When the world feels like it is ending, it can be comforting to look to history and see that such global convulsions have happened before and the Earth kept on turning. Carmen Reinhart, co-author of the book "This Time Is Different: Eight Centuries of Financial Folly," had these thoughts about the coronavirus crisis:
Q: What is your take on what we are seeing so far?
A: You can't have a standstill in economic activity and not expect serious balance-sheet consequences. My expectation is that we will see a big increase in bankruptcies at the household level, at the corporate level and at the sovereign level.
Q: Many people are looking to the Spanish Flu of 1918 for clues — what can we learn from how that pandemic played out?
A: We don't really have historical antecedents for a lockdown of this scale. The last major one in 1918 was in World War I, and as is common with wartime economies, the big thing was production. Real GDP growth at the time was 9%, so we can't really look to that period for lessons in economic effects.
Q: What are you worried about, that others aren't realizing?
A: I worry a great deal about social unrest. The longer this lasts, the hardest-hit households will have less and less ability to cope. A prolonged scenario when people don't have jobs, and things are shut down, is worrisome in terms of what it does to the human psyche. We haven't really had this experience before.
Q: Since you have looked at hundreds of financial crises, any lessons that are helpful now?
