This is by Fla_Medic on the PFP site: _____________________________________________________________
Not for the faint of heart
In my post-paramedic career, I spent 10 years working in commercial real estate/construction, and my primary focus was obtaining the financing for multi million dollar projects. High rise office buildings, Condos, and even golf course communities. I also hold a mortgage brokers’ license, and have worked for a Fortune 500 homebuilder. So, I have a little expertise in how things work in the financial world.
The question has been asked, what happens if, during a pandemic, I am forced to shelter in place, and cannot work for months, and am unable to pay my mortgage? Will my family and I be put out on the street? What about those who rent? Will they be evicted?
It is a legitimate concern.
Much, of course, depends upon the severity and duration of a pandemic. A 1957 or 1968 style pandemic will have little effect on the economy. A downtick in GNP, some bankruptcies, but nothing devastating. A 1918 style scenario would be far more disruptive. And if it’s worse . . .
Right now, were the H5N1 virus to go pandemic, the fear is 1918 could be a walk in the park in comparison. The CFR for avian flu is greater than 50%. Even assuming an 80% reduction in that fatality rate would be devastating. But for the sake of our sanity, let us assume a 30% attack rate, and a 10% mortality rate. And, since we have no other major pandemic models to guide us, let’s assume 3 waves over 18 months, as we saw in 1918.
These assumptions would generate the following numbers. Roughly 10% of the country would be affected in each wave. That’s 30 million people. And of those, 3 million would die. The waves would last 3 months, and then there would be 3 or 4 months of relative quiescence between them. People would still be stricken, of course, but in far lower numbers than during each wave.
All totaled, we could see 90 million Americans sickened, and 9 million could die. A significant number of the survivors would likely have long lasting, and debilitating after effects. How many? We don’t know. But let’s assume 10% become disabled, and are unable to return to work.
Granted, this is not a worst-case scenario. But we don’t need a worst-case scenario to speculate on what happens next. And what follows is speculation. We’ve never dealt with this kind of economic blow, and would be entering uncharted territory.
Our economic engine, as robust as it is, runs on cash flow. Stop that cash flow, and nasty things begin to happen quickly. Cash flow is generated by the production and sale of goods, and by the wages earned and spent by the populace. Additionally, the government it dependent upon taxes collected from this cash flow to fund its operations.
The assumption is that during a pandemic wave, 40% to 50% of employees will be absent. Some will be ill, others will be taking care of stricken family members, and others will simply refuse to expose themselves, and by proxy, their families to the virus. That number is probably low. It doesn’t take into account the number of businesses that will close their doors during a pandemic. Movie houses, restaurants, sports venues, the list is extensive. And it assumes that most people, who can work, will work.
But then, all assumptions are lies.
When I worked for a fortune 500 builder, my job was to prepare pro-formas, essentially spreadsheets, that showed the likely expenses, and returns, when building high-rise office buildings. The owners would give me their numbers, and I’d plug them in. Turns out they made 3 sets of pro-formas. One for the bank, one for investment partners, and one that was kept in-house. The bank pro-forma was the most optimistic. Fanciful occupancy rates, exorbitant rental rates, and the construction costs were downplayed. The second one was a little more realistic, but not by much. And the third, only slightly optimistic. Almost, but not quite, realistic.
Even a break-even project, one where no profit was foreseen, was worth building, simply because another project brought in cash flow. As long as there was another project in the wings, the corporate ship stayed afloat.
This is how big business really works.
But I digress.
Every business operates on assumptions. Car dealerships bring in inventory based on anticipated sales. Homebuilders build spec houses based on their projected sales rates six months in the future. Even the corner nail salon owner makes assumptions as to how many manicures a day they must provide, in order to cover wages and overhead. And nearly all business ventures borrow money, in order to fund their operations. Auto dealers don’t pay for those cars, they floorplan them, and pay the interest until the cars sell. Homebuilders get construction loans, and the funds are released as the building progresses. And that nail salon probably had to float a loan to remodel their storefront. Debt is a way of life, made workable by easy credit.
