in a rush to lend some restaurant. It you know, went for weeks without an he accounts receivable a yet. The bank can take the package go to the government, get the money turn around and give it to the business and have the business agreed and not let people go off payroll, they will at loan forgiveness on it and back capital will not count against regulatory capital considerations for the bank, so it keeps the banking system highly liquefied and enables return on equity to take place for the banks, as they do. Rational lending on top this sort of distress to ending it puts the
the Treasury Department and the fat in the position of being a distressed lender, but there too thus lender on money. Good assets is profitable America, their lending to the We need the liquidity stretch, and so I think it's way you're gonna get the most bang for your back in this whole bill so let's go to the FED and what the FED has been. Is hugely important. But a layman, like myself, it's really hard to to understand, so we got tat, we had a couple different actions during this crisis, but this week we had another big I gather another big round of quantitative easing and that we are all these sir facility, We shall need to go into detail, but just to give an indication of how much going on how complicated as the primary market, corporate credit facilities, secondary market corporate credit facility, the term ass it back to you
These loan facility, the money market, mutual fun liquidity facility, the crucial paper funding facility. So what what big picture what's what's going on here and how important is it yeah for those not interested in the alphabet. Soup of everything you just laid off and all these things became kind of household acronyms in are in my world, is a finance guy at ten years ago, but if one does needed a one sentence summary it is quite literally, the FED has agreed, to be the lender of last resort to everything. Now that is the feds charter. That is what the fetters created for. We had financial crises in the nineteenth century and rather than ass, J P Morgan to come back the country or Ass Warren Buffett in a you know to that and twenty version to back the country, neither one of which add the balance sheet command, to do so. Then,
P. Morgan did a hundred years ago the FED with you, a printing press, has the ability to be Lender of last resort in crises saw the owl but soup you'll tell us this. So suddenly. Added at the real sack, simple question: real some whatsoever: or of last resort. It simply means that when there's no more access to liquidity, no access to cash and there are many good assets there, but you can't convert to cash right. You can't spend a treasury bonds. You can't spend small business receivables. You can't spend a bond he can't spend a stock and so forth and so on, but the conversion into camp which is the medium of exchange for our economy, recur, someone who will end on assets at the end of the day, and lending on assets does not mean landing on bad assets that are really in impaired, but it
it can and does mean landing on good assets that are just simply a temporarily a liquid. Because of a run on the bank. There's more people trying to get cash then there are we willing to convert so and you every you and me and abnormal environment you know, You have something I want. I pay you and I assume you are you pay me. We can do exchange like that, create liquidity for one another in free exchange. But when all of a sudden everything hit the fan that you'd by three hundred million people that liquidity That ability to transact goes away. So the feds steps to become the lender of last resort? The complex city that I'm ignoring to make this. Explanation is, is incomprehensible, but when you commercial paper, which are find many businesses thirty days at a time, money markets which so many people here. Money in as a substitute for a checking of savings account. And then these other more complicated facilities terms?
so back referring to a kind of packages of student loans and an auto loans, and the cartoons. These are all my good assets, their cash flowing, but one cannot convert them to cash right now, so the FED has to come in with its cheque book and converted to cash will defeat. Doesn't really have a cheque book they just where the ability to to make money- eczema, Hilo. And in this, this is this is Thank you view that has to happen. It's the system that we have rich, and so so many people are coming to be wanting to talk Philip philosophical and ideological, and I am quite sure that when we and Paul heels from kroner virus which we pray he will soon heal. Plenty to say on this in his fathers had plenty to say. I have NEA views about what the feds should do in shouldn't do philosophically, but I actually think it's very important. We understand that you can
have a system like we have and tell Corporate Amerika, dough borrow four trillion dollars to get us out of financial crisis and growth call me that way with expanding credit and then oh by the way, when our corner virus pandemic kids, then there will not be a lender of last resort. The FED made this monster so's, I certainly think defended, should and has to do this work they're, not the feds, should be creating a monster. In what the central bank ultimately should look like those are different. Ideological conversations, but this is I will tell you this much people saying like the FED is just buying bad assets in the feds gonna make a fortune on this Fourchan, probably more money than has ever been made hundreds billions of dollars, because what the that is doing is by money. Good assets and they're gonna get what we
call in financial circles the ill liquidity premium, there's extra money that gets made when you sacrifice liquidity, but Now what financial actors, like you and me, or a certain corporation or a hedge fund? They can't take the liquidity, They sacrifice that premium and transfer it to the FED. The FED programme becomes a liquidity provide and over time it's U normalization in the economy. The FED will reap the benefits of that ill equipped. And then by law. They have to pass that on to the Treasury department, which is as taxpayers and so who could be the major players taking advantage of what that it, using the liquidity that the fetters offer there's totally different categories here, the ones that are most important right now in our financial system of the bond facilities, their ability,
to come in and by either primary or secondary corporate bonds up to five years. This goes Add to what I was saying of the real averaging that took place. The american economy post financial crisis are. Will you added trillions of dollars of high grade high raided totally money. Good corporate debt that had tremendous return on us That's in return on equity associated with it; in other words, companies did productive things with that debt, but that debt sits there. Now and the market froze completely you, I mean trade, you know the hundreds of millions of dollars of staff in my business all time and you couldn't get a bit and so the FED had do come and become a buyer. That's just started this week and already have seen a lot of loosening in the debt markets we're still early in it, but the same would apply for municipal
