The housing market is sizzling in the Lower Mainland.
There's a great deal of talk about a V-shaped recovery.
And the media consensus is the worst economic impacts of COVID-19 are behind us.
Sure, there will be more deaths, according to this narrative. However, the prevailing view is that we should be back on our feet economically in a reasonable amount of time.
And one indication is the high volume of real-estate transactions.
The data crunchers at rennie intelligence even coined the term "Great Suppression" to describe what just happened: a government-induced slowdown to deal with a global health emergency.
But what if the story doesn't end here?
World Bank offers bleak forecast
Two high-powered U.S. economists, Carmen Reinhart and Vincent Reinhart, recently wrote a disturbing article entitled "The Pandemic Depression: The Global Economy Will Never Be the Same".
It appears in the September-October issue of Foreign Affairs.
In it, the Reinharts point out that the World Bank has forecast a 5.2-percent decline in global economic output in 2020.
"The pandemic has created a massive economic contraction that will be followed by a financial crisis in many parts of the globe, as nonperforming corporate loans accumulate alongside bankruptcies," they declare. "Sovereign defaults in the developing world are also poised to spike.
"This crisis will follow a path similar to the one the last crisis took, except worse, commensurate with the scale and scope of the collapse in global economic activity. And the crisis will hit lower-income households and countries harder than their wealthier counterparts."
Foreign Affairs is published by the Council on Foreign Relations, which has been at the heart of elite thinking in the United States dating back to the early 1920s.
Carmen Reinhart is chief economist at the World Bank. Vincent Reinhart is chief economist at Macro Strategist at Mellon.
Closed borders elevate economic threat
One of their key points is that a "rebound" should not be confused with a "recovery". And that's why they argue in favour of continued fiscal and monetary stimulus packages.
"Public sentiment matters to the economy, and it is hard to imagine that attitudes toward foreign travel or education abroad will rally quickly," they note. "More generally, trust—a key lubricant for market transactions—is in short supply internationally. Many borders will be difficult to cross, and doubts about the reliability of some foreign partners will fester."
While that's no guarantee that this will undermine Metro Vancouver's housing market, it could elevate the risk over the medium term, given how dependent B.C. is on tourism. Our university and K-12 school systems rely on international students to help balance their budgets.
Prime Minister Justin Trudeau has extended the federal wage subsidy for businesses until December. And going into this crisis, Canada's debt-to-GDP ratio was far lower than where it was in the mid 1990s.
But as the Reinharts emphasize, we're still in perilous economic waters. In fact, their piece is one of the most pessimistic that's been published in a mainstream newspaper or magazine since April.
"Most analyses project that the U.S. unemployment rate will remain near the double-digit mark through the middle of next year," they write. "And the Bank of England has warned that this year the United Kingdom will face its steepest decline in output since 1706. This situation is so dire that it deserves to be called a 'depression'—a pandemic depression.
"Unfortunately, the memory of the Great Depression has prevented economists and others from using that word, as the downturn of the 1930s was wrenching in both its depth and its length in a manner not likely to be repeated," they continue. "But the nineteenth and early twentieth centuries were filled with depressions. It seems disrespectful to the many losing their jobs and shutting their businesses to use a lesser term to describe this affliction."
Moreover, countries that are more dependent on trade, including Canada, could face an even more uphill struggle.
"The World Trade Organization estimates that global trade is poised to fall by between 13 and 32 percent in 2020," the two economists write in their article. "If the outcome is somewhere in the midpoint of that wide range, it will be the worst year for globalization since the early 1930s."
It's something to keep in mind as you watch the stratospheric rise of several U.S. and Canadian tech stocks and the seemingly insatiable desire for Vancouver housing.