In many ways, businesses make the same assumptions we all do. We work, and we budget based on what we can afford, based on our bringing in a paycheck every week. We base our mortgage payments, rent payments, car payments, and credit card bills on the continuation of that income. The age of saving, and paying cash for the things we want, is long gone. Want a new house? Sign a 30 (or now 50) year mortgage. Fancy that 42 inch LCD TV? Put it on the Visa card. As long as you can make the payments, life is good.
Americans average roughly $10,000 in credit card debt, and most make minimum monthly payments. And mortgages today routinely run into the hundreds of thousands of dollars. And everything works, more or less, as long as nothing upsets the apple cart.
Now, comes a pandemic, and a serious monkey wrench gets thrown into the works.
The auto dealer will find that his inventory simply sits in the lot, because no one is in the mood to buy a new car, and those that might like to, are out of work, or fear they will soon be out of work. But the dealership’s interest payments continue unabated. The house builder, with dozens of spec homes in various stages of construction, ceases construction, and their bank draws stop, but the interest keeps accumulating. Employees are laid off, and even those who might wish to work, find their income has evaporated. But their credit card bills, mortgage, or rent payments go on.
The scene is repeated in millions of homes, and businesses across the country and around the globe. Restaurants close. Sports events are canceled. Movie theatres are locked up. And most people stay home, fearing the virus more than they fear bankruptcy.
Government revenues fall drop like a stone. With half of the workforce out, and most discretionary spending sharply curtailed, the government’s income plummets. And yet, their spending, including servicing the debt, go on.
There will be calls, of course, for the government to do something. A moratorium on evictions for non-payment of rent, or mortgages. And I suspect some will be tempted to impose such a law. For a short-term crisis, it might even work.
But no legislation, no matter how well intended, can repeal the law of economics. Forbearance by creditors may seem like a great idea, and is bound to be popular among those who owe money, but it won’t solve the problem.
The bank that holds your mortgage didn’t lend you its money, it lent you its depositor’s money. Or money from institutional investors, like insurance companies, 401K’s, and large corporations. Banks rarely have more than 7% of their deposits on hand in cash assets. The rest is loaned out. If you default on your mortgage, they will find themselves unable to borrow money from the FED to satisfy requests for withdrawals.
What happens next is totally predictable. Loans, both commercial and residential, will go into default. Depositors, fearing for the stability of their bank, will demand their money. It won’t be pretty. And the FDIC insurance fund has only 1.3% in reserve to cover deposits. Meaning they can only pay off the first 1.3% of defaults, or pay out a maximum of $1300 on a hundred thousand dollar deposit. After that, the Fed’s cupboard is bare.
And it may not matter if you have assets in the bank, and could pay your mortgage out of them, if those funds are unavailable.
For the beleaguered mortgage owner, this might provide some breathing room. Banks that fail won’t be able to evict delinquent payers, at least not in the short run. But failed banks will eventually go into receivership, and attempts will be made to recover their losses.
Worse, the fuel for the economic engine, credit, will have dried up. The stock market will likely have crashed. Investment firms will be leery of lending money in a high-risk environment, particularly while the carnage is ongoing. When the first wave is over, many businesses will find they have no available credit, and even if they want to, may find it impossible to restart operations. Ergo, many will find their jobs, and businesses gone. And the cascade deepens.
No matter what, the expectation will be that a second, and perhaps a third, or even forth wave will be coming. The window of opportunity to restart things could be only a matter of weeks or months. And the consumer market, for items like autos and new houses, will have been destroyed. Builders will find they are unable to complete the houses under construction, and probably wouldn’t want to, as long as their existing inventory sits unsold. Non-essential businesses, like the nail salon, will simply vanish. We could wait months, expecting the next wave, and the economic crisis will only grow worse.
The cascade effects are almost unthinkable. And the Federal government, already mired in debt, will see little or no tax income. Their ability to help jumpstart the economy will be nil.
