'This Time is Different' is the title of a celebrated book which came out with exquisite timing in 2009.
Written by US economists Carmen Reinhart and Kenneth Rogoff, it told the story of various bubbles, crashes and defaults through history. The title comes from a mantra often heard at the height of booming economies.
We’re not going through a crash precipitated by a property bubble, credit boom or any form of 'irrational exuberance'. But this time, truly, is different.
This week we got a first glimpse of the impact Covid-19 is likely to have on our economy. We also saw the very real impact it’s already having for the hundreds of thousands of workers who have lost their jobs, some hopefully only temporarily.
The Central Bank’s quarterly report forecasts a severe contraction in the economy of 25% over the next three months. It’s still factoring in a recovery at the end of the year (because we all need hope!) which should limit the damage over the course of the year to a drop in GDP of 8.3%.
That still implies a deep recession.
For me, the most important sentence in the Central Bank’s report was this: "...the path ahead for the economy depends on the path of the virus, both domestically and globally".
So when it comes to answering questions about where the economy is going, you really shouldn’t be asking an economist.
Focus Economics published a survey this week which found that economists from 62 institutions around the world now believe there will be a longer global recession because of the pandemic.
For lovers of alphabetical metaphors for the progress of economies, just 28% polled now believe there’ll be a V-shaped recovery (sharp recession quickly followed by a fast recovery) and 58% now believe the recovery will be U-shaped, In other words, we’re going to endure a longer recession before things begin to pick up.
For that we need to peer through the Covid-19 fog.
When we all emerge from our containment, our behaviour as consumers may have changed.
Will people be happy to congregate in crowds for sports events, concerts or public transport? Many people will have suffered a loss of income, so they will spend less. Lots of us may think twice before hopping on a plane. In short, things will be different this time.
Thankfully, that difference also applies to how governments fund themselves when their tax coffers are empty.
During the last financial crisis, we all became casual experts on the vagaries of the bond markets. The normal rules are that bond investors, the people that loan governments money, charge a rate based on the risk they attach to getting their money back.
During the financial crisis, many investors feared they’d never get their money back from governments in Greece, Italy and indeed Ireland.
Governments cut back on spending because they couldn’t afford to borrow.
Today, the fuel that lubricates and buoys the bond market - money - is in plentiful supply. The European Central Bank, in tandem with other central banks across the world, have stepped in to ensure there is so much money sloshing around that the rates charged in the market will remain low.
What this means is the cost to governments of borrowing to deal with this crisis will remain low. This will, it’s hoped, encourage governments to maintain income levels and peoples' livelihoods to a significant degree while this crisis continues.
What happens with all of this money - and debt - after the crisis is another question. But I think just one economic conundrum at a time is enough upon which to ponder.
After all, next time it will be different.