Harrison: We’re Living a Wartime Economy

Your Real Vision Daily Briefing for April 28, 2020

Ash Bennington hosts Real Vision’s Managing Editor Ed Harrison to discuss recent developments in markets, macro, and the coronavirus crisis.

  • Government largesse will be key to avoiding a Great Depression-like scenario, which is the reason the Fed is intervening so aggressively.
  • Recovery could take years and sentiment will be a significant driver; European countries releasing lockdown can provide important clues as to how things may play out in the US.
  • With Brent at $20 a barrel, the oil industry is poised to collapse under the demand shock of recent days.

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If the chasm between financial markets and the real economy can’t be closed by government largesse, we will likely see another huge leg down, Ed Harrison said during today’s Real Vision Daily Briefing.

He called liquidity the lifeblood of the American economy and said that if the government continues to pump money in and support asset prices with bond purchases, we may avoid another Great Depression and see only a deep recession.

Harrison said we’re currently living a wartime economy, and that he thinks recovery will take at least two years. He also said that perception will play a critical role as sentiment drives consumption patterns and changes people’s long-term behavior. 

Harrison also revisited oil markets and expressed that the is doubtful the industry will be able to withstand the stress it is currently under. With Brent below $20 a barrel, he expects massive carnage. 

“Brent is telling you there’s a fundamental problem with demand that is going to crush this industry,” he said.

With perception driving so much of the potential for economic recovery, Harrison said he is waiting to see how lockdown release plays out as a forward indicator of sentiment. In the near term, he predicts a snapback in countries like Germany and Denmark and is interested to see how it compares to lockdown release in US locations like Georgia, Texas, and Alaska, which are far less prepared.