With 3 million dead, and another 3 million disabled, from the first wave, vital skilled workers will have been lost. Insurance companies, where many have invested their 401K’s, will be devastated. Banks will be closed, or struggling to merge, leaving their accounts in disarray. And the economy in ruins.
The second and third waves, if they come, will only add nails to the coffin. If the pandemic lasts 18 months, as in 1918, we won’t know with certainty that it’s over for at least 2 years.
And what happens here, in the United States, will be repeated in every country around the world. While the economies of 3rd world countries may not be as badly affected, trade, and foreign aid to these nations will evaporate.
We learned in the 1930’s how difficult it is to restart an economy in a depression. It took 10 years, and a world war to prime the pump. And that was caused by a stock market crash, and did not have the accompanying death and destruction that a pandemic would bring. During the height of the Great Depression, the unemployment rate was 25%, but debt was far lower. Restarting the economy, when all economies are equally devastated, will require enormous luck and a Herculean effort.
This nightmare scenario is what our government, and governments around the world, fears most. A loss of millions of lives would be tragic, but it would pale in comparison to the loss of our global economy. Governments could, and likely would, fall. Social systems disintegrate. And the rebuilding could take decades.
Property values will plummet. A decrease in population equals a decrease in demand. And fire sales will occur as investors try to dump properties for pennies on the dollar in a futile attempt to keep alive thru cash flow. Office buildings will sit empty. Condos and houses will sit unfinished, and disintegrating from neglect.
There will be some who will say `good riddance’, the system in place today is both flawed and unfair. But what takes its place could be far worse. A busted global economy would destroy our ability to produce vaccines, or provide health care, or a safety net for those in dire need. Life, as we know it, in a consumer driven society, will be ended. It would leave a hard scrabble life for the survivors, for years to come.
What then can be done?
I expect the federal government will try to keep as many people working during a pandemic as possible, trading infections and deaths, for keeping the economy stumbling along. To do that, they will have to `sell’ the pandemic as being less lethal than it really is, and will use propaganda, and incentives, to get us to go out into the fray. It would be a long shot, but it might work.
As heartless, and cruel as that sounds, it may be the only practical solution. For as horrible as a higher death toll might be, the losses in human life in a collapsed society could be far higher. This is the terrible dilemma facing governments around the world. Sacrifice the few, to save the many.
It would not be an entirely altruistic decision, of course. Those in power covet remaining in power. The rich will try to remain rich. And this course of action would help promote both agendas. But it may still be the right thing to do. Even if our leader’s motives aren’t pure.
But personally, I doubt it would work. Sure, I expect they will try it. But people will know, despite the `happy news’ reports, if the pandemic is ravaging their communities. And few will be willing to be virus fodder.
Business as usual’ will fail. And with that, goes the economy. And then, in all likelihood, society.
Pessimistic? Yes, very. But realistic, I fear. Try as I might, I’ve been unable to find any good reason to believe that the economy could survive a long-term severe pandemic intact.
I would love to be proven wrong. That there is some miracle in the pockets of our leaders that would lead us out of the abyss. But I hope, for all of our sakes, we are never put to this test. _________________
We may not want to restart this economy. Either way it’s scary.
And of course I’m not talking like an expert in how civilizations change - I bet no-one here is.
:-?
Homesteader
Sums it up nicely. Well done. I am in complete agreement, with the exception that I beleive U.S. (and world) deaths will probably be much higher. In any event (your scenario or mine), it will be catastrophic. I am planning accordingly.
Makes sense. Now would someone else please explain why it won’t be that way. Please. Pretty please?
Oops. Didn’t pay attention to the header - I thought you were the author. But I still agree with Fla-medic. Thanks for showing this to us.
The logic is sound, the reasoning tight.
The result of a severe pandemic will be very bad.
SOmeone once said that a measure of someone’s intelligence is how closely they agree with you. Fla-medic looks like a genius to me!
