Has the Pandemic Caused a Depression?

Question: Has the pandemic caused a Depression? I'm reading a book that provides a good answer. That answer: No.

And I'm not talking about the claim that the economy was not in great shape before the "Wuhan Devil" arrived on our shores. The claim has merit. But were we headed for Depression. No way to know.

What we do know is that the Pandemic didn't cause our current economic dysfunction. That was reserved for policy-makers who decided to shut everything down. That shutting down brought on a what we should really call a Depression. And the Depression it caused may be with us for years.

To better understand why the Pandemic cannot be considered a cause of Depression, and to grasp just what we mean by the term "Depression" and why we're in one now, read The New Great Depression by James Rickards. That's the book I'm reading.

It's not long and it was written and published with lightening speed. Rickards writes extremely well. You can easily pick the book up and understand pretty much everything in it without taking a graduate level course in either epidemiology of economics. You may have to pause and look up a concept here or there. But anything worth reading takes a little work. The author presents pretty complex ideas and relationships. He doesn't try to make the complex simple. That's not honest or informative. But his writing style isn't an obstacle to understanding. 

I'm not saying everything he says must be accepted as gospel. He's looking at the world from his background in law, economics and government work. That background allows him to burrow into how these areas intersect and relate. I find that approach helpful. 

One thing you won't get is a simplistic left vs. right, Democrat vs. Republican, patriot vs. traitor, lover of liberty vs. communist, etc. Whether these oppositions provide any valuable insight I'll leave to you. Maybe they do. But what I found refreshing about this book is that it doesn't get tangled in the webs these can opposing views can weave. So in that sense it's refreshing.

As for our Depression, the case is made in a compelling manner. Once you understand what the term really means (as defined by Rickards), it will be hard to deny its existence. As for the time it will take to work our way out of it, well, maybe someone can posit an opposing view that shows how we'll be up and running with a healthy economy within a year or two. But they'll have to make an equally compelling argument - one I can't see and haven't seen so far.

Which leaves us here and now in one of the very few Depressions our country - and our world - has experienced. These aren't common events. And (this is important) they are not more serious or intense Recessions. They're a different animal. Rickards thinks the best definition of Depression comes from Keynes: long periods where economic activity remains below the long-term trend. The most recent example of this: Japan since 1990. Yes, Japan has been in a Depression going into its 4th decade.

Rickards gets into some detail about different Depressions like Japan, our Great Depression, of 1929 - 1941 (yes, it lasted that long), or the "long" Depression of the 19th century that remains the longest of our history.

An impressive feature of the book is Rickards' grasp of and explanation of viruses. I learned a lot from his descriptions. And, again, he's not getting tangled in the political overlays that have accompanied this Wuhan Devil. 

It's worth a read. And in the end, you'll find two concrete recommendations that are worth considering. The author lays out what he considers a good allocation of your assets to keep you relatively secure and safe no matter how things unfold (deflation, inflation, social disruption, etc.). He also promotes a solution to the real problem that will keep us in Depression unless something is done to address it. (And that something isn't everyone getting vaccinated.)

I can't say whether his solution will be taken seriously by those in the position to effect it, but the argument for it is well presented. And in lieu of another proposed serious solution (and I haven't seen one), we might hope policy-makers read the book and take the suggestion seriously - even better, actually implement it.

Let's leave it at that. 

One benefit from the book will be that you can get an overview of what's going on around us that's not infected with talk of stock bubbles, Reddit/Gamestop, or hack political slogans. It's the sort of work - sort as it is - that helps open the mind and maybe get a better view and focus of matters that should be of personal concern. 

In the end, we really ought to face up to the mess that the shutdown/lock-downs have caused - both the severity of them and the obstacles to real recovery that severity has erected. We're in the mess and won't be extricated any time soon. Best to try to understand it and take whatever actions we can to help ourselves negotiate through it all with the least damage to ourselves and our families. 

Go read the book.