HN Explorer

Why hasn’t the US economy done worse with Covid?

5 points by idoh ↗ HN
Curious as to the point of view of the HN community. I live in SF, and many of my neighbors are not able to pay rent, and many shops and restaurants were closed for months or permanently.

Given that, and extrapolating, I’d expect that there would be a huge wave of mortgage defaults, that commercial real estate would be in the tank, mass unemployment that cascades out, etc.

The economy has been hard on many, and I don’t want to diminish it for people who are suffering the effects of it, but it seems like it hasn’t been nearly as bad as it could have been.

My question is, why hasn’t it been worse?

7 comments

[ 4.4 ms ] story [ 14.6 ms ] thread
rogerkirkness
Most places did not shut businesses down for longer than a few weeks last April, so naturally they're able to sustain.
elil17
Well, in terms of mortgage defaults at least, COVID hardship forbearance has but many mortgages "on pause" so to speak.
idoh
Doesn’t that just shift to whom the burden falls? The people paying the mortgages have forbearance, but the people who would recieve the payments aren’t, and that should have some type of impact, right?
rory
The primary forbearance program people talk about only applies to loans held by Fannie and Freddie, which are government-sponsored entities. I'm not sure of the financial situation at Fannie and Freddie, but the government will bail them out if they start coming up short on cash.

It's also worth noting that the amount owed on a loan keeps going up while in forbearance, so the homeowner does have to pay that money (plus interest) back eventually.

twunde
One thing that's been interesting is that there's been a noticeable dichotomy in how people and companies have been affected. Those who are lower-class and potentially worked in retail or restaurants have been slammed economically with the stimulus checks and the rent forbearance being one of the few things keeping them afloat. Yet if you talk to those who are middle class or upper-class many have done incredibly well since the stock market has gone up and their cost of living has decreased. From an industry perspective, there's been a shift in spending and some industries like ecommerce, groceries, video games etc have done extremely well.
shams93
Mother's little helper would be the Mick Jagger answer
jfengel
Mostly, the US federal government. It took on $5 trillion in debt. That kept the economy as a whole from taking a complete nosedive.

A portion of it was direct payments. A bit more of it went to keeping people from being laid off. Foreclosure laws helped a bit, too, as did the moratorium on student loans. There was a ton of other stuff.

Local organizations and states helped, too. People gave more to charities this year, partly helped by new IRS rules on charitable donations especially for the pandemic.

As you say, it hasn't been great. But the federal government managed to avoid the kind of deflationary trap you're worried about, by engaging in exactly the kind of behavior that causes inflation to counteract that.