Hi, everybody.
Ian Bremmer here with the latest edition of
The Red Pen.
And today, we're taking our Red Pen
to an article titled "A V-Shaped Recovery
Could Still Happen."
I'm not buying it.
It's published recently by Project Syndicate,
authored by British economist named Jim O'Neill.
Jim O'Neill is very well-known.
He was chairman of
Goldman Sachs Asset Management.
He's the guy that coined the acronym BRICS,
Brazil, Russia, India, China.
So, no slouch.
But as you know,
we don't agree with everything out there.
And this is the case.
Brought to you by the letter V.
We're taking sharp issue with the idea that
recovery from all the economic devastation
created by the coronavirus pandemic
is going to happen quickly.
That after the sharp drop
that the world has experienced,
everything bounces back
to where it was before.
That's the V.
Economists around the world are debating
how quickly recovery will happen
to be sure.
But we're not buying the V.
Here's why.
W-H-Y.
First, among his arguments,
O'Neill points to stimulus money pouring in
from all corners of the globe.
He writes, "After all, governments around
the world have mustered an absolutely massive
economic response, exceeding the amounts
even provided during the 2000,
2008-2010 financial crisis."
No question.
But this is not the 2008 recession.
This moment has brought the entire world's
supply chain, massive disruption, debt-distress,
unlike anything we've seen in our lifetimes.
And with the virus very much still exploding
around the world and no vaccine for the moment
and none really expected that would work
and be distributed globally until at best,
mid, late next year, we're likely to see a
relentlessly stop and start economy
that more resembles what we think is a jagged swoosh,
than a V.
Sure, we've had a good balance after a very
steep decline, but all indications are that the
hard part is still to come.
Second, O'Neill writes that improving conditions
in China and South Korea bode well for the
rest of the world.
He writes, "despite China's ongoing challenges,
the Caixin services PMI index rose to a
10-year high in June,"
and he points to increased exports
from South Korea, too.
Sure, China and South Korea, but they're doing
particularly well because they contained the virus.
They quarantined.
They had contact tracing.
They had early testing.
That's not true in much of the rest of the world.
Certainly not in my own United States,
the world's largest economy.
Not in Brazil.
Not in India.
Not in most of the world's emerging markets.
A global recovery will not gain momentum
while the world is following
completely divergent paths.
And finally, O'Neill writes,
"If lockdowns remain localized and temporary,
if health systems continue to expand testing,
and especially if a vaccine or more effective treatments
are developed, the economic outlook
need not be as bleak as many believe."
Those are some very big "ifs", my friend.
Testing is nowhere close to what it needs to be
in the United States and in most of
the developing world, aside from China.
Yes, the United States is testing a lot more
than it used to, but nowhere close to the
explosion of cases that we have right now.
We're still looking for effective treatment options,
let alone the vaccine that could
potentially take years to develop
and distribute globally.
And if the first vaccines are not seen as effective,
a lot of people are going to wait.
They're not going to take them immediately.
That's even with good education.
That's even, never mind, anti-vaxxer sentiment.
And it's not paying attention to vaccine nationalism
and the fact that the world is not rowing together
in developing a vaccine together,
which is what you want to respond
to a global pandemic.
In other words, all of this is not pointing to a V.
It's this jagged swoosh.
It's going to be a lot uglier
than we'd like it to be.
That's your Red Pen for today.
Have a great weekend.
Stay safe and avoid people.
