The coronavirus pandemic shows that the trickle-down theory of economic growth is a fabrication

Treasury Secretary Steven Mnuchin on Sunday told Fox News’ Chris Wallace that the American economy would “bounce back” from the coronavirus shutdown by this summer. “As businesses begin to open,” Mnuchin promised, the “demand side of the economy” will “rebound.”

Mnuchin was reiterating President Donald Trump’s line on the economy — the idea that when social distancing ends, the economy will miraculously renew itself to pre-virus levels. “We’re going to rebuild” the economy, Trump promised reporters last week, “and we’re going to rebuild it better, and it’s going to go faster than people think.”

Trump and Mnuchin aren’t the only ones predicting a strong recovery. Ross Walker, the chief UK economist at NatWest Markets, envisioned a V-shaped recovery. Carsten Brzeski, the chief economist at ING Research, believes the recovery will be more U-shaped, with a slight trough at the bottom before the economy bounces back to normal. At the end of March, Goldman Sachs economists predicted what CNBC’s Jeff Cox characterized as “the fastest recovery in history.” (Goldman has since tempered its rosiest expectations for the rest of the year, but its economists are still predicting an “unprecedented” recovery.)

But the longer this crisis goes on, the less likely a V- or U-shaped recovery becomes…

(Read more at Business Insider.)

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