Moneybeat - Economic crisis in perspective

MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: We’ll say it again: Worst week since the financial crisis of 2008. All the major indexes down for the week between 12 and more than 17 percent.

But here’s a silver lining, of sorts: to report “worst week since” is better than reporting “worst week ever.” Meaning, the markets have endured even more perilous times, historically speaking, and bounced back.

It’s not just the capital markets, though. When people are on lock-down, major sectors of the economy they depend on are locked, too. 

And so I’d like to turn back to David Bahnsen, financial adviser and analyst with offices in New York and Southern California. Today, he’s at home in Southern California, so we have a digital connection there to his home office.

David, thanks for giving us some time. Good morning.

DAVID BAHNSEN, GUEST: Hey, good morning.

EICHER: I saw an estimate, David, that we’re looking at 5 million job losses this year. $1.5 trillion lost in economic output. Just estimates, of course. What’s your sense of the future, assuming this passes? Do we just bounce back to normal or do you see economic life just being vastly different because of the shock?

BAHNSEN: Well, I would be really careful of anyone who gives too confident of an answer because of the variables that exist out there. There is a variable as to how long it will last and how deep it will go and various things that will be on the stage when we get some normalization. And all of those variables represent the ability to change that answer quite dramatically. 

Do I think that the second quarter unemployment and GDP contraction is going to be just unbelievably bad? Of course. But in being able to forecast the job losses that are sustained they would require so much more intelligence than we have right now it’s futile. What I do believe is the sort of base case, not as bad as it could very well get and not as good as it could very well get is that you would see approximately $1.5 trillion of economic output lost. And probably that much or more of government stimulus that enters the fray. And then in terms of the recovery and the ability to sort of unwind the short term temporary efforts that were put in to keep the economy afloat, it will—that’s going to be the trillion dollar question. Third quarter and fourth quarter of this year are so much more important right now than the second quarter because the second quarter we know is basically going to be lost.

EICHER: Tell me what you know about economic stimulus plans in Congress—some of the discussions that are ongoing. Do you have a sense whether the broad strokes of what we’re hearing will prove helpful?

BAHNSEN: Yeah, I mean, I think it’s going to be big. I think it’s going to be dramatic. I believe that it’s going to be as much as a $2 trillion federal stimulus package, a combination of what you might call a kitchen sink approach, direct money to taxpayers, tax cuts, tax deferrals, loan guarantee programs where businesses can go to banks that otherwise would not lend to them, but then the bank would be able to go to the government, get the money, and then turn around and give it. 

And the government would give that backing to the loan on the bank’s balance sheet without making it count against the regulatory capital. Those types of things are very—they have a big multiplier effect. Some are probably going to like, some are probably not. I’m in daily communication with folks in Washington, D.C., on where this is shaking out. I do think you’re going to get a vote on it sooner than later and I think that the market’s been worried this was going to take another week or something. So, the next few days are pivotal. We’ll find out where that goes and there’s a lot of conversation to be had about what it all means for the future of our country and our economy.

EICHER: So, let’s talk philosophy just a little bit. Do you have a sense that what we’re going through now is a vindication of free-market economics or do you think it’s the kind of thing that someone who is committed to a large role in the government managing the economy, pointing to this crisis, and saying, more of this, please? Clearly, socialism is the answer, some say, and that point of view would start to gain some purchase among more and more Americans. How do you think that philosophical debate is sort of setting up based on circumstances?

BAHNSEN: Well, I think it’s really unfortunate that there is a sort of political and ideological debate in the midst of kind of the peak problems and health concern and what not, but I guess it isn’t uncommon. However, it really strikes me as odd that while we’re sitting here desperate to find private companies to produce solutions for masks, for hand sanitizer, for soap, for food delivery, that we’re looking to private companies to design the vaccine, to come up with therapeutic cures. 

At the end of the day, I think that this will prove to be a tremendous victory for free enterprise and for the reality of human action, driven by the dignity given to them by their Creator and their care for fellow man. 

What I’m seeing right now are businesses stepping up in profound ways. I believe that there is a compassionate, free enterprise DNA and so much of the Judeo-Christian ethic version of free enterprise. 

Yeah, there’s going to be a big check to cash from the government and a debt that is put on our kids because the scope of this problem is larger than any one balance sheet could happen. But that debt is going to get paid from the fruit, work, sweat, and spirit of free enterprise. Otherwise, that debt wouldn’t be there. The ability to go about servicing it still comes from the natural human actions that drive our experience and, ultimately, our economic activity. And I hope that answer is helpful for our listeners.

EICHER: I think it is. Before we go, maybe my questions didn’t give you the opportunity, so I just want to give you the freedom to say at this moment, any message that you think it’s important that each listener hear?

BAHNSEN: The last thing I would say is that through this uncertainty, there is one certainty out there and that is that God is in control and that our country has been through worse. It has been through many bad things and we will come out of this thing OK as well. I don’t know when. I don’t know how. But I do know that in those periods of most uncertainty, when one looks to the lesson of history and the hope of the future, they should derive optimism and we will get through this.

EICHER: Financial analyst David Bahnsen, God bless you. Thanks for your time.

BAHNSEN: Thank you for having me.

(AP Photo/Mark Lennihan, File) This Jan. 31, 2020, file photo shows a Wall Street sign in front of the New York Stock Exchange.

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