Glenn Hutchins, North Island chairman, joins ‘Squawk on the Street’ to discuss his thoughts on the economy, the Fed and interest rates, and the risk of a recession. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

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The risk of a global recession is looming large, according to Glenn Hutchins, co-founder of North Island, a prominent investment firm. As the economic fallout from the COVID-19 pandemic continues to wreak havoc on global economies, Hutchins warns that the possibility of a severe recession cannot be ignored.

Hutchins points out that several key indicators are signaling an economic downturn. One of the most significant concerns is the contraction of gross domestic product (GDP) across many countries. The International Monetary Fund (IMF) predicts a 4.4% decline in global GDP for 2020, which is the steepest contraction since the Great Depression. Such a sharp decline in economic output indicates the severe impact the pandemic has had on industries and businesses across the globe.

Moreover, the labor market has been significantly affected, with unemployment rates reaching record highs in various countries. The closure of businesses, furloughs, and layoffs have left millions of people without jobs. This loss of income not only affects individuals and families but also has far-reaching consequences on consumer spending and overall economic growth.

Another perilous sign is the decline in business investment. Uncertainty about the future, combined with weakened demand, has forced many companies to postpone or cancel investment plans. This reduced investment can have long-term implications for economic productivity and growth, potentially prolonging the road to recovery.

Furthermore, the global trade landscape has been severely disrupted. Hutchins emphasizes that the imposition of tariffs and trade barriers exacerbates the economic slowdown. With major economies engaging in trade wars and protectionist measures, the flow of goods and services has been disrupted, hindering global commerce and economic recovery.

In addition to these indicators, Hutchins highlights the inherent risks associated with the massive fiscal and monetary stimulus enacted by governments and central banks to mitigate the impact of the pandemic. Such actions have artificially propped up markets and prevented a more significant economic collapse in the short term. However, the long-term consequences of these measures, such as inflationary pressures and the potential creation of asset bubbles, pose considerable risks to the stability of the global economy.

While countries are gradually reopening their economies and making efforts to return to pre-pandemic levels, the emerging second wave of infections presents a new set of challenges. This resurgence threatens to derail the global recovery and poses an even greater risk of recession.

It is crucial for policymakers to address these risks and implement appropriate measures to support economic growth. Hutchins suggests a balanced approach that emphasizes targeted fiscal stimulus, continued monetary support, and comprehensive healthcare measures. By ensuring the necessary support for both businesses and individuals, countries can navigate these troubled waters more effectively.

The risk of a recession is indeed real, and it is essential to confront this reality head-on. Governments, international institutions, businesses, and individuals must come together to implement coordinated efforts that prioritize economic stability and the well-being of societies. The pandemic has underscored the interconnectedness of the global economy, making it incumbent upon us to work collectively to mitigate the risks and pave the way for a more resilient and sustainable future.