Life After COVID: A Look At The New Economy
Life After COVID: A Look At The New EconomyFollow @KnightsTempOrg
Many Americans have been locked down in their homes for more than a month now, and they’re anxiously awaiting the day when things “get back to normal.”
I regret to inform you, that we’re never going “back to normal.”
The world After COVID will not be like the world Before COVID.
It’s very important to understand what lies ahead so we can prepare for it.
Two reasons that the world After COVID will be so different are problems with the economy and the supply chain. Let’s take a look at both and see where we’re headed.
The After-COVID economy for businesses
The government stepped in fairly quickly after lockdowns began to approve a massive number of small business loans. These loans were to be distributed by the institution with which the small business does their banking.
Unfortunately, the outcome would be laughable if it wasn’t so tragic.
Here’s an example: Chase Bank gaveRuth’s Chris Steak House a $20 million forgivable loan meant for small businesses by dividing it up by locations instead of treating the company like the large corporation that it is. Incidentally, Chase “earned” $100K for processing the loan. After everyone rightly lost their marbles over this, Ruth’s Chris is returning the 20 mill. Chase and Ruth’s Chris aren’t the only culprits. There were all sorts of shenanigans that meant the fund ran out of money before the legitimate small businesses could even complete their applications. For example, big banks earned ten billion dollars in fees for processing the loans and here’s a list of big companies that played around with this system and drained it of millions.
Another round of small business loans has been approved by Congress but I’m not really holding my breath that any of this will happen in the way we’ve been told it will.
So to summarize, a lot of the small businesses who need the money to survive haven’t gotten it yet and may never get it, but big banks and big businesses are sitting pretty with the help of their cronies in Congress. It isn’t a stretch of the imagination to say that the longer a small business stays closed, paying their expenses and holding inventory while not being able to earn income, the less likely they are to reopen successfully (or at all) once the all-clear is given.
And if they can’t reopen? All those folks they used to employ will be out of a job.
The After-COVID economy for individuals
Despite seemingly generous government offerings of stimulus payments and higher-than-normal unemployment payments, getting by is about to get a whole lot harder. First of all, many people haven’t yet received their stimulus payments. Some states still haven’t rolled out their COVID unemployment registration websites, so we have unemployed folks who still haven’t gotten one thin dime.
It isn’t going to be long before that stimulus money is gone and if unemployment hasn’t yet kicked in, the first week of May is not looking pretty. A lot of folks were unable to make rent or mortgage payments in April, and of the ones who managed to hack together last month’s payments won’t be able to pay rent and mortgages.
It isn’t just a roof over their heads that people are worried about. The use of food banks has soared over the past month. People who were barely making ends meet before are in a hole from which they may never dig out. And this isn’t out of laziness or any other lack of “virtue” – people can’t go to work because their workplace is closed.
And it’s a perfect storm. If people are not allowed to work and the government is not following through with its promises of aid, there will be a response – most likely in the form of civil unrest and crime waves.
At the same time, many of those who have gotten their COVID unemployment are refusing to go back to work. Why would they go back to getting minimum wage when with unemployment and the extra $600 per week, they’re getting close the $3000 a month? Businesses can’t reopen without employees. Unfortunately, when the COVID unemployment is over (it’s currently good for a total of 3-4 months), people may not have jobs to come back to, because, as I mentioned above, the longer a business is closed while still facing expenses, the less likely that business is to survive.
It’s very likely that even once we’re “open” again, unemployment numbers will remain extraordinarily high.
Prices are going up.
Meanwhile, what money people are able to scrape together isn’t going to go nearly as far as it did Before-COVID.
A lot of folks haven’t been to the store in a month or so. When they do go back they’re going to be in for one hell of a surprise. Prices have increased on just about everything. On the products with no price increase, many companies have reverted to the rather deceptive practice of selling a smaller container for the same price as before. (We found this to be true on both peanut butter and coffee, to name two examples.) You’re going to pay more for things like meat, eggs, canned goods, pasta, frozen pizza, and other popular lockdown foods.