Surfer; I agree that the collateral damage will be much higher.
I imagine there would be emergency debt relief passed pretty fast and a massive debt/mortgage rescheduling. If half of all homes were foreclosed, property values on the other half would collapse and the entire credit system would crumble. The main initial problems will be deaths and infrastructure/essential deliveries. If we somehow get through a year without massive fatalities, the credit part could be rebuilt with delayed payments and a recovering economy. It is in no one’s interest to add a credit collapse to a pandemic and with the Dems in Congress, it is even more likely that some relief would be passed - and maybe not even resisted much by those holding the debt. What good could come out of over 100 million homeless?
Homesteader – at 08:34
. BRAVO!
My hubby was in banking for 17 years … mostly commercial but did have to deal with the non-commercial side regularly.
He said that there would be massive repurcussions in a pandemic … or similar catastrophic event … that was even slightly worse than the 1958/1968 versions. The reason for this is many of the “big players” in most industries are really just a stack of cards that would be easy to topple.
Too many “regular joes” are living this way as well.
There have been some laws put in place after the stock market crash of the 20′s/30′s as well as after the savings and loan debacle of the 80′s/90′s that will help, but not if there is a totally cataclismic event.
He gave the example of New Orleans post-Katrina. The city itself is all but bankrupt. They can’t get the people they need to move back to the area. The people who are stayed there are not doing well. And those that moved into the area post-Katrina thinking that it was a great economic opportunity have found the exact opposite. The city itself still has some serious infra-structure issues to deal with.
Now magnify that tenfold (or more) into cities even larger. There isn’t going to be a huge influx of cash. Doubtful you are going to get a huge influx of new workers. The population may even redistribute itself geographically to those locations best able to get the basics of food and fuel and trade.
Port cities will probably thrive better than interior cities. Think of the types of cities that thrived prior to the industrial revolution … and why they thrived … and you will have cities most likely to “heal” from an economic collapse. Artificial urban centers, those built around just-in-time economics with all of their needs “pumped in” will fail … think about places like Las Vegas and some cities in California that survive only because they can get their water from far away.
We are in the same boat as many … we are mortgaged across several properties, though we have a couple that are paid off; we are self-employed in a market that is easily “shook up” (housing); and those assets that we have come from equity and deposits - both of which could be ceased or disappear if a bank collapses.
Hubby says that he is willing to lose it all as long as we can figure a way to keep one home and keep the kids fed and clothed. If it is so bad that we lose the majority of what we have, then highly likely that it will be an across the board loss for most of the population. For all of our debt, by today’s standards we are very secure because aside from mortgage-based debt we aren’t very leveraged out — we pay off all unsecured debt at the end of the month.
What to do? What to do? Going to far in either direction can be as disastrous as doing nothing at all.
I was a mortgage loan officer/credit analyst/business owner from 1985 until last week when I accepted a position as a high school biology teacher, biology being my degree. I couldn’t come up with any reason why Fla_Medic’s scenario was accurate and likely.
It has been written that the reason the Great Depression lasted so long was that people who had money weren’t spending it. They had lost confidence in the system. Now run that through the Pandemic Scenario and factor in the worldwide death toll, brain drain, weatlth evaporation, corporate and personal bankrupticies either actual or de facto, infrastructure decay, Government disarray etc. . . and the time line back to “normal” is very long indeed.
Teach those highschoolers well ! Assign Flu Wiki for extra credit!
;-)
Short term-
In the immediate aftermath of a severe pandemic, a good firearm and ammo will literally be worth it’s weight in gold, which will be worth very little. As the new carrying capacity is established, ammo will be priceless, and the ability to make more also priceless. Once the situation has stabilized, a means of exchange will be required and gold and silver will likely again be that means of exchange. Pure water, food, shelter and clothing will be of great value. A $15 pair of Dickie’s might bring $10 in pre-64 silver coinage……..
anonymous at 13:03 —”I couldn’t come up with any reason why Fla_Medic’s scenario was accurate and likely.”
