Friday, March 20, 2020

The Race Is On

With California arbitrarily deciding to shut down the most populous state in the Union, following the lead of Pennsylvania, I expect other states to do the same. I suspect this is coordinated, a cascading process where we close down a few states and then slowly add more states. This would help avoid the appearance of a national lock-down while still having the same effect. Clever.

This is going to have serious ramifications on the economy. I don't want to waste the time sketching out some scenarios but as "non-essential" businesses close down, they stop buying from their supplies and stop paying their employees. That means their suppliers suffer, stop purchasing whatever goods they supply and stop paying their employees. Most businesses in America are at least slightly connected to one another and as some businesses begin to suffer, all of them start to suffer. That means people have less disposable income and perhaps even worse it makes them very uncertain and people who are nervous and uncertain do things like not add on to their house or remodel the bathroom or upgrade their phone.

I am often out and about early in the morning and during those hours the local Amish work-crews are heading to their job sites. It can be a little hairy as many of their drivers are lunatics and drive 15 passenger vans pulling trailers full of tools with ladders hanging on the side at breakneck speed. Certain roads have a lot more traffic because they connect with the main road heading into nearby Fort Wayne. The last few mornings traffic on those roads is noticeably sparse. Other Amish have businesses and small factories that primarily supply "English" businesses and the word is that their orders are slowing down. While most Amish have ample money in the bank, having their income diminish significantly will mean that perhaps their wives don't get new shoes from local Amish stores or buy fabric to sew new clothing, opting instead to patch dresses and shirts. This small microcosm of the economy is what is happening all across the economic sphere.

It is a well known and often repeated fact that most Americans have very little in the way of savings and live "paycheck to paycheck". We are about to see how true that is and what happens when potentially millions of people start overdrawing their accounts. I am hoping people are being smart and not spending money on anything but the absolute essentials but as I am fond of pointing out, you will never go wrong better on the average American to be dumb. When the checking account is empty and people can't afford to buy things that may or may not be in stock anyway, what happens? In many cases they simply take what they want anyway. A few years back there was a snafu in the EBT (food stamp) system that allowed people to buy without the normal monthly limit so people were loading up on steak and lobsters. When the government figured out what happened, they shut off the cards completely. With a cart full of food and an EBT card that wouldn't work, lots of people simply rolled the cart of unpaid groceries out of the store anyway.

The government is quietly putting measures in place to keep the lid on so the whole thing doesn't boil over. You can't be evicted or foreclosed on. Student loan interest is on hold. You apparently are not going to get your lights, heat, water, phone or internet disconnected for non-payment. People having their lights turned off or even worse not having the internet means civil unrest. To repeat, I am confident that this slow motion shut down of the United States is being coordinated to minimize panic.

Honestly, as much as I despise approximately 100% of politicians, I don't envy them trying to do this balancing act. If you believe some reports, if we don't shut things down to "flatten the curve", the number of cases will spike and overwhelm the health care system but on the other hand, if they get too draconian too quickly, they risk people going nuts or just simply widespread and public cases of people ignoring the law and making the government look impotent. As Pat Buchanan mused yesterday:

But if, in diverse cities, minority communities come out for block parties in summer, are we going to have the police march them back into their homes? Do we have enough cops for that?

We know the answer to that, the optics of police rounding up blacks or mestizos and forcing them to go home is something no urban mayor will allow and the odds of a dozen cops being able to force hundreds of people who mostly hate the cops back into their homes is next to zero.

Meanwhile Congress and the President are frantically trying to hammer out a deal to send checks to people as soon as possible. Getting money into the hands of average citizens, or even just the promise of the check coming, might be enough to quell civil unrest. The question remains, will the checks come before a critical mass of people run out of money? The next question is: what happens if the pandemic lasts through the summer? It is only March right now, will the checks keep coming for millions of people for the next 3-4 months?

People are mostly resigned right now to the situation and relying on gallows humor to get through the day, but for how long will they take it in relatively good spirits? I suspect the answer is: not much longer.

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