Michael asks, “Hey chris, What is your current opinion on Job losses, Economy shrinkage, Duration, Real estate values, Were that puts us in comparison to whatever the last comparable date”
We’re in uncharted territory for the most part here. We do know it’ll be bad. We know unemployment will be high. We know the recession or depression will last for quite some time – 2-5 years, based on past major events. So we need to prepare for it. Watch the video for full details.
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What follows is an AI-generated transcript. The transcript may contain errors and is not a substitute for watching the video.
In today’s episode, Mike asks, Hey Chris, what is your opinion on job losses, economy, shrinkage, duration real estate values and where that puts us in comparison to whatever the last comparable date? Oh, well, we’re in uncharted territory here is the best way to put this.
We don’t have great economic models for a situation where you’re just shutting down the US economy.
The last time we had to face any kind of pandemic, the head of substantial impact on the economy was 1918.
And most of our economic data, at least the things he would use as economic indicators don’t go back that far, many of our measures really stop around the mid 1960s.
So that information, we don’t have anything that we can use as a model.
The two most recent system shocks that had substantial effects impacts on the economy.
We’re, of course, September 11, back in 2001.
And we do have data from that time period, and the Great Recession from 2007 to 2009, which was caused by a credit market crash.
And again, these are both events where they do not directly have the same economic underpinnings, that I guess we’re gonna call this the pandemic recession have in the case of steppe September 11, it was a terrorist attack that really created this massive mobilization by the US government.
But day life was not impacted for the most part for most people.
The same is true, the Great Recession, the the collapse of credit markets, really caused substantial damage in the financial system and impacted a lot of people’s retirement accounts and employment.
But day to day activities were not really changed during that time period.
You still want to work you still bought groceries.
As you went to concerts, what we’re seeing in this pandemic is, of course, unprecedented in recent history, where people are in lockdown in their homes and their communities.
And the ways for them to spend money are very few, basically groceries and online entertainment.
So we can’t say with any level of authority that we know what’s going to happen.
What we can be reasonably sure of is we can be reasonably sure that job losses will be high.
We know job losses, particularly in small and mid sized businesses will be high because those companies simply cannot float the amount of cash needed to stay open.
A restaurant has inelastic demand.
People don’t store up their their demand.
I will give you an example when you are forbidden from going to your favorite sandwich shop for two months.
When that restriction ends, you will not go to that sandwich shop and buy two months worth of sandwiches, you will go back to the sandwich shop and maybe buy an extra one that you missed it so much.
But that sandwich shop cannot recoup that demand.
Whereas if you’re into something like the construction industry, demand can be deferred, right? You don’t do that home improvement now or build that new addition now, but you will build that later.
And you’re not going to build five of them because you know, that doesn’t have as as much supply influence.
So, we know job losses will be high.
The initial reports as I record this on the 19th of March are already up 33% which is a substantial jump.
We know the duration will be long.
When you look at the economic data from the Great Recession, it was a relatively short System Shock and it still took two years for the recession and and really about another three years after that.
For You know, initial jobless claims and things to come back down into into a healthy territory.
It took another two or three years for things like treasury bonds and things to recover.
So realistic timeframe would be after the pandemic has ended would be anywhere from two to five years for the economy to fully recover from this assuming that you’re they’re not, you know, substantial changes to the fundamentals underneath.
In terms of real estate values, nobody knows.
Again, consumers don’t have money to spend, they’re not going to be buying anything.
So you know, there will be a System Shock at least until the end of the pandemic on the lockdowns and the ability for people to go to work.
And then not economy shrinkage.
What we do know from simulations by Johns Hopkins University’s Center for Health Security is that the pandemic they simulated which was also a coronavirus pandemic.
The first year was a minus 11% GDP planetary, and the second year was minus 25%.
GDP planetary Lee, that is a massive amount of money.
You know, we’re talking 10s of trillions of dollars that will effectively vanish for a while until the the engine gets restarted.
The economic engine that we have in our society right now is consumer driven.
And it functions a lot like, in some ways, like a nuclear reactor, right.
It’s easy to stop it, but then it’s really difficult to get it restarted to get it up and running again.
So we will need to give consumers time they will need to have jobs and they will need income.
And so our priorities are to make sure that people have income to spend.
Because without that, nothing else works.
So when we talk about next steps, employers to the best of their ability need to be able to keep employing people, a lot of small and mid sized companies will go out of business and those people will need to find work.
And people will still need to buy things, but they will need to have money to buy things with.
And so the solution for this, unfortunately has to come from a large part from the government.
Because money doesn’t actually exist, right? Money is a theoretical construct.
It’s a faith based construct that we use to make life easier.
But it doesn’t have any intrinsic value in and of itself, right, you can’t eat money.
And so I would expect to see a revival of barter, you know, at some level on a small level interpersonally among individuals, and the government just needs to print a whole bunch of money.
Once it does that, it can then take that money back in and slowly delete it out of existence over time through taxes, bringing the money supply back under control, but functionally, in order for the American economy to and the world economy to emerge.
From this with anything that is not like outright dire consequences, the government will need to print a whole bunch of money handed to citizens to spend as opposed to corporations and let citizens spend their money once they’ve gotten through the, the lockdown period, they can go out and they can, you know, pay off their debts, they can go and they can buy stuff again.
It’s going to be a long time, saying that now it’s going to be a long time.
It’s not going to be easy for a lot of companies and a lot of people.
So be ready as best as you can personally and professionally.
Make sure that you are as marketable and employee as possible.
If you work at a company, make sure your business is appealing a business as possible from a sales and marketing perspective so that when we do turn the consumer engine back on, you can be as best positioned as possible for your business to benefit.
There’s a lot more to unpack here.
And then So many more unknowns that we just don’t have information for yet.
We will in the days and weeks and months to come.
Keep an eye on all those economic indicators that are important for judging the health of the economy.
And, you know, ask good questions.
Speaking of which, if you have follow up comments, leave them in the comments box below.
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