Ruminations and Forecasts in the Time of Pandemic – 1
The magnitude and probable consequences of this gargantuan black swan event will be significant and numerous. Realizations, insights, revelations, probabilities, and forecasts keep coming to me as this all sinks in.
Here are just some of what may lie ahead both in the near term, and more significantly in the long term. Each of these may well merit a future column.
First, some context. As regular readers know, I named 2010-2020 the Transformation Decade on 1/1/10 and stated that one of the dynamics of this decade was the beginning collapse of legacy thinking. One view of COVID-19 is that it will speed up this collapse as we enter this new decade. In the Shift Age everything undergoes a shift of some magnitude.
In addition, I am embarking on a series of books about the 2020s, with Book One called “The 2020s: the Most Disruptive Decade in History.” It is already clear 75 days into the decade that this is true.
Humans are adaptive
As we all reconstruct our new day to day use of time, we will initially struggle to adapt, all the while questioning if it is all necessary. The longer we are in a world of self-isolation and social distancing, the more how we adapt will trigger large and deep changes in behavior.
Will we all develop a deep need for socialization and if so, how long will it take to occur? How many of us will feel that craving and how many of us will be altered socially? Since hundreds of millions of us will be in lock down, a number, significant or small, will develop new habits, interests, and a growing sense of our non-social sense of selves, that a certain percentage will evolve to a different relationship with society. How big, how many and how significant will these changes in sense of self and society become and how will they affect what we have collectively decided is reality? This will be a real example of my oft stated premise that reality is transitory and not fixed.
The Two Realities
During the last 15 years I have always spoken about the current iteration of humanity is unique in that we have two realities we have to manage, our physical reality and our screen reality. We now have entered a time when the screen reality is replacing our physical reality.
How will this alter behavior long-term? Will the bandwidth be able to be ramped up to handle the new load? How much of what humanity does daily can be fully on-line? This may be a time we will look back upon as a tipping point of humanity moving ever more to the screen reality.
Recession and contraction of global GDP.
In the first week of February and first week of March respectively I forecast global financial contraction due to COVID-19 https://davidhoule.com/forecasts I now think they are conservative. Though I don’t like to use Industrial Age terms such as GDP and Recession, it is clear that we will be in recession globally through at least June.
Global GDP may shrink 5-10% compared to 2019.
70% of the U.S. economy is consumer spending. Depending on the length of the lock-down, consumption will decline annually by at least 10-25%
Massive debt default
The Great Recession was triggered by real estate. The COVID-19 contraction may well be triggered by the massive amount of junk level corporate debt. Currently in the U.S. there is $16 billion of corporate debt – 75% of GDP- much of which is junk level status. This is a record. Think about the collapse of revenue and thus profits going forward. Some corporations will not be able to pay on the debt, some companies will be able to but, with shrinking or collapsing revenue, post minimal if any profit. This will affect the earnings per share valuations in equity markets.
Under capitalized companies, mostly small and medium sized, will simply be declaring bankruptcy in the coming months.
These realities will not be helped much by the Federal Reserve Bank, which has lowered interest rates to unsuccessfully prop up markets. They have no more ammunition and still hold $trillions of debt from the Great Recession.
Government and the Private Sector
COVID-19 may well show the necessity of the private sector to step up and face the common good. Governmental leadership may be too slow, governments may be too indebted or dysfunctional to react to this crisis. Enter corporations and foundations to save the day.
We know that it is the older, elderly people who are at the highest risk of dying due to COVID-19. This means that the first step after self-isolation is to have those under 50 flood back out into the marketplace. This demographic separation may have interesting long-term consequences.
This is a big one. Of course, for the first time in 5 years, GHG emissions may actually not increase year over year. They may in fact decline year over year. In addition, there will be a lot less consumption with the resultant lowering of waste.
The pandemic has within it the chance to lower consumption as we all realize that impulse buying of stuff is less important than having a clutter free life of fewer things. Many will realize what is truly important and that less is more. Finally, the global experience of moving through COVID-19 collectively will increase the necessary Spaceship Earth consciousness that, collectively we can successfully face daunting realities.
More next column.