On Thin Ice!

     Long ago and far far away I once took an economics course...who called it the 'dismal science'?  The only real specific I recall from the course is the old saw "There is no free lunch." Perhaps there were other learnings which, absorbed into my general body of information, I cannot specifically trace back to that class. Among my subscriptions is one to The Economist, that should be good for something. Now, on that flimsy platform, i.e., thin ice, I'm going to venture into the realm of economic prediction. You heard it here first.
   The prediction is this. Both the American and the World economies are entering a u-shaped recession. U-shaped because recovery is going to take awhile. Likely public figures are reluctant to predict recession for fear it will be self-fulfilling prophecy.  On what grounds do I make this prediction? The American stock market was overdue for a correction based on fundamentals. Along comes the COVID-19 virus and disrupts the manufacturing supply chain because China has become

the world's factory. This causes significant disruption in manufacturing and in the supply of goods, both for business and consumers. The virus continues to spread to and within countries. Health officials, unable to contain the virus, fall back on efforts at prevention. Foremost among their recommendations is 'social distancing.'  Saturday I'd planned to attend Augustana University's choir concert only to be notified that the choir tour had been cancelled. Multiply this by some factor for all the other cancellations. Approximately 70% of the American economy is driven by consumer demand. Given the uncertainty created by the spread of the virus will American consumers be lining up to buy 'big ticket items?' America has a hodge-podge, mishmash of sick leave policies for workers. Will virus bearing workers report to work sick because they are not eligible for sick leave?  Or, will they stay home without pay?  It seems unlikely that consumers are going to add much to the economy for some time to come, except to buy gazillions of had cleaners.
    Into this mix came Saudi Arabia's decision to increase oil production driving oil prices into the $30. range. Suddenly shale oil production is not competitive. Take that North Dakota!  We may see lower gas prices at the pump but likely we'll also see oil companies lining up for government bailout.
    The travel industry is being hit hard. How many of you are planning to put money down for a cruise? How are your airline stocks doing?  How big a contributor these are to our economy I don't know but they are one case among many others.
     "Don't put all your eggs in one basket." Likely you've heard that countless times but it's what has happened in effect with our dependence upon Chinese manufacturing. Business leaders have just awakened to the dangers of over reliance on China. Supply chains will now be reworked.  That will take time with likely some fits and starts. It will not be business as usual and this, too, will be a drag on the economy.

     Well, you might ask "How did you move from reflections on life in the land of grief to an essay on economy?"  Perhaps I'm not certain myself except to say that this is what I've been thinking about. I hope you will let me know what you think; agree or disagree.

Takk for alt,

Al

Today's random picture: teaching in Thailand.