2020 vs 2008 — Why the Sequel will be much worse than the Original

We lose the freedom we don’t struggle for.


Shashank Shekhar

3 years ago | 12 min read

Rachel, my assistant, asked me in early February if the media was blowing this “Coronavirus thing” out of proportion. My answer — they weren’t even scratching the surface.

Fast forward to six weeks later — The Covid-19 threat has become the biggest crisis of the last 75 years. Our social lives have been turned upside down and the national economy is in distress. What lies ahead for common humanity is suddenly the theme of our time.

We lose the freedom we don’t struggle for.

When President Trump took office in 2017, the White House’s National Security Council Directorate for Global Health Security and Biodefense survived the transition intact. Established after the Ebola epidemic of 2014: its mission was to do everything possible within the vast powers and resources of the U.S. government to prepare for the next disease outbreak and prevent it from becoming an epidemic or pandemic.

One year later, White House dissolved the office, leaving the country ill-prepared (pun intended) for a pandemic like this.

A virus, of all things, we thought, did not have the legs to imbalance our society. Only that it appears to have the legs.

We realize that Covid-19 hasn’t only held our social norms as a hostage, it is affecting us on a moral, psychological, and economic level, too. Post-Corona America may turn out to be many things but it won’t be a pre-Corona America.

But we ask…

…Life, anyway, has a mortality rate of 100%. (Give them some time and they will all die someday.) The novel Coronavirus‘s mortality rate is only 2% in comparison. So what’s the need for this big pack-up?

Life kills in the end, true, but offers us priceless sights and sounds of the planet while it lasts. Life kills but does not plan to run away with a whole civilization like Hitler tried to run away with a century. The 2% deal of Coronavirus does not look bad at the face value but it is a con man’s face we are looking at.

Is it like 2008?

Just the other day, my friend, let’s call him John, asked, “Shashank, is this like 2008?

Look, it is simple! The causes of every recession are different. So if you ask me, is the Subprime crisis equal to a virus pandemic, the answer is NO because unlike ‘08’ it cannot entirely be laid at the policymaker’s door. However, in terms of its impact on the economy, the similarity can be eerie. On second thoughts, no similarity there either. This one is going to be far scarier.

Our only saving grace is that the economy isn’t as stretched this time. Does it help? Yes, if the community transmission of Covid-19 is checked shortly and the losses can be contained thus far. No, if the virus goes crazier or even stays at its present level of craziness.

Now, into the real meat of your Q John.

Injudicious lending had led to the Subprime crisis

The 2008 crisis was caused by a loss of real estate wealth. Few undeserving borrowers became homeowners. The lenders converted such subprime loans into securities and passed it forward to international investors, among others. When the loan defaults began, the hurt spread beyond the real estate. Funding markets, banks, stock markets, small-business credit; all got involved.

It was a battlefield in 2008

Over the 2008–2009 winter, we shivered from more than cold. Each month, job losses close to 750,000 were recorded. A few studies claimed the monthly average was a million. In excess of 8.5 million jobs were lost. Lehman Brothers gained maximum notoriety. There is a face to every crisis. The company became that face. This said it was not the only big organization that collapsed. Behemoths like GM and Chrysler filed for bankruptcy.

International trade foreshadowed the worse. GDP went down by 4.2%. Unemployment stood at 10% by the time the administration started picking up the economy.

The current White House adviser Larry Kudlow's recent comment that the Covid-19 threat was ‘manageable’ is a clean throwback to Ben Bernanke’s (Federal Reserve Chairman in 2008) claim that the subprime threat had been ‘contained’.

Debt accumulation- the bane of America

America has had a liquidity surplus on several occasions since the 80s. At times, the money has found its way into the US junk bonds. At other times into the Asian currencies or the technology stocks. Similarly, a lot of liquid money leaped out at our eyes in 2006–2007. This built the foundation of the 2008 crisis. Wasn’t unchecked liquidity among the root causes of the Great Depression?

We are being told that the debt levels that had been near 100% of the GDP in Subprime days are only at 76% now. Also, while America saved only 3.6% of the money it earned in 2007, today it saves 7.9%. Good, really good, but is it enough, I begin to ask myself.

76% or 100%, the symptoms of debt keep getting worse. Between 2008 and 2017, the USA accumulated further $20 trillion worth of debt, largely non-financial business debt. It is not an easy debt level to manage.

