2020 Economic Adjustment: How Severe?

The worst thing you can do at this stage is sell into the panic. There have been numerous corrections in this country's history and in every instance, we have recovered. Those that sold into the fear end up lagging far behind those that just chose to ride things out. Every economic analysis confirms that. And don't attempt to try to time the market. That never works.The key strategy is to have an emergency fund available for these types of situations. Most financial experts recommend at least a three month fund to accommodate living expenses in that timeframe. Not always a viable option for low income workers. But even a little bit extra in the bank helps.Regarding the Fed, they actually have pissed me off for the past several years. The decision to lower interest rates last year was clearly political to prop up the market. It was completely un-necessary for an economy with historically low unemployment and stock market highs. Now, we have far less maneuvering room for this downturn. Also not sure why they opted to drop rates to zero so fast. They could have been more measured. Their decision to do so just exacerbated the panic.

Yahoo had an article that showcased some of the estimates from the banking sector as to how much the economy will contract in the coming months:'Unrecognizable': Experts warn of historic collapse in economic activityThis is USA specific, but I suspect it will be echoed in other areas of the globe.Hard to say exactly how this will play out because its not exactly akin to normal recessions where supply and demand naturally adjust themselves after a period of growth. This is more of a mandatory drop in demand due to quarantine measures.The other question mark is how long the situation with Covid-19 will last. If we peak in late April to early May, as the predictions indicate, that may reduce the damage downstream. Time will tell.

It's likely not fair to most. But it is what it is and we have to contend with it. For now, the concerns should be focused on the health and safety of people. The economic damage from this won't be pleasant. But stock markets recover. Not all people have the same luxury. I would concur with jar. As the famous quote goes:"The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings."But take solace in the fact that it is the 21st century and modern medicine is extremely advanced. We have ventilators, vaccines, anti-viral medications, rapid communication for collaboration and governments that, more or less, can take action to mitigate problems.As Tangle likes to say "this too, shall pass".

Actually, considering we are not on the gold standard anymore, most Fiat currencies can just be poofed into existence. We just conjured up $2 trillion out of thin air. (More or less) Funny how when we want universal health care and better education subsidies, there is no money to be had. But the moment corporations and banks are threatened, it seems money just magically manifests. Yes and no. Our dollar is in no more danger than any other currency in the world. Ultimately, if you see deflationary pressures, the dollar value will increase. The Fed will offset that by poofing money into existence to create an equilibrium. Not a guaranteed strategy, but its the only option they have.The big issue is the severity and duration of the downturn. We've been shut down now for almost a month (most places). Some states will likely carryover into May as well to extend their downturn. Although based on the projections I am seeing and the sentiment of people, I think any shutdowns passed May 15th are unlikely. With the exception perhaps of New York City.Certain sectors will likely come back slowly. The restaurant chains that survive will being to start to recover. Businesses that are essential or can accommodate remote workers will likely absorb the downturn better.
The main damage I see is the travel and tourism sectors. Along with potentially some of the entertainment sectors like movie theatres. I think people will be far more tepid to want to go on a cruise, go to Disneyland or get on an airplane unless they absolutely have too. Families with children will likely opt for road trips instead. Something that allows them more isolation capabilities.Of course, this is all just conjecture on my part. Time will tell.