Following my last rather aggressive rant I’ll try and tone down in this week’s blog post. That’s not to say I am in any way ok with what’s happening in our national and global political landscape and its response to the biggest crisis since WWII. That’s the human part.
As for a view on some of the political leadership, I’d like to share a short video of George Monbiot with you. He puts similar views into a very clear language in a way that I can’t. George is a writer and independent journalist and lives in the UK. I have read two of his books and in general, think he is a lovely chap.
Economy. Well, I think we can all agree we were hoping 2020 would be “the year”? The word’s New Year resolutions didn’t even have time to be forgotten when Covid19 started emerging. Forget about that. Not going to happen.
Research suggests the current crisis won’t hit the global economy as hard and long as the GFC in 2008 did. Honestly that remains to be seen. I have a different view, but let’s just focus for a moment on why it apparently is not going to be as “tough”.
Research by some clever people of some of the big economics and financial firms suggest that the GFC was essentially a “balance sheet” recession. “The bursting of an earlier housing bubble punched a hole in household balance sheets, forcing a collective shift towards saving/de-gearing rather than spending.” This exposed vulnerabilities in a highly-leveraged banking system and as counter-party confidence collapsed, the financial system froze up.
This all manifested itself in a collapse in demand.
A few slides that give you some insights regarding GDPs, credit defaults and more of the current COVID-19 impact.
COVID-19 affects both supply and demand within the economy. Restrictions on people movements (factories, travel etc) reduce the productive capacity of our economy.
The same research suggests that fiscal responses by the governments – ramping up now and over the course of 2020 – will act in time to buffer the economies from recession. Globally, the paper continues, the firms believe there is ample liquidity in the financial systems to absorb financial market volatility.
Maybe, but let’s not forget that we are not talking about corporates helping societies to get back up on their feet but governments. Governments by their very nature need to “borrow” unplanned budgets from the future. As shitty as this sounds (and is) it is borrowed money from our kids. Why? Because governments have only one income stream: TAX. Borrowing from the future means higher tax as we move forward and given the amount of cash needed to get economies back afloat simple means we all have to chip in. Watch this space because none of this is being discussed at all. Which brings me to my last point.
Everything is going to be better
I have heard many people say, “this is our lesson, the world will be a better place after this”, “people will wake up and see that we have to change” and so on. As I said in one of my blog posts before.
This is what’s going to happen.
Humans don’t run on information.
Humans don’t make decisions on facts.
Humans don’t spend money based on data.
Humans run on feelings.
Humans want stuff, humans want ownership, control and independence (BTW there is a great book I read that explains more of why this will not make you happy)
By the way, did you know that the Great Barrier Reef suffered its third mass bleaching event in five years? News of this study came out two days ago. Humans don’t run on information. Humans run on feelings. That’s why anyone who has never dived there or is not directly impacted by climate change barely lifts an eyelid.
Already during this crisis, corporates are gearing up to catch the early bird, be it investments in high demand products, laying off personnel under the banner of Covid19, shifting investments or signing a memorandum of understanding promising government support for coal-fired power stations as everyone else is busy fighting this health crisis.
All the while we humans fight over toilet paper.