Did you mean to write something different? Leave out the word “not”? I’m confused by what you wrote.
Sorry, cookies strike again! that was my anonymous post at 13:03
What started my line of thinking this morning was reading the “will you go to work” thread. I saw a pitfall in many of the posts that had been nagging at me for a while, and had been mentioned already by others. One: we/most of us are focusing soley on our own personal situation ie: our mortgage, our bills, our jobs etc. . .And this is definitely job one. Alerting others in our communties in order for them to do their personal preps is job two. But the pitfall is in thinking that is as far as it goes. Our lives , our communities, our societies and our world is at risk of being “bankrupted” for many years. It isn’t as though we will get through a severe pandemic, if that indeed is what occurs, and then pick up our lives where they left off.
We can’t simply prep our individual nuclear families and then sit and wait for the Pandemic to start. We have to prep for the worst and pray for the best. We need a strategy in place for the aftermath. The government will be ineffective, TPTB will be ineffective or dead, there will be a lack of many items and services, transportation will be limited for a period of time, communication, power etc. . .
Local community will be of paramount importance. No family will survive long term as an “Island”. Going out into our communities at this point is necessary but proving to be of limited effectiveness. It will be more effective as the general public wakes up to the danger, but only on their individual prep level. Look how long our own process has taken to hear, accept, join this community and look to our personal preparations. Denial comes at every step along the way, and we have had the luxury of time.
As a start I printed off a copy of the Constitution and the Declaration of Independence in order to have a hard copy for later reference.
Others thoughts?
Yeah, I left out the “not”. One little word and such a big difference! Thanks.
We have discussed the fact that people may not be working because they have either decided to not work or have lost their jobs. Most people during and after a pandemic has passed probably will not have a lot of disposable money and employers that once were in the community may not be functioning anymore and their owners will be bankrupt. It may take a long time for supply chains to get reestablished so manufacturing can begin again.
With that said, there will also be a lot of dead people/families. Why should people go out and buy new items after a pandemic when there will be so many estate sales? People will be selling items of relatives, etc for whatever they can get (barter or pennies on the dollar for items). This will reduce consumer demand for new items and will affect the manufacture and employment of the people that would produce those items. Any thoughts?
LMWatBullRun at 13:09
I agree. I have hunted and fished all my life. My kids target practice, my wife is a good shot. We are fortunate to already have rifles and shotguns. To round out the selection I recently purchased a Ruger 10/22 and put a good quality scope on it. So far I have accumulated 1,650 rounds of ammuntion for less than $30. The gun, scope and mounts were $285. This gun will be the gun of choice for small game, roaming feral dogs, and whatever else a large caliber rifle or shotgun is not suitable for. I’ll have 5,000 rounds of ammunition soon. No way I could afford that much ammunition for a large caliber rifle.
Also,
My wife has been a licensed nurse (not currently, which may be a positive in a bad way)and I have had a lot of first aid training including wilderness first aid. Reference books on Home Medicine, farming, building, small engine repair, etc. . are in our library.
Homesteader – at 13:22
THE TIME IS NOW, to learn how to do the things you will need to know post-pandemic.
Learn:
Homesteader – at 08:34 (and FLA_Medic)
agree. and on the ammunition, as well - it’ll be very hard to come by later, once things shut down.
Sniffles at 13:28
You are correct. The economy is a function of supply and demand. There will definitely be an excess of existing non-food supplies after the pandemic - everything from real estate to shoes. Asking price for those items will be severely slashed. However, certain “essential items” will command a premium.
This is ‘thinking out loud’ more than based on any sound research …
We have very little information on the economic impact of the 1918 pandemic. What does come to mind is that the majority of ‘business’ was still based about primary production with only a small portion of the cash flow being generated by service industries. That situation has almost totally reversed for most ‘developed’ countries. I think these will be the economies most severely impacted by a pandemic.
