Scott Minerd, the chief investment officer of Guggenheim Investments, thinks it may take four years before the economy regains the level of activity it had before the coronavirus pandemic triggered a global crisis.

“To think that the economy is going to reaccelerate in the third quarter in a V-shaped recovery to the level where gross domestic product (GDP) was prior to the pandemic is unrealistic,” he wrote in a note published on April 26.

While governments are doing all they can to aid both businesses and individuals impacted by the virus shutdowns, Minerd said the help will likely be “insufficient, misdirected, and full of unintended consequences.” Many of the 26 million people who have applied for unemployment benefits over the past five weeks won’t be going back to work immediately even if the economy fully reopens, he added.

The unemployment rate could rise to as high as 30% and could still be in double digits by the end of the year, Minerd wrote. Consumer confidence, meanwhile, is set to take a massive hit as half of all Americans were unprepared to weather the storm, with less than $500 in savings.

“Few people will immediately go out and buy automobiles and return to movie theaters,” he said. “The damage to the household sector is so severe that it is going to impair living standards for most of the decade.”

Our central bank will never be able to get back to normal. The #Fed’s balance sheet has expanded from $4.5 trillion to $6.6 trillion in just about a month, and it is likely on its way to over $9 trillion soon. https://t.co/jcbtrJNFHk pic.twitter.com/sjEWiB2Xhr

Other Key Quotes:
• “The most financially vulnerable households are experiencing the majority of layoffs.”
• “The disruption in corporate cash flows will be pervasive and will rebound unevenly.”
• “There will be few positive outcomes in credit as companies are encouraged to accumulate more debt in the already overleveraged corporate sector.”
• “Sending checks for $1,200 to households does very little to solve the problem, because these payments are not targeted. Many people who are working and doing fine are going to get a check they don’t need.”
• “Companies that are keeping people on their payrolls right now — which is a good idea — will find that they can’t sustain longer term employment based upon diminished demand. Programs need to be instituted to address these issues today before facing the inevitable outcome.”
• “Fed purchases cannot turn bad debt into good debt. A buyer who is not careful can mistake Fed liquidity for credit strength and pay the price down the road when downgrades and defaults start in earnest.”
• “The Fed and Treasury have essentially created a new moral hazard by socializing credit risk. The United States will never be able to return to free market capitalism as we knew it before these policies were put in place.”
• “Soon pressure will mount on policymakers to bolster the social safety net and increase things like healthcare and job security and maybe even institute a guaranteed living wage. My only concern is that it will be done in a way that is not productive for long-term growth.”

This article was provided by Bloomberg News.