We Destroyed the World’s Greatest Economy for No Reason
The comments below are an edited and abridged synopsis of an article by Jim Rickards
Everyone knew the second quarter of 2020 was going to be a disaster, and it was. The US economy fell by 31.4% (annualized) in the second quarter.
But the expectation was that there would be a V-shaped recovery in the US, with a sharp bounce-back in the third quarter, a reopening of closed businesses, rehiring of the unemployed and a rising stock market.
But so far, the economy is not following the script laid out for it by the politicians and experts.
The stock market did rally, but that was mainly because the stock index components are heavily weighted to companies least affected by the pandemic: Amazon, Apple, Netflix, Alphabet (Google), Facebook and Microsoft.
It didn’t hurt that the Fed printed $4 trillion of new money and backstopped money markets, corporate bonds, municipal bonds, foreign central banks and other facets of capital markets with direct purchases, guarantees or currency swaps.
Even so, stocks have been struggling since hitting new highs on September 2.
There was growth in the third quarter (the best estimate is that the US economy will grow at about a 35% annualized rate, but there won’t be official figures until October 29).
The 35% third-quarter recovery was to be expected as Americans got back to work after the lockdown. That 35% rate might sound like the third quarter will make up for the second quarter, but it won’t.
Up for discussion: Not as good as it sounds; when will output return to 2019 levels; another L-shaped recovery; 90% of lockdown benefits at only 10% of the cost; we destroyed the world’s greatest economy for no good reason.