Economist David Rosenberg was on the front lines of Wall Street during the global financial crisis in 2008. He saw Merrill Lynch, the firm at which he was serving as chief economist, collapse alongside Lehman Brothers Holdings Inc. and Bear Stearns Companies Inc.
The financial crisis put the health of the U.S. financial system itself in extreme jeopardy. Riddled with debt, 10 million Americans lost their homes and nine million lost their jobs. The housing bubble popped, the equities market was eviscerated and the U.S. Federal Reserve cut interest rates to zero, only to realize it had little influence to combat the problem.
There is no comparison between then and the current economic crisis brought on by the outbreak of the coronavirus, Rosenberg said. That is because, this time, it’s worse.
“In the financial crisis, air travel didn’t come to a halt, borders weren’t being closed, we weren’t talking about quarantines and self-isolation,” said Rosenberg, now the chief economist of Rosenberg Research and Associates Inc. “In the financial crisis, people weren’t scared to leave their homes. We’re talking about palpable fear and when people get fearful, they withdraw from economic activity…. The reality is the financial crisis did not come with a mortality rate.”
In only a few weeks, Canadian and American economists have rapidly transitioned from waving off fears of a recession to debating the extent of the damage that will be done. Scotiabank, CIBC and RBC have each now said one is likely.
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