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What truly boggles my mind is this: * Personal consumption expenditures constitute 67% to 68% of US GDP every year: https://apps.bea.gov/iTable/iTable.cfm?reqi

by cs702 7y ago

What truly boggles my mind is this: * Personal consumption expenditures constitute 67% to 68% of US GDP every year: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&nipa_table_list=5&categories=survey https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri... * Business revenues are the flip-side of those consumption expenditures, because every dollar consumers spend, to a close approximation, is a dollar of revenue for some business -- whether it's your Aunt Tilly's burger joint, your local movie theater, one of the airlines, a downtown hotel, an amusement park like Disneyland, a retailer like Neiman Marcus, and yes, Amazon and Google too. So, 67% to 68% of US GDP every year, give or take, is made up of business revenues from sales to consumers. * If consumer spending in the US collapses by, say, 30% (a figure I've seen in some articles), business revenues from sales to consumers in the US necessarily declines by a similar magnitude at the same time. If two things are near mirror images of each other, and one declines 30%, the other declines by a similar magnitude too. For every expense not incurred by consumers, there's an equal sale not made by some business. I don't even know how to reason about the impact of a 30% collapse in business revenues across the entire country. See also: https://news.ycombinator.com/item?id=23116055 https://news.ycombinator.com/item?id=23116055

proverbialbunny 7y ago
It's not cleanly divisible across companies. Some will get hit very hard while others will be nearly effected, similar to unemployment right now. Some people are untouched and others are hit hard.
- cs702 7y ago
  Yes, of course, but think beyond the immediate consequences. If that -30% collapse in consumer spending affects mostly, say, half of all businesses, that half will see its consumer revenues collapse by around twice as much, or -60%. Most of those businesses will fail and most of their employees will be out of a job, contributing to a greater collapse in consumer spending. The economy seems to me unlikely to be able to "repurpose all those human atoms" quickly enough, as many people are and will be understandably afraid of returning to work before there's a treatment or vaccine.
  - proverbialbunny 7y ago
    Previously when we have large problems like this, companies are not allowed to loan out so much debt it would bankrupt many non-startups. If it's different this time, it's because companies are allowed to loan at far more than they should be able to. The last time companies (and people) were allowed to loan out so much it caused major problems was 1929. The Spanish Flu crashed the stock market pretty badly with a quick recovery in the 1910s similar to today, but loaning was not crazy then so it didn't hurt the economy in the long term.

by cs702 7y ago

proverbialbunny 7y ago

It's not cleanly divisible across companies. Some will get hit very hard while others will be nearly effected, similar to unemployment right now. Some people are untouched and others are hit hard.

cs702 7y ago
Yes, of course, but think beyond the immediate consequences. If that -30% collapse in consumer spending affects mostly, say, half of all businesses, that half will see its consumer revenues collapse by around twice as much, or -60%. Most of those businesses will fail and most of their employees will be out of a job, contributing to a greater collapse in consumer spending. The economy seems to me unlikely to be able to "repurpose all those human atoms" quickly enough, as many people are and will be understandably afraid of returning to work before there's a treatment or vaccine.
- proverbialbunny 7y ago
  Previously when we have large problems like this, companies are not allowed to loan out so much debt it would bankrupt many non-startups. If it's different this time, it's because companies are allowed to loan at far more than they should be able to. The last time companies (and people) were allowed to loan out so much it caused major problems was 1929. The Spanish Flu crashed the stock market pretty badly with a quick recovery in the 1910s similar to today, but loaning was not crazy then so it didn't hurt the economy in the long term.