as well as their only by right now by law, allowed to buy up the six month maturity, but I think that now and getting extended, and you see them being able to come in and make a market in tax free, which is important for cities and states and municipalities in the fire. That's a mechanism they use for various school bonds bridge. Tal roads. You know, tunnels, those types of public works projects so that that element is really important and then just to overall balance sheet, and this is kind of what our society learned the terms. Twelve years ago, throughout the post crisis era, quantitative easing q, one two and three it's a Japan style Can it somewhere effectively the FED, buys bonds with money it doesn't exist. It is now inflationary in the sense that that money does not get into the economy and less the bank's? Take them
that is put on their access reserves and go wended out. Then you increasing money supply, but in this case if demand compression, you're gonna she'd, no velocity of money for quite some time, so the FED can afford the ram their balance sheet without risk of inflation? For now the fair? emboldened by the way by how they did that post crisis, and we saw no increase in inflation and end yet, of course, at some point the Piper s you get paid it that's a whole different com station, but heads balance sheet, I think, is going to seven trillion dollars if we're lucky ten trillion. If we're not lucky and ass, I sit here right now. I think it's already exceeded five trillion just in the last week, so let's say things stay bad were or get. Get the worse than than we can imagine.
Now does the FED halved in congressional terms in a Congress has a phase for does the FED have? Next, they also can do or is: is the bazooka just been fired Congress has more. They can do this. I doubt they're gonna need to do more than the face for in phase five that I'm laying out phase for as a payroll tax cut, which is high We stimulative, in my opinion, for employers phase five. Is a big one. It has political ramifications, it has gin, racial ramifications, and things our friend, Michael Brennan, Dirty, will love that. The massive tax credit for business is to bring their supply chains on shore and talking to people to think they're. Gonna. Do a trillion dollar package around that so In the immediacy of
colonel virus economic contraction. Is this the lowest hanging fruit? Not at all? This is something that would take a long time to play out, but I think it will end up being part of resolution is that they will ultimately argue you can stimulate american jaw. It just becomes that sort of national economic nationalism. Of the corona virus Trump ISM, which is going to have a warmer audience when all of this settles than it ever did before we invest in irony. So let me ask you a bit more about that, but first it does the FED I was trying to get to the FED have. As I said, the February has just been fired. You and reload or if, if there were some need to do more, is there more to be done, or is it just that this is the most tells them at all? This is the most effective way Japan would argue that there is no limit and then so would Mario Draghi, I mean
obviously the more they do it at some point, the Piper S to get paid, ok, you, buy an you, get a diminishing return. You know. Here you each trillion. Dollars of Treasury bonds, they by going forward, is less efficacious in the quantity, provides in the interest rate management. It provides then the asteroids so here is diminishing return, but no no hard number and that's what the FED made clear on Monday and provided in the course of forty eight hours a simply stunning amount of stability to our credit markets in the country and loop. Creation to our money markets, but the FED said as we're gonna do what ever it takes, so no than our law? Not the number is not capped. Now, They are on the after, ring and then I'll have. The caps are too broad of cages for engage questions in and we can wrap up. So do you? Do you make
That makes sense now. Are you wanted one other folks that looks at that more warmly than you might have even a month ago, at a fair price? and because I am one Who argues for the law of comparative advantage in and where global supply chains are more effective for the individual economic actors freely exchanging I've been supportive, but do I think that there is a internet no health argument to be made in light of colonel virus for better domestication of the supply chains. I think it would be impossible right now, argue that Bryant's on global supply chains did not exponentially add, did the risk of everything. The just happened: and so, if there can be no risk of the risk of getting needed needed, medicines or men. I really think I mean even economically. I mean that
economic risk when we were so connected and tied, you I've clients at a manufacturing, businesses in and rely on China Facility, some with IP and some without and the ones with IP just laugh at the idea that they could pick up their supply chain move it to. Vietnam will move a debate the cow, let alone moved Ohio This is years of work to get it up and running. There would be used on packet but supply, chains and manufacturing facilities that do not require IP are much more portable nimble, but I do. I do believe that the economic risk where There's a global health pandemic of what was was exactly was exacerbated by the boy recycling out a risk in the sensitive of what happened in China was was quite bad and they-
stand steadily started Coroner official numbers, you know, what's with drastic measures that have severe economic consequences there and for us, but that the economic risk, meaning what a child had got a handle on a totally melted down an and would say we ve somehow, were kept different. Getting on our shores, stolen, had enormous economic consequences here, just because of our art dependence now intertwined. We are worth That's right in that! Isn't hypothetical! That's real! Now, first of all the issue about, if you believe the China numbers of it, I just want to put it to bed. It doesn't matter. If believes that China has altered the numbers here or there on death camp they're, not altering the fact that their fate, Teresa back, open and Eric and workers or their ninety four. Percent of that productions gone back on line. That's american numbers, not chinese numbers. These are my clients, businesses telling me their factories or up and running so unless making the bunch of sick people are running the factories with daily hell right, you know,
testing going on it, so it's a kind of silly conspiracy theory, but the truth is that today We know the semiconductor space was destroyed as a result of what our reliance on heavy ip supply chains, China, when China had they inability to deal with the medical side of this had a domino effect, devastating the american economy, before The pandemic spread to arguments from how standpoint that right, scolding. And so do I take what I now so hypothetically again. If they ve been no locked down here cases here would we still be in a recession or at risk of recession. Just on the basis of what happened in China no I don't think so. I think that you'd be real flat rate economic growth. That may be two point: five per and real GDP growth seldom something in the range of forty five.
