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Economists believe that the pandemic is causing the US economy to plunge into a double-dip recession and is also exerting great pressure on the dollar. They are calling for fiscal support to address the difficult economic situation, citing that the economy is heading towards a hole in savings more than ever in history.

Nouriel Roubini

Nouriel Roubini, an economist, shared an article on how the virus surge in the US is leading to a double-dip recession and dollar crash according to Yale University’s economist Stephen Roach. He further adds that the rise in coronavirus cases is disrupting Wall Street’s hopes for a V-shaped economic recovery.

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Rubini also predicted the US to economy to face further lockdowns in the days ahead, as he spoke to CNBC’s Trading Nation. However, he also adds that these lockdowns may not be as severe than the ones in spring but could lead to undeniable damages and shock the global economy into recession. Roach therefore believes that investors should be vigilant.

Roach also predicts a temporary relapse in the economy, mostly in the beginning of 2021. He has also called out for a 1% dip in gross domestic product (GDP) in the first quarter of 2021 but said could be more significant. He also warns of continued and intense pressure on the dollar, with the need for fiscal relief to address the economic crisis.

Dr Jennifer Robson

Dr Jennifer Robson, an associate professor at Kroeger College, Carleton University, re-tweeted an article on government’s debt sustainability in Canada’s post-Covid future. The International Monetary Fund (IMF) has forecasted Canada’s general government debt, including federal and provincial, to exceed 100% of its GDP, the article noted. Economists worry whether the country will be able to sustain the vast accumulation of debt, not seen since World War II.

Additionally, experts explain that Canada’s debt sustainability depends on the fiscal health of its provinces. Steady rise in provincial debts, Covid-induced economic shock, and mounting healthcare costs for the aged have exerted great pressure on government debt. However, a working paper analysis for the Canadian Tax Journal by Dr Trevor Tombe, finds long-term effects of the increase in federal debt from Covid-19 to be small compared to the significantly larger challenges faced by provincial governments.

Giving his projection of debt to GDP ratios for Canada, pre-and post-Covid, Tombe concluded that the large increase in Covid-related federal debt has been outdone by the increase in provincial debt. Additionally, despite the virus-induced economic shock, federal finances have remained sustainable.

Brian Riedl

Brian Riedl, an economist and senior fellow at the Manhattan Institute, re-tweeted about how the Covid relief compares to the Great Recession stimulus. He tweeted that about 70% felt that the government provided less stimulus during the Great Recession and that the response to the 2008 recession was much smaller. However, adding it all up, the Great Recession saw as much response as during Covid-19.

According to Committee for a Responsible Federal Budget (CRFB) calculations, Covid-19 relief totalled about $2.5 trillion for the next five years, a proportion that was equally attributed for the Great Recession between 2008 and 2012. However, recent analysis finds that the Great Recession funds were mostly distributed over the five years, but the Covid relief was spent over just six months.

CRFB data further revealed that the Great Recession cost the federal government 2.4% of the GDP, compared to Covid-19 that has cost the government 2.3% of the GDP. Additionally, economic rescue measures will also cost the US government 12% of the GDP in the fiscal year 2020, compared to 1% in 2008 and 4% in 2009.

https://twitter.com/Brian_Riedl/status/1333506463604613121