Special Feature | The Coming Economic Collapse

An eTPL31 Circular Letter

The Trump Administration wants to get the economy open again and return the country to “normal” again in short order. But some economists state unequivocally that such a return cannot be accomplished in the near term. Instead, some are predicting dire consequences for the USA and the broader world economy.

The failure of the president’s optimistic plan is already becoming evident...

The highly destructive impact of the coronavirus has all but frozen commercial activity throughout the nation at its height – and the greatest impact is yet to come, if one listens to many of the movers and shakers – the long-term, serious thinkers – who are speaking out.

They are largely those trained in economics; many of them are expecting a much deeper collapse of the world economy.

Whether the pandemic is now receding (doubtful) or expanding (that seems more likely), the nations will experience wave after wave of bankruptcies – not only millions of personal bankruptcies but countless commercial ones as well. Even the largest and formerly most prosperous companies are at risk as the crisis deepens...

These include the airlines. The recent government bailout dollars have covered only a small fraction of their catastrophic losses. All of them are burning through millions of dollars of losses daily. Thousands of highly-paid employees including pilots have been permanently furloughed. Huge fleets of expensive aircraft have been flown to remote desert locations and parked in the blazing sun until business rebounds. It may never do so...

The energy sector is suffering immensely as crude oil prices hover around $40 per barrel. Many companies, and entities such as Russia’s oil industry, need to sell their crude oil for at least $80 per barrel in order to prosper. In the US, oil fracking operations also must be able to see their product for a price much higher than the current prices. Many of these are failing.

Most cruise ship operations are on hold until after the end of 2020 as the dangers of crowding on their vessels is highly conducive to the spread of Covid-19.

Restaurants throughout the US which recently ventured to reopen with widely spread-out table service are now being coerced to pull back their service and revert to drive-in operations.

Professional sports teams are being forced to play their games in empty stadiums – a necessity which shatters their box office sales and cuts deeply into players’ salaries.

Hotels are operating at far below profitable occupancy levels and their prospect of a quick recovery is directly affected by the lack of all other commercial recovery.

The travel industry is suffocating as business travel is stifled and mostly halted worldwide.

Many giant retail chains can see no profitable way forward; retailers such as J. C. Penney, the Gap, Macy’s and many others are being forced to close almost all their retail outlets.

Commercial real estate is taking a severe hit with prospective wholesale failures of their tenants; shopping malls are prospectively empty shells in the face of this threat. Entire strip malls could be abandoned and fall into gross delinquency.

Property owners are doomed to unrecoverable losses and certain failures as rents are not paid.

Manufacturing plants are being shuttered unless considered essential (such as meat and poultry producers) and their workers are drawing limited unemployment benefits. What happens to these families when their unemployment benefits expire is unthinkable.

The natural sequelae of consumer and business bankruptcies and mortgage (and other loan) defaults will result in the rapid failure of many banks, credit unions, insurance companies and other financial businesses.

Such a quick review illustrates that those are only the slightest glimpse of the overall challenge to business and industry.

Car and truck sales will start to falter as families and businesses fail to come up with the funds to replace worn out rolling stock. Used car prices will doubtless rise due to demand.

Utility companies – usually some of the most stable and prosperous businesses – will not be able to stay in business as individuals and companies fail in their ability to continue paying high utility rates.

The tax revenues of all municipalities, counties, and states – as well as the federal government – are falling rapidly, which will have an effect on all services rendered by these functionaries.

And just think of this: almost all those difficulties are a result of the coronavirus outbreak.

But that is perhaps only the tip of the vicious iceberg...

The result could doubtless be the worst financial downturn since the Great Depression of the Twenties and Thirties. Millions of folk will be forced to withdraw from the labor market and will cease trying to find a paying job. It has happened before. After the crash of 1929, many workers sought jobs for up to eight years before reaching the recovery years of 1938 and 1939 – a wave of nascent prosperity only brought on by the approach of a great war.

All those factors are incredibly frightening because they are NOT “future” prospects – they are already here! They are a present reality!

Nearly forty million Americans have become unemployed. Their livelihood has been terminated more or less permanently – or at least for the foreseeable future. The precipitous loss of business functionality will mean the loss of some of the biggest corporations in the country; they will become insolvent and fail.

Because, as one economist put it, “Washington and Wall Street have been ‘cooking the books’” for many years! Dishonest manipulation of markets, deceptive accounting practices, and the prevalence of outright lies are bringing on a chain of economic disasters that will rock the nation ... and the world.

Of course, some of the outspoken commentators themselves have an agenda. Some of them offer a “secret” plan that will help the average worker preserve his wealth – and even grow it immensely – as the crisis further unfolds. Be wary of them!

The way we see it, only those folk who already have an assured income stream that is adequate for their standard of living are fortunate. Those and the super-wealthy, whose wealth can easily bridge many years of income loss and ongoing debt incurrence, the latter being a function of continuing existence – they are the fortunate minority in this great disaster which has fallen upon the contemporary world.

So, unless families can discover a means to protect themselves, every temporal thing they have worked for all their lives could disappear.