MY HOT TAKE: Plan for a U-shaped economic recovery.

COVID-19 has inflated countries’ debt (relative to GDP) to levels greater than the period immediately post WW2. This is astonishing and deeply worrying.

There was talk of a V-shaped recovery, but this is wishful thinking. A V-shaped recovery is a sharp, short (within 6 months) recovery, but this is now being revised to a U-shape and by U, I mean a bath tub shape where growth will remain flat at the bottom of the curve for a very long time.

The 2008 global financial crash was a U-shaped recovery, which took 4 years. This is the likely outcome for our current situation, if Brexit isn’t hard. If Brexit adds further damage, then the curve will distort downwards and outwards adding years and depth.

It’s bad economically but if you have survived this far, then there is hope.

Once we get to the bottom of the curve, say March 2021, then simply put “the only way is up”. Albeit a long and slow growth path, but whilst not ideal, this is preferred to no growth or a W-shaped crash-rise-crash economic recovery pattern.

There is also hope that this crash will inspire new innovations. The global climb out of WW2 holds the answers for our climb out of COVID-19. It is conceivable that the world will change post COVID-19 as it did post WW2. There was an economic revolution that grew out of WW2 that led directly to the greatest technological leap that mankind has ever made. Without WW2 technology there would be no satellites, GPS, astronauts, air travel in pressurised planes, penicillin, synthetic rubber, radar, nuclear power and computers. This is no different today. We are already seeing huge innovation arising purely from COVID-19.

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