Primary produce business has the opportunity to recover quickly - this being the production of food, which will, naturally, be in high demand. Think food, shelter, warmth. The transport industry could recover quickly on the back of primary produce. We are likely to see more ‘farmers markets’ in the centre of urban areas instead of shops for selling produce.
Shelter, as already mentioned, the availability of shelter won’t be the issue, but there will be a lot of the equivalent of squatting? Sorting out ‘ownership’ etc will be a nightmare on a long-term scale. There will be an excess of properties available and the building industry will probably be one of the slowest to recover.
Any attempt to ‘make public’ what measures lending institutions may take to ensure they help to ‘prop up’ the economy would be foolhardy prior to the event. Why? If I was to make a loan to you at present and say “when the pandemic occurs, I will give you time to pay off your debt (repayment holidays etc), moving to interest only etc etc’” gives you the knowledge that you do not have to be fiscally prudent. Equally, lenders foreclosing on mortgages under the current rules will not assist them in trading their way out of the situation either - the whole situation will be balanced on a very sharp knife-edge.
Maybe businesses need to think now about keeping the impact short and sharp - if each wave is going to be say 6 weeks in duration with a period of 2–3 months between waves - should they not consider closing as soon as possible, sit out the wave, starting up again between waves etc? While businesses keep their doors open they have financial obligations …
All of this requires that employers and employees both get realistic about the impacts and determine a course of action now that gives the long-term benefits needed for a quick recovery. If your boss said ‘give up 4 weeks wages out of the 6 weeks and we could start to trade again immediately. If I have to pay you continuously, I could not afford it and would cease trading’ would you consider it?
End of brain-stream - not sure what I think of my own thoughts - do not hold me responsible for then (smile) - just throwing some options into the mix ..
I concur. That is why I made comments on other threads….
Buy a bike now or at least a good pair of hiking boots. A wheelbarrow of money will buy a loaf of bread. I worry about my SS, Pension and IRAs’. Buy kids shoes,clothes in sizes too large for them now. Buy seeds now for planting later. Buy water filters now… 2 or more. Put in a rain collection system of some type. Pray.
Homesteader-
5/6 of the cost of factory ammo is the cartridge case, which can be reused. consider reloading.
It’s almost impossible to predict how it’s going to play out. We can’t stock up on everything. If we go back to the pioneer days, and play a fast forward, throw out things that didn’t work, may be we can rebuild. Better watch some old western movies. The good, the bad, and the ugly. We may learn a few useful skills.
FLA MEDIC wrote an excellent analysis of a post-pandemic economy, but I do have one point with which I disagree. The 1929 stock market crash (that lasted for two months)did NOT cause the Great Depression. The depression that began in the fall of 1929 was the result of nine years of overreaching domestic and international government policies that included buying stocks on margin, pyramiding, tariff walls, and an ill-conceived war reparations program. The stock market crash, bank closures, and home evictions were results of the crisis of confidence that culminated in October to November, 1929. Sorry, I’m trying to condense an hour’s lecture into a few sentences.
I do think there are lessons to be learned from this time period that could be applied to a post-pandemic world, and hopefully there will be more input from economists to help guide us.
“The depression that began in the fall of 1929 was the result of nine years of overreaching domestic and international government policies that included buying stocks on margin, pyramiding, tariff walls, and an ill-conceived war reparations program.”
Uh, NOW I am truly depressed! What a reminder of an incredible prallel to today! A nudge would knock things over the edge, the kind of wallop to the head of this already crazy economical structure a pandemic will bring is not cheery to think about.
The problem with input from economists is that people only want to listen to the ones that tell you what you already WANT to do! Voodoo solutions are always welcome, “go on a diet” is ignored.
LMWatBullRun and Oremus:
My brother was the rifle cartridge reloader. I was more into the shotgun shell reloading since I shot skeet and bird hunted and he was into deer and ballistics. I should get a set of reloading dies for the .243 and the bullets, powder and primers.
