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Thursday, July 30, 2020

GDP Plunges Significantly in Q2-A Need for Long Term Emergency Plans

It is suspected that Q2 was going to be a little of a wash. It was hoped toward the end we would see the numbers start to improve. That is a problem now that COVID is starting to make a resurgence. I was reading the historical declines in GDP in the article, "Second-quarter GDP plunged by worst-ever 32.9% amid virus-induced shutdown" by Jeff Cox and was somewhat awed by the 32.9% GDP drop. It strikes me that a little virus could stop all of us in our tracks and create such havoc on our economy. Maybe we should think of a future emergency plan to minimize spread and economic pain. 

They say that economics is an animal spirit. While we may have reduced consumer spending, government spending, and exports one might wonder how much is due to necessity and how much is due to our own fear. 

We know we have to shut some things down but the question of when and for how long is highly important. The virus was so novel we needed to just act on it without thinking through things because the information we had was ambiguous. 

That leaves us considering the possibilities of future plans. Sure we are going to experience significant change and gravitate more of our business online but we will likely need a more strategic plan by Congress and/or White House how to deal with these things in the future. 

No one knew what this virus was but we might want to consider future emergency plans based on what we learned here. Such a plan could have an impact on panic, animal spirits and help minimize future GDP plunges.

Fundamental questions like, How long do we shut down airports and travel when we first find a novel virus? Should we localize shutdowns quickly and keep as much of the economy going? Sine we know we can limp along with partial capacity businesses should we implement emergency operating requirements?

It is likely that in the near future we will need to think about have along term emergency plan. We should take what we learn hear and then apply it to future situations. Develop and draft a plan that will help us take emergency protocols that give use the most immediate options as well as provide a little time before making more concrete decisions. 

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