The Chinese virus is deadly; there is no question about it. However, the wave of economic depression heading to the United States’ shores will be far worse if the economy doesn’t start to reopen. Unemployment reached twenty-two million last week, Crude oil for the first time in history sold for negative, large portions of the service industry have shut down, countless small businesses across the nation have closed, and that’s not even the half of it.
Twenty-two million people are out of work, and the number of jobs available catered, which signals a contraction of the U.S. economy. The scenario that is beginning to unfold is one that will leave an everlasting impact on life as we know it. In addition, it was reported on April 1st that nearly one-third of American renters did not pay rent. That doesn’t account for the businesses which were also unable to pay their rent and or homeowners who are unable to pay their mortgage.
For the first time in U.S. history; Oil costs less than zero, which means that sellers will effectively have to pay buyers to store crude oil. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.
“The May crude oil contract is going out not with a whimper, but a primal scream,” said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd. “There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace, and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”
The economy has stalled, one-third of global demand for oil has collapsed. Oil is considered a backbone of the U.S. economy, and with demand for oil reaching record lows, it is clear that a stake economic crisis is beginning to unfold.
On another note, nearly half of U.S. states have logged double-digit percentage declines in their trust-fund balances since the end of February, the month before the beginning of the Coronavirus. From the end of February to mid-April, New York had used about half of the trust-fund money it had on tap, representing one of the steepest declines among states.
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According to Alan B. Lancz, “The next 45 days may just become the most critical period in U.S. financial history,” he wrote in a newsletter published Wednesday. “While on average, we may face a bear market every ten years, this one is like no other.”
“All benefits, including enhanced benefits, are being paid, and to help ensure it remains that way the state has applied for an up to $4 billion, no-interest federal loan,” said Deanna Cohen, a spokeswoman for the New York Labor Department. Massachusetts also has used up about half of its available funds. California registered the third-largest decrease over this period: Its trust-fund balance had dropped nearly 40% since February to $1.9 billion in mid-April.
“Even if we execute properly, the recovery will take time, and a best-case scenario is a ‘U’ shaped recovery,” he wrote. “The much talked about ‘V’ shaped recovery is no longer in the equation because of the unprecedented combination of negatives with this crisis,” he said, referring to hope for a recovery that is sharp and fast.
According to Stephen Moore, an economic adviser to President Trump, the economy needs to open back up immediately, despite the genuine ongoing health crisis from the Coronavirus, because if the administration waits any longer, it could get even uglier for the economy. Moore later said, “If we wait until June or July, you can write off not just 2020, but the first half of 2021. You’re talking about real devastation. So that’s why I have been such a bull on getting the economy open quickly. Really it’s just heartbreaking, and you see what’s happening with the food lines, with people at the Salvation Army where trucks in some cities are a mile long. We are facing real devastation here, and the human toll is growing with each passing day.”
Mark DeCambre. “The next 45 days are the ‘most critical period in U.S. financial history,’ says stock-market expert who profited in 1987 and 2008 crises.” MarketWatch. . (2020): . .
Victor Van Chen. “The Second Phase of Unemployment Will Be Harsher.” MSN. . (2020): . .
Catherine Ngai, Olivia Raimonde, and Alex Longley. “Oil Plunges Below Zero for First Time in Unprecedented Wipeout.” Bloomberg. . (2020): . .
Sarah Chaney. “States Burn Through Cash for Unemployment Payments.” The Wall Street Journal. . (2020): . .