The Coronavirus

and The Economy

 
 
 

Vocabulary

overall	isolation	intervention
extent	sharp (2)	precedent
depend	pack up	quarantine
crisis	compare	measure (2)
crazy	head off	fall/fell/fallen
supply	collapse	demand (2)
as well	no longer	supply chain
rent	shape (2)	lose/lost/lost
brief	chain (2)	production
signify	rebound	followed by
dip	recover	reconsider
hope	survey (2)	freefall (2)
plunge	chief (2)	think/thought/thought
sort of	mortgage	straight (2)
disease	care (2)	species (2)
host (2)	outbreak	see/saw/seen
deliver	pandemic	throw/threw/thrown
agree	contain	take/took/taken (3)
solve	obvious	say/said/said
loan	strategy	come to an end
fiscal	sum (2)	come/came/come
policy	monetary	coordination
layoff	nature (2)	approach (2)
flu	stage (2)	transmissible
localize	electorate	distribution
set up	apply (2)	this time around
cope	construct	interdependent
fragile	construct	private (2)
flow	inflation	vulnerable
debt	scenario	speak/spoke/spoken
ready	massive	work remotely
risk	downturn	experiment
effect	level (3)	feel/felt/felt
split	wedge (2)	inequality
remote	imagine	handle (2)
public	frustrated	move away from
conflict	epidemic	macroeconomic
output	sense (2)	unthinkable
fragile	stay down	with respect to
sever	bankrupt	wake up call
anxiety	take time	in this respect
heap

 
 
 
 
 

Video

 

 
 
 
 

Transcript

Saadia Zahidi, WEF Managing Director: “There is this overall sense of uncertainty and anxiety.”

Economic Expert: “We can expect a sharp recession.”

The question isn’t if a recession is coming. The question is how bad it will be.

Rolf Langhammer, Kiel Institute for the World Economy: “We don’t have a precedent. We do not know how long it will take.”

Economic Expert: “The extent of the downturn depends on the development of the epidemic.”

Steve Keen, University College of London: “The only thing I can compare it to is not a financial crisis . . . but to a world war.”

It really is like everybody’s packed up and headed off to war.

Ben Fajzullin, DW Senior Business Editor: “Where is everyone!?!

This is crazy!”

In a regular recession, economic activity falls.

Rolf Langhammer, Kiel Institute for the World Economy: “I A normal recession is not so bad. But at the moment, we have quite a different situation.”

Steve Keen, University College of London: “It’s a collapse in both demand and supply. Because we can no longer produce output, the supply chain has been shattered by the coronavirus.

It means people lose their jobs. Therefore, demand falls as well. And people can no longer pay their mortgages, their rents.”

Economists like to give recessions a letter.

A “V” signifies a sharp, brief decline, followed by a rebound.

A “U” takes a lot longer than a V-shaped recession.

“W” is a double-dipped recession.

“L” is a plunge that stays down for a long time.

“I”? That’s the worst of all — that’s a freefall.

Rolf Langhammer, Kiel Institute for the World Economy: “We hope that it will be a V-shaped recession.”

Don’t we all?

But that wasn’t the result of a survey of chief economists.

Saadia Zahidi, WEF Managing Director: “While a good 30% thought that this would be sort of a V-shape, there was a good 30% that were completely uncertain. And a good five to ten percent (5% to 10%) were actually thinking this is going to be an L-shape, which is going to take a long time to recover.”

Steve Keen, University College of London: “An I-shaped recession is straight down. We have to have a collapse in production, simply because this disease doesn’t care about the fact that we are an industrial species. It simply sees us as a species, like a host.”

And hosting this outbreak has delivered us the fastest, deepest economic shock in history.

Central banks and governments are throwing trillions at the pandemic. They say, “Whatever it takes, for as long as it takes.”

But not everyone agrees.

Ben Fajzullin, DW Senior Business Editor: “So how successful have governments been in containing this?”

