Friday, 20 March 2020

The Recipe For A Depression

So, with all of this talk of the virus pandemic, there is the added fear that the cure to stopping it will trigger another depression, like the one in the 1930’s.

How? Well, let’s walk through it. Okay so this pandemic is here and needs to be stopped, but the best way to stop it is to keep people away from each other.

To do that we:

Isolate sick people
Institute Social Distancing
Wash hands really well and often
Shut down social areas
Order people to go home and stay there
Shut down non-essential businesses
Wait it out until the virus dies off

Yet, while that will work the risk is that these measures will push businesses (and people) who were on the edge of insolvency into insolvency.

Don’t forget that even before all this we have the debt crisis. As in the average person is overloaded in debt that they are servicing and carrying indefinitely.

A serious downturn in the economy for long enough (even a few months) could push businesses to close and/or people to go bankrupt.

Every business that closes puts not only more people out of work but the jobs they had are gone, which means that there are less jobs around and more unemployed.

Seeing this trend will cause people to panic further and then they will further not spend a dime they don’t have to. 

Survival mode will set in across the general population. 

This will put further pressure on the economy and push more businesses to fail as there will be a general dread of the state of things throughout people.

This will be a self-feeding cycle that will cause a downward spiral into an economic crash. 

The only real way to stop this and/or break the cycle is to convince people that things are okay and that things will get better.

A good way to do that is a direct payment to the population, as in every last adult gets a guaranteed income, regardless of their employment status.

That would give people the confidence to go out there and either get a job or start a business. 
There is, however, a fundamental refusal by government to directly help people. It is somehow thought that only business or the rich should be helped in such ways.

I am hoping that all of this will be avoided but this is a real possibility.

As always: Keep your head up, your attitude positive, and keep moving forward!

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