Much of the financial gambling class, (rich white boys on Wall Street mainly playing with other people’s money), keep talking of a V-shaped recovery from the current Trump Depression. (Expect they refuse to recognize the fact that we are in the Trump Depression.) I have a much different take on the current American economic situation and as is often the case I hope I’m wrong; but I doubt it. Let’s explore.
Labor/economic statistics by their inherent nature always are a snapshot from the past. We simply lack the methodology and resources to present real time credible statistics in those areas. With all that said, it is prudent to say the current unemployment rate is around 20% which is a Great Depression level. An economy is much like a house; it takes months to build but you can destroy it in minutes with a fire, bulldozer, natural disaster, etc. To expect the economy to have gone in the toilet in a matter of a few weeks and to rebound just as swiftly is insane. It’s not a light that you turn on with the flick of a switch. This was something between a wakeup call and knockout blow to most Americans and it is certain to modify their consuming behavior.
There is also what I will call the Twin Peaks theory. It says that we hit a peak in coronavirus deaths that will disappear for the summer and then we will have a similar peak in the winter after which everything will be fine and the economy will come roaring back.
The first problem with this theory is that history tell us (what limited history there is that we can try to learn from) that the second peak is much larger. That shoots the entire “twin” part to pieces.
My fear is that the “reprieve” period may not really occur because too many of us already think and act like it is over. It is not!
Even if the Twin peaks model is somewhat correct put yourself in the position of a business owner; particularly a mom and pop operation. Are you willing to gear up to a full scale opening with all its inherent costs if you are uncertain as to consumer demand and how long you can go until you are forced to shut down or dramatically scale back again?
Think of yourself as a worker/consumer in the situation outlined in the above paragraph. Are you willing to start spending like everything is fine and will be for the foreseeable future?
Until we get the coronavirus pandemic under control – and that includes sufficient and readily available testing in addition to a widely distributed, affordable and available vaccine – I think we are looking at a curve that more closely resembles a mountain range and we are currently just in the foothills.
Since this is essentially an economics article here are the bottom lines: You can’t force consumers to spend and if they aren’t comfortable there will not be sufficient demand to fuel a comeback. You can (and the right wing is) basically force workers to return to work but you can’t force them to stay alive. If you lack a sufficient able workforce you can’t create sufficient supply. So, even if you still believe in the long disproven supply side economic theories it still won’t work.
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