This economic crisis will be bigger than GFC 2008: Ross Cameron

Nothing seems to be working for the markets. Cities in India are selectively going into a shutdown. Is that the only answer, just shut trading for a while hopefully? When we come back after a month, the world will be a calmer place?

Unfortunately, a month is probably too optimistic. First of all, we have to be prepared that the economic crisis arising out of this pandemic will be worse than we saw during the 2008 Global Financial Crisis. The difference here obviously is that during the 2008 GFC, it was really a banking crisis which turned into an economic crisis, and the path to recovery was fairly clear in that case: failing banks, supplying liquidity, cutting interest rates and fiscal stimulus. This time around, with a pandemic appropriate fiscal action and appropriate monetary action are much less clear, and the duration of the impact is likely to be much longer.

We are seeing shutdowns across the board. In terms of economic relief, we have seen certain announcement — whether it is the Fed or the ECB, whether it is certain countries, trying to assure markets.

What we have seen so far is that the market is completely unresponsive to interest rate cuts. Basically, central banks are already at zero interest rate levels, which means there is not much they can do to stimulate within the realms of conventional monetary policy. It provides little assistance to the financial system, but people here are worried about the real economy, and for the real economy, it will be absolutely critical if governments around the world try and slow the spread of the virus to avoid an Italy-like situation. The only way we can do that is by really locking down cities. In that environment, monetary policy is relatively ineffective.