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Coronavirus Could Paralyze Economy Indefinitely, Ex-FDA Chief Warns

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  • A former FDA commissioner warned that coronavirus is far more devastating than the public seems to believe.
  • The economic impact of the disease will be lasting and could push the U.S. economy into a lasting depression.
  • The stock market has been resilient, but analysts say it could dip lower once reality sets in.

With coronavirus cases in Europe apparently on a consistent downward trend, the U.S. stock market is rejoicing. But the celebration is most likely premature according to former FDA Commissioner Scott Gottlieb, whose comments suggest Americans don’t understand the impact coronavirus will have on the economy for years to come.

Coronavirus Will Crush U.S. Economy

Gottlieb compared the fallout from coronavirus to that of other major outbreaks like polio and smallpox. He suggested that even after the pandemic has been contained, the U.S. will be plagued with smaller, localized outbreaks in the year to come.

That, he says, will significantly disrupt the U.S. economy for the foreseeable future. “Marginal” consumers will cut out activities that require unnecessary contact, dealing a lasting blow to many industries.

A certain percentage of the population is going to be more circumspect about crowding into tight spaces indoors. The idea that things are going to snap back, we’re going to forget about this […] that’s not the case, this is going to be with us.

Gottlieb says this change in consumer behavior is unavoidable unless a vaccine is developed— something that could take roughly two years. He cautioned that lifting lockdown measures won’t instantaneously bring businesses back to life. People are going to be hesitant to mingle for some time.

Depression May Be Looming

Investors may be ignoring the long-term threat that COVID-19 presents to the U.S. economy. | Source: Kena Betancur / AFP

Gottlieb’s prediction adds fuel to Jim Cramer’s suggestion that the U.S. economy could be “on the verge of a depression.”

Following Friday’s dismal unemployment figures, Cramer conceded that although the government’s stimulus efforts have been commendable, businesses won’t recover unless coronavirus has been defeated.

As much as I love that the government’s basically keeping businesses on life support through this difficult period, at the end of the day there are no customers. I have to emphasize that this is mainly a public health crisis that’s morphed into an economic crisis. The only way to get back to normal is by defeating this plague.

Cramer’s concern is valid— nearly 10 million people have applied for unemployment benefits over the past two weeks, and that number is rapidly rising.

As more people lose their jobs, consumers will have less to spend. Add to that Gottlieb’s expectation that consumers will be hesitant to patronize restaurants, attend conferences, and even take unnecessary flights, and you have the makings of a severe depression.

Analyst: Stock Market Will Crash Lower as Reality Sets In

Analysts say the stock market could recoil once the reality of coronavirus’ economic damage sets in. Legend: Dow (blue), S&P 500 (red). | Source: Yahoo Finance

Guggenheim Partners Global CIO Scott Minerd echoed both Cramer and Gottlieb’s sentiment in a Sunday report. He said the stock market hasn’t bottomed yet and that the S&P 500 could slide to 1,500 in the coming weeks as people absorb the lasting impact coronavirus will have on the economy.

Probably the most surprising thing to me at this point is how well the markets are holding up. Given the economic data, and given the fact that large portions of the capital markets are still virtually closed for business, I would have expected stock prices to be lower at this point

Like Gottlieb, Minerd believes hospitality businesses and airlines may never recover. That could have a domino effect on the rest of the U.S. economy as the hundreds of thousands of lost jobs depress consumer spending indefinitely.

Disclaimer: The opinions in this article do not represent investment or trading advice from CCN.com

This article was edited by Josiah Wilmoth.

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