Chicago cancels Thanksgiving plans as lockdown begins. Will the rest of the country follow?

This past week, Chicago mayor asked residents to "cancel Thanksgiving plans and stay at home unless they need to go to work or school or to tend to essential needs such as a doctor’s appointment or grocery shopping.". This seems all to similar to the nationwide lockdown the country saw earlier this year. Mike Dewine also came out this past week and mentioned the possibility of a lockdown in Ohio as well. As COVID-19 cases continue to rise, there is increasing speculation of another lockdown looming for the country. However, there seems to be a vaccine euphoria regarding the virus, and many argue a lockdown is not needed if the virus will be ready in the next few months.

An additional lockdown would likely hurt an already crippled United States economy, but no lockdown could lead to increased cases, and potential deaths. So what do you think? Should the US go into another lockdown? Will other large cities follow Chicago? How will the Biden administration handle this issue differently than the Trump administration?

https://www.cnbc.com/2020/11/12/chicago-issues-stay-at-home-order-as-covid-cases-continue-to-rise.html

Fed’s Bullard Says Economy Has Recovered Faster Than Expected

The Federal Reserve Bank of St. Louis leader James Bullard gave an update today. He said that the US central bank policy is in a good place right now following Covid challenges. Regarding the monetary policy, Bullard said “we don’t know what’s around the corner as far as the crisis goes, so all those things make me think that we’re in a good position for now.” 

The interest rates are at very low levels which aren’t expected to change much and there is seemingly a significant pace of purchases. He didn’t show much concern towards more stimulus because of the larger first round of fiscal stimulus which is still helping the economy. He also thinks that there is more improvement still coming with the unemployment rate. He said unemployment, which is currently at 6.9%, “could fall to between 4.9% and 5.5% by year-end, depending on when workers are called back.” Unfortunately, Bullard didn’t give any insight into possible policies going forward, but he noted that central bank and government aid have been effective during this Covid economic shock.  

I agree with him that policies and aid thus far have been effective. I am not sure that I agree with stimulus being unnecessary at this point because many people and many businesses are still facing serious hurt. Do you agree or disagree with Bullard’s statements? What possible economic events do you think are coming our way that could change our current economic position?

Derby, M. S. (2020, November 13). Fed's Bullard Says Economy Has Recovered Faster Than Expected. Retrieved November 13, 2020, from https://www.wsj.com/articles/feds-bullard-says-economy-has-recovered-faster-than-expected-11605274229

 

Africa's Debt Crisis Grows Amid COVID-19 Pandemic

 [SOURCE]

As reported by DW, various countries, particularly Zambia, have been racking up foreign debt over the past few years, and while the path to repayment has already been a long and tough one, the COVID-19 pandemic is not making it any easier. 

Zambia is expected to grow over 120% of GDP by the end of the year. It owes about $3 billion in debt to just China and Chinese entities. This would already be a significant challenge to overcome even without the pandemic. Angola, the 5th largest African economy recently has received around €5.3 billion over the next few years from donors, but that still does not place them favorably. 

DW writes, "According to the International Monetary Fund (IMF), African states need almost €410 billion to pay off all foreign debts due by 2023. ". 

While not only does this seem bad from an economic standpoint, we also have to think of the individuals in these countries. What happens when the money for fighting the pandemic runs out? What happens when funding for schools and hospitals runs out? 

Seeing how various international entities have been attempting to invest in various large African countries over the years, this can also have greater affects off the continent, such as in China who has heavily invested here. At this point, how could countries like those discussed be able to look for help, as so many foreign entities have been focused on containing this pandemic domestically and not helping abroad?

