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I don’t get the economy

April 6th – 10th 2020

this is an insanely naive view from someone who is still clueless about the economy despite having tried to understand it better by reading intermittently and cursorily about it for 3 years… but I’m a slow learner so stay with me while I think through this

trying to make sense of things….

trying to understand two things: “how bad is this going to be?” and “what should I do to survive, and perhaps even thrive”

so. significant number of people are off the streets. they don’t gather, they consume less, spend less on offline entertainment and secondary needs.

travel and hospitality industries got hit. businesses got cashflow difficulty.

they don’t have enough savings to pay rent and salary without cash coming in.

they need to cut costs and conserve cash. some employees are let go, some rents are being negotiated

some employees will probably get handouts from the government to sustain the bare necessities for a week? a month? idk. till the govt run out of reserve from stimulus. some also got savings to purchase the non essential or extend the lifelihood, make ends meet, keep the household alive. some rent and essential bills waived or subsidised.

then let’s say everything runs dry after 3 months. okay let’s be generous and assume 6 months.

after 6 months, then what? will people raid supermarkets? will there even be anything at the grocery stores?

will people bang on their more affluent neighbor’s house? why can’t they let them in and share the food?

why is it a bad thing for businesses to close down till everything recover to a certain extent (vaccine, mass immunity)? there is nothing inherently broken about the mechanism, right?

so we pause

and help keep each other alive

but can we pause the economy tho? where is the supply chain? it’s a full complex system, and we can’t just pause one component without ripple effects.

economy is where stuff gets made. the rest is bookkeeping.

need to buy oil to keep agriculture running? to transport the goods to places. can we just make everything free for 18 months?

then let’s say the experts found the vaccine in exactly 18 months

can’t the business just rehire all their employees (if they’re still alive) and reopen? the old customers will come (if they’re still alive). everyone is going through the same thing, so… ur employee will likely be there once you’re back

are we just scared because we won’t have MONEY coming in to stay alive? then why don’t we think of a way to make things work without money? or just print a lot of them (lending it to our future selves)

money is just fiction no?

it’s a tool for sure, tool to measure value, and accommodate fair trade. // ok, read “money” book from that david who? oh David Graeber. The book’s title is: Debt

https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

In Debt: The First 5,000 Years, Graeber proposes a concept of “everyday communism”. The thing which makes it “everyday” is this argument: “communism is the foundation of all human sociability. It is what makes society possible.

Graeber suggests that economic life originally related to social currencies. These were closely related to routine non-market interactions within a community. This created an “everyday communism” based on mutual expectations and responsibilities among individuals. This type of economy is contrasted with exchange based on formal equality and reciprocity (but not necessarily leading to market relations) and hierarchy. The hierarchies in turn tended to institutionalize inequalities in customs and castes.

I suppose it’s impossible to try and organise this temporary communism during a crisis.

// btw the main argument of the book is: the idea of “credit” (debt, a promise) predates the idea of “money”

illustration of macro economy

https://web.facebook.com/1407549016135526/videos/205986170730134/

and the evergreen video

and just found out he had this recent conversation! (Update: check the notes I took from this conversation here)

you can’t “pause” a business. you stopped. you’ve fallen off the treadmill. and restarting it involves the all deeply entangled dependencies.

There’s a lot of friction to get it back up, rehiring, filtering, doing it in phases.

Supply chain disruption

Shift of demand and supply chain mechanism from B2B to B2C

It’s a complex web of things

https://news.ycombinator.com/item?id=22770709

I think over the coming weeks, we’re going to see just how much of the “essential” part of the economy depends on the “non-essential” part.For example, a comment in one of these postings on HN was talking about how the manufacture of essential supplies was continuing and robust (even I’ve made a similar comment some time ago). But… ok… how much of the logistics capacity, the capacity of hauling those essential products from the factory to the final buyer is being impacted? And it’s not just trailer cubic feet availability that’s at issue… it’s are those containers available in the right place at the right time? Greater cubic feet available for essential products in fewer overall containers is still a potential major problem. I have to think that a fair portion of the common carriers are dependent on a mix of “essential” and “non-essential” goods for their business and that some of these common carriers are marginal even during the “good times”. Fewer trucks/trains/drivers/etc, mean that getting a truck scheduled to a loading dock on a timely basis is harder, even if available cubic feet for essential goods has risen. If my speculation holds, manufacture of essential goods will be robust, but there will still be shortages at the stores and for buyers simply because shutting down the non-essential has reduced available containers and the bottleneck has shifted to inventory logistics. I can repeat this sort of thing for many different parts of the economy; I went to get a replacement part for a computer keyboard… the company’s website said they were closed under county order as a non-essential business…. yet food producers still need to use their computers to ensure they can monitor available shelf-life, etc.When we see broad pronouncements from politicians and bureaucrats talking about not shutting down essential businesses, I wonder if they appreciate how interconnected the modern economy is and that it doesn’t simply break down into “essential” and “non-essential”. Perhaps this sort of thing is why I so distrust those that would embrace economic central planning.

