America is Committing Economic Suicide

See that chart above?

You are watching an economy begin to die. That, my friends, is what economic devastation looks like. It says that unemployment claims skyrocketed to 7 million last week. That’s a number so high, so fast, that there’s no parallel in all of recorded history — even remotely.

The American economy is undergoing the largest shock in history. It’s a shock faster, bigger, and more devastating than any war, which is one of many reasons the war metaphor is inadequate. We have literally never experienced such a thing before.

Why is the American being left to die? Because not nearly enough is being done about. This shock is unprecedented in history — and the response needed to be, too. Instead, Congress and the Prez passed a stimulus bill that’s far, far short of the mark. How much so? In what precise ways?

Let’s think about it together.

The first reason the economy is dying is that the stimulus is inadequate because it’s simply far too little. We’re going to do a little math together — don’t get scared, it’s math any grade schooler can handle. How large is the US economy? It’s $20 trillion per year. Of that, about 99% of the number of firms are small businesses. How large is the portion of the stimulus outlined to support businesses, especially small ones? $500 billion. Are you seeing a problem here yet? You should. That’s about just 2.5% of the economy over a year, which means this.

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The portion of the stimulus meant to support business is enough to keep the economy going for…just one week. (Sure, we can adjust those numbers up and down. If I assume 80% of the economy is business, not 100%, the stimulus is enough to keep the economy going for…two weeks. You see the problem, perhaps.) Think about that for a second. Just one week of support, amidst the greatest crisis since the last World War. What the?

This shock is historic precisely because it’s going to cause the economy to shut down — as in waves of businesses to literally shutter its doors as people stay at home — for far, far longer than a week. It’s already been a week. It’s going to be months until any semblance of normality is resumed. But by then, it will be too late: because this stimulus only supports the economy for a week, most of it will be…dead.

Yes, really. That brings me to the second reason the stimulus is short of the mark. This stimulus isn’t quick, large, or simple enough to buoy confidence — and so people are beginning tp panic. Even if I want to get what little support is being offered — say as a small business owner — how do I begin? Where do I turn? Even I myself can scarcely figure out the answer, and I’ve pored over the various documents. It’s a tangle of red tape, a bureaucratic mess. That might not sound like a big deal, but it is. Why?

Keynes pointed out about a century ago that the key to staving off depressions is confidence. If I believe that things will be OK, and you do too, then maybe we won’t hoard our money and lay off our employees and so forth — and the vicious spiral of depression won’t result. But If I can’t figure out how to access even what little support there is…then I will lose confidence, fast. The vicious cycle will set in all the sooner.

That is precisely what we see happening. Why have ten million people filed for unemployment in just two weeks? Because there’s not enough support to keep the economy going, and because what little there is isn’t producing a feeling of confidence. Instead, because it’s a maze and a mess, people are fast losing confidence in institutions and systems. Employers are laying people off — even if they don’t have to, because they can’t figure out how not to have to……more here

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