Fortunately I grew up on a small farm and have some knowledge of animal husbandry, gardening, electricity, plumbing, small engine repair, carpentry, hide tanning, fishing, hunting, first aid, preserving food.
Oremus, that is a great list and a reference book on each item you list should be in everyone’s library.
My Grandfather was a great man who died before I was old enough to truly appreciate him. My father, who is in his mid-80′s has quoted him my whole life and told many stories about him. One of my favorite quotes is “To hell with the necessities, its the luxuries I can’t live with out!”
Just wanted to interject a little humor.
Luxuries like running water, electricity, plumbing…I agree I don’t want to live without either!!!
As for funds existing to cover only 1.3% of FDIC insruance obligations, just remember that the government can print money at will. Of course that money becomes worth less as the government prints more…
History Lover:
Thanks, you are correct. The stock market crash was a symptom, not the cause, of the great depression. In my haste to write the essay, I glossed over the true causes. I appreciate the clarification.
Homesteader:
I appreciate your posting this. I felt it was a bit long for the wiki, which is why I didn’t do it myself. ;)
Fla_Medic,
It was too good not to post! Thank you.
Don’t worry, a’Akova! This year, the US government stopped reporting how much cash is out in circulation, so its no longer a problem! What we don’t know can’t hurt us, right? (Imagine how much money had to be printed to keep interest rates down under 1%!!! We really, really, don’t want the foreign buyers of our debt instruments thinking about that!)
As horrific as a pandmic would be, it’s the aftermath that really bothers me! You can plan & prep to SIP for the months of a pandemic (or the waves)…how do you prep and plan for the years/decades of a post-pandmic rebuilding of society?
SnowDog – at 10:47 …how do you prep and plan for the years/decades of a post-pandmic rebuilding of society?
See my entry at 14:25
Oremus at 14:25
That list is super.
If it is as bad as it might be rebuilding will be an organic local effort at first and then regional, national etc. . .
A good magazine is Backwoods Home. Back issues are available and a great way to build up reference material. Prepping should include sustainable and renewable sources like gardening, animal husbandry, hunting, fishing.
Sniffles made a good point earlier about there being a glut of many items post pandemic, so make some assumptions and prep for what will be in short supply.
Food for thought:
No Economist, Finance person or Management type has posted on this thread saying Fla_Medic’s scenario or our following comments are incorrect or that we are a “bunch of paranoids” or given an alternate scenario.
Dec 8 2005, (rev, July 2006) “Dear Sen Frist” letter, from the CBO] …called a “severe” pandemic one with only a 2.5% crf.
Also, imagined sick people would only miss 3 weeks of work… p21 a slight mention of “..if the disease struck workers who were in their prime working years more heavily, then the effects on GDP growth during the pandemic would be more significant”…however…
Most of it sounds like, “on historical average more hurricanes are Cat. 1 than Cat. 5, and, if New Orleans were to get hit by a Cat. 1 -though it might miss - the levees will hold just fine… (don’t mention the Cat.5 hurricane aproaching in the bay the scientists are tearing their hair out over…)
When people want good news, their underlings usually will be able to write acceptable reports -who wants to be dismissed as “a doomer” just because they trust scientists in their fields more than politicians and bureaucrats?
from New Zealand: http://0010115.e-xpert.co.nz/SITE_Default/SITE_x-navigation/x-files/17499.pdf Managing the Business Risk of a Pandemic; Lessons from the Past “To Conclude
Underlying the threat is a number of misconceptions that are slowing progress towards organisations and individuals preparing for the risk of a pandemic. Namely;
• It will not happen
• Communication will be optimal
• Leadership will be optimal
• People will not panic
• 50% of the work force will come to work
• Public transport will work
• Infrastructure services will not be affected”
messy; sorry! :-/
The opening post is VERY optimistic. No infrastructure = 95% of population dead.