What happens between now and Inauguration Day

 Now that Americans have spoken and casted their votes, what happens next? Well, Americans who went to the polls on Election Day don't actually select the President directly. They actually voted for 538 electors, who, by the constitution of the United States, meet in their respective states and vote for President and Vice President once the popular vote totals are completely counted. These electors are known as the electoral college as a whole. Now that the votes have been counted and certified, all disputes must be settled in the supreme court by December 8th. On December 14th, all electoral votes are cast. These electoral votes must arrive in Washington by December 23rd. On January 3rd, Members of the House and new members of the Senate take the oath of office at noon. This marks the official beginning of the new congress. January 6th is the day that the electoral votes are counted. The President of the Senate (that’s Vice President Mike Pence) presides over the session. Each state gets a vote, and it it the house that decides the next President of the United States.  While there are more Democrats in the House, Republicans, as of now, control more state delegations, so it is very possible the House could pick Donald Trump even though there is a Democratic majority. This leads us to January 20th, Inauguration day. This is the day that the elected president takes the oath of office. The people of the country have spoken, and have chosen Joe Biden as the next president of the United States. Assuming that all goes well, do you think that we will have a peaceful transfer of power? If not, what effect do you think it will have on the economy of the country, and with the international relations of the country?

Wolf, Analysis by Zachary B., and Will Mullery. “What Happens between Now and Inauguration Day.” CNN, Cable News Network, 12 Nov. 2020, edition.cnn.com/2020/10/18/politics/electoral-college-timeline-2020-election/index.html. 

What a vaccine means for America’s economy

 https://www.economist.com/finance-and-economics/2020/11/14/what-a-vaccine-means-for-americas-economy

The news of a vaccine may curb the threat of the US economy sliding into a recession. Before the news of a vaccine was publicized the US economy was already recovering better than what was predicted. With many countries in Europe begging shutdown and lockdowns the US will likely follow suit in the next coming months but not as severe as European countries, these more relaxed restrictions will help the economy not lose much momentum on its journey of recovery. As the news of the vaccine breaks the chance of having a vaccine will only help our economy in it a trend to pre covid levels, all this being said the economy is still not predicted to be in the state it was in before covid until 2022 or even later but the signs of a vaccine will help the US decrease it record-breaking infection rate. Everything in the US economy seems to be trending in the right direction but we must keep in mind that these future lockdowns will hamper economic growth and employment growth. The delay of stimulus packages being passed is also a problem we will have to face. Even though the signs of a vaccine have appeared, the economy can still be set back by the constant increase in covid cases through the US, we still have a long road to travel to fully recover but it seems the road is paved for us to travel.

What do you think the act of having a vaccine will have on the economy and do you think it will come in time before the US sees lockdowns and restrictions?

Winter Covid-19

     With winter months coming close, we have already seen the predicted surge in coronavirus cases. Countries in Europe are going back in to lockdown, and their economies will struggle once again. Positive economic performances in the third squared saw the US GDP rise by 7.4%, and European output grew 12.7%. However, the recent surge in cases has already drove down the price of oil to a 5 month low. Mobility data from Google has shown that America's recovery has come to a halt as cases have risen. Europe reached an economic peak in September, and has been on a decrease since. With countries such as France and Germany going in to lockdown, economists are unsure of the consequences. Luckily, it is assumed that new lockdowns will be less damaging as previous ones due to more knowledge on the virus. Manufacturing, and construction firms will stay open this time around with safety precautions.

Will new lockdowns have as big of an economic impact as previous ones?https://www.economist.com/finance-and-economics/2020/11/07/how-economically-damaging-will-new-lockdowns-be

In other news...

 Article: "Turning Inward," The Economist, November 7, 2020

We all know COVID-19 has disrupted supply chains. So has rising suspicion of China in the West. The global economy is decoupling, according to The Economist, as it has been since the financial crisis of 2008. Given the major supply chain shocks that are causing the industrialized world to look increasingly inward, an old idea is becoming popular once again in emerging markets: import-substituting industrialization. The article defines this practice as, "a strategy that seeks to develop industrial capacity by shielding domestic producers from foreign competition." Practices associated with ISI are tariffs, subsidies, and government protection of key industries (sound familiar?). However, the goal in ISI is not to protect jobs or workers, but to develop a mature, industrial economy. 

