6 ms·

> 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

> 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.
  - ryanwaggoner 6y ago
    Kinda working off a small sample size there, aren’t you? The last world war was almost 8 decades ago, and the last pandemic of equal impact was a century ago, and also overlapped a world war. We have no idea what life looks like on the other side of this, but I’ll take pandemic over world war any day.
  - wegs 6y ago
    The debt forgiveness can happen here too. That's the critical piece now. A month ago, a debt freeze would have done it.
  - pvaldes 6y ago
    > It doesn't make more homes available In fact it does when kills elder people that lived in their own house, and some places are still unsuitable to normal human activities since WWII, but I understand the subjacent idea. If debt (specially of the artificially inflated kind, with generations of people paying interests totalling decens of times the amount borrowed) is a menace for the recovery, at some time we eventually will need to agree to forgive it, or to make a law to enforce a limit. If copyright can't be applied for an unlimited time, maybe debt shouldn't be allowed to extend over an unlimited time. And of course a lot of debt will dissapear itself naturally after covid killing the debtor. I assume that the models include that possibility.
  - SpicyLemonZest 6y ago
    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 6y ago
      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.
- redis_mlc 6y ago
  Overly dramatic? The US financial system never recovered from the 2008 recession - that was 12 years ago, and the Fed is still propping things up.
- eli_gottlieb 6y ago
  Germany's recovery from World War II involved splitting into two countries, military occupation, de-Nazification of governance, and the Marshall Plan.
lsllc 6y ago
I feel like this time is different (at least I hope it is!). The downturn is so pervasive that everyone is screwed. As a landlord, if my renters can't pay, and I can't find new renters, my best option is to forgive the rent and hope things get better -- of course now I probably can't pay my mortgage so I have to ask the bank for forgiveness. Basically, the buck (or lack-thereof) gets passed up the chain to someone who CAN absorb it (probably the government via bailouts). In prior recessions, you could kick that failing restaurant out from your commercial building and try to re-lease the space. That won't happen now, there's no one to lease to -- so there is no point in doing that. Similarly, if that restaurant can't pay its bills, the supplier has nothing to gain by foreclosing on them (and in fact needs them to continue to exist so they can count on them as a customer in better days). I think (hope!) the whole economy is in some sort of suspended animation. That when the lockdowns ease, things will start moving again and hopefully quickly.

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.
- ryanwaggoner 6y ago
  Kinda working off a small sample size there, aren’t you? The last world war was almost 8 decades ago, and the last pandemic of equal impact was a century ago, and also overlapped a world war. We have no idea what life looks like on the other side of this, but I’ll take pandemic over world war any day.
- wegs 6y ago
  The debt forgiveness can happen here too. That's the critical piece now. A month ago, a debt freeze would have done it.
- pvaldes 6y ago
  > It doesn't make more homes available In fact it does when kills elder people that lived in their own house, and some places are still unsuitable to normal human activities since WWII, but I understand the subjacent idea. If debt (specially of the artificially inflated kind, with generations of people paying interests totalling decens of times the amount borrowed) is a menace for the recovery, at some time we eventually will need to agree to forgive it, or to make a law to enforce a limit. If copyright can't be applied for an unlimited time, maybe debt shouldn't be allowed to extend over an unlimited time. And of course a lot of debt will dissapear itself naturally after covid killing the debtor. I assume that the models include that possibility.
- SpicyLemonZest 6y ago
  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 6y ago
    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.
redis_mlc 6y ago
Overly dramatic? The US financial system never recovered from the 2008 recession - that was 12 years ago, and the Fed is still propping things up.
eli_gottlieb 6y ago
Germany's recovery from World War II involved splitting into two countries, military occupation, de-Nazification of governance, and the Marshall Plan.

lsllc 6y ago

I feel like this time is different (at least I hope it is!). The downturn is so pervasive that everyone is screwed. As a landlord, if my renters can't pay, and I can't find new renters, my best option is to forgive the rent and hope things get better -- of course now I probably can't pay my mortgage so I have to ask the bank for forgiveness. Basically, the buck (or lack-thereof) gets passed up the chain to someone who CAN absorb it (probably the government via bailouts). In prior recessions, you could kick that failing restaurant out from your commercial building and try to re-lease the space. That won't happen now, there's no one to lease to -- so there is no point in doing that. Similarly, if that restaurant can't pay its bills, the supplier has nothing to gain by foreclosing on them (and in fact needs them to continue to exist so they can count on them as a customer in better days). I think (hope!) the whole economy is in some sort of suspended animation. That when the lockdowns ease, things will start moving again and hopefully quickly.