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Economics of COVID-19

  • Date: March 15, 2020
  • Category: Economy

These college, school, and business shutdowns cascading across Maine are doing far more damage to the economy than people understand. Families are scrambling to afford (or even find) childcare, and when they can’t they’re having to decide between staying a two-income household or going down to one income so their children have supervision. If these institutions are shutting down when there are a handful of cases in Maine, do you really think they will re-open when there are thousands?

These shutdowns could last for months, and mark my words the economy can’t withstand that without massive multi-trillion dollar stimulus packages deployed immediately by the Federal govt. They are going to have to hand out monthly checks to displaced workers, business owners, landlords, banks, even large corporations. Even that may not be enough to keep the machinery of the US economy from coming apart.

Most of my friends are corporate managers or small business owners. If the average worker listened in our recent conversations it would chill their blood. Layoffs are coming, a lot of them, and soon.

I’m going to take flak for stating this publicly—including accusations of putting economics before lives—but it’s the truth and somebody has to say it: If this panic sweeping across Maine and the country doesn’t end soon, then our economy is going into severe recession and the corporate and personal debt bubbles are going to burst. That’s a fact.

I strongly encourage state, municipal, school, and business leaders to take a deep breath, help minimize the panic, and take reasonable actions to help the CDC “flatten the curve” without imploding the economy in the process. Social distancing will help to slow the virus, but at some point in the next 1-2 months America is going to need to re-open for business or this economy is toast. And then we’ll be dealing with sick people who are also out of work and having their homes foreclosed on.

We have a difficult choice in front of us: We can have a bad pandemic, or we can have a less bad pandemic AND a severe recession. That’s where we’re at folks.