As well, food manufacturers are halting promotions – so things won’t be going on sale like they used to. Of course, they’re doing this to “help” us out by making it more expensive, thus keeping people from being able to buy as much.
“But the tactical dynamic is that we’re in daily discussions with our customers on how to help them meet the needs of their shoppers. And many customers are looking to pull back on promotions as they try to manage the basics of just keeping their shelves stocked.”
In a given month, “22% of food on store shelves is discounted, according to the companies under its coverage, and the average discount is 23%.” According to Market Watch, getting rid of the discounts will lead to a 5% increase in sales. This means, of course, a 5% increase in what consumers are paying will occur. And that’s just for certain items. Eggs have actually tripled in price since early March and many readers have reported seeing the price of their commonly purchased items increase by 25% all the way up to double the Before-COVID price.
Then there are the supply chain issues.
And this isn’t the worst of the news. Shortages are appearing to occur across the country – shortages that stores struggle to hide by spreading out the inventory and filling in gaps with items that are more plentiful.
Some of the things that are missing are products that originate in China – see this list.
Other items, like paper products, are also sparse even though many of these things are made in the USA. It isn’t just because of so-called “hoarders” either, as the media wants us to believe. There have been shortages of TP across the globe and the main reason is the fact that everyone is now at home most of the time now. Previously, a lot of a person’s toilet paper usage was outside the home – so everyone was using those giant janitorial supply rolls. Most households are now using 40% more toilet paper than before. This interesting article goes into detail about why there isn’t a quick and easy fix for this.
Then there are food “shortages.” Interestingly, this problem isn’t necessarily about actual shortages as much as it is processing and distribution.
Processing plants across the country are shutting down as more and more employees become ill. At least ten large meat processing plants have closed due to the virus. Distribution issues have farmers dumping thousands of gallons of milk, plowing under vegetables in the fields, and leaving potatoes to rot.
A lot of the food being produced was destined for restaurants, hotels, and cruise ships. Diverting it to grocery stores and the millions of people using food banks right now (because they didn’t get their money from unemployment yet, remember?) is unfortunately not as easy as it should be. This article explains some of the issues with getting food to hungry people.
One of the issues processing. With meat, in particular, this is difficult – most folks aren’t even going to be willing to process their own chickens and it’s wildly unrealistic to imagine a family in the city processing a cow or a pig. With produce, it becomes a little bit easier – anyone can wash fruits and vegetables – but employees are still needed to harvest the food.
A lot of that scarcity could be remedied if we could reallocate things – if janitorial supplies could be sold to the general public, if farmers could sell directly to stores or consumers, and if farmers could donate unpurchased items to food banks.
To summarize, farmers are losing billions of dollars and people are going without food, while the food we have is left to rot. Hopefully, President Trump’s new 19 billion dollar plan will allow the federal government to play matchmaker between frustrated farmers and hungry families.
Introducing another run at UBI
Let’s put all this information together. Here’s the TL;dr version:
Trillions of dollars were created from thin air to “help” us through the crisis. Unfortunately, a lot of that money is now lining the pockets of massive businesses that would survive regardless. Many small businesses will never reopen. Many jobs will never come back.
People who are getting COVID unemployment would have to take a massive pay cut – for many, more than two thousand dollars a month – to go back to work so they have no interest in returning to their jobs. Why would they when they’re more financially secure sitting at home? But they’re not thinking ahead – these new-found riches are only coming in for 3-4 months.
People who are not getting money are going to run out very soon (if they haven’t already) and this will result in an uptick of crime and civil unrest. Meanwhile, the money that folks have will buy less as the cost of just about everything goes up and scarcity continues.
This all leads nowhere good. I’m not saying that COVID-19 itself was a big conspiracy but more a case of “never let a good crisis go to waste.”
