6 ms·

The Covid-19 Economy: We won't recover until 2022

58 points by cl42 6y ago

darrmit 6y ago
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 6y ago
  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?
  - ianai 6y ago
    Well a reset means offline for some extent. People sure are taking advantage of opportunities that only arise when things are nearly offline. Lots of (needed) road work on high traffic roads where I live, for instance.
    - cl42 6y ago
      I wish that were the case here. I think cannabis and alcohol sales are up 10x, but no road work getting done. :)
      - netjiro 6y ago
        High unemployment periods should be used to build common infrastructure. Electricity, water, roads, rail, airports, etc.
        cl42 6y ago
        100% agree with you.
  - ken 6y ago
    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 6y ago
      Oh, that's a much more eloquent interpretation. Also a bit scary, but I think you're right.
  - wegs 6y ago
    Well, the goal of an economy is to (1) Keep people working productively (2) To distributes the fruits of production equitably. What constitutes productive work is disputed, of course. Most people agree growing food and teaching kids is productive work. Most people agree selling narcotics or a crime ring is not productive. A lot of work (advertising, the financial sector, many types of legal work, some types of management, drilling for oil, prostitution, etc.) are areas where reasonable people disagree. There is a lot of stuff to definition of equitable too: Who plays the capitalist game best? Who produces the most value? Based on need? Who works the hardest? Capitalism and money is an accounting scheme to make that happen. It's far from optimal, but it's the best algorithm we've got. A reset could mean: (1) We forget all debt. We give everyone the means of production they're currently using. We start all bank accounts back at a common value. We resume from there. (2) We put a new system in place to replace capitalism, and we pray it works better. (3) We unwind debts and bank accounts to where they were in January 2020. We start from there. It's just bits on computers. (4) Etc. I don't think the recovery model ever had legs. The suspend/restart model could have worked in March, perfectly cleanly, but we're past that point now. We've gone to where we'll either have major problems for a few years, or some kind of major out-of-the-box solution like a reset.
freefriedrice 6y ago
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.
redis_mlc 6y ago
> 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.
- cl42 6y ago
  > When you throw a wrench into their cash flow, those owners decide maybe the time is right for retirement. Apparently 100,000 small business owners decided on some version of this already. (From the article.)
- TheCoelacanth 6y ago
  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.
  - acqq 6y ago
    Have you checked how long it took for Germany to actually recover, and what was involved in the recovery (e.g. direct foreign help)?
  - user5994461 6y ago
    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.
chrisco255 6y ago
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.
- cl42 6y ago
  I agree with you. Anyone talking about a recovery this year is delusional -- the IMF chart is really meant to show that... Even if things open up this quarter, it'll take until 2022 to get back to where we were before this all happened... And that's the best case scenario according to them. $3T in stimulus coming again (potentially); so much debt.
- pvaldes 6y ago
  Maybe we need an universal partial debt pardon. We could burst the planet also and damage nature much faster than before, would be a lot of fun (for a short time).
- sjg007 6y ago
  The debt is a non-issue.
  - cl42 6y ago
    I generally agree with you, but there are two counterpoints that I think we should keep in mind: * "The passage of time is really all it takes to turn a liquidity problem into a solvency problem." - Powell * This is true as long as you inflate the debt away or have strong policies to pay the debt off. The US had this after WW2 and it took 30-40 years to pay off/inflate its debts way[1]. This is also good to keep in mind for corporations. With that in mind, I think "debt is a non-issue" as long as we've got good policies around this after the pandemic ends. --- [1] https://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/ https://www.theatlantic.com/business/archive/2012/11/the-lon...
Unsimplified 6y ago
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 6y ago
  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 6y ago
    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.

58 points by cl42 6y ago

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 6y ago
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?
- ianai 6y ago
  Well a reset means offline for some extent. People sure are taking advantage of opportunities that only arise when things are nearly offline. Lots of (needed) road work on high traffic roads where I live, for instance.
  - cl42 6y ago
    I wish that were the case here. I think cannabis and alcohol sales are up 10x, but no road work getting done. :)
    - netjiro 6y ago
      High unemployment periods should be used to build common infrastructure. Electricity, water, roads, rail, airports, etc.
      - cl42 6y ago
        100% agree with you.
- ken 6y ago
  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 6y ago
    Oh, that's a much more eloquent interpretation. Also a bit scary, but I think you're right.
- wegs 6y ago
  Well, the goal of an economy is to (1) Keep people working productively (2) To distributes the fruits of production equitably. What constitutes productive work is disputed, of course. Most people agree growing food and teaching kids is productive work. Most people agree selling narcotics or a crime ring is not productive. A lot of work (advertising, the financial sector, many types of legal work, some types of management, drilling for oil, prostitution, etc.) are areas where reasonable people disagree. There is a lot of stuff to definition of equitable too: Who plays the capitalist game best? Who produces the most value? Based on need? Who works the hardest? Capitalism and money is an accounting scheme to make that happen. It's far from optimal, but it's the best algorithm we've got. A reset could mean: (1) We forget all debt. We give everyone the means of production they're currently using. We start all bank accounts back at a common value. We resume from there. (2) We put a new system in place to replace capitalism, and we pray it works better. (3) We unwind debts and bank accounts to where they were in January 2020. We start from there. It's just bits on computers. (4) Etc. I don't think the recovery model ever had legs. The suspend/restart model could have worked in March, perfectly cleanly, but we're past that point now. We've gone to where we'll either have major problems for a few years, or some kind of major out-of-the-box solution like a reset.

freefriedrice 6y ago

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.

redis_mlc 6y ago

> 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.

cl42 6y ago
> When you throw a wrench into their cash flow, those owners decide maybe the time is right for retirement. Apparently 100,000 small business owners decided on some version of this already. (From the article.)
TheCoelacanth 6y ago
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.
- acqq 6y ago
  Have you checked how long it took for Germany to actually recover, and what was involved in the recovery (e.g. direct foreign help)?
- user5994461 6y ago
  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.

chrisco255 6y ago

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.

cl42 6y ago
I agree with you. Anyone talking about a recovery this year is delusional -- the IMF chart is really meant to show that... Even if things open up this quarter, it'll take until 2022 to get back to where we were before this all happened... And that's the best case scenario according to them. $3T in stimulus coming again (potentially); so much debt.
pvaldes 6y ago
Maybe we need an universal partial debt pardon. We could burst the planet also and damage nature much faster than before, would be a lot of fun (for a short time).
sjg007 6y ago
The debt is a non-issue.
- cl42 6y ago
  I generally agree with you, but there are two counterpoints that I think we should keep in mind: * "The passage of time is really all it takes to turn a liquidity problem into a solvency problem." - Powell * This is true as long as you inflate the debt away or have strong policies to pay the debt off. The US had this after WW2 and it took 30-40 years to pay off/inflate its debts way[1]. This is also good to keep in mind for corporations. With that in mind, I think "debt is a non-issue" as long as we've got good policies around this after the pandemic ends. --- [1] https://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/ https://www.theatlantic.com/business/archive/2012/11/the-lon...

Unsimplified 6y ago

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 6y ago
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 6y ago
  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.