Further, the crisis of poverty leaves millions of children and adults most vulnerable should they contract the COVID-19 virus. For 40 million poor and low-income Americans, the choice between going to work when you or a loved one is sick or putting food on the table is not new. It becomes a dire situation for one to wait to see if the over-the-counter generic medication will work, rather than risking the time and expense of an emergency room or urgent care visit. Figuring out if it's better to pay your utility and water bills late and face shut-offs, or be late on rent, is becoming a monthly routine. With the country in an economic coma, those Americans in poverty will suffer to a far greater extent, with a job loss causing desperation.
With the spreading of the pandemic, more Americans will experience this fear. A deep fear of poverty is another factor. Already one in six Americans lives below the poverty line. What will happen to them? What will happen to all of us?
Approaching Depression
Physical distancing required by the COVID-19 virus to slow its spread is, conversely accelerating the spread of the economic impact as workers can no longer work side-by-side, which is crippling our capability to produce, even with the requirement of wearing protective face masks.
In summary, consumption is collapsing, business investment has contracted, and trade is precarious.
We are in recession and on the verge of depression. The statistics are harrowing and an indication that businesses have no ability to provide for their workers, as demand for goods and services has fallen dramatically due to fears of the COVID-19 virus and orders to stay at home. The question now is how deep will it go and how long will it last? The answer depends, in turn, on how quickly and seriously will our elected politicians respond. Reopen the economy too soon, without preventive and treatment measures and assurances that all Americans are no longer threatened, would result in an even greater medical and economic crisis.
Turmoil And Upheaval
If we are unable to stem the fear and depression, people will become irrational and act selfishly, even violently. This will incite turmoil and upheaval. The result of insufficient action to quell any panic will be revolution by pandemic. This begs the question whether our community police forces will be sufficient. They are, after all, just as likely to contract the disease as everyone else.
Financial Markets Deflation And Default
A third channel of economic contagion is emerging that may dwarf the effect of the supply chain disruption and household consumer demand collapse. It is the condition of the financial system itself.
What began as supply chain and household demand problems will be greatly exacerbated by financial instability.
Globally and in the United States, financial markets are depressing and fracturing, which affects not just secondary stock markets based on unbridled speculation to boost savings for those wealthy enough to have savings in the first place and take risks, but oil and commodity futures markets. Foreign exchange currency markets are being disrupted. Corporate bond markets, which are far more important to real capital asset investment than secondary stock markets, are experiencing great stress. According to reports, banks globally are sitting on $10 trillion in non-performing loans. Should prices collapse further, widespread defaults on paying principal and interest on debt will take place. That will result in massive layoffs, a further collapse of business investment, and a yet further acceleration of contraction of the real economy.
Liquidity (cash) is rapidly drying up throughout the economy as businesses draw down their bank credit lines to zero. This is in order to hoard cash to weather out the storm of consumption and production collapse on the horizon, and keep essential operations functioning.
Businesses are selling their financial assets across the board to gather in as much cash as possible, needed to continue to pay interest and principal on the $10 trillion debt run up since 2008, as prices, sales and revenue drop precipitously in the meantime.
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