One possible outcome is Universal Basic Income.
We’re being told we’ve got no place to go except giving away a lot of free money – although they’re calling it something different: the Emergency Money for the People Act.
This fund would give everyone 16 and over $2000 per month for at least the next six months.
The bill is called the Emergency Money for the People Act and would provide $2,000 a month for a guaranteed six months or until “employment returns to pre-COVID-19 levels.”
“Pre-COVID-19 levels” mean the employment to population ratio for people ages 16 and older is greater than 60%. The monthly cash payments would not count as income.
You could still apply for income-based federal or state assistance programs, such as assistance with purchasing food.
Who would be eligible for the money?
Everyone 16 and older making less than $130,000 annually would receive $2,000 a month;
Married couples earning less than $260,000 would receive at $4,000 per month;
Qualifying families with children will also receive an additional $500 per child for up to three children.
So a family of four with two children earning income up to $260,000 a year would receive $5,000. A single tax filer would get $2,000.
If you are unemployed, you are eligible for the money, as well.
College students will be eligible for the money. They were not eligible for the stimulus payment sent out this week if they were claimed on their parent’s income tax as a dependent.
Adults with disabilities were also left out of the stimulus payment since they could be claimed as dependents on others’ tax returns. They would be eligible for the Emergency Money for the People Act.
What could possibly go wrong with “free money,” right?
Plenty. Hyperinflation is one major factor nobody’s talking about – this money they want to give away does not exist and is backed by nothing. If you think prices are super-high now, just wait.
And then there’s the other cost.
Trust me when I tell you there will be a high price tag for that “free” money and the cost will be liberty. Maybe it will be your freedom to decide where you work. Maybe it will be your freedom to choose what you buy. Maybe it will be mandatory vaccines or microchips or ID cards but it will cost you something that you’ll never get back.
UBI Emergency Money for the People isn’t a done deal yet. But the government is going to feel that they’re obligated to take some kind of measures to maintain order. (Back to that civil unrest and crime again). And to some degree, they’re right – the current straits Americans are finding themselves in can be chalked up to decisions made by the government. But I can’t imagine that in this direction lies liberty.
What can you do?
The answer, as always, lies in self-reliance. The less you need, the better off you’ll be. Below, find some general guidelines.
Produce or acquire food as much as possible. Gardening; sprouting; raising livestock for meat, eggs, and dairy; hunting; and foraging are all ways to put food on the table yourself.
Learn to preserve food. When food is plentiful, putting it back by canning, dehydrating, and freezing.
Localize your supply chain. Find local farmers and purchase directly from them. Visit pick-your-own farms, get CSA shares, or hit up your farmer’s market. Buy in as much quantity as you can for the best prices.
Slash your budget. Get spending down to a bare minimum right now while we wait to see how things pan out.
Mend and repair. Instead of throwing things away and buying new when something breaks or gets damaged, learn how to fix things like clothing and household items.
Make do. There are a lot of things we get that we don’t need: upgraded phones, new clothing, decorative items, updated vehicles, newer tools, and small kitchen appliances. Whenever possible, make do with the things that you already have.
Make things last. Use everything to the last drop. Squeeze out that last little bit of toothpaste. Add some water to your dish soap. Use a little less detergent in the laundry. These are tiny changes that can really add up over time.
Be prepared for a lack of services. At some point, as income tax revenue continues to decrease, we’ll start to see cuts in services like garbage pick-up and first responders. Start thinking now about your solutions should these things happen.
Continue building your stockpile. Even though prices have gone up, continue adding food and supplies to your pantry as you can.
Participate in a barter economy. If you have eggs and your neighbor has honey, see if they’re interested in a trade. Do the same with skills – swap yardwork for haircuts, repair something in return for someone else’s used item that you need, supply manual labor in return for part of someone’s harvest. If you run a small business, be open to barter within your local community.