by Sean Kelly
For weeks we’ve been asked to quarantine ourselves, stay indoors, social distance, work from home, wear masks, and avoid outside contact. We’ve become a restless and agitated nation.
Americans were simply not cut out for isolation. After all, we tamed the wild frontiers of the West, pioneered aviation, invented muscle cars and perfected the road trip. We even “slipped the surly bonds of earth” to send a man to the moon.
Can we go back to normal now?
In 2020, cabin fever does not adequately describe the ferment of over 320 million people who love to shop, eat out, travel and socialize. We crave normalcy. But the notion of “normal” is a consequence of conformity. It is the embrace of things considered “ordinary.” In the wake of COVID-19, however, the very word seems inapplicable. Most experts agree that there will never be a precise return to how we once were. Will folks really rush into jam-packed stadiums again? Will Americans embrace busy restaurants and shopping malls as they once did? Who, if anyone, will opt for the middle seat on an airplane? We’re in a precarious place – trapped between wellness and disease, recovery and relapse, and economic rescue and financial ruin.
Are we reopening the economy too early?
While we have segregated ourselves into ‘flattening the curve’ of infection – some states are now relaxing restrictions and others have announced phased re-openings like: Texas, Colorado, Alaska, Oklahoma, Georgia, Tennessee, Idaho, Iowa, Minnesota, Nebraska, Montana, North Carolina, South Carolina, North Dakota, South Dakota, Mississippi, and West Virginia. Despite the mad dash to normal, however, concerns linger about an infection bounce-back. Have we tested enough? How many asymptomatic people are lurking about? Could the virus return in a stronger, second wave? As social interaction increases, a possible rise in new infections could send us back to solitary confinement and side-track any hopes of an economic recovery.
Is Washington fueling an epic stock bubble?
As states and businesses slowly open up, the stock market is rallying. The Dow surged over 350 points yesterday and despite a multi-week economic shut down, it is just 18% off its recent high of almost 30,000 on February 12th. Wall Street has been oddly resilient in the face of what has become the worst economic calamity since the Great Recession. Are traders perhaps overly confident about Americans getting back to work? Is market negativity already priced in? Has massive risk appetite returned? Or are investors betting on endless rounds of stimulus from Washington to make everything okay? More federal money means more risk-taking and bigtime risk, builds bigtime bubbles which almost always wreak economic havoc.
Are we entering dangerous debt territory?
The coronavirus fallout has prompted lawmakers to pass the biggest stimulus package in U.S. history. The $2 trillion Cares Act and over $480 billion dollar coronavirus relief monies have pushed federal deficits to unprecedented levels. And more cash is on the way. Our national debt could eclipse our annual economic output as soon as this year. We’re on track to grow the balance sheet by up to $10 trillion next year and our debt liability could reach 117% of GDP by 2025, far exceeding World War II levels. The Treasury can continue to borrow its way forward as long as interest rates remain low but if inflation returns and rates are forced higher, the weight of that debt could crush our economic future.
Will America’s Cities Go Bust?
With restaurants, bars and businesses suffering under stay-at-home orders, America’s cities stand to lose billions in sales and income tax revenue along with tourism and travel dollars. Shoppers in the nation’s largest municipalities are few and far between, hotels are empty, malls have become ghost towns, trade shows and conferences have all been postponed. And, the loss of these revenues along with skyrocketing pension costs could jeopardize essential city services like school funding, road repairs, sanitation, fire and police protection, medical supplies and infrastructure care. Under these pressures, cities are less likely to pay down their debt. As a result, the coronavirus will severely test finances in places like New York, San Francisco, and Seattle and threaten pensions in Philadelphia, Dallas and Chicago. Insolvent pension plans could push some major metropolitan areas into fast bankruptcy.
Confirmed worldwide cases of the coronavirus have now surpassed 3 million. Over 210,000 people have died, 56,000 in the United States. America is now the epicenter of the virus outbreak. Most of us, just want our life back – but that’s the hard part. The emotional fear and economic fallout will likely linger for a while and uncertainty about the days ahead will be one of our greatest challenges. We should prepare ourselves for anything from a new wave of infections and a broad market bubble – to soaring national debt and the collapse of our most celebrated cities. Tomorrow, however, belongs to those that understand that “normal” may very well be something we no longer recognize – so we should plan accordingly.