The loss of business from virus lockdowns may exacerbate an already fragile financial system. Short of a war to stimulate or distract, does that mean everyone will lose their jobs and starve, asks hipi owner Chee Su-Lin
As my daughters and I discussed whether an art competition prize of a week-long summer art camp would, in these coronavirus times, still be held, we couldn’t help but feel some fear for its main sponsor, a regional bank — if they themselves would keep above water during what is now officially a recession here in Germany.
I don’t profess to be an economics expert, even if I did study it at university and wrote on the macroeconomics of real estate in my years as a journalist. But I certainly have been fascinated by it, as almost the enigmatic ring of power that all try to harness but can never pin down in the family movies we’ve been watching during this isolation period.
Of course, everyone can see this downturn will be a bad one. In my middle-aged lifetime, I have never seen businesses and schools close so long. The International Monetary Fund which imaginably tends to be more sanguine, for example, forecasts the gross domestic product of advanced economies to contract by about 6% in 2020.
The truth though, is that this won’t be the first time, even in the last 30 years, that people have lamented a recession. There was the mid-90s when several Asian currencies plummeted, the dot com bubble bursting in the early 00s, as well as the late 00s financial crisis which kicked off with the fall of Lehman Brothers, among others.
Each time this happens, people cluck their tongues and shake their heads, as if we were all held to ransom by this ring of power. That if the economy staggered, we would lose our jobs and starve.
Is this really true? Yes, travel and retail are suffering. Restaurants, which provide not only an enjoyable good and service but important cultural and community aspects beyond economics, are suffering. Tenants may stop paying rent. Restaurant The Cheesecake Factory already declared it will not pay rent because of significant loss of income due to the coronavirus crisis. And if landlords stop paying mortgages, banks may lose their revenues and jobs would be lost.
In fact, I reckon that things will go beyond that. Besides dropped revenues over the next quarters, macroeconomic conditions are in a tentative state. US federal debt as a % of GDP is at a record high of close to 110%, which dwarves what it has been even throughout past recessions, as can be seen from this chart from the Federal Reserve Bank of St. Louis.
Still then. Would we be starving on the streets? Are we really at the mercy of an economy which we define by how it looks, only when it’s booming?
I could posit alternative economic systems, from socialism to voluntary simplicity… but honestly, I don’t really know the answer. What I do feel strongly about is, Coronavirus crisis notwithstanding, I don’t believe our lives are completely irretrievable or unfeasible without the economy chugging along the way it did.
What is the economy? It is us — you and me, needing something from one another, giving to one another. So yes, if the boss says he, she or they can’t afford to pay your next paycheck, what you may have lost may be a habit, a routine, a channel of providing supply in this network which we call the economy. Heck, the supply, might not make sense during this Coronavirus time or even after, like printing CDs. But no matter what, there are still people out there wanting entertainment, help with their garden, knowledge, care for their child, therapy, a computer…
Yes, in a depression, one may have to strip away edifices of global manufacturing, standards of uniform impeccability or technical supremacy, perhaps values in fiat currencies and other assets, and previous supply systems and even governments would be dismantled. Certainly, we will say goodbye to much predictability, including perhaps annual summer camps sponsored by banks.
However, the most important thing is coming together, where necessary, to share our knowledge to satisfy each other. In fact, we’d need to share all sorts of resources, which becomes a market in itself.
Am I talking about a barter system? To some extent yes, if money as a medium or store of value is no more tenable, we’ll surely find some other way to get what we want. Might it mean a regression to pre-industrial ways of life? Perhaps to some extent, and the truth is, it would be way harder to cook on a wooden fire than an induction hob. Everything would likely be slower and less of immediate gratification.
And sure, changing jobs is painful. Picking up a new skill and figuring out what to do is hard. But I can’t imagine this recession meaning that hordes of the world are now going to starve and that there’s nothing we can do.
In fact, there’s everything we can do as we are the economy. And while one of us needs something that one other of us can provide, let’s do that rather than worry about going back to the way things were.
In this spirit, we are offering hipi protective phone belts to barter. Just email me at firstname.lastname@example.org if you think you could offer food or anything I could use! I am also open to Bitcoin or any established cryptocurrency, and while conventional currency works, 29€ per hipi. More info at www.hipi.fit.