The Covid-19 Virus And Its Economic Impact By Benedict T. Palen, Jr.

The COVID-19 is the event of a lifetime for just about everyone on this planet.   Here in the United States, there have been massive numbers of people filing for unemployment, and the impacts of this virus are likely to be long lasting, and impacting all segments of society. My focus in this short essay is the economic impact of the COVID-19.

      There is pressure from some to “re-open” the economy.   The reality of doing so is likely to be further outbreaks of the virus, and continued massive disruptions of Americans’ financial fortunes.   To be sure, this is a difficult balancing act for our political leaders because, ultimately, not even the government, whether by printing money, and handing it out, or by social policies, can hope to reverse a disruption of such scale as we may be yet to see.

     Think of the consequences of the virus by considering a micro example.    A local restaurant is closed, and so its employees are out of work. They cannot pay their rents, so their landlords are impacted. They cannot pay their utility bills, or their car payments, so those vendors and their employees and suppliers are impacted. The restaurant is no longer ordering supplies from a food service company, so it has tolay off employees, who then become unable to pay their bills. The analogy from this example, or many others just like it, is a snowball. It keeps rolling down a hill, becoming larger as it moves, until it is almost impossible to stop. A larger snowball takes a long time to melt. So too does an economy that is damaged at all levels take time to recover. 

     The United States has been on a long economic recovery track since the so called Great Recession of 2008-09.    The current circumstances, I fear, are going to have far greater impacts, and last longer, than any of us can imagine.  Unlike the Great Recession, which was fueled by a housing market that crashed, this virus has impacted all levels of the economy.    There are many companies saddled with high levels of debt added by private equity firms in the course of buying out those companies, and now that debt is coming full circle, with an inability to service it, and likely massive defaults in many sectors.

     It has been said that, to some questions, there are no answers.  It could be said of the current situation that there are no clear cut answers.   We are in uncharted waters, and no one knows the depth or breadth of the true impact of this virus.   Our so called leaders would be wise to think before they act, or speak, and to gather as much expert, unbiased, advice as possible.  No one has a monopoly of knowledge about this virus. Its consequences are so massive that it is hard, if not impossible, to understand the full extent of the problem.

     There are echoes of the era of President Franklin Roosevelt, and his efforts to put the country back to work in the aftermath of the great depression of the 1930s.  That said, this virus is an invisible, and poorly understood, enemy, and, while I hate to suggest it, it may well be too big for any government to handle.   It really is true that the entire world is in this together.  It is perhaps the only way to find a solution lest we experience an unprecedented global economic crisis.