Four and a half nominal gdp growth that we would have gotten. Would come down to one percent or sub one, but I dont think, apart from the Jew, Coney shut down the american economy that we would have had to economic contraction. We pressed growth. Ok, so my promised to ask since so one what's your gas and how this plays out going forward in our politics, with the sense be less argument that look hey, you can spend load of of money on a lot of stuff, with zero negative consequences the year that we seen so far too? I can't we spend more a micro version of this argument. Ray last week with a woman on the left, and it came up what California has been doing, to deal with the homeless homelessness
This is like a now an acute in a public health crisis as opposed to a chronic one, so they just been buying motels. And putting homeless, n n N motels in LOS Angeles, you're saying well, look: this is the left us we set along just give the homeless housing houses, so this crisis is opened up that Vista? So do you think that's that kind of argument, unlawful game, game, more traction oral, be even a few Bernie Sanders, the democratic nomination were elected president that we're tapped out. Look. We have definite now the what whatever is gonna. Be you two three and ours whatever's. We can't we are. We area fired at multiple bazookas and we need to wait. We we need, trench now without argument get more traffic.
Yeah I mean, I think that there's a distinction between whether or not their argument will become more economically cogent versus whether or not I'll be more politically convenient, and I certainly expect that then you will see those try to use the other thence here as an opportunity to expand the arm of the state, but The economic cogency of it is questionable in this sense, did this stimulus is driven by access to the government's balance sheet for busy to do a business. Does it is, driven by substituting the role of business operational with intervention from government. The profit there is still at the heart of what we are talking about here or there. Thing falls apart. In other words, big government intervention- is driven by desire to let the profit motive continue to live. Businesses to open
paid employees to bring in cut code, consumers and drive goods and services activity a greater degree of non economic intervention, has no profit motive attached to it and so itself to feeding through time, but that doesn't mean Don't be a politically effective, clean here and there, but I kind of, cuts both ways right now. You do see people like Bernie Sanders tweeting. This is because to see how we need more government to help fix things and they and then you see others pointing out, including left wing, whilst readers like oil, blank find the old, CEO Goldman Sachs say its use. It seems to me, were asking med chronic to go, create, ventilators and Julia to create a therapeutic and, and to create a vaccine amino. So there's a big calling on the private sector going on, at the same time so honest
rich. You know that kind of thing. I think they do. Everyone will retreat to the corners they were in before, and just yell a little bit louder those of us who are pro enterprise will will make the enterprise case in those that were programme activism will make the collectivist case, but I dont think that it's gonna alter the you're, the argument, which is one we benyon now for a hundred years, so that the final question I take it that you bit basin lying conversations spirit. Your basically an optimist about this situation. You know relative the circumstances, so so leave us on that. On that note, if well yeah. I will first of all you done if you asked me that anything, no matter what, generally, an optimist, I believe in the forward ARCA history being being a positive one, in the sense that I am
I am believe in the principle, should undergo a country in believing in our ability to overcome very difficult times of diversity in the shorter term sense and specifics to what we're doing with now. I Obviously, I am humble to admit that their uncertainties and unknowns there be very hesitant. To try to predict are all gonna come up roses, but do I I believe that we will medically get through the pandemic. I do Do I believe that economically, we all get through the carnage that is created thus far by the pandemic. Ideal: but I say that with a wide bandwidth is too how good it can get and how bad it can get. But but the over all play stay where we will be again sort of grey area around the shape of versus view shape, do believe we will be back in the Bin This is being America, ensure
order and in the health side I'm not a scientist had become more of a student of science than ever of wanted to be in my life in the last few weeks. Ben. I am mostly optimistic about where this is going to go, but I'm definitely humbled by the fact that there are things we don't know. Yet. Well, that's it. For us, this has been a special corona virus economy. Edition of the errors are regularly scheduled. Programming will rest Soon. You been listening to a national view. Part Jesse, rectory, broadcast retransmission causes game without the express written permission of Sure you magazine is strictly prohibited. The spot gasoline produced by the incomparable surgery,
who makes us sound better than we deserve thanks David Martin and thanks specially to everyone for listening. We are the editors stay safe. Everyone.
Transcript generated on 2020-05-18.