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Money Why the coronavirus downturn may be just a recession, not a depression

17:13  26 march  2020
17:13  26 march  2020 Source:   financialpost.com

Sentix economic barometer collapses - "Euro zone in deep recession"

 Sentix economic barometer collapses - © Reuters / Yves Herman FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels Berlin (Reuters) - The coronavirus pandemic hits the economy in According to a survey, the euro area is tougher than the financial crisis more than ten years ago. The investment consulting firm Sentix reported a record low on its economic barometer on Monday: it fell in April by 25.8 points to minus 42.9 points.

The coronavirus recession will be brutal, but there are still decent odds that it will be short. If the economy is put on life support, then it should start up again once The stability of the banking industry is the reason we ’ re confronting a second Great Recession , and not a repeat of the Great Depression .

The idea here is to help employers put the workforce temporarily not needed in a sharp downturn into hibernation for when normality returns, not to fire them and do irreparable damage to the nation's Let's be clear, we are in a recession already, as is most of the coronavirus -afflicted developed world.

Carolyn Wilkins, Stephen Poloz are posing for a picture: Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins, a crisis fighter in the 2008 recession.    © Reuters/Blair Gable Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins, a crisis fighter in the 2008 recession.

The lessons of the financial crisis were starting to fade.

For instance, every major Canadian political party sought votes ahead of last year’s federal election by promising easier mortgage restrictions. Some of the biggest companies were issuing cheap debt and buying back shares instead of building up reserves and investing. Financial markets were frothy, and yet investors appeared more fearful of missing out on the boom than of getting wiped out by a bust.

Massive stimulus packages in Canada, U.S. put cash on Main Street in departure from 2008 crisis

  Massive stimulus packages in Canada, U.S. put cash on Main Street in departure from 2008 crisis Massive stimulus packages designed to combat the economic fallout from the COVID-19 pandemic were unveiled both in Canada and the United States on Wednesday, with both countries aiming to put money quickly into the pockets of individuals hit by the economic standstill. Canada’s stimulus package, which will be rolled out early next month, will almost double direct spending on the crisis to $52 billion, with anyone who has lost income due to the COVID-19 pandemic qualifying for up to $2,000 a month for up to four months.

The coronavirus pandemic is inflicting enormous economic damage in the United States, as quarantines close businesses, force workers to stay at home, and create uncertainty that has spurred volatility in financial markets. The Fed chair says the United States may be in a recession already.

JUST WATCHED. A recession may be inevitable. Here's why . How coronavirus could lead some countries into recession . CNN Business' Christine Romans explains the difference between a recession and a depression , and the likelihood of the first depression since 1929.

But central bankers never forgot.

The major central banks and financial regulators kept working to make sure banks would be more resilient when the next storm hit. They also put considerable effort into thinking about which of their tools worked best during the financial crisis, and how they could be adjusted for future crises. They developed contingency plans so they wouldn’t be forced to create policy on the fly, as they often did during the autumn of 2008 and early 2009.

That work is now paying off. The coronavirus recession will be brutal, but there are still decent odds that it will be short. If the economy is put on life support, then it should start up again once the threat to public health passes. The reason a quick reboot should be possible is that the banks were told the mistakes behind the financial crisis wouldn’t be repeated. Financial institutions were ordered to preserve enough capital to survive the toughest situations imaginable.

Coronavirus: Macron says he discussed with Trump an "important initiative"

 Coronavirus: Macron says he discussed with Trump an Coronavirus: Macron says he spoke with Trump about an "important initiative" © Reuters / BENOIT TESSIER CORONAVIRUS: MACRON SAYS TO HAVE TRUMPED AN "IMPORTANT INITIATIVE" ( Reuters) - Emmanuel Macron said on the night of Thursday to Friday he met with his American counterpart Donald Trump on the issue of the coronavirus crisis.

A recession may be inevitable. Here's why . How coronavirus could lead some countries into Just over a week ago, the Fed had set a limit of 0 billion on these bond-buying programs. The social distancing policies imposed to fight the coronavirus crisis have brought the American economy to its

This is a fairly open ended question, but how will the Coronavirus pandemic effect different geopolitical situations in the world. This is not a place to discuss conspiracy theories! There are other communities for that. Memes, puns, and off-topic jokes will be removed.

Banks grumbled that their new stress tests were unreasonably harsh. Thankfully, their regulators mostly ignored them. You will have heard stories of banks being difficult in recent weeks, as desperate companies collide with inflexible processes for loan approvals. But imagine what it would be like if financial institutions were in danger of bankruptcy like almost every other company? The stability of the banking industry is the reason we’re confronting a second Great Recession, and not a repeat of the Great Depression.

“In some ways, we are in better shape (than in 2008) because we aren’t destroying balance sheets,” Paul Boothe, an Ivey Business School academic who served in senior positions at Finance and Industry during the financial crisis, said in an interview this week.

