The 2020 Covid-19 Recession and Detroit

[ABetterDetroit]

The recession we all knew would come sooner or later is now here unfortunately. When bad things happen the only upside is that they do present a new view on what needs to be done to protect and grow the economic future.

What can be done differently this time around that will get Detroit and the metro area out of this recession sooner rather than later?

[401don]

It will be interesting to see if the auto companies receive funding again. When your company is in trouble like the airlines, cruise ships, etc. you will get a bailout. The auto companies have been hit just as hard and this time it's through no fault of their own. Because they have been better prepared compared to 2008, they may have enough cash to wither this storm but should they be expected to burn all their billions in cash reserves? Where will that leave them with R & D funding and what happens if car volumes don't return to normal for a few years?

[Justin SOD]

Relevant article I just happened to come across this morning: https://www.bloomberg.com/news/artic...=pocket-newtab

"Used-car sales fell 64% in the last week of March, according to Manheim. The Cox Automotive-owned auction company estimates that prices have fallen about 10% in recent weeks, though that figure is based on unusually low volume at auctions.

If that level of decline lasts or worsens, it could have huge implications for GM, whose General Motors Financial unit had $30.4 billion worth of vehicles leased to customers at the end of last year. If GM Financial needs to boost its estimate of how much those vehicles are going to depreciate in value, each percentage point increase raises the firm’s expenses by $304 million, according to a regulatory filing.

GM assumed a 4% decline in residual values this year. If the 10% drop Manheim has seen recently persists, depreciation expense could counter the $1.9 billion that GM Financial earned in pretax profit last year, said Joel Levington, a credit analyst with Bloomberg Intelligence. Ford Motor Credit faces similar risk, he said."

[ABetterDetroit]

In the near future there is going to be a large push to get more medical supplies domestically produced. With Detroit’s legacy as a manufacturing hub it would be a intelligent move to aggressively go after this business.

[313WX]

but should they be expected to burn all their billions in cash reserves?

Yes. That's the purpose of having cash reserves in a free market economy.

And for the record, I don't support the bailout for the other industries either.

[Colombian Dan]

The bulldozers will be working overtime once this virus passes. Automation will eliminate many mundane jobs.

[Metro25]

The bulldozers will be working overtime once this virus passes. Automation will eliminate many mundane jobs.

I'm not sure how anybody could think this. If anything this virus has proved is that the world still runs on human labor and is completely dependent on it despite the hype of automation, the only truly essential jobs are labor and healthcare. Unless you mean white collar non-essential jobs will be automated?

[401don]

Yes. That's the purpose of having cash reserves in a free market economy.

And for the record, I don't support the bailout for the other industries either.

What's the point of bailing out individuals with the stimulus cheques if they have no where to go back to work? Did you support bailing out the banks in 2008 or would you have let the economy completely collapse?
Also there hasn't been a free market economy since the 1930's. Any time a gov't uses fiscal and monetary policy to affect the economy it's not a free market economy.

[313WX]

What's the point of bailing out individuals with the stimulus cheques if they have no where to go back to work? Did you support bailing out the banks in 2008 or would you have let the economy completely collapse?
Also there hasn't been a free market economy since the 1930's. Any time a gov't uses fiscal and monetary policy to affect the economy it's not a free market economy.

Theoretically, the demand would still be there if these companies disappear [[not all of them will). For the companies that do disappear, new job-creating companies would crop up to meet that demand.

I agree with your last sentence. And now here we are with a bunch of zombie companies that are "too big to fail," massive deficits/debt and on the verge of a hyperinflationary spiral.

[401don]

Theoretically, the demand would still be there if these companies disappear [[not all of them will). For the companies that do disappear, new job-creating companies would crop up to meet that demand.

I agree with your last sentence. And now here we are with a bunch of zombie companies that are "too big to fail," massive deficits/debt and on the verge of a hyperinflationary spiral.

The question is if that demand would be filled with new American companies or if foreign brands would just fill the void. Everything I was taught about economics is out the window with this pandemic. The gov't just prints money and nobody seems concerned about inflation or the debt. I've tried reading about it some and all I get is "as long as the gov't can issue new taxes it's not an issue." Sounds like just kicking the can down the road to me but it's been going on for so long now maybe it really isn't a problem.

[iheartthed]

The question is if that demand would be filled with new American companies or if foreign brands would just fill the void. Everything I was taught about economics is out the window with this pandemic. The gov't just prints money and nobody seems concerned about inflation or the debt. I've tried reading about it some and all I get is "as long as the gov't can issue new taxes it's not an issue." Sounds like just kicking the can down the road to me but it's been going on for so long now maybe it really isn't a problem.

The government has to print money or else the system would collapse.

[401don]

The government has to print money or else the system would collapse.

I understand that but they used to say printing money had pretty strict limits or inflation would result but it seems those concerns are out the window and now they aren't printing billions, it's trillions. Makes the auto bailout, which many Republicans railed about, look like a few pennies and most of that was paid back.

[ABetterDetroit]

The government has to print money or else the system would collapse.

The above is a fact.

Whether anyone likes it or not is irrelevant. With both parties in Washington spreading money around like confetti the game is how to bring as much of it to Michigan and Detroit as possible. Capital is a highly effective tool.

[iheartthed]

I understand that but they used to say printing money had pretty strict limits or inflation would result but it seems those concerns are out the window and now they aren't printing billions, it's trillions. Makes the auto bailout, which many Republicans railed about, look like a few pennies and most of that was paid back.

