Powell on CBC’s ‘Face the Nation’
- It’s going to take ‘a while’ to get back all GDP lost
- Economic recovery needs people to fell confident about virus and safety
- Full confidence may have to await arrival of a vaccine
- US recovery may stretch through the end of next year
An improvement in the second half is inevitable, if only because of the crippling extent of the contraction in Q2 but that’s the wrong way to think about it. The real question — and that’s what Powell is touching on here — is that when we get back all the growth that was lost in the pandemic.
He’s talking about it taking until the end of 2021 but that’s optimistic. Firstly, no one knows how long a vaccine is going to take. If we never get one, the impairment is going to be severe; like a Great Depression.
However if we get one in a year, I still think it takes well beyond 2021. The virus is going to do so much damage to corporate, household and government budgets that you really can’t get on track until you’ve returned to full output and then had time to pay it back. On top of that, many governments will be forced to raise taxes (or cut spending) to get climb out of the coronavirus hole. That will restrain future output.