I have to think that as a society, we’re going to be introducing a lot of slack that never existed before. Consider commercial real estate: there are going to be loads of small businesses that can’t make rent in the next 3 months... but from a landlord’s perspective, it probably doesn’t make sense to terminate the lease (or hound the business into bankruptcy or something), because who the hell else are they going to get to rent the place?
Effect of economic crisis on America’s small businesses [slides]
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Re: Effect of economic crisis on America’s small businesses [slides]
#32The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…
1) the stock market is collapsing because business cashflows are collapsing 2) the collapse has barely begun
Re: Effect of economic crisis on America’s small businesses [slides]
#33One thing that really horrified me was how quickly people threw away the economy. Unfortunately, this virus is highly contagious (to the point that the vast majority of countries won’t contain it) and fairly lethal. We don’t actually know how lethal, but it appears 1%-3%, but without widespread testing we wouldn’t know. At the moment, we just reduced our GDP by 30%-50% in regions under quarantine. Think about that fo…
> We don’t actually know how lethal, but it appears 1%-3%, but without widespread testing we wouldn’t know.
That’s the fatality rate within a functioning medical system. It’s safe to assume that if the virus is uncontrolled the rate will be substantially higher.
Re: Effect of economic crisis on America’s small businesses [slides]
#34Earlier quoted context omitted.
What does that even mean?
Traditionally it implies sacrifice, on both the individual and collective levels, to achieve a larger goal or to fight an existential threat. But American civilians haven't really been called upon to sacrifice anything in wartime since WWII. It won't be long before there's no one left alive who remembers mandatory rationing, price and wage controls, and production mandates.
Especially when the people who do are the ones most at risk of dying from the virus. Every day we delay increases those that will die by 40%.
Re: Effect of economic crisis on America’s small businesses [slides]
#35Earlier quoted context omitted.
Everything is related. Imagine if the market only dropped a bit, large companies could support their employees, the credit markets wouldnt require massive trillion dollar spending. Supporting small businesses would be a walk in the park.
It's not really possible for the market to drop only a little bit in response to half the economy shutting down. Stock prices are an expectation of future cash flows, so they have to drop on news that a huge chunk of those future cash flows are cancelled.
Look at Boeing stock.
Companies dropping 50% because they miss 3 months of revenue?
Re: Effect of economic crisis on America’s small businesses [slides]
#36One thing that really horrified me was how quickly people threw away the economy. Unfortunately, this virus is highly contagious (to the point that the vast majority of countries won’t contain it) and fairly lethal. We don’t actually know how lethal, but it appears 1%-3%, but without widespread testing we wouldn’t know. At the moment, we just reduced our GDP by 30%-50% in regions under quarantine. Think about that fo…
Even if you take an extremely high estimate of the currently infected in the US, you're probably in the low 100s of thousands of people, approx <0.1% of the country. So to say it's "likely too late" is just crazy - 99.9% of the country is not yet infected.
Re: Effect of economic crisis on America’s small businesses [slides]
#37The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…
> The stock market is largely collapsing because:
I'm gonna go with:
0) A pandemic has caused the government to shut down a double-digit percentage of the economy.
Re: Effect of economic crisis on America’s small businesses [slides]
#38The virus is terrible. But our solution could turn into an economic catastrophe. It simply isn't possible to shut down the economy and then pay people, businesses to sit idle for an undetermined amount of time.
The solution is aggressive, continuous testing so that people can feel safe going back out.
1. Make hundreds and millions of the rapid tests available. 2. Deploy them to every business, every institution. 3. Test everybody coming into work every morning. 4. Isolate and quarantine the positive ones. 5. Elderly and immunocompromised self-quarantine.
Lets find the actual contours of this infection within the population. And then squeeze it down.
- Want to get into a theme park? You need a negative test result on your phone from this morning.
- You got tested at one of the thousands of mobile test stations. You received a code with your test.
- 15 minutes later, you get a test result on your phone - also sent to a national database in real time.
- The theme park worker scans your phone and validates the result.
This is not a fool-proof system. But it or something like it will instantly reduce anxiety of people trying to work.
If you knew that everyone at your coffee house, at your gym, in your lecture hall, etc. tested negative in the morning. You'd feel safer and we'd all be able to move forward.
Re: Effect of economic crisis on America’s small businesses [slides]
#39Earlier quoted context omitted.
What does that even mean?
Congress declares war. Think WWII. Edit. Thanks to the wonders of HC I can’t reply to you so I have edited this post. The declaration of war is symbolic in one way, but it captures what needs to be done. The entire economy needs to be swung around to getting this pandemic under control as quickly as possible. Once war is declared we can start conscripting people to do the things that need to be done like enforce curf…
Hard to have a war economy when winning the war means shutting your economy down.
Re: Effect of economic crisis on America’s small businesses [slides]
#40Earlier quoted context omitted.
As a counterpoint, Illinois just ordered residents to shelter-in-place after closing schools and restaurants a week ago and our new cases of COVID-19 aren't accelerating upward as of today. This model also predicts far fewer deaths with shelter-in-place rules: https://covidactnow.org/state/IL As governor Pritzker said: "I fully recognize I am choosing between saving people's lives and saving people's livelihoods, but…
The problem will be how long the shelter in place can be maintained; as long as you have folks coming in infected from other states, once the mass quarantine is lifted, outbreaks will flare up. This only ends with a vaccine and enough people recovered after infection we arrive near enough herd immunity. Until then this will have to burn through populations. Regardless, I can appreciate and support Pritzker’s response…
I agree with your first paragraph. On the second, I would think a moderately successful therapeutic protocol would go a long way to quickly getting us out of the houses. A vaccine is too long a time away to count on; there won’t be an economy left by then.