I think some of the nuance here is that essential vs non-essential assumes a short time horizon. In the keyboard example, an “essential” service can probably operate with a broken keyboard for some amount of time before it is a major problem.(I hope) lawmakers are not trying to demand who can and can’t stay open long term

….

My intuition is that you are correct that some marginal logistics operators will go belly-up, but I think the end result of that is a lot of equipment becomes available at low prices, and the cost of running a logistics operation goes down. Labor probably also gets cheaper with all the people who have been laid off. Anyone with cash can invest at great prices. So while there would be some disruption, there should be enough capacity to go around.

Agriculture

Example in milk and farms:

In retail:

https://marker.medium.com/what-everyones-getting-wrong-about-the-toilet-paper-shortage-c812e1358fe0 The changes wrought by the coronavirus, he said, “have thrown the whole thing out of balance, and everything has to readjust.”

In retail clothing:

Online learning and teaching

Events

LiveStreamFest dari MRA Media

Food and fisheries

Food and Beverages

https://marker.medium.com/tom-colicchio-spent-19-years-building-a-restaurant-empire-coronavirus-gutted-it-in-a-month-6c08cdc8cc05

unemployment, economic contraction, kelangkaan pangan, supply chain crisis, ripple effect, hiccups, everything readjusting

explain recession to me. explain (economic) depression to me

aren’t we just hitting that part in the roller coaster where we’ve reached the top and just gotta drop to the bottom again?

sure in relative terms we are “doomed”, we need to adjust lifestyles, devalued money, some people at the fringes will be hurt more than the people at the top (cue: “The Platform” on Netflix)

but in absolute terms, collectively we still have better standards of living? the progress in tech etc are not wiped out. we will still have internet, more clean water, and better healthcare in the whole history of civilisation no?

isn’t it just a shock in the relative terms? we will need to adjust to new baselines. create and get used to the new normal

why do we need MONEY to keep the world spinning,

why can’t we bypass it temporarily, forget all about credit, debits, the accounting part of the economy and just do the real tangible things. the food, goods,

well even if we agree to ignore all the accounting, we still need fuel and other materials to produce these goods, and often we don’t have it within our disposal, within our own soverignty. so this can only work if EVERYONE in the whole world agrees to cooperate. which…. is wishful thinking? haha

it goes without saying that deglobalisation is in everyone’s minds now. it’s apparent that we need it. that the new world we’ll be creating will contain a higher number of self sufficiency than we have now. there will be less dependency, bottleneck, and points of failure. it’s going to be more resilient. but it takes time to get there. to set up manufacturing, less outsourcing,

until we get a way to produce more things ourselves, we allocate some budget to still buy stuff from other countries (with also impacted production capacity), but in the mean time keep everything subsidised within the sovereignity.

well, can’t. we’re paralysed.

and it’s difficult to comprehend the full view of things, how to distangle the deadlock.

inflation

(heads up, here he’s arguing for having money separated from any controlling nations, aka Bitcoin / cryptocurrency as global currency)

nice resources

I hesitated initially because I thought I had a bad association with “Vox” but I have since learned that this is not the same Vox that posted that post throwing shade at billionaires’ donations. this is a research division of CEPR, some economic think tank or sth. well idk how credible they are compared to WHO, but yeah

time to revisit this again? rethinking measurement of economic activity

https://voxeu.org/article/rethinking-measurement-economic-activity

Things I have read

  • https://marker.medium.com/this-looks-like-a-depression-not-a-recession-16a123f966d8
  • https://blog.usejournal.com/how-the-2020-economic-collapse-will-differ-from-the-2008-financial-crisis-d0f5b5b1b49b
  • https://eand.co/america-is-committing-economic-suicide-c7c1f7122169
  • https://blog.usejournal.com/manufacturing-normalcy-7633259f63b5
  • https://www.npr.org/2020/04/03/827016244/episode-988-the-economics-of-hospital-beds
  • https://medium.com/swlh/managing-your-money-during-a-global-recession-b4186d3e763
  • https://eand.co/how-our-civilization-is-beginning-to-fail-5392597c0f5c
  • https://eand.co/this-is-how-an-economy-dies-a19bbcdc1c96 (April 12th)
    • In 3 weeks, about 10% of the US labour force has filed for unemployment. The US labour force is about 165 million people. // During the great depression, the unemployment rate was 29.4%.
    • The stimulus that was passed supported businesses and households for just one week. Furthermore, it was badly designed
    • And that is what an economy is really about: not stocks, bonds, or corporate profits — but human potential.
    • Coronavirus will finish a job that began in earnest about two decades ago: the death of the American middle class. It began shrinking as a result of bad economic choices. Not just because people will lose their incomes, then, savings, then assets. But because a lot of the jobs that are being destroyed right now are probably not going to come back.
    • Many of the small and medium sized businesses that are shuttering their doors right about now are probably gone for good. Their owners are going to have declare bankruptcy. Do you think they’re suddenly going to be able to start new businesses, the moment all this chaos ends? Of course not. Not only will they be trapped, liquidating assets, for months or years, struggling to make ends meet
    • At the same time, megacorporations will have a field day once all this is over. They’ve got plenty of cash stockpiled. In the end, what will be left in the wreckage of such an economy is just a handful of mega corporations controlling most of the economy.
    • Think of how many lives will be reduced to penury, unable to fulfill themselves and reach for their dreams now — forced by the coming depression into doing what they must to survive now. What happens, by the way, when people finds their hopes dashed, and their dreams shattered? They turn to demagogues and strongmen, in rage, frustration, despair, anger, pain. The demagogues point their fingers at the powerless — and blame all the problems of an economy and a society on them. “They are the reason you’re poor!”, shout the strongmen. In America, “they” are Mexicans and Latinos and Jews, in Britain, Europeans, in India, Muslims, and so on across the world.

