Everyone I know keeps asking me if I am worried about the stock market, as if that’s even a question. Um, yeah, I am worried about the financial markets. In fact, I am worried about every aspect of the financial system. There is no good store of value in the world right now and that’s insane. And this whole situation is unnecessary, which makes it even more insane.
At this point, what happens in the stock market is totally binary: Either circumstances radically change, stocks fully recover, and people are lavishly rewarded for buying the dip (can we even call it a “dip” anymore?) or we are headed into a major economic downturn unlike anything that anyone alive has ever experienced. We are kind of in uncharted territory here in terms of government dysfunction.
When this whole thing started, I assumed there would be about a month of wild volatility in the markets based on government and market responses to past epidemics (which were actually far worse than this one in terms of the number of people affected, but they did not involve Baby Boomers staring down their own mortality en masse, so it is only socially acceptable to say this is the worst thing that has ever happened to anyone). When H1N1 happened, for example, we were already in the middle of a financial crisis, so basically no one even remembers it now.
I did not assume that people would panic to this degree and that they would perceive their own panic and the panic of others as evidence that the event actually deserves this level of panic. That is exactly what creates financial death spirals instead of mere market volatility. We’ll see how that turns out and whether people start returning to rationality. They may or may not.
I did not assume that state and local governments would choose to nuke their economies over this event. They’ve never chosen to do that in the history of our nation. And everyone we’ve traditionally borrowed money from to smooth out the economic consequences of terrible events has nuked their economies too. Anyone who tells you they know how this ends is lying. We may be looking at a suddenly socialist world, where every country starts closely guarding its own painfully low new standard of living. I think this entire thing depends on how long it takes governments to get a grip and change course. Judging by the level of group-think happening in the US right now, I am finding it really hard to be optimistic.
There will no doubt be temporary boosts to the market as people try to feel good about each version of stimulus that gets passed. I’m not sure even a trillion-dollar stimulus package can stop the bleeding on what has happened now, to be honest.
But the stock market is not the American economy. If anything, the stock market underestimates what state and local governments have done by driving commerce to a halt. It will take weeks for the consequences to register fully in the American psyche, and that’s probably going to happen when folks are no longer working from home, they are just home. And at some point, providing necessary medical care to anyone for any purpose is going to get complicated because the panic is destroying the way people get paid and the way governments fund essential services.
Yes, I am worried about the stock market. But I am more worried for the people in our country. If state and local governments do not change their behavior immediately, there’s a pretty solid chance more people will die from finance-driven suicides than the coronavirus. And I hope someone quantifies that so future governments fully understand what has happened this week and the true human cost of panics.
We have an aging population. We cannot shut down the entire freaking economy every time there’s a risk that the elderly might catch a virus. They are going to be in this holding pattern of being afraid of their own environment for decades.
Folks are talking about destroying civilization with this logic. Putting entire industries out of business. Destroying the public education system wholesale. Putting millions of people out of work. Destroying pension systems. This is insane. People getting sick is not the only human cost of your behavior. You can’t quarantine the entire population of the world with any good outcome.
There are a lot of disingenuous articles being published in the media about how life is “returning to normal” in China after a massive quarantine. They are all of the “I survived six weeks of quarantine and you can too” variety. First of all, the measures being taken in the United States are actually far more extreme than what happened in China at this point. Second, the media is telling the story they want to tell about quality of life in China. China has experienced an economic contraction that no one in the United States can even fathom. Third, China does not have a government system like we have here. Our system functions in ways that theirs does not, and dysfunctions in ways theirs does not. The government of China tells people what to do at the point of a gun. They manipulate asset prices all the time, even under normal conditions. People are not allowed to publish anything that makes the government look bad. You ultimately can’t even compare our experiences. We need to start thinking for ourselves.