With markets crashing and virus fears escalating, I’m getting lots of questions on my take on the world. So I thought I’d share a short piece I wrote for Macro Hive:
“Public opinion is sacred: no panic, above all no panic”
“There have been as many plagues in the world as there have been wars, yet plagues and wars always find people equally unprepared”
Those are words from Albert Camus’ classic 1947 novel, The Plague. Frankly, it should be the book of our times. It’s a reminder that something as primitive and ancient as viruses and bacteria can up-end any civilization, no matter how sophisticated. In current times, our dream was an age of exponential technological development, spouted especially by the Silicon-Valley utopianists. But we got the nightmare of an exponentially growing coronavirus instead.
In a sad twist, the very measures needed to contain this pandemic – quarantines, isolation, school closures and so on – necessarily lead to economic decline. This puts governments in a tough spot – sacrifice growth to save your population, or sacrifice your population to save growth. This should be a Hobson’s choice (and an obvious choice) if there was ever one – either save the population or don’t. But alarmingly, it seems most governments have so far opted to save growth.
What about the lessons from the financial crisis? Policymakers and regulators have devoted all their resources to observing and containing the financial sector in all its forms and reminding themselves to quickly ease or stimulate on any downturn. But we all knew that the next crisis is never the same as the last. We just didn’t anticipate it being a biological crisis. In our digital/crypto/blockchain/AI world, the seemingly redundant human body does matter after all.
The trouble is that what we need now is not rate cuts or fiscal stimulus, but rather a plan to contain and manage the pandemic. Scientists, doctors and governments need to lead the rescue plan, not central banks. The horse has come before the cart. The trouble is that many governments have staked their credibility on reviving economic growth and ignoring expert opinion. The very opposite of what is needed now.
So don’t expect a quick resolution – it will get worse before it gets better. Recent markets and economic weakness are only the beginning. Hold on to your hand sanitizers, loo rolls and canned tuna – it’s going to be a long year.
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