The comments below are an edited and abridged synopsis of an article by Jim Kunstler
The Covid-19 debacle presents a set of puzzles. There’s no sorting it out, and the uncertainty is intolerable.
People are going broke fast. The cheques promised by Uncle Sam are little consolation, and the small business loans add another layer of obligation in a lifetime of debt.
The global debt system that supported the global economy was disintegrating badly in 2019, threatening every financial asset and the markets that managed them, and the operations of daily life that they represented. Nowhere was the debt load more out of control than in China.
The biggest economic fiction of all was that China could maintain its supernatural growth rates in a world that had reached the limits of growth. President Trump’s trade wars sent tremors through the system. Many bad loans were about to be flushed down the drain. Banks everywhere felt the vibrations, too.
Covid-19 didn’t start the financial disorders in the US and Europe, but it ensured there would be no recovery, as with the central bank interventions of 2008-09. Rather, it is a fast-track journey to a new reality: first, an angrier society of broken promises and dashed expectations; and then adaptation, when facts amount to a new reality.
Money is not an economy, it’s a medium of exchange within an economy where people grow things, make things, move things, and serve each other. You can’t replace that by giving people money. Money is not necessarily wealth; it just represents our ideas about wealth, and interest stops compounding when the trend is for reduced services. That’s why capital vanishes. The hocus-pocus of Modern Monetary Theory can only pretend to work around that reality.
The world never reached such a pitch of activity prior to the blow-ups of 2008, and it went through the motions for a decade after that. Now that it’s stopped, all that’s left is the law of gravity. The wealth acquired since then by the so-called 1% was loaded onto a defective aircraft, and a lot of it will fall to earth on broken wings.