https://www.simulasikredit.com/apa-itu-resesi-ekonomi-indikator-suatu-negara-memasuki-resesi/

Ekonomi tak jauh-jauh dari produksi dan konsumsi. Keseimbangan diantara keduanya menjadi dasar pertumbuhan ekonomi. Di saat produksi dan konsumsi tidak seimbang, maka akan terjadi masalah dalam siklus ekonomi.

Apabila tingginya produksi tidak diikuti dengan tingginya konsumsi, akan berakibat pada penumpukan stok persediaan barang. Sebaliknya, jika produksi rendah sedang konsumsi tinggi maka kebutuhan dalam negeri tidak akan mencukupi sehingga harus dilakukan impor. Hal ini akan berakibat pada penurunan laba perusahaan sehingga berpengaruh pada lemahnya pasar modal.

Tenaga kerja menjadi salah satu faktor produksi yang memiliki peranan penting dalam menggerakkan perekonomian. Jika suatu negara tidak mampu menciptakan lapangan kerja bagi tenaga kerja lokal, maka tingkat penggangguran di negara tersebut jelas akan tinggi. Risikonya, daya beli rendah bahkan memicu tindak kriminal guna memenuhi kebutuhan hidup.

—

https://www.simulasikredit.com/perbedaan-antara-ekonomi-mikro-dengan-ekonomi-makro/

tiga pilar mikroeokonomi:
– teori produksi
– teori harga
– teori distribusi

pilar makroekonomi:
– output (GDP) and income
– employment rate
– inflation and deflation (interest rates and amount of money. credit and debit)

April 12 2020

  • debt driven growth, australia’s debt bubble (8 mins or 10 mins in)
  • 12 mins in: the chain of debt described.
  • so fiscal stimulus is deployed to keep the cash flow going.
  • 13:11: crowding out: safe and attractive govt lending crowds out the market for all types of lending. like giving transfusion to the economy but you’re also using the blood bank (zero sum)
  • 15:47. if you’re printing money, someone’s gotta pay eventually. who? the savers
  • the economy depends on spending and savers aren’t doing their part. screw em.
  • who wins? the people with big debt who can stay solvent. thus, the vicious cycle. incentivises the debt chain and bubble all over again.

  • 40% of households in america got less than liquid $400 cash
  • an umbrella policy across the board yes, then a targeted as well
  • this is emergency, temporary. UBI is a separate discussion, more permanent, and expensive
  • if no such handouts, riot

  • massive fiscal stimulus like helicopter money (MMT, used to be a radical leftist) is necessary for short term, but supply chain is in negative supply shock as well, so soon there will be bigger wave of ripple effect: a stagflation (recession and hyperinflation)
  • china did it right, italy was a bit late but finally caught on

  • what is the value of money if it doesn’t physically exist? becomes another form of promise. abstract, perputaran, maya, credit, debit. became accounting. and less control over them

Debt, promises, expectations, anxiety, anticipation,

So: 99% of human problem comes from the ability to imagine a future.

April 13 2020

It’s reassuring to see Scott Adams asking the same “clueless” question as I do. I thought it’s just me who’s ignorant / can’t wrap my full head around the economy. “so what, what goes here, what will happen if x y z, why can’t we do this”

wait. he could be trolling / trying to prove a point

but he seems to be engaging although he seems to have a conclusion in mind

  • it’s free money
  • inflation vs price inflation
  • as with economy: it’s complicated

excerpted here: https://www.evernote.com/l/AIFlTLm6cMhDZbHg70ErvSPcMZjAegNTR5k

April 15 2020

May 2nd 2020

https://threadreaderapp.com/thread/1254110879479746562.html

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