I don’t think we’re on the cusp of another Great Recession and after reading these two paragraphs (quote below), I wonder if further rate cuts will really move the needle for the economy. Basically, the Fed (and PBOC et al.) can further flood the market with even more cheap money, and with less consumables available (thanks beer flu, manufacturing slowdown, etc.) and consumer confidence being a big factor in propping up the economy, will further rate cuts really help?
With the 11% slide of the S&P in the last seven sessions, and the markets betting that a 25-50 basis point cut is almost a guarantee, rate cuts seem like they’re bound to happen. I just question the efficacy of lower rates in a supply-shocked economy - though, it may be great for the stock market in the near term. But 1-2 years...?
I know there are a lot of factors to consider and am genuinely curious on everyone’s take.
Quote:
The Great Recession of 2008 and 2009 was largely a “demand shock,” as banks neared collapse, home prices plunged and trillions of dollars in household wealth were wiped out. People and businesses suddenly had less money to spend, tipping the economy into a deep recession.
The virus threat is a “supply shock” — one that stems from a sudden slowdown in economic activity as China, the world’s factory, struggles to get back to work and as crucial industries come under strain against a backdrop of travel restrictions, limited public gatherings and shuttered schools.
Source:
https://www.nytimes.com/2020/02/28/business/economy/coronavirus-economy.html
Submitted February 29, 2020 at 03:41PM by HipHopPolka https://ift.tt/32Jlya7
