Thursday, 19 March 2020 11:24

Coronavirus Could Lead to an Economic Depression

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(New York)

This week has a very worst-case-scenario vibe to it, and thus we wanted to examine what the worst economic effects of the coronavirus outbreak might be. With a recession seemingly a foregone conclusion at this point, the question on economists’ minds is whether a depression could occur. A depression is an economic contraction that lasts for a long time, as in years, not a couple quarters. Since 1854, there has been 33 recessions and only one depression—by 1933 the US economy was only half the size that it was in 1929.

FINSUM: Many factors led to that huge downturn, and it takes a perfect storm for them to lead to a depression (e.g. the Fed raising interest rates at the same time as a huge drought in the Midwest). That multitude of factors does not seem to be in place right now.

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