1) Seeing commentary that the $1.4ish trillion in proposed fiscal stimulus isn’t enough.
Likely true, but it will help and it is only the beginning. Market panic will continue to drive policy panic.
The policy response will keep growing until it is sufficient.
2) The most realistic Q2 GDP estimate so far is from Goldman Sachs at -24%, which is a $1.3 trillion “hole.”
Roughly $1.4 trillion concentrated in Q2 and the most aggressive Fed *ever* will matter even in this context.
3) $1.4ish trillion in fiscal stimulus, another several hundred billion from automatic stabilizers, temporary relief from some expenses, an oil dividend to American consumers and the most aggressive Fed in history will really help.
4) And the stimulus will eventually be as large as it needs to be.
“The Americans always do the right thing, but only after they’ve tried everything else.”
5) Important to remember the government can and will do *anything* that they want to restart the economy.
We went from $500 billion to $1.4ish trillion of proposed fiscal stimulus in roughly a week.
The UK government is *paying* 80% of the wages of retained workers.
6) Bailouts should be framed as pro-employment. Either companies can be bailed out and employees can remain on their payrolls or they will immediately be shifted to the government payroll.
7) In 2009, many smart people said that a depression was inevitable and that QE was going to destroy the economy. They were *utterly* wrong, but pessimists always sound smarter than optimists.
Malthusians have been wrong for hundreds of years.
8) There have been many ways for the world to end over the last 100 years. World Wars, the Great Depression, the Spanish Flu and tens of thousands of nuclear weapons.
The world did not end. I don’t think it will end because of this virus.
9) I’m not minimizing the situation. We have entered what is likely the most severe recession in modern history. The economy has never just stopped before.
But the policy response will be equally unprecedented. This recession will *eventually* end.
10) These are uncharted waters for both the economy and the market.
The range of outcomes is really wide, but I think the odds of a “Walking Dead” scenario or another Great Depression that lasts for almost a decade are quite low.
11) We do know that bear markets accompanied by recessions have lasted 18 months on average and we are only a few weeks into this one.
So it is highly unlikely that we have seen the bottom in the market.
12) But we have likely seen “The End of the Beginning.”
You can follow @GavinSBaker.
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