TLDR: My daughter informed me that the text below was dark and gloomy. My wife said it was more positive than she expected. YMMV. Bottom line. If the stimulus works and Coronavirus ends soon - we will all still be a little poorer. If COVID-19 lasts longer or is more intense, no stimulus package can avert economic troubles for long. Be smart, start thinking about the next phase now. Take steps with your family, community and church. Do things now, and make decisions now that will make life easier for you over the next 18 months. There is no point in doom and gloom. Americans have historically risen to the occasion. Get moving.
All week, random people I talk to say, "Something is coming". An old man that used to sit in front of me at church would say that almost every Sunday. I dunno. #somethingiscoming
— Barry L. Clark (@onlyBarryLClark) January 31, 2020
I 'knew' what was coming in January. I regularly watch Foreign news media and saw the real situation with Coronavirus, I was tame in the post because - nobody cared then, we were still mired in talk of impeachment.
Something is coming, everything just might change. I am not a prophet. It is not my intention to predict the future, nor to spread gloom. I admit, my bias leans toward considering the worst-case scenario, but I am also pragmatic. I spent much of my life parsing intelligence data, applying risk assessments to complex military operations and reading history as an avocation. However, I am no more qualified than all the fools talking on the internet right now.
Despite that, I believe there is a distinct possibility I am right about much I will say below. Take my words from what they are and consider the source, but please, if you have arrived here, at least consider them. Let us begin as one should begin evaluating any operation, with facts and assumptions.
- (F1)People in the U.S., many of them at least, are afraid.
- (F2)The scale of the shutdown, economically speaking is unprecedented.
- (F3) The supply chain for regular and essential items is strained.
- (F4) Increasing the money supply faster than the growth in real output will cause inflation - i.e. the bailout packages.
- (F5) Coronavirus is just that, a virus. Modern medicine has proven deficient in creating drugs that effectively treat viruses.
- (F6) Some economists predicted the U.S would enter a recessionary period in early 2020, this had nothing to do with Coronavirus. If their facts are correct the market and economy were already vulnerable.
- (F7) Depression is a period of recession and inflation.
- (F8) Some economists and financial experts now predict a global depression. Goldman Sachs is forecasting a 24% drop in second-quarter GDP.
- (A1)When people are afraid, some of them can become dangerous.
- (A2)The shutdown can't continue long, Americans will either just refuse, or the government will take steps to force compliance.
- (A3) Americans are not eating or consuming more than normal, we are simply buying from different sources.
- (A4) Suppliers of restaurants will soon figure out ways to shift delivery to the consumer market.
- (A5) Recessionary monetary trends may offset inflation caused by (F4) - that is the theory of modern monetary theory at least.
- (A6) Coronavirus appears to be past containment, and will likely 'burn' through the U.S. population.
- (A7) We assume that effective treatments will arise, but (F5) indicates this is difficult with a virus.
- (A8) Coronavirus, therefore, will be with us for a while.
- (A9) If depression(F8) becomes a reality, everything changes.
Something is Coming
Whether you accept the worst-case scenario of depression or the milder version of a recession, I think it is hard for any thinking person not to realize it will be significant, painful and transformative. Only the most rabid socialist could possibly think that the government can prop up or sustain the economy for long by simply creating money and injecting it into the system. Modern monetary theory, the sort advocated by so many on the left, is not that different than the monetary policy of the Weimar Republic. It has never worked historically. At best it is a temporary band-aid to keep people home and stop panic. Even in the best circumstance, it is dangerous and extremely destructive. But, this is the path we are on, it is a done deal. It cannot continue for long, not without adding many additional negative effects.
What does this Mean, What Practical Steps Should the Individual Take?
As we get ready to go through this, the smart among us will realize that entire sectors of the economy are going to change during the event and then after. The Great Depression changed how people worked and lived, the 2008 Recession did the same on a smaller scale. A full-blown depression in 2020 will be more transformative than the 1930s. People are different now.
Smart people will right now begin to evaluate what they did for a living before this all began. There are many occupations and roles that are not critical to recovery and production. Administrative, marketing, middle-management, salespeople hawking unnecessary items, some lawyers, journalists and many many more - will soon find themselves redundant. Take a look at what you do for a living, what benefit you bring to actually producing or delivering the good or service your firm offers, and perhaps even what goods or services your firm is in. The government may bail out folks for a bit, but a depression is more transformative than a government can control.