To continue with the business-investor tax cuts, the government has resorted to intense Federal borrowing. Add to it, student debt, credit card debt, auto debt, and, well, bring it on, mortgage debt.

Unemployment Rate: From Good to Bad to Ugly in just 2 weeks

The early labor impact of the corona outbreak is starting to make a pattern. The pattern doesn’t offer much hope. 6.6 million have filed for unemployment for the week ending March 28. The US Department of Labor’s (DOL) data suggests that the food/accommodation industry is the worst hit, closely followed by the manufacturing, construction, retail, and the healthcare industry (in no particular order).

Math tells us that we have lost close to 10 million jobs in a fortnight during the current crisis. The total job loss spread in 2008 was 8.8 million. Does it even compare?

I have mentioned above that unemployment peaked at 10% in 2008. A sobered down estimate says that we will be staring at a 19% employment rate in a year’s time and that the rate will be close to 15% at the end of 2021. Mind you that’s a sobered down estimate. Worst case (but still probable) estimates are pointing to an employment rate in the high 20s. Note that the highest rate of U.S. unemployment was 24.9% in 1933, during the Great Depression.

What makes the current crisis a lot trickier?

Okay, picture this.

For the second time in 12 years, our ship is stuck on a zero-provision island.

Good news- it has better provisions this time.

Bad news- this time it’s an even terribly isolated island. It has man-eating plants. The stay is expected to be longer.

The balance sheet becomes grimmer.

At the time of writing this piece, the number of global cases has crossed 1 million. Reliable Coronavirus models tell us that the US body count will be higher than Vietnam and Korea wars combined.

The President looked somber when conceding that a very difficult couple of weeks are coming up next. And why only a couple of weeks, I think it is going to get very grim before it gets better. Look, an acknowledgment may or may not help but denial has a 100% track record of not helping.

International Monetary Fund: We are already in a recession

“The world economy has entered a phase of recession”, says IMF. A businesslike expectation says that no recovery is possible before 2021. The number we hear of late is $3.4 trillion but I feel we could lose a lot more in global labor income by the time recovery begins. Up to 25 million jobs are expected to vanish in thin air. As bad as they may sound, I still find these numbers optimistic.

Europe in dire straits

Over the last decade, American banks have consolidated enough. This can help them lie underground for a while and let the recession blow over. Europe is different. It isn’t still over either the Eurozone crisis or the effects of 2008. Corona is just the kind of situation it doesn’t need now.

And yet…

…If Europe was facing slow poison in 2008, it is a firing squad this time. With Italy, Spain, the UK, France, and Germany spent or shaken, no European country looks safe anymore. In passing, the mortality rate in some of these countries is also very disturbing.

Already, the main architects of the modern world have hung their boots. Factories, malls, shops, gyms, restaurants, schools, and colleges have been closed down everywhere. If the pandemic spreads beyond June, the recent bloodbath in the stock market will start looking like a good bargain compared to what may follow. Note that even during the worst phase of 2008, the stock market took 274 days to go bearish, a dubious feat it has accomplished in only 24 days in the Corona year.

Covid-19, unlike 2008, is playing with every sphere of our lives

Virtual learning, really?

Big things can happen almost secretly. Even before we can realize what fell on us, 87% of the global student population is (about 1.5 billion students) out of schools and universities. 60 million teachers can only get nostalgic about the classrooms.

We are not rehearsed for a pandemic of this nature so there is no muscle memory to react with. On top of this, imagination absents itself, nearing a calamity.

The above two paragraphs explain why some of us have become bullish about the prospects of virtual learning. But guys, we need to think this over.

I can completely get this feeling. We are nervous. While we don’t want our children off our sight for a bit, there is a part of our brain that is busy wondering- How much their abruptly snapped lesson continuity will hurt them? When their normal classes start, will we be able to see our kids off calmly, given the viruses that may lie in wait?

More generally speaking, is there an expiry date; a time after which parents, globally, will stop worrying about some new virus strain infecting their kids?

The die is cast. We can’t get back to being relaxed again. And put like that, it is no wonder most of us are cheering for virtual learning.

But as I said, we need to think this over.

‘Virtual’ is a great soldier only till it is used sparsely. It has its strengths and can be very useful in certain settings. But there won’t be a happy ending in this story if we shift the entire education system to the virtual classrooms. Look, many highly capable teachers have aced the physical classroom setup. Not only are they really good in their subjects, they can also judge students’ energy levels, emotional deficits, inhibitions, and their need for instant gratification. Many such teachers will fail the virtual migration.

