As much as 30% of mortgage owners, and perhaps even more, may default in the next two months in what might be the biggest sudden mass default in modern history.
“Some 30% of Americans with home loans (about 15 million households) could stop paying if the U.S. economy stays hobbled by shutdowns through the summer,” according to Bloomberg.
Renters in particular are being hit hard due to no support from the UK government unless they were and are in a PAYE job where 80% of the wages are guaranteed.
That’s a promise however. This mass administrative undertaking should take some time and thats while the civil service is in exceptional working practices due to the new flu.
For the self employed Brits get no help until June, and even then barely any help at all, as the government spent hardly a couple of days to come up with what must be a huge administrative undertaking.
In America they’re taking a more scattered gun approach of just giving all “free” money, but merely $1,000 for most of them. Not enough to cover even half the rent for plenty.
Those that were just about managing, a demographic so often talked about, are now pretty much sinking.
No industry is spared, except for the government which keeps operating and arguably the food and supermarkets industry which is seeing a boom.
The rest of the private sector is now closed, all so relying on the public sector, with unemployment claims climbing and climbing in USA.
Someone obviously has to process them and you can probably imagine the hecticness that must be going on in those offices or work from home laptops as a system designed to deal with at most 500,000 claims, maybe a million, now has to deal with 10 million and you would think very much climbing.
It is more the suddenness of it all that may cause most damage to the economy rather than the almost full loss of production.
If individuals or businesses were expecting a closure, as it of course happens every year during Christmas for example albeit not for so long, then they could have prepared, there could have been measures, there could have been things in place.
The decision by a capitalist democracy to shut down Milan however, and then in quick succession all global iconic western cities, was somewhat abrupt, and took all by surprise.
In other countries likewise there was no priming for a lockdown, only that it was not ruled out, with the decision then announced without prior notice.
So the evaporation of income was pretty much instant, while liabilities remained in place, like rent or mortgage or bills or indeed food and for businesses many are leveraged or have investment timelines, etc, etc, which usually are an efficient way of operating but depend on the pipeline running unless they know activity might reduce and so they prepare.
That suddenness instead means the defaulted liability of one, becomes the liability of another, which becomes the liability of another, and so in a domino effect you end up at banks which will probably be given printed money in addition to still wanting the house or business or whatever other collateral might have been put down.
Meaning there is a considerable risk we may sleepwalk into communism, something that was already the case, but now temporarily we’re all basically dependent on the government which is the definition of communism.
Some $13 trillion might be spent globally to deal with this, which is as much as China’s GDP, with western capitalistic governments to take equity in pretty much all corporations.
From oil to telephone lines, maybe even Google and Twitter which have probably seen their ad rates plunge, all of these global giants may become openly public-private companies instead of just private.
It is what Karl Marx predicted, but we also know what the problems are with a bureaucratically led economy with the administration probably struggling to ascertain who should get what.
In UK especially the government is fully new so the Chancellor barely had the time to introduce himself to the new staff. Likewise the health secretary was probably just about figuring out how many hospitals there are in Britain and where.
The elected obviously don’t run the government machine day to day, but arguably right now they’re not running any bit of it with the bureaucrats clearly fully in charge.
And that’s wealthy west. Even rich Italy and Spain is asking for help. Imagine Eastern Europe, or just a bit below in the Balkans, while further below there may even be starvation especially as a locust swarm is making its way through the crops.
As this has never been done before in modern time, it is difficult to predict its effects even in the short term now that we are probably very much past the peak of this and near the end of next week it should be pretty much over.
The week after that things should be starting to get back to normal regardless of what the TV heads say, with self compliance probably evaporating by that point.
It is probable even now everyone has tuned out of this TV show, but we’re still just about coming out of the peak so a few more days just staying in could be useful.
Then next week the weather is predicted to be very springy in London and New York, so people might start relaxing a bit because by that point there should be herd immunity which is also very useful for a potential second wave that would likely be far worse than if most, who this doesn’t do any harm, didn’t get it during the past four months.
That probable vaccine effect might explain why all these people on TV seem to be getting it, and probably the best explanation for why we are now coming out of the peak is because that heard immunity level has been reached.
So where the general population is concerned late next week should be when this is probably over. While where hospitals are concerned, early next week should be the very peak of hospital admissions, which luckily is to be hopefully greeted with nice, and for UK hot, sunshine so reducing the spread in hospitals.
After that things should start easing at the NHS, but the statistics on just how many grandpas and grandmas have left us should take quite a bit more time.
Yet although that is very relevant to the families, where the population is concerned its a, well all life is at the hands of god.
What the population at large may be started to be concerned about is: where is all this money that was promised?
And who pays for it? Are tax dodging corporations that offshored our tech and manufacturing knowhow going to be actually taxed now, or are ‘politicians’ going to continue with the make belief of printer goes brrrr.
In UK they took pretty harsh public spending measures last decade, so they should be able to handle it, but still they were borrowing and a lot even before technically pretty much everyone became entitled to this new thing they’ve aptly so named as Universal Credit.
In US they have the petro dollar, but even before this they were paying as much on interest on borrowed debt as on anything else in public services except for pensions, healthcare and the army.
Germany should be fine, but in France who pays might be a big question. Italy and Spain was hugely indebted even before this. The rest below… well, there’s a reason why they used to call North Africa as Atlantis.
On a better note, maybe it won’t be much different than a three weeks long ‘holiday’ – with the Italians of course getting six weeks – as everyone kind of cancels everyone’s obligations with it all then back to like nothing happened by easter.
That would be optimistic, but everyone sort of thinks this has all been just some show theatre and while them TV talking heads might be claiming we now house arrested forever, no one can hear them even now, let alone in a week or two when laughter in their face would be a nice way of telling them to get off the now boring show.