Therefore, I’m guessing it won’t matter if a renter gets evicted or mortgage gets foreclosed. With 90% of the population deceased, squatters rights will prevail. Real estate will be worthless. There will be very elegant homes in Vegas sitting empty for decades. Real estate near hydro power plants and water transportation routes will be the first regain any value.
Hunting/fishing gear, gardening tools/seeds, water filters, and salt/spices will be the most valuable things.
Look at how society evolved and moved and settled since 1700 or so. Post pandemic will be a rerun of that.
Just my humble conjecture/opinion…
JJF:
Thanks for the optomistic outlook…
Economist/finance people are heavily “invested” into keeping the idea going that everything will work out, even if they personally believe its all going to flush. As soon as the general belief that “it will all work out” is compromised, the more-than-religious-belief that all these pieces of paper have an intrinsic “value” worth your life’s work goes away. Everyone involved wants play it until just BEFORE the final bell with never a word of concern unless they are selling short a particular day, and then be first out (which BTW, would involve buying real things like gold, tools, etc - the appreciation of portable commodities in a week will be staggering). In the 1800′s gold rush camps, a shovel could cost a year’s pay for an average person, 40 times its worth where they were plentiful (still one or 2 weeks pay! - we have lost the idea of tools being valuable).
Fiddlerdave – at 15:13
Thanks for the reminder. Now I’m off to the store to prep tools.
Oremus – at 15:20 Fiddlerdave – at 15:13
I have a barn full of hand tools, but that doesn’t mean I look forward to going back to using them.
Hillbilly Bill – at 14:47
Optomistic? No
Realistic? Yes
I have just posted this on the Nes thread but thought it was relevant here. There are also some links in the article to run part of the simulation (I think - couldn’t get it to download).
Study Shows Costs of a Worldwide Pandemic: Staggering
By Mil Arcega Washington, DC 14 November 2006 (link http://tinyurl.com/yd8sly)
A specialized information network known as MIDAS, short for Models of Infectious Disease Agent Study, shows an avian flu outbreak could wreak serious havoc on people and economies around the world.
Since 2003, H5N1, better known as the avian flu virus, has spread to nine countries, mostly in Asia and Africa. Health experts fear the bird-borne virus could mutate and spread among humans. If that happens, new computer models suggest the outcome would not only be deadly, it could also cripple the global economy.
Joshua Epstein is a member of the computer simulation project. “We have computer scientists and epidemiologists and demographers and economists and very diverse teams of people contributing to aspects of the modeling,” he said. “And government agencies, for example: the transportation data needs to be obtained from the FAA and other agencies. So it involves big-time computing, big-time expertise and a lot of quite creative collaboration, not a small project.”
The project’s objective is to develop strategies that would limit the worst outcome of a global epidemic. Warwick McKibbin, an international economics professor, says an uncontrolled outbreak of pandemic influenza in Southeast Asia would send shock waves around the world.
“When people get sick or die the labor supply changes. People don’t go to work or they die. That changes the capacity of the economy to produce. It disrupts production, that’s one serious shock. Another shock is that industry has to take some sort of action and that usually raises costs, depending on your industry it could raise costs a lot — in the tourism industry for example,” said McKibbin.
And there’s a wide range of scenarios. McKibbin says the mildest foresees a nearly one percent drop in the world’s gross domestic product. “For the most severe, the ultra scenario, it was very dramatic. We had over $4.4 trillion wiped off the world economy. 140 million people killed. So the individual consequences were severe — the death rates. But the economic consequences were also severe.”
<snip>
Unfortunately, McKibbin says, most countries are not doing enough. “I don’t think we are. We certainly are not spending enough in developing countries in public health systems for example. Because by the time this pandemic influenza breaks out from Asia, you can’t stop it at the border. So what really matters is preventing it in the first place.”
And Mckibbin says their findings show something else: that preventing a pandemic would cost far less than having to deal with its aftermath.
If you want a good idea of the aftermath of an economic collapse and the underlying reasons for it I suggest that you read “Atlas Shrugged”
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