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2020 has been quite a year so far. It has been one nightmare after another, and yet the economic optimists continue to insist that economic activity will soon snap back to normal levels somehow. So the economic optimists aren’t really alarmed by the fact that the core areas of our major cities have been torched, gutted and devastated by protests, because they assume that all of this chaos is just a temporary phenomenon and that any damage that has been done can be repaired. And they aren’t really alarmed by the fact that the pandemic is starting to escalate again. In fact, over the last seven days we have seen the number of newly confirmed cases around the globe hit levels that we have never seen before. They just assume that “the worst is behind us” and that the vast majority of the businesses and jobs that have been lost during this pandemic will be quickly recovered.
Wouldn’t it be wonderful if they were actually correct?
Sadly, the truth is that this economic collapse will not be returning to normal. Yes, some of the jobs that were lost will be recovered as states start to “reopen” their economies. But more than 100,000 businesses have already permanently closed during this new economic downturn, and all of those jobs are lost forever.
And yes, the level of economic activity will rise as states end their lockdowns, but it will still be much lower than it was before the pandemic started spreading like wildfire in the United States.
At this point, even the perpetually optimistic OECD is admitting that global economic activity as a whole will be way down in 2020…
A 6 or 7 percent decline in worldwide GDP is definitely not “normal”.
Actually, if this OECD projection turns out to be accurate, we will be talking about a “global great depression” by the end of the year.
But all of the optimists keep telling me that things are “getting better”.
In fact, they just keep on insisting that a new golden age for America is right around the corner.
Well, apparently the largest jewelry retailer in the U.S. doesn’t share that optimism, because they just announced that they will be closing at least 150 stores…
Overall, the U.S. retail industry is facing a tsunami of store closings that is unlike anything we have ever seen before…
Unfortunately, this is just the beginning. The cost of living is going to continue to rise aggressively, and this comes at a time when more than 42 million Americans have already lost their jobs.
Yes, some of those jobs are starting to come back.
But more Americans continue to lose jobs each week as well.
And economic activity will be higher than it was when virtually everything was closed down.
But more businesses are shutting their doors permanently and declaring bankruptcy on a daily basis.
This new chapter in our economic history is just getting started, and a tremendous amount of pain is ahead of us.
Of course Fed Chair Jerome Powell completely disagrees with that assessment, and he is trying really hard to convince all of us that a new great depression has not begun…
And I would actually concur with Powell that what we are facing will not be very similar to the Great Depression of the 1930s.
In the long run, what we are facing will be far worse.
Needless to say, many businesses that have been destroyed are going to be extremely hesitant to rebuild and start over in the same location when the same thing could easily happen again.
And many of the businesses that will remain open in the heart of our major cities will now look a whole lot different than they did before.
Thankfully, the chaos has subsided in recent days, but the damage continues to reign in some of our biggest cities.
For example, a radical group of protesters has literally taken over a large chunk of downtown Seattle and has dubbed it the “Capitol Hill Autonomous Zone”…
In this “autonomous zone”, demonstrators are passing out free food to everyone and they want to show the world that society actually doesn’t need any authoroties.
I am sure that their “utopia” will be fun for a few days, but soon they will run out of money to feed everyone and it will be very interesting to watch how they handle a serious damage that start to happen.
Yes, some businesses will stick it out and risk being torched again, but many others will leave our major cities and never look back.
In the end, this could create a new cycle of crushing inner city poverty all over America, and that is something that none of us should want to see.
The “perfect storm” is here, and our economy is being shaken to the core. Many people continue to be hopeful that the worst is now behind us, but what they don’t realize is that what we have experienced so far is just a warm up act for what is still to come.
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