The article points out ISI's flaws, which I agree with: despite its promise, ISI will not deliver long term growth to most emerging markets. First, most emerging economies are not highly effective autocracies run by technocrats (read: they are not China). This means that firms will likely be protected not for economic reasons, but political ones. Further, even firms that are protected for their economic potential will, when shielded from foreign competition, have no incentive to become more efficient or to be responsive to consumer demand. Finally, although this is not mentioned by the article, I think the global economy will, in the long run, return to the enthusiasm for globalization present before the financial crisis. When this happens, emerging markets will need to be able to compete in a world where developed nations will (albeit a little hypocritically) insist upon the principles of free trade being adhered to. 

What do you think? Are there any countries or circumstances in which ISI might be beneficial? 

How the U.S. Election Could Affect Europe's Markets, Economy and Trade

 The results of the election can have an effect that reaches farther than just the United States. Europe does a lot of business with the United States and the future policies of the next president can have a large impact on economies other than our own. The increased number of mail-in ballots is causing the results to take longer and the volatile changes caused by the difference in poll and mail-in votes has created a stir. While the U.S. stock market has been going strong, consumer confidence could take a hit abroad. The continued legal actions to drag out the election will only increase the market's volatility. If Trump is re-elected, then a trade war could erupt between the U.S. and Europe. In 2019, Europe exports to the U.S. equaled about 384 billion euros; while the U.S.’s imports to Europe were only worth about 232 billion euros. Europe’s surplus means that they have a lot to lose if Trump were to impose tariffs on their goods. If Biden were to win the election, there following tax changes in the U.S. could have an effect on Europe. Biden may undo Trump’s tax cuts and increase taxes while pushing expansionary spending; this has the potential to lead to negative market growth. The U.S. economy could have many, potentially negative, global effects due to its important role. Other sources believe that the increased public spending could boost global markets and increase equity performance. Ultimately, there are more than just U.S. citizens who will be impacted by the results of the presidential election.

https://www.cnbc.com/2020/10/14/how-the-us-election-could-affect-europes-markets-economy-and-trade.html 

Biden’s economic recovery plan, called Build Back Better, would spend over $7.3 trillion and invest in green infrastructure, health care and more

Joe Biden has recently been announced as the next US President. With this, Biden is inheriting an economy that has been destroyed throughout 2020. Therefore, Biden will have to come up with an economic recovery plan at the forefront of his presidency. 2020 has seen high unemployment, bankruptcy, and eviction rates. Additionally, the winter months are approaching, which is when Covid has been predicted to be more prevalent and deadly. Therefore, his economic policy will also need to be a pandemic policy. 

Biden plans to start with another stimulus bill. While this requires a lot of spending, this is only the start. Afterwards, he plans to spend over $7 trillion on initiatives such as infrastructure, housing, education, economic fairness, and healthcare. His economic policy has been given the title Build Back Better.

Do you think this plan will work? What short term and long term effects will come out of his $7 trillion spending on initiatives?

link: https://www.cnbc.com/2020/11/10/president-elect-joe-bidens-plan-for-the-economy-jobs-and-covid-19-.html

"The UK economy is heading back into recession"

https://www.cnn.com/2020/11/05/economy/uk-economy-recession/index.html

Stores, restaurants, schools, and more across the UK are closing as the country plans to head back into lockdown. The United Kingdom has seen their interest rates stay extremely low and they want to keep it that way, however, the central bank plans to buy more bonds from the government.  The country has seen one of the worst years for their economy at the hands of Covid-19 and leaving the EU.  However, stimulus package plans have already been released and the country plans to continue their previous furlough policies. The country knows that this year will be hard to recover from and are attempting to prevent the economy from worsening any farther.

Do you think the US will start to follow suit as more countries are going into lockdown and providing stimulus etc.? Do you think there is potential for the current US administration to follow suit?