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When Economic Depression Follows Pandemic, No Time to Waste

When Economic Depression Follows Pandemic, No Time to Waste

What the Bank of Canada and IMF see coming will demand bold stimulus.

ClubMonacoRobsonBoardedUp.jpg
On Vancouver’s Robson Street, the Club Monaco outlet is boarded up to prevent looting. Photo by Joshua Berson.

It is still sinking in that the end of the pandemic will not be the end of our troubles. On the contrary — we will likely see the end of the pandemic overlap with a full-scale economic depression, with COVID-19 waiting to make recurrent comebacks. Amid a global economic collapse, Canada will have to postpone hopes of recovery; for the foreseeable future, we will be in damage-control mode.

The IMF’s best-case scenario assumes that the pandemic “fades” in the second half of 2020, and “containment efforts can be gradually unwound,” permitting some economic rebuilding. Even so, “the global economy is projected to contract sharply by -3 per cent in 2020, much worse than during the 2008-09 financial crisis.” 

Strikingly, the IMF implicitly endorses a program that is socialist in all but name:

“The immediate priority is to contain the fallout from the COVID-19 outbreak, especially by increasing health-care expenditures to strengthen the capacity and resources of the health-care sector while adopting measures that reduce contagion. Economic policies will also need to cushion the impact of the decline in activity on people, firms and the financial systems reduce persistent scarring effects from the unavoidable severe slowdown; and ensure that the economic recovery can begin quickly once the pandemic fades.”

The IMF approves such policies in many of the advanced countries as well as in China, Indonesia and South Africa. It argues that “Broad-based fiscal stimulus can preempt a steeper decline in confidence, lift aggregate demand, and avert an even deeper downturn. But it would most likely be more effective once the outbreak fades and people are able to move about freely.”

The best-case scenario?

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