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Big Government Here to Stay?

 

Even as some economies push to re-open, the scar left by COVID-19 is likely to remain for a long time. Like it or not, this means big government is also here to stay – at least for the foreseeable future. National, state, and local economies are on life-support with a steady IV drip of fiscal and monetary stimulus. It’s hard to say how many months or years it will take to resuscitate the global economy, but as of now, it’s incredibly challenging to see a way out any time soon. This week we get a taste of what the damage might be with the US and Eurozone Q1 GDP numbers on tap. While the numbers are going to be awful, they are likely to pale in comparison to what Q2 has in store.

Even if major economies were to ‘re-open’ in May, what does that look like? There isn’t an on/off switch that automatically turns the entire system back on. Millions of jobs have been lost. Countless small businesses have been shuttered, never to return. As governments and central banks inject trillions in stimulus to try and facilitate a soft landing, we have to wonder what the long-term implications are. This isn’t a criticism of government action – it is clearly necessary – but there are questions surrounding what comes of all this.

Stay tuned.

-CL

We continue to monitor this shift and assess the potential implications of COVID-19 on the macro picture.  If you’re interested in taking a deeper dive into this, please send us a message.

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