The cost of the auto bailout wasn't what was troubling. It was the precedent set by intervening to save private sector companies. To give another example, the three major U.S. airlines were crying foul just a couple of years ago about how Middle East carriers like Etihad, Emirates, and Turkish Airways were being unfairly supported by their governments, and creating unfair competition. This was a huge factor in why U.S. carriers stopped flying directly to cities in the Middle East [[Dubai, Abu Dhabi, Istanbul, etc.), although they claimed it was because of security risks from ISIS fighters. Now they'll likely all need to be bailed out by the U.S. government themselves to survive and it all looks hypocritical.

[401don]

The cost of the auto bailout wasn't what was troubling. It was the precedent set by intervening to save private sector companies. To give another example, the three major U.S. airlines were crying foul just a couple of years ago about how Middle East carriers like Etihad, Emirates, and Turkish Airways were being unfairly supported by their governments, and creating unfair competition. This was a huge factor in why U.S. carriers stopped flying directly to cities in the Middle East [[Dubai, Abu Dhabi, Istanbul, etc.), although they claimed it was because of security risks from ISIS fighters. Now they'll likely all need to be bailed out by the U.S. government themselves to survive and it all looks hypocritical.

I think the precedent was set with Chrysler in the 70's but I understand your point. I just find the whole situation strange. The worse the news gets, the more money gets printed and the more the stock market ignores the fundamentals and says things will be great again in a couple of months.

[Richard]

The above is a fact.

Whether anyone likes it or not is irrelevant. With both parties in Washington spreading money around like confetti the game is how to bring as much of it to Michigan and Detroit as possible. Capital is a highly effective tool.

and that is the bottom line.

Your Governor tried doing that right out of the gate and was called an idiot,not because she is an idiot,but because she had little experience on how to milk the cow to benefit the state and tried to put the cart before the horse.

Do not let the condition of some of the other cities and states fool you,they got that way after billions were dumped into their economies after natural disasters.

Its a horrible reality and way of doing things,but it is the way it is,she would better serve the needs of the state if she dropped the politics of it all and asked and took guidance those more familiar with how it all works.

If they are going to print money,do it for the betterment of a state or city where it comes back and is not charity,investing in the taxpayer is different.

[Lowell]

The wholesale printing of money always carried specter of inflation but who knows now since all the major economies are doing it at once.

Inflation is generally a situation of too many dollars chasing too few goods but with demand very low, and likely to remain so with so many laid off and snake-bitten, that situation seems unlikely.

A business-talking head said last night,'maybe five years'.

[313WX]

The government may have to provide stimulus to prevent the systen from collapsing, but it should be done in a Great Depression-style.

Pay people to rebuild our country's infrastructure while establishing programs such as M4A or UBI to support people who lose their jobs when their companies fail.

Furthermore, if the government does provide support to businesses, the conditions should include a majority ownership stake by the FED until the loans are paid in full with interest along with the stipulation that no employees lose their job, those employees are paid a certain minimum wage, stock buybacks are prohibited and they can't seek out assistance for up to 10 years after the loans are paid.

[Jimaz]

The government may have to provide stimulus to prevent the system from collapsing, but it should be done in a Great Depression-style.

Pay people to rebuild our country's infrastructure while establishing programs such as M4A or UBI to support people who lose their jobs when their companies fail.

Furthermore, if the government does provide support to businesses, the conditions should include a majority ownership stake by the FED until the loans are paid in full with interest along with the stipulation that no employees lose their job, those employees are paid a certain minimum wage, stock buybacks are prohibited and they can't seek out assistance for up to 10 years after the loans are paid.

Wow. There's a lot of meat on that bone. I can't say I disagree.

One thing this coronavirus crisis has made clear is that our economy is nowhere near as resilient as it was promised to be.

I'm noticing the emergence of economic failures that cascade in unexpected ways. E.g., the public reaction to the coronavirus crisis causes irrational toilet paper hoarding, which causes alternatives like "flushable" wipes to be flushed, which causes an expensive 400% increase in unmanageable sewage system debris [[according to Candice Miller in Macomb County).

A local CVS has had empty toilet paper shelves for many weeks now. If the private sector is too fragile to keep the supply chain flowing, perhaps it's time for the public sector to step up "Great Depression-style" measures if only to warehouse TP stockpiles sufficient to bridge demand fluctuations.

From what I've read, the private sector can't afford to stockpile low-margin TP because they're required to make a profit. Maybe instead the public sector can justify that expense to save on fatberg removal costs?

[Scottathew]

Imagine if we come out the other side of this having built out an extraordinary amount of green infrastructure. That would be fantastic. We have a chance depending on what happens in November.

[Zacha341]

The greed and hoarding [[on both sides - stores and buyers) brought us to this place. Many weeks ago stores where allowing people to purchase five 12 packs at a time! Good times for all!

Aldi's has TP, but as a German-based company they are off the standard inventory/ supply grid. I've shopped Farmington Hills store - they seem to be well stocked of most things... for now.

...A local CVS has had empty toilet paper shelves for many weeks now. If the private sector is too fragile to keep the supply chain flowing, perhaps it's time for the public sector to step up "Great Depression-style" measures if only to warehouse TP stockpiles sufficient to bridge demand fluctuations.

[Zacha341]

Hopefully avoiding the Weimer Republic 1922 style which rendered money useless at the wheel barrel level!

The government may have to provide stimulus to prevent the systen from collapsing, but it should be done in a Great Depression-style....

[Danny]

This is COVID-19 pandemic has set Detroit's development back to 1990's. When its over. This city will had to start all over again.

[Bigb23]

This is COVID-19 pandemic has set Detroit's development back to 1990's. When its over. This city will had to start all over again.

We all appreciate you're concern Danny, but screaming in all cap's about the end of the world does not help. And also limit your copy and paste.

[ABetterDetroit]

This is COVID-19 pandemic has set Detroit's development back to 1990's. When its over. This city will had to start all over again.

Whining never helped a damn thing around here that’s for sure.