Reading the Economy In Covid

For now, it seems to me that GDP forecasts simply don’t represent what we are going thru. I think of it as an interrupted race. You have racers, say on bikes, going at 40kmh. Then, at one point, you say stop! You then measure their speed, and calculate an average, some part of which will be at zero. Let’s say that average comes out at 23kmh – you then look up your historical tables, and conclude this is a terrible year. Never since the early 1920s have riders been this slow. That, in my mind, is how we are looking at the economy.

In actual fact, the racers are bouncing and ready to go. They have so much stored up energy, that if they were let loose, they’d cruise at 50kmh+… if someone will let them. Sure, some riders have given up; some teams got bored or ran out of money – it’s not a simple story.

But in the main, that is how I see it – in other words, GDP data is meaningless – and this crisis is a lot less dramatic than we tell ourselves. That said, governments – almost all – have made catastrophic mistakes, and continue to believe, as they have for almost 20 years, that free money is the solution to everything. Started by Greenspan around the Y2K panic, the central bank belief now is that every time something happens, you just open the spigots. Truth is, everyone loves free money, or free candy, or free alcohol. Doesn’t mean it’s good for you long term … But for now, don’t fight the central banks… easy money means easy capital markets and cheap equity, and at the margin it’s bad for debt, certainly long term. For now … it’s all good.


2bC is principally a debt lending firm – and we like the fact that savings rates have gone up… thru inability to spend.

Sometimes it’s better to be lucky than smart.