Daniel Stelter, Beyond the Obvious: “We had a financial crisis which was not really solved. We had a Eurozone crisis which was not really solved. And not we have the virus causing another crisis.”

And we see clearly our strategy of the past thirty years of solving all problems in the economy by having cheaper money and more credit, and more loans is coming to an end.”

Saadia Zahidi, WEF Managing Director: “There isn’t a belief that there is coordination between fiscal and monetary policy, despite the very large sums that are being talked about. That there isn’t that coordination at the international level, between various governments, of the nature we saw in 2008.”

A global problem needs a global approach.

But this whole pandemic has been about panic.

It didn’t have to be that way.

Steve Keen, University College of London: “We’ve not had a virus that has been this transmissible and this and this deadly, since the Spanish flu. That was in 1918, during the end of the First World War, to 1919, 1920.

At that stage, we did not have the iPhone, being produced in thirty separate countries, meaning that the system was very short supply chains. Even though it was handled very badly, it was localized to a level that simply does not apply this time around.

So we should’ve been setting up our production and distribution systems to cope with it. We constructed this economy, which is so massively interdependent. A very, very fragile web of commodity flows are necessary to produce output these days.

And to add to it, we have a level of private debt, which is three to four times the level of that applied back at the end of the First World War.

And that means that people are going to be going bankrupt.”

The World Economic Forum says employers it spoke to also weren’t ready for this either.

Saadia Zahidi, WEF Managing Director: “Less than 10% had ever thought about pandemics as part of their current risk scenarios. And less than 50% had ever experimented with even part of their teams working remotely.”

But so many people have died, while we experimented with quarantines.

There have been mass layoffs . . . I don’t know what’s going to happen to me.

And the effects of the coronavirus could be felt for decades.

Rolf Langhammer, Kiel Institute for the World Economy: “Well, it could split society further. It could create even sharper inequalities, drive a wedge between rich and poor.”

Steve Keen, University College of London: : “A massive increase in homelessness, indebtedness, social conflict. I see a much angrier electorate, and a much more frustrated public about this.

But also a public that recognizes the need to move away from globalization to go back to localized production.”

Daniel Stelter, Beyond the Obvious: “And we will see a measure on a macroeconomic level, which has been unthinkable before. I could imagine we will see a world of more government intervention, higher inflation rates, higher interest rates down the road.

And where we see more open financing of governments by central banks. And that’s a completely different world than the world we had before.”

Rolf Langhammer, Kiel Institute for the World Economy: “We have to reconsider the entire economic system. Maybe there is too much of a good thing with respect to globalization.

This is a wake-up call: That technology and digitalization of the economy can help us. But we are fragile, and we are very vulnerable in this respect. It will take time to recover from that very deep sever, economic crisis.”

So, back into self-isolation for me.

Looks like I’ll be doing a lot more home office. And reading a heap more books.

I just hope those economist aren’t right about everything.

*     *     *     *     *     *     *

 

 

Questions

1. Only one person, the journalist, spoke during the entire report. True or false?

2. At this point, is it possible to avoid a recession? What do the experts compare the current situation with?

3. How does the coronavirus-induced economic downturn compare with previous recessions?

4. “Economists like to give recessions a letter.” What does this mean?

5. What does everyone hope for? Does everyone agree with the possible outcomes?

6. There are solutions to the economic crisis. Is this right or wrong? What are some solutions?

7. Is coordinated, international cooperation required? Is this easy to enact?

8. What are the immediate results of the coronavirus pandemic?

9. According to the experts, after the coronavirus outbreak has passed, everything will return to normal. Is this correct or incorrect? What may be the long term consequences?

 

A. My family, friends and I have been impacted by the coronavirus outbreak. Yes or no?

B. What is the situation like where you live? Is there a feeling of dread and desperation?

C. Who or what industries will suffer as a result of the pandemic?

D. Will anyone emerge as “winners” from the coronavirus epidemic?

E. What might happen in the future?

F. What lessons can be learned from this outbreak? What should people and governments do?