From a COVID-19 recession to COVID-19 depression?

As we move into September, business failures will begin to mount, unemployment will soar, and underemployment may be even worse. It will be a time of instability and unpredictability. In past depressions, there was vast social unrest reflected in political fragmentation between those who suffered the most and those who didn’t. Sometimes the system can balance it, but usually it cannot, giving birth to a powerful political movement championing the dispossessed. In Europe, it was usually right-wing parties crushing the left. We are far from that point, but the coming U.S. election will be a harbinger of what might come.

Depression scares me. It creates not only vast human suffering but also political monstrosities. It is clear at this point that the current medical solution will remain in place until there is a vaccine. It is also clear that even with the best of luck a vaccine will not be fully produced, distributed and injected to a degree necessary or in time for the current solution to be improved. By that time, the economy will be in a very dangerous condition, if it is still salvageable. But the sooner a vaccine is found the less the danger will be. It should be remembered that after the European and American depressions of the 1920s and 1930s, there was not only political extremism but also war. History does not repeat itself, which is a great comfort – save that, as Mark Twain pointed out, it does rhyme.