This article is based on a presentation from John Mauldin’s 2020 Virtual Strategic Investment Conference, which is being held from May 11 to 21. To register for this conference, click here. The Strategic Investment Conference was just approved by CIMA and CFP for 14 hours of continuing education credits.

Wall Street will proclaim that any increase in economic activity is a good sign. But, according to Jim Bianco, even a recovery to 90% of pre-crisis levels will be terrible.

The dismal implications of a 90% economy were first presented in the Economist. Bianco amplified that message in a talk he gave as part of John Mauldin’s 2020 Virtual Strategic Investment Conference. Bianco is president and macro strategist at his own firm, Bianco Research, L.L.C., which is based in Chicago.

GDP fell only 4% as a result of the financial crisis, so 90% would be twice as bad as that, he said. Early evidence from China is that 90% might be the best we can accomplish.

“This is a relative, not absolute, game,” Bianco said. “But the pundits look at it on an absolute basis – any recovery is good. Like the Economist, a 90% recovery is not good.”

The economic drawdown following 2007 was the worst since World War II. It was a drawdown of 4% (the U.S. economy operated at 96% of its pre-GFC output). But that resulted in 10% unemployment and a 50% stock market correction, along with social unrest, Brexit and Trump’s rise to power. The estimate for Q2 shows approximately twice as big a contraction as 2008 – about 9%.

“This will be unlike anything we have seen in terms of its decline,” Bianco said.

The worst decline was in the Depression, when the GDP was down 26%. “This will go down as one of the worst in our economic history,” he said.

“We need to get all the way back,” he said, “or else we will have lasting unemployment and business failure.”