I don’t know how bad this Corona virus is going to get- perhaps it could be the next Spanish flu. But I tend to think that it’s being exaggerated, not only in the US but all around the world. Certainly you can err on the side of caution, especially with the absurdly litigious nature of our society. But I really think we’re overreacting to this thing, most likely. If you look at the death rates for reasonably healthy people under the age of 50, they’re tiny.
But I’m not here so much to discuss the Corona virus itself, but a potential economic crisis which the virus was the catalyst for. IMO, the virus could be cured and eradicated tomorrow, and that still wouldn’t save us from the coming recession, and I think there’s a greater than .500 probability that we’re heading into a global depression.
The main problem isn’t the corona virus. If we had a fundamentally sound and healthy economy, we could weather the virus. The problem is that we’re currently in the largest economic bubble in history. This ain’t no ordinary bubble, this is a colossal hyper debt bubble. The Federal Reserve has kept interest rates artificially low for so long to “stimulate” the economy that it has led to all kinds of distortions in the market. The virus is merely the pin which pricked the bubble.
Nothing actually got solved after the last economic crisis. We tried to paper over a debt problem with even more debt. Far more debt. And because we never finished the last crisis, this next crisis may finish us. They may have to rename the “Great Depression” after this one.
There’s oceans and mountains of debt everywhere. The whole economy is imploding because of it. Thanks to the central banks, everybody is leveraged to the hilt. Individuals have record debt and are living paycheck to paycheck, record auto debt, student loans, credit card debt, corporations have borrowed heavily to overpay for their stocks, the governments at all levels have record debts and deficits that are only going to get much larger, record trade deficits… everybody has been gorging on debt because the Federal Reserve made it so cheap to borrow. All this debt has made our economy incredibly vulnerable. If the Corona virus never happened it would have been something else that wrecked the global economy- the bigger the bubble the smaller the pin required to prick it. This isn’t going to be anything like 2008- that was just an institutional/banking crisis. This is going to be a currency crisis and a sovereign debt crisis.
I know this isn’t the main point of the thread, but…
I’ve seen posts on Facebook saying that, if the precautions we’re currently taking have their intended effect, it’s going to look like we overreacted. Which will be a good thing.
Well guys, I said that I thought the probability of a global depression was greater than .500- I change my mind. The probability of a global depression is approaching 1.
Zero % interest and we dont even have March numbers yet. It is a full blown catastrophe. Good Lord this is like a nightmare. I knew this economic meltdown was coming, I knew that when it happened it would happen at lightning speed, but now that it’s finally here it all feels so…surreal to me.
I’m deeply worried for the future of this nation. This nation may not even be recognizable a year from now.
The thing is, the steps we are taking to flatten the curve and not overload the healthcare system, all good things, are exactly the ones which will lead to a recession.
A number of national chains have closed all their stores. Restaurant visits are down 35% nationwide, worse in places like Seattle and New York. Tourism, conventions, and entertainment are crashing. All that leads to job losses which leads to reduced consumption which leads to more job losses which leads to recession. The large amount of debt will make it even worse, as does crashing oil prices.
We have only anecdotal data on job losses. Maybe the decline in stock futures today after the Fed cut is partially due to the market thinking the Fed has data on this, and it doesn’t look good.
I particularly liked this bit, “It is important to understand that the sudden demand for precious metals in the face of the severe crash of the financial markets has put an unprecedented strain on the supply side. Mints and other up-stream suppliers of the products we sell have to a large degree been cleaned out of everything they had on-hand.”