Where is the World Heading?
I am going to start this post by saying that what I am about to write is pure speculation with--atypically for me--no basis in fact other than my own personal logic. I do not purport to be an economic guru of any kind. All I want to do is record my thoughts for posterity and perhaps years from now have people return to see if any of my predictions have come true. You should know that these predictions are from a Canadian point of view. In Canada we are approximately one month into the serious phase of trying to control the spread of COVID-19. Authorities are making no predictions about when it will be over because that is impossible. Many ordinary citizens are, I think, ready to wait it out for perhaps as many as six months. The federal government has committeed in the order of $80B to pay people who are out of work to allow them to continue to live with a reasonably good standard. Don't get me wrong. This is a good idea; however, there is no timeline on it, which of course begs the questions, "What happens when that money runs out? Do they repeat the offer? How many times?" An interesting piece of history might tell us a little in this regard. In 1666, the village of Eyam in Derbyshire, England, self-isolated from the plague. Basically, they sacrificed themselves because the plague was already in their small community. Nobody was allowed in or out. It took 14 months for the disease to be eradicated, during which time around 50% of the villagers perished. So, my tidbit of wisdom from this story and my prediction is that our present pandemic will probably take a year to burn itself out, given that we have better health care and controls than the villagers of Eyam did. The most difficult part is going to be the recovery phase. Even if we get the virus under control within say an optimistic six months, we will still have to remain in at least a semblance of national quarantine because of the potential return of the virus from other countries, hence my prediction of a year. Can the government support those with no or little income for that long? If they are not already doing so, they will need to be thinking about this NOW. Let's imagine that they make a commitment to support for a year. What will be left in the country's piggy bank? Taking the typical government economic sleight-of-hand and knowing that by that time they will have instituted strict controls on God knows what else, they will need to begin taking money from obvious sources. What are those? First of all, there is the Canada Pension Plan, whose assets in 2018 were around $360B--and those by now will have dropped with the market's fall. It would not surprise me if they were to "steal" $100B to $200B directly from those assets, meaning that anyone receiving CPP would immediately have their cheques slashed by 50%. Likewise with Old Age Security (which they might completly eliminate) and all government pensions. It is in this latter that serious problems could arise. First of all, no matter when or how we recover from this crisis, I believe that any cost-of-living increases in these pensions will soon be a distant memory. I would not be surprised if the government went further and slashed all such pensions by 25 to 50%. I think it's almost a certainity that we will see a means test for the OAS at the very least. Where else would they get the money? It's certainly not going to be oil and gas revenue as this will be way down even if all the new projects were to be fast-tracked, assuming they can keep the pesky indigenous folks and climate alarmists out of the picture. Lastly, I would not be surprised to see wage and price controls in Canada as we try to claw ourselves out of the hole. As if that will not be enough, there is at least one or more shoes that will drop, probably in short order. First I cannot see how the European Union can survive this crisis, with a real mess already in Italy and Spain, two countries that were in serious financial trouble even before COVID-19. The EU's collapse could take down the rest of the world. What that means I have no idea, other than it is a terrifying thought. If this happens, or probably even before it happens, the stock market will settle in at 25 or 30% of its current value, wiping out gazillions of dollars of savings, and leaving little for many to spend on the essentials of simply living. If we have the patience, it will probably recover, but it could be a very painful period of time before it does. I'm afraid that some industries may find it hard to recover at all. One of the big ones is tourism, and specifically the cruise industry. I, for one, will never, ever set foot on a cruise ship again, although I am a senior and love to travel. I wonder how many other people feel the same. In a similar way, but more essential to general commerce, the airline industry must get creative in coming to grips with the dismal hygiene conditions onboard their aircraft - germ-carrying HVAC systems, filthy tables and seats, lack of passenger separation, crowded airports and security, sick people everywhere, volatile fares. They have to address these problems before a lot of people are going to feel confident about travelling again. There are bright spots in the future, though. As many have noted, pollution is down, and may even stay that way for a while since few people will be doing discretionary travelling. I really hope the climate alarmists don't try to insert themselves into the middle of a recovery, or if they do, that the government shuts them down at all levels and throws them in jail. Althouth there is lots more to predict, I would rather stop here and add some comments of encouragement. As I have said before, and as a Christian, I believe this is God's reset. Though painful, it is probably the greatest opportunity of our lifetime to set things right with ourselves and with the world. It is a time to replace intolerance with forgiveness, narcissism and selfishness with charity, pride with humility, and humanism with respect for God. My wish is that when it is all over, many millions of people will choose to be on their knees instead of taking selfies.