Better get used to it
Many countries are planning to lift the corona virus lockdown gradually, which is a relief.
Still, there is a lack of perspective, so also understanding, of why it was imposed in the first place and why it is being lifted now, as the system delivers such events with regularity. We have corona virus every year as part of the flue season, but there is no reference provided as to how this one compares.
In the end, I believe, money talks and forces the right behavior (it is the world’s smallest violin, no?). And you know I like the sound of a violin.
We need to be open for business, but for now the entire world is still under lockdown and quarantine.
I may get a nice deal on a Harley-Davidson out of that, but it doesn’t make me feel good.
The damage to the household sector is so severe that it is going to impair living standards for a long time. This problem is compounded by the fact that the most financially vulnerable are experiencing the majority of layoffs. As of this writing US jobless claims soar past 30 million (out of a work force of 164M). France's economy shrank an eye-popping 5.8%, the biggest quarterly drop since 1949. In Spain, the contraction was 5.2%. Germany is projecting that its economy will shrink 6.3% this year.
Fiscal and monetary programs that are being put in place are redefining how the government interacts with us, and they will remain in some form or fashion forever. There is no return to free market economy from here.
The central banks have essentially created a new moral hazard by socializing credit risk, but the real danger is elsewhere. The amount of money pumped into the financial system doesn’t have the ability to create inflation - the European Central Bank has been creating money for the last few years like it is going out of style, but they just can’t get any inflation going.
It just shows that the quantity theory of money is wrong.
Problem is that the bankers are also in control of the cost of money in the form of interest rates. By manipulating rates they violate the natural laws of supply and demand. They can create money at will and price it at 0%, which ruins the savers and retirees, impairs capital formation.
The next financial crisis is coming from pension funds that are not able to meet their obligations, have no doubt about that.
In the end, money is just a mental concept represented by computer entries. The few percent of it’s stock that exists in physical form is mostly for convenience. What follows, is that inflation is also a mental concept and once it’s triggered there is no stopping it – in the 1920’s in Germany people were paid twice a day, this is how quickly the money value was going down the drain.
Money has value as long as the people have trust in the government.
This may now be broken as we're looking at the most tragic case of governmental, medical, and media malpractice in the history of the world.
Now for the good news - supply lines have been cut. The world will become way more local.
Amazon’s dumb-ass business model will sink with the oil and trucking industries.
Tesla posted 16M profit, which is laughable in any universe given the company stock market capitalisation. The board should be out in the parking lot looking for new jobs by now.
The real thing is that commerce will persist in human life, of course, it will just be reorganized differently.
There are huge opportunities for smart, young people who recognize this.
I know I think in terms from before they invented political correctness.
And you know what? I like it that way.
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Tom Kubiak is the author of The Traveler