If you are sitting at home reading the news on Facebook and Twitter, doing a little telework - this may be the time to try and figure out how to learn something new, to transform yourself and your skills. Doers act in a crisis, losers go hungry or cry for government tyranny. Take steps now.
As mentioned above, depression means less production and higher inflation. Essentially your inflated dollars will chase fewer goods. People have already taken it on the chin in terms of investments, none of that will come back in a big way if (A8) becomes a reality. Speculators will rally the market some in the coming days, people do get rich in depressions and recessions, but these rallies will be just that, opportunism, not something the ordinary guy can risk.
The smart money right now is on shoring up the things we need to make it through. Chase lower interest rate loans now, while there is still money to lend. Pay down things you can. Buy things that last. Stop buying luxuries. Invest in sustainable things. Don't speculate unless you are willing to wear a sandwich board if it all does not work out for you.
Don't sign leases, buy expensive new things, buy 'deals' you see for vacation packages in the fall. Save your money and reduce your expenses and commitments.
Stop stressing over the availability of food. We are not eating more than we did a month ago. We are simply not going to restaurants, we are buying all that the groceries have. Suppliers will soon figure out how to get the food normally delivered to restaurants packaged and delivered to groceries. The only danger is the unknown of the virus. What happens if truckers start getting sick? You cannot just create new long-haul truckers from thin air.
Here is a fact that should reassure you. The government has a lot of capability they can throw at a problem. If in a worst-case the truck network stops or slows, the rail system will work, it is aligned with the strategic transport network. The military has trucks and drivers and planes. Food will be delivered, even in a worst-case scenario for a bit. This virus is not a world-killer. It will not get bad enough to stop civilization.
However, that does not mean your income will buy as much food as you might want in a depression. It does not mean that people may not have hungry bellies.
Plant a victory garden, in your back yard, on your balcony, in your common area. It is close to spring in many parts of the country. This all happened at basically the perfect time for us to take steps to make life easier. Some potatoes and fresh vegetables will reduce your financial burden, give you a physical task to work on, relieve stress, reduce anxiety and help the nation. Smart Americans need to do this right now and stop worrying and complaining. The generation in the Great Depression did this, so did the WWII generation. We have this in us. We have t can beat this. Plant a garden!
Learn to fix things. We have the Internet - learn stuff. Get ready to make some of the things at your home last longer than they might have otherwise, without the need to call a handyman. Give yourself the option.
Parents - Prepare to make room for your adult kids. Go ahead and start rearranging things now so that they have a safe place to land. Adult kids - You should face no shame in moving back in when the time comes. Bring your resources, respect the house and the roof, endeavor to contribute and prepare to thrive through this. Do not be prideful and think you alone can get through this with no job or work if only you had an extra $thousand bucks loan. Know when it is time to change course. Families will likely, in many cases, have to pool resources. Parents, if you have been stupid, selfish and wasteful and cannot provide a safe nest for the family to return to - take steps now.
Church and Community
This could be the genesis of the Fifth Great Awakening. Stay connected to your local church community. Come together, help one another, reach out to others. Pray and study. Find ways to help each other become more sustainable. Plant a church garden of vegetables that glorifies Christ's garden on Earth.
Be aware. Prepare for this. Scared, confused people are dangerous. It is not bad yet. But, a depression in 2020 will not be the sort of the 1930s. Many people are selfish, greedy, evil and violent. If you are not now prepared for this, it is too late - it is pretty expensive to buy a gun or ammo.
All that I said above has little to do with Coronavirus itself. For good reason. I am not an expert and many of the 'experts' we listen to on the television or the Web have been wrong about so much - how contagious it is, how it is transmitted, when people are contagious, how deadly it is, etc. We do not know and I would be hesitant to say.
Some reports indicate that Italy is a special case, with an older population that smokes a lot. I saw a disturbing and unconfirmed report today that demonstrated that active cell phone accounts in China have shrunk by millions since the event started there. The first data point would indicate it may not be nearly as deadly here. The second, if true, has all sorts of potential implications. But I do not know.
The virus is not a threat to how we live long-term. People will suffer, some will die and many will be afraid. I am not making light of that by pointing out what comes next. None of us can do a lot about the virus. We can try and avoid becoming sick or passing it along, but ultimately, what becomes of the virus is not in our hands as individuals.
What comes next, stage two of this event, the economic effects, these are things we can have an impact on. If you have read this far down, you know in your heart that this is different and things have changed. Take steps to prepare yourself and your family for stage two.