The epidemiological crisis is growing into an economic one. The quarantine-free global economy is losing strength. Moreover, the number of cases increases daily and the United States is already in third place in terms of the number of infected. According to the World Health Organization, the United States is at risk of becoming another major source of infection.

In just 15 days of March, the US stock market crashed by 20%. Further, the decline in stock indices from recent highs exceeded 30%. Credit markets rose, and credit spreads (between treasuries and junk bonds) jumped to 2008 levels.

Dow Jones Index

During the crisis in 2008, as well as during the Great Depression, the stock market fell by 50%, credit markets froze, unemployment soared above 10%, and GDP fell by 10% per year, and all this "disgrace" took place in a series of bankruptcies. However, it took three years in previous crises, not three weeks, as it is now.

Even financial companies such as Goldman Sachs, Morgan Stanley, and JP Morgan give disappointing forecasts. US GDP may decline by 6% in annual terms in the first quarter. The second quarter will be even more stunning, the economy risks losing as much as 30%. Therefore, Treasury Secretary, Steven Mnuchin, warned that unemployment in the United States could soar 20% or more, which is twice as much as the peak of the 2008 crisis. That is, each component of aggregate demand is currently in a state of unprecedented decline.

US GDP

Some experts, who did not feel the full scale of the new crisis, predicted an optimistic V-shaped economic recovery. It was a sharp decline with a quick recovery in the segment of a quarter alone. Now, it has become clear to everyone that this will not happen and that you do not need to have any superpowers. The coronavirus crisis is something completely new, and neither the "V" form, nor the "U" form, or even even the "L" form are applicable here. No one knows what will happen, so far we are seeing the letter "I" - the collapse of financial markets and the real economy.

Even during the Great Depression and World War II, there was no economic downward trend, as it is today in China, America and Europe. Most likely, the current crisis will be more widespread than in 2008-2009, but more short-term. This will allow the economy to return to growth by the end of this year. Markets will begin to recover as soon as they see the light at the end of the tunnel. It's too early to think about it yet, one can only imagine. It goes without saying that in order to implement such a scenario, a number of conditions must be fulfilled.

At the same time, the regions most affected by coronavirus will have to deploy large-scale measures to combat it: testing, tracking infected, treatment, quarantine, etc.d. Central banks should continue to fight the crisis by any unconventional methods: zero or negative rates, quantitative easing, the purchase of private assets in order to help different companies.

Another important point is that the government needs to launch powerful fiscal stimulation, including, among other things, using money, that is, direct budget transfers to households. Judging by the current scale of the economic shock, developed countries will have to expand the budget deficit from 2-3% of GDP to 10% of GDP or even more. But only the central government has the balance necessary to prevent the collapse of the private sector.

What do we see now? Authorities in developed countries are doing too little to contain a pandemic. Perhaps, you just need to wait due to the fact that the crisis has not yet been fully believed and they think that everything will settle down by itself. This means that the risks of a new Great Depression are increasing every day.

The pandemic must be stopped and if this is not done, the global economy and markets will continue to fall freely. Even if the coronavirus is taken under control, economic growth may still not resume by the end of this year, as we would like.

It is possible that by that time new mutations will appear during the new viral season. The therapeutic agents that humanity is counting on and practice shows may be powerless.