Not your grandfather’s depression

Follow-up to my previous post:

Suppose that in 2019 I had told you that during the spring of 2020 America would plunge into the deepest depression since the 1930s. Would you have expected to see this news story in late May?

Walmart said “unprecedented demand” for essential products during the pandemic had caused its sales to spike as the world’s biggest retailer disclosed it had taken on 235,000 workers in the US to cope with the surge.

Sales of toilet rolls, surface cleaners and grocery staples helped Walmart’s like-for-like revenues in the US, its largest market, jump 10 per cent in the last quarter from a year ago.

Doug McMillon, chief executive, said on a results briefing call that Walmart had been selling in two or three hours what it would normally sell over two or three days.

After the initial rush to stockpile essentials, customers in lockdown later spent heavily on entertainment, education and exercise products, Mr McMillon said. Categories to perform especially well included video games and bicycles. Sewing machine sales also picked up as customers took to making their own face masks.

Don’t get me wrong, it’s a horrific depression. But it’s also an extremely unusual one. The term “unique” is overused, but it actually does seem to apply to this business cycle.

The DYI face masks made me recall the story of the Texas factory for making face masks that still has one assembly line shut down. Aren’t anti-price gouging laws (and norms) wonderful?



9 Responses to “Not your grandfather’s depression”

  1. Gravatar of rayward rayward
    19. May 2020 at 10:38

    “The term “unique” is overused, but it actually does seem to apply to this business cycle.” How is this a business cycle? Cycle: a series of events that are regularly repeated in the same order. If this is not a “cycle”, how will conventional (monetary) methods get us on the path of a quick recovery? I don’t have answers, but if those who might are looking in the wrong places, that’s not good.

  2. Gravatar of H_WASSHOI (Maekawa Miku-nyan lover) H_WASSHOI (Maekawa Miku-nyan lover)
    19. May 2020 at 11:05

    Everyone is now buying for new high spec computers for telework.
    I surpriszed at underinvestment they had before the corona.

  3. Gravatar of ssumner ssumner
    19. May 2020 at 15:06

    Rayward, Not sure if you’re joking . . .

  4. Gravatar of Todd Ramsey Todd Ramsey
    20. May 2020 at 05:55

    Not only extra sales at some retailers, but also the Help Wanted advertising: Dominos on national TV, Kroger on (at a minimum) local media, Amazon with internet display ads (start as soon as 7 days!)

    Strangest recession ever. Staggering unemployment rate alongside massive help wanted advertising.

    I blame the $600/week extra unemployment benefit.

  5. Gravatar of Justin Justin
    20. May 2020 at 09:42

    I don’t get why the business with existing unused mask production lines can’t make money without falling afoul of price gouging laws.

    That being said, it would make sense if you could defend against price gouging by pointing to production cost if that really is a problem.

  6. Gravatar of ssumner ssumner
    20. May 2020 at 11:21

    Justin, The owner who was interviewed said he’d need higher prices to get the line going. The government officials he talked to seemed to think getting more mask production was not a high priority. Go figure.

    But in any case, if there are no price controls then there are no shortages.

  7. Gravatar of Michael Sandifer Michael Sandifer
    20. May 2020 at 14:38


    I’d like to push back against this simple view of price controls. The problem with just leaving increased supply to the market over the short-run is that the price gougers will price out some poorer or less liquid consumers. And in some crises, there is only a short-run. This is even more of a problem when there is a negative demand shock associated with the crisis in question.

    I think government has to step up in these situations and organize the purchase of broadly needed supplies, particularly with regard to public goods, like masks and other PPE, disinfectants, vaccines and other treatments, etc. Government needs to be willing to pay margins high enough to increase production enough to meet demand, but use it’s bulk purchasing power to be able to buy more cheaply than private agents.

    Sure, this is not a perfect approach, but is better than approaches that simply price many out of the market for critical goods and services in times of peril..

  8. Gravatar of Matthias Görgens Matthias Görgens
    21. May 2020 at 21:13

    Michael, even without any price controls, the government can still do what you describe. They can buy goods in the open market and distribute them for cheap or free.

    That’s what lots of countries do with roads, or police services. (Basically, the police hires people on the open market and just buys cars and stationery there as well, but they provide their services for free.)

  9. Gravatar of Matthias Görgens Matthias Görgens
    21. May 2020 at 21:16

    P.S. Flexible prices help especially in the short run.

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