From the students’ perspective:

Every student doesn’t have fast internet at their disposal. Some of them don’t even have a computer. Past experiments with online learning have revealed that the disadvantaged don’t take too well to it. Virtual classes are inegalitarian. In the absence of the right kind of computer or internet speed, poor children are more likely to be left behind the curriculum.

Besides, clicking the correct hyperlinks, logging into the app, staying with the task; it is no picnic for younger children. Imagine a kid or parent who is not up to speed with ‘tech’ trying to make all this happen on a tight deadline.

Observing from still another angle, can virtual classrooms offer after-school activities, counseling sessions, sports, and extra-curricular stuff, free meals, and stage for social bonding, among a lot more stuff?

This debate looks pretty ill-balanced.

On the psychological tightrope: effect on the children, adults and the elder population

Over the last month, children have been feeling very edgy. Schools gave them a sense of structure. It also gave them their social groups (a big strength!). Forced into a new life order where nothing is like the old days, children are feeling lonely, nostalgic, and maybe even depressed. In addition, they can be witnesses to home violence which the parents spared them earlier.

Children, parents, parents’ parents; all three roads have heavy traffic.

Us parents have bigger problems on our plates. We can fight thoughts of death and extinction but to be able to cope with the job crisis and savings erosion, well, that’s a different premise.

For now, the check from life is just not payable at par.

And what about our parents? These old men and women in their 60s and 70s know that they are least likely candidates to defeat Covid-19. One cough and an ominous silence gathers around them. The old wrinkled faces, a visual shorthand into the terror of a pandemic.

The International Journal of Online Research and Public Health conducted an online survey of 1,210 Chinese respondents between 31st January and 2nd February. The survey encompassed 194 Chinese cities. It yielded that 16.5% of the respondents felt depression of some order. 28.8% of them felt anxiety ranging from moderate to severe and 53.8% of them believed that they were psychologically impacted in some way.

“Corona-crimes” has got itself a life

It is sad in many ways that a few people are disregarding morality at this crisis hour. I am speaking about crimes associated with Covid-19. Confidence tricksters are pushing fake cures. Hate groups are brainwashing infected people into passing on the infection to doctors and nurses. Fake clinics are claiming to have test kits, attempting to capitalize on mass-anxiety.

Hate crimes of ethnicity are on a rise. Foreigners belonging to Corona hubs of the world are having a hard time convincing that an Italian or a Chinese or a Persian in America has just as little chance of spreading the infection as an American citizen.

A Ugandan parliamentary speaker recently proposed a common disinfectant as a Corona-killer. Many lapped the idea. After all, no hope is feeble hope in times of a crisis. But propagating false hope now is equivalent to a betrayal of faith. Rebecca Kadaga, the Ugandan speaker in question, should have thought this through.

The spring comes to an end someday

Above, I have tried to reason what makes 2020 so very different from 2008. Even those who feel that the economic impact will be similar ( I am not among them) will agree that unlike the Subprime crisis, Corona will test every sphere of our lives. Corona has established its personality. We have accepted it. It’s just that it has, so far, turned out to be a night so quiet that we can’t even dream.

America has had a long expansionary phase. Inflation, unemployment percentage, the stock market have all given us reasons to cheer. One day, the spring comes to an end. Mark Zandi, the Chief Economist at Moody’s Analytics, looked pensive while putting, “The tornado is in our backyard”.

The crisis is beginning to be compared to the Second World War. Worth noting that in 1945, the US was doing well enough to help Europe’s turnaround. This time, America is itself in a tricky situation.

It is hard to anticipate the plan of a novel virus strain. Two or three ninja mutations later, it can pick up, say, a mortality rate of 10% ( like SARS) or even 35% (like MERS). Agreed that the vaccines are a good bet but where are they at this point? Even an Excalibur is only good if I can wield it in my hand.

At this hour, a lockdown is our only weapon in sight.

Confusion always attends a big change. Our deserted streets and panicking hearts reveal this confusion. And fleetingly to me, it appears that all crises are one.

The earth has raised its whip. We are not sure how it will descend. We can be sure though that we will prevail.

No feeling is final.

This article was originally published by Shashank shekhar on medium.


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Shashank Shekhar







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