Some things I am thinking about…
What I find interesting about the current situation is that all the tools and knowledge we gained from past economic crises are not *super* helpful in our current situation. The modern globalized world has not really faced a global pandemic like this one. And, the way forward for the economy and society is a new path that is going to require experimentation.
It is easy to look at sectors like retail and restaurants that are getting destroyed at a speed we have never seen, but there are a lot of sectors that are slowly bleeding out. Taken as a whole this is as bad a situation as I could possibly imagine. Especially with a total lack of federal leadership in the USA. The EU has handled it better due to the design of their institutions but the division between the north and south is impacting a real response.
It is hard for me not to look at this situation and see parallels to the Great Depression and FDR revamping American society and government. Or, on a darker note the rise of Hitler and other dictators.
What worries me right now?
- In March in the USA, 40% of households making less than $40k had lost a job. 33% of households in the USA make less than $40k.
- Real unemployment right now is probably ~25%.
That is a crazy amount of pain inflicted on a lot of people and communities. And, if we undo the lockdown too soon we make it worse because Covid comes back and we have to start over… causing even more economic damage. And, if we don’t convince people it is safe they won’t go out.
Next, you have all the chain reactions that are slowly going to make things worse and take a long time to shake out the economic impacts. Especially when these are all happening at once instead of one sector is really hurt and the rest kinda ok.
- Restaurants – A lot of restaurants are not going to open, and those that do have to figure out how to survive on xx% less revenue (even if states/cities open up the lack of trust in the gov and fear of covid is going to hurt). A lot will declare bankruptcy, thus making it near impossible for those owners to start a new business. All the industries that supply those restaurants suddenly might have 25% less business, food suppliers, wine/liquor suppliers, linin services, etc. They layoff people, people have less money, repeat, repeat.
- Retail – The same problem.
- Tourism and Travel Related – Just decimated. Airlines will be back but at what % compared to last year? 25%? 50%? And, for how long. Once again, more layoffs. Hotels too. Think of all the ripple effects downstream from those… This is a huge part of each State’s income too.
- Hospitals – They are all going to lose massive amounts of money. All their elective surgeries have disappeared, at what pace they come back is going to be interesting. And, with the USA’s poor response it is likely they will have 20% of their hospital for Covid and as things spike watch everything happen again. Stories of nurses and doctors being laid off or having pay reduced during this crisis are emerging. Covid doesn’t pay the bills.
- Doctors – Small practices don’t have many patients right now. They are going to start going out of business or having significant revenue declines.
- Health Care Premiums – I am curious about what premiums will cost for 2021. The fun thing is we should find out a few weeks before the election I believe :). A ton of elective surgeries are being put off, but what is Covid care costing and will see the normal 3% to 5% increase. Or a 20% increase?
- States – Income is down and they have balanced budget amendments and obligations. Goodbye teachers, cops, and firemen. More layoffs.
- Universities – Loosing foreign and domestic students because they can’t reopen classes. Some could need States to step in to fill the holes.
- Daycare – Absolutely vital for working parents, and already insanely unaffordable. How many are not going to be able to stay in business and reopen? How many are losing kids now both from fear and to cut down on costs? 40% of households making less than $50k a year use a daycare, a big chunk of them just lost jobs, can they still pay that bill or are we about to lose a ton of people from the labor market.
- Oil – Ditto.
- Trucking / Shipping – Duh.
- Landlords – A lot of missed rent payments, a lot of missed mortgages. A huge swath of landlords are just normal people not big businesses and that is going to impact their spending and ripple out.
Things I am thinking about what comes next…
- Are we going to nationalize the health care system in the USA? Or will they just keep giving it money they create and ignoring the nightmare that is our medical system?
- The 2020 election…
- Can the EU pull their shit together and build an actual union, or just kinda limp along until someone else tries to leave.
My hope is that Covid just kinda mutates and goes away like the magical ending of a Michael Crichton novel. Or, maybe we will get a true scientific breakthrough and get a vaccine to market that breaks all previous speed records. Or, maybe we can’t make a vaccine and we are living with this thing for a long time.
Maybe you live in interesting times and all of that.
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