This is a very different animal from the great depression, which was largely man-made, and the current situation is closer to a snowstorm or natural disaster, said ex-Fed chair Ben Bernanke on Wednesday.
The US Fed has largely stayed ahead of the problem and needs a national effort to increase hospital capacity, and enhance healthcare infrastructure, Bernanke told CNBC.
“Cannot put people back to work when the public health situation is not geared for it.”
He said monetary policy is part of the mix the Fed is using. “Monetary Policy and quantitative easing will help once the shutdown ends, but not much of use now. Fed has been extremely proactive & doing well to keep economy functioning during shutdown.”
Keeping economy going during shutdown key to a quick recover once it ends, according to Bernanke.
“If activity Is 10 percent lower this quarter than last quarter, the economy numbers could be scary whether we snap back will depend on whether the virus die down, will social distancing work, length of time we're shut down will be a key factor.”
Fed is trying to ensure credit is available to help business survive, he added.
Bernanke said, "This can be a very sharp short recession in the next quarter or two because everything is shutting down."
"The GDP figures are calculated on an annual basis so if activity is 10 percent lower this quarter than last quarter, you multiply that by 40 because there is a 40 percent rate of decline, so you are going to see some really scary numbers and unemployment is going to go up although may be not to 30 percent."
"So whether or not we are going to snap back depends on a couple of things, it depends on the course of the virus, will our social distancing strategy work? Will the virus begin to die down? Will it perhaps be less dangerous in warmer weather?"
"Will we bend the curve enough so that the hospital system can handle the number of cases? So the length of time that we are shut down is going to be important. The second factor will be, can we keep the economy healthy or at least functioning throughout this shutdown period?"
"So if there is not too much damage done to the workforce, to the businesses during the shutdown period, then we could see a fairly quick rebound. However there is also the possibility that bankruptcies and people being laid off or not finding jobs during this shutdown period means it takes longer for things to get back to normal."