"Great Depression" Expert Bernanke: "COVID-19 Is Just a Snowstorm"

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[Asia Economy New York=Correspondent Baek Jong-min] "It is like a massive blizzard."

Former Federal Reserve (Fed) Chairman Ben Bernanke (pictured) described the COVID-19 pandemic this way and expressed the view that although an economic recession in the second quarter of this year is inevitable, a rapid V-shaped recovery is possible.

Bernanke, an authority on the Great Depression of the 1930s who led efforts to overcome the 2008 global financial crisis, defined the economic shutdown caused by COVID-19 as "close to a natural disaster" in an interview with CNBC on the 25th (local time).

Bernanke diagnosed, "Next quarter may see a very steep and, hopefully, short recession. Everything is heading in that direction," and predicted, "If the shutdown period does not inflict too much damage on employment and businesses, a very rapid economic rebound will occur, even if it takes some time." However, he cited the recovery of public health as a prerequisite for the early recovery of the U.S. economy. This means that if the COVID-19 infection situation does not calm down, the Fed's various stimulus policies will be ineffective.

He strongly rejected the view that the economic halt caused by COVID-19 would lead to a Great Depression. Bernanke emphasized, "The fear and volatility of (COVID-19) may look similar to the Great Depression, but they are very different animals," adding, "The Great Depression lasted 12 years and was caused by people." He stressed that the economic stoppage due to COVID-19 will be short-term, unlike the Great Depression. He also expressed hope that the economy would improve rapidly once COVID-19 passes.

CNBC reported that James Bullard, President of the Federal Reserve Bank of St. Louis, who was interviewed earlier, also expressed optimism similar to Bernanke. Bullard, who warned that the U.S. unemployment rate could soar from the current 3.5% to 30%, forecasted, "There will be a tremendous shock to the economy in the short term, but once the COVID-19 outbreak passes its peak, a strong rebound will occur."

The market is pinning hopes on a $2 trillion stimulus package. Following an 11% surge in the U.S. stock market the previous day, the market closed higher for the second consecutive day after news at 1 a.m. that the Republican and Democratic leadership had agreed on the government’s stimulus package bill.

The bipartisan stimulus plan includes $500 billion (approximately 614 trillion won) for large corporations and $367 billion (approximately 450 trillion won) for small business relief. It also provides $250 billion (approximately 308 trillion won) in unemployment insurance for those laid off. However, Republican Senators Lindsey Graham, Tim Scott, and Ben Sasse have raised concerns that the unemployment benefits are excessive, and the bill has not yet been voted on.

Some predict that the passage of the bill through Congress will not be easy. In response to opposition within the Republican Party, Senator Bernie Sanders, a Democratic presidential candidate, said, "If Republican senators do not withdraw their opposition to unemployment benefits, I am prepared to hold up the stimulus bill until stronger conditions are imposed on the $500 billion corporate support fund."

U.S. Treasury Secretary Steven Mnuchin said at a White House press conference that day, "The stimulus package will pass on Wednesday night," and "Americans will receive stimulus checks within three weeks." According to the bill, Americans earning less than $75,000 annually will receive $1,200.

This content was produced with the assistance of AI translation services.