Keep a Sunny Outlook, there is No ‘Room for Gloom’

Keep a Sunny Outlook, there is No ‘Room for Gloom’

Worry about the Key personal and family stuff you can work on, but never worry about the stuff you can do nothing about.

The coronavirus war and the economy let up to President Trump and his expert White House task force.

When we are beyond the short term effects of the made to order medical crisis the level of economic gloom is somewhere between low to very moderate.

To learn why, consider the effects of the war against Covid-19 on the Key elements of all successful economies.

Physical capital is unharmed by the virus. Factories are still intact, and almost all of them are ready to be scaled up to meet the demand which is being pent up in isolation.

The same goes for service industries. Though restaurant and movie visits will be lost for most people, the desire for parties, plane trips and conventions will be huge when the world opens up.

The same goes for technological progress. The infrastructure of brains, equipment and lines of communication is still in place. The massive efforts devoted preventing the coronavirus and caring for its victims will almost certainly bring healthcare benefits.

Human capital is eroding. Months of enforced idleness and lost education, not to mention the psychological damage from fear and isolation, will leave scars. But, let’s assume that restrictions begin to ease real soon, the long-term damage will be modest. Most furloughed workers will go back to their old jobs if the employers are still in business. And President Trump is working hard for them to be.

The pandemic demonstrated the importance of active and efficient government like we have in the US. The crisis has demonstrated the importance of solid large companies that can take care of their workers and show initiative. The post-crisis economy will insure that governments are not anti-business.

Disaster resilience was not on many people’s minds a few months ago, but its economic importance is now crystal clear. Countries and companies are certain to strengthen early warning and fast response plans and build up greater inventories of Key products. Preparation is Key now more than before.

The money system is in good shape. In many developed countries, cash distributions to temporarily unemployed consumers and financially squeezed businesses mean there should be enough money in the right hands to pay for all the goods and services that can be produced.

The picture is simple.

Temporary government restrictions on economic activity are temporarily reducing that activity, but by little more than is necessary. When the restrictions end, the economy should be pretty much ready to go back to where it was before. As President Trump says with a “big bang“!

Here is the downside to this national lockdown: loans, leases and dividend policies are not designed for sudden economic halts. As the forced slowdown shrinks government, corporate and household cash flows, the originally agreed financial obligations become more onerous than either side intended. To avoid economically pointless bankruptcies and defaults, lenders and governments will recalibrate financial payments to match the unexpected reality of temporarily lower profits and incomes.

As we are seeing worldwide. governments are providing money to borrowers, and regulators are encouraging lenders to be generous by not calling in old loans and making ample new ones to keep borrowers ready for better times. Even the IRS is calling off the dogs!

The future is bright!

Have a happy healthy Easter and Passover weekend, Keep the Faith!

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