
The Covid-19 Economy: We won't recover until 2022 - cl42
https://chimerais.com/covid19-may13-prospects
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chrisco255
This is where it's very important for chartsmiths to acknowledge the extremely
chaotic nature of the economy right now and its high degree of uncertainty.
The IMF is just making stuff up right now. Nobody knows what the hell happens
when you shut down the whole world for 2-6 months. One thing is apparent, is
that our debt is growing faster than our economy. We may be approaching the
limit of how much debt can be produced and still get returns on growth. This
current situation has a lot in common with the Great Depression, but we
weren't as over-leveraged in the 30s. Based on the world's total debt levels
of $250 trillion with a pre-Covid economy of roughly $80 trillion...I'd say
we're in for a world of hurt over the next decade or so.

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nscalf
While I strongly disagree with MMT, supports would argue that the central bank
can manipulate the currency to the degree that basically any debt is not a
problem.

~~~
cl42
This is true as long as your currency is a reserve currency and people are
willing to access it, buy bonds denominated in it, etc. The central bank can
print money and inflate debt away as long as it's seen as the asset of last
resort.

The credibility of the US government becomes critical in maintaining this.

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darrmit
I’ve been thinking a lot about whether the correct way to think about it is
more of a “reset” than a “recovery”. So much about what we are doing with the
economy right now seems theoretical that it’s hard for me to think about it
any other way.

~~~
cl42
Interesting idea! How would you differentiate between the two? I guess with a
reset, you stop everything, turn it all off, and turn it back on. Is that what
you mean?

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ken
I don't think "reset" was meant in the computer sense of "turn it off and on
again".

I think the implication is that our financial indicators have outrun the
actual state of the economy. We're _resetting_ in the sense that we're forcing
the indicators to match reality again.

To _recover_ would mean the numbers would go back to where they were before,
which isn't going to happen.

~~~
cl42
Oh, that's a much more eloquent interpretation. Also a bit scary, but I think
you're right.

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Unsimplified
We need a new economy. The ability to work and survive does not need to be so
precarious. If households could make everything themselves, no abstract shock
or "job market" would disturb them. But that is not reality. The key
challenges... dependency coordination, natural resource control, and circular
negotiation. Answer these to clarify the transition.

~~~
Nasrudith
An autarcic approach was left behind for a reason. Specialization and
economies of scale provide far more with better efficiency.

The closest steps towards it have involved automation to effectively deskill
and delabor processes usually for logistical advantages - take printing for
example.

Using today's technology the best we would have is essentially a "remote
compound" with a well water, and septic tank as very basics. Beyond that gets
into renewable power sources like solar or wind and batteries, more extreme
maybe a fully automated garden based upon indoor farming tech scaled down. All
take up space and are more expensive such that it is not the cheaper option
unless you are at the fringes. And it would be very far from making everything
themselves. That world is gone for a reason.

Even if a housshold could be self sufficient that would be insufficient for a
society - infrastructure needs support as well.

~~~
simmanian
I'm not in favor of every household going fully self-sufficient, but I think
it's time we evaluate if we really need extreme efficiency in many aspects of
our lives. I believe there are many services that would be less damaging and
less polluting to the world if implemented at the community level. Growing and
delivering food is a great example.

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redis_mlc
> We won't recover until 2022

Even if the lockdowns in the US ended today, there won't be a recovery for at
least 2 generations.

Although the FAANG companies can weather a lockdown, virtually no other
businesses can shutdown while still paying rent without bankruptcy.

For those unfamiliar with business, here's some examples of the slim margins
and huge overheads outside the FAANG bubble:

\- Major grocery stores typically make 1% of gross. One percent.

\- Large car dealerships typically employ 500 people and finance their
"floorplan" (inventory) with short-term loans.

\- Large restaurants typically have 100 staff.

When you throw a wrench into their cash flow, those owners decide maybe the
time is right for retirement.

A similar thing happens in the accounting field.

Periodically the IRS makes major changes, and the older generation of
accountants says "enough", and moves to Florida.

~~~
TheCoelacanth
This is bad, but you are being way too dramatic.

If it takes two generations to recover from this, then this is worse than
WW2's impact on Germany.

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user5994461
Please don't compare the virus with a world war.

World wars are followed by a miraculous age of prosperity. Home are destroyed
and can be rebuilt, tenant and landlord alike passed away. Rent is cheaper if
not free in some places. All debts are forgiven and anyway the creditor is
likely to be dead. Business that closed or lost their workforce can start over
from scratch.

A virus is nothing like that. It gives no boost to the economy. It doesn't
make more homes available or make rent cheaper. Debts continue to accrue with
interest while there are no revenues coming in.

~~~
SpicyLemonZest
I feel like you're missing a basic sanity check here. If your position commits
you to believing that having a bunch of infrastructure blown up is _good_ for
the economy, that it stimulates growth when a bunch of people die and most
businesses disappear, you need to back up and think about where your train of
thought got lost.

~~~
eli_gottlieb
It's certainly true that the rate of profit on _new_ investments goes up when
you destroy existing capital stock. In normal times, continuous expansions
make bad money chase after good, and you need downturns to wipe out the
malinvestments. War wipes out both good and bad money alike, so that, very
temporarily afterwards, almost all investments are "good money": pick a
rebuilding project and invest in it, and it'll probably turn a healthy profit.

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freefriedrice
What was that about exponential growth and nature? I'm sure the 0.1% can rest
on their billion-dollar laurels for the next decade, but at some point the
next batch of $100-millionaires will become restless and steer they system
toward their desires. I'm hopeful: greed always wins, and as a flea on the
back of the big dogs, I don't need much to be happy.