Impact to Alberta's oil and gas could put Canada on brink of recession, says Conference Board

  Impact to Alberta's oil and gas could put Canada on brink of recession, says Conference Board The impact to Alberta's energy sector due to COVID-19 and oil prices could put the country on the "brink of recession," the Conference Board of Canada said Tuesday in their spring outlook report.The board expects business investment and exports to substantially decline across the country and consumer spending to ease in the second quarter as the impact of COVID-19 takes hold.

The government might not have played any part in causing the disease, the narrative goes, but they’re making things worse with their efforts to control its spread. Even when China’s Central Political and Legal Affairs Commission issued a blanket order against trying to cover up cases of coronavirus

to prevent coronavirus recession ‘from morphing into a prolonged depression ’. with sufficient strength and speed to prevent the recession from morphing into a prolonged depression , made Stock market’s historic bounce may signal ‘near-term bottom,’ but remember what happened in 1987

“Luckily, it’s not a financial-market driven, or a financial-meltdown driven, shock,” he added. “That tells me that if we can get through this, and that’s the sort of the public health side, then I think we can come back fairly quickly and we don’t have to have the long rebuilding of balance sheets that we had post 2008-2009.”

The relative stability of the banking system has allowed the Bank of Canada to fight a guerrilla war, rather than relying on interest-rate cuts alone to offset the economic damage from the crisis.

Governor Stephen Poloz and his deputies slashed interest rates by a full percentage point in less than two weeks, dropping the benchmark rate to 0.75 per cent. Many analysts and investors predict Canada’s official rate is headed to at least 0.25 per cent, and maybe even zero, matching the U.S. Federal Reserve’s move earlier this month.

Those moves are likely. But one reason the Bank of Canada hasn’t had to rush to zero is that it has developed ways to calm specific markets that are showing signs of stress. The strategy allows policy-makers to save their biggest gun — the benchmark interest rate — for when things go really bad.

Bernanke says this is much closer to a natural disaster than the Great Depression

  Bernanke says this is much closer to a natural disaster than the Great Depression The ex-Fed chairman who served before and after the 2008 financial crisis said Wednesday the coronavirus economic halt is more like natural disaster than a classic depression. Earlier Wednesday, current St. Louis Fed James Bullard told "Squawk Box" the U.S. economy is facing a huge shock to the system over the near-term, but it will then bounce back strong after worst of the outbreak passes.Bullard said this week the nation's unemployment rate would skyrocket to 30%, higher than it was even during the Great Depression.

Coronavirus symptoms: what are they and should you see a doctor? The pay of senior public servant may too be frozen by the freeze if a government request to the Australian Public Service 'We are demanding the Morrison Government immediately provide an Australian coronavirus wage of up

Welcome to /r/ Coronavirus . In December 2019, a novel coronavirus strain (Sars-CoV-2) Wait until the recession , we are still at the station slowly departing for the whole roller coaster ride of missery! I may be wrong and I'm still perfectly happy staying in my quarantine and not seeing people, but I feel

Earlier this week, after the Bank of Canada’s trading desk noticed unusual spikes in the market for short-term provincial debt, the central bank created the Provincial Money Market Purchase program, becoming a buyer of provincial treasury bills and promissory notes. On March 25, the Bank of Canada bought some $279-million worth of such assets, reducing the cost of credit for provincial governments, which are on the frontlines of the health emergency.

On March 24, the Bank of Canada bought $242 million of mortgage-backed securities, keeping a promise to purchase as much as $500 million of those securities per week to ensure a steady source of demand in a market that banks rely on to backstop their mortgage lending. The previous day, the central bank added $20 billion of banker’s acceptances to its portfolio through a separate program meant to keep cash flowing in a market that underpins a source of small-business finance.

In all, the Bank of Canada has established about a half-dozen of these sorts of programs with remarkable speed. That’s because policy-makers have spent the past decade getting ready for a scenario like this one. Many of the crisis fighters on the political side have drifted away, but many of the technocrats remain in place. For example, Carolyn Wilkins, a senior member of the Bank of Canada’s staff in 2008, is now the second in command.

“Those lessons were learned not just by the lenders, but they were learned by the policy-makers,” Poloz told reporters on March 18. “Personally, I have great comfort from the seasoned people who I’ve got around me who were living through that.”

• Email: kcarmichael@nationalpost.com | Twitter: carmichaelkevin

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Stocks surge for second day amid apparent slowdown in new virus cases, Dow jumps 800 points .
Stocks rallied on Tuesday, building on the strong gains from the previous session, as investors grew more optimistic about a decline in new coronavirus cases. The Dow Jones Industrial Average traded 846 points higher at the open, or more than 3%. The S&P 500 gained 3.2% while the Nasdaq Composite surged 2.8%.“Investors chose to accentuate the positives, as they have been mostly doing since the bear-market low,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note to clients. “In our opinion, we are in the midst of a Great Rebalancing away from bonds and into stocks.

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