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Yahoo Finance's biggest recession questions answered

Yahoo Finance's Rick Newman answers some of the biggest questions Yahoo viewers have surrounding the current state of the market and if a recession is imminent.

Video Transcript

JEN ROGERS: You've got questions. We have answers. We are always about just telling you what's happening. Myles Udland was probably the first person to tell you that we were actually in a recession. Now we're going to get answers to your questions about being in a recession, and Rick Newman is going to do it for us.

So three-- you've got 29 recession questions, Rick, but I have time for three. First off, number one question-- can there be a happy medium between keeping people safe but not having the economy continue to hurt? Rick Newman.

RICK NEWMAN: Yeah, yeah. And Jen, just to point out, these are questions from our audience. I solicited them on our website to just figure out what's on people's mind. And this is-- I think this is a great question. You know, can we have zero risk from the COVID virus, or are we going to have to accept some risk at some point?

This is what governors are trying to figure out right now. How much risk is acceptable to get back to work? And I think the answer is, we're going to have to accept some risk of exposure to this virus. I mean, the proper answer here is not that the best level of risk is zero because then we have a horrible recession with no end in sight.

So this is something governors are trying to figure out. They're trying to minimize the risk of exposure. But I think one of the things we're going to have to get accustomed to as we gradually reopen the economy and open some businesses is, there is going to be some exposure to this virus. And in a way, that's the optimal thing to do here because we-- there's also a risk of all the economic damage we're causing. So it's a very delicate issue.

ANDY SERWER: Yeah. And Rick, I don't know if you guys saw this, but, you know, this trade-off thing-- Dr. Oz just got flamed on Twitter for suggesting that we could, you know, open schools and only a few kids would die, something to that effect. So this is really touchy, tricky, difficult, dangerous, uncharted territory.

RICK NEWMAN: Yeah, and I--

MYLES UDLAND: And if I could add to-- you know, Andy, we've talked so much about testing, and we hear experts talk about, we need a vaccine. And maybe I'm just missing this conversation, but we need a treatment as well. Like, when we have hospital capacity where we can treat people who get sick with COVID-19-- because people will get sick with COVID-19 for a number of years to come-- if we have a way to treat them, then we can begin to have some of these conversations.

But right now, not only do we have too many people in hospitals, but our methods for treating them are ad hoc because the doctors don't have a plan. They're just doing the best they can, and they're doing an amazing job. But it's like an episode of "House" in every hospital around the country.

RICK NEWMAN: And Myles, Gavin Newsom, the governor of California, actually pointed that out. He has put out six broad guidelines for reopening, and one of them is we need to have better treatment. We need to have better public health measures in place across the board to help, number one, minimize the rate of infection, but also react better if people need treatment.

JEN ROGERS: And just as a reminder, we're going to be getting an update on what the president is thinking about this happy medium between the two. At 6:00 PM Eastern, he is set to come out with guidelines on just this very question.

Moving on to a simpler question, Rick, what's with the shortages of food and toilet paper?

RICK NEWMAN: We've been covering this a lot, so I actually cadged from some of the guests we've had on Yahoo Finance, including the CEO of the King Arthur Flour Company. Right, Jen? We had her just a few days ago.

These are supply chain disruptions. That's what it's all about. So we have-- as a country, we have enough of all these different products, whether it's, you know, I'm noticing we're running out of bacon right now, for example-- toilet paper, obviously. Beans have been in short supply.

What's interesting is, you know, we have just-in-time delivery here in the United States. It's very efficient. And it keeps costs down because retailers don't have to keep inventory. They don't have big warehouses of inventory. It just kind of moves into stores as it's needed, but obviously very vulnerable to disruptions.

And we have a major disruption here. We have a major demand disruption. So we've got a huge decline in demand on the commercial side for toilet paper and other things, huge increased demand on the retail side. And the producers of these things cannot just switch from the products they make for office buildings and restaurants and stadiums and just start packaging an ad for grocery stores.

So we're just not suited for the amount of stuff people want at the retail level right now. This is going to even out over time. But this-- I think this could go on for some time because producers aren't necessarily just going to switch from one type of production to the other because they know at some point, they're going to have to switch back. So they're trying to figure out what's the-- how much change should they pay for, and how much should they just try to crank up production a little bit?

ANDY SERWER: But wait, Rick. Aren't you ignoring one facet of this, which is hoarding and [INAUDIBLE]?

RICK NEWMAN: Yeah. Well, that's part of the demand. That's part of the demand.

ANDY SERWER: Yes, but it's-- irrational purchasing is contributing to the shortages.

RICK NEWMAN: I'm sure that is true. And if you think about it, when you notice that something has not been showing up on the shelves, if you see it, you're going to buy it, even if you don't need it.

ANDY SERWER: Yeah.

RICK NEWMAN: Everybody's doing that. So-- but that is part of the demand shock that is going on here. Again, when you have these very efficient, just-in-time delivery systems, you have not built hoarding into the business model.

ANDY SERWER: Yep.

RICK NEWMAN: And I don't think they're going to build hoarding into the business model, frankly, because there's going to come a time when they don't-- they don't want to get stuck with too much supply.

ANDY SERWER: Yeah.

JEN ROGERS: That's why I have too much bacon.

RICK NEWMAN: Stop hoarding, people. How about that?

JEN ROGERS: I wish I could give you my bacon, Rick. That would really--

ANDY SERWER: I'll take it.

JEN ROGERS: I would trade you.

RICK NEWMAN: Well, I mean, we are having a barter-- we are bartering in parts the economy.

JEN ROGERS: We are a bartering economy. Last question, your question for the day-- Rick, why are some people working and they're also getting a check from the government?

RICK NEWMAN: This pisses off some people who say, why is Congress sending out checks to people who actually have a job? And Congress is actually doing that. Those up to $1,200 stimulus checks are going to people who qualify. There's an income cutoff for those checks, so wealthy people don't get them.

But they go out to everybody, and it doesn't matter if you have a job or not. You're just going to get the check. And the reason they're doing this is because it's generally proven that this is just the fastest way to get money into people's hands that they will actually spend, and that's what we need right now is some additional spending. That's the kind of stimulus this is.

It's kind of messy. It's kind of ugly. There is going to be cheating for sure. There are some people who don't deserve the money who are going to get it. But the economists who have studied this for a long time-- and we've done this kind of stimulus many times. There's a lot of research on this. It just happens that this is an effective way, a fairly proven way, to get people to spend some money and create some demand at a time when demand has gone way down.

JEN ROGERS: And I think there is also some cases, just the way that the stimulus was set up, that some people on unemployment are making a little bit more than they made in their regular job--

RICK NEWMAN: It's true.

JEN ROGERS: --which is leading to some of the-- probably some of what that person was getting at [INAUDIBLE].

RICK NEWMAN: Well, if you want to do this fast-- if you want to do this fast and you want to do it big, which is what Congress needed to do, there are going to be some problems and some bumps along the way.

JEN ROGERS: So Rick Newman, that was three answers, so three of your questions he's answered-- 26 more. You're going to go read those, and hopefully that'll answer all the questions you have.

RICK NEWMAN: And if you others, let us know what they are.

JEN ROGERS: Sorry, what'd you say, Rick?

RICK NEWMAN: If people have other questions, let us know what they are. We'll keep answering them.

JEN ROGERS: Yes, please send in your questions. Rick will answer them all-- and Andy and Akiko and Myles. And I will try and help.