This is How an Economy Dies

How the Failed Coronavirus Stimulus is Leading to the Fastest, Deepest Economic Disaster in Modern History

See that chart above? It’s every bit as shocking as it looks. Let me explain.

Not so long ago, watching the way America’s government and leadership class failed to respond to Coronavirus, I wrote a little essay called America is Committing Economic Suicide. It’s just a few days later, and already, my friends, you can see vivid proof of what I was talking about.

Another week — and by now, 17 million people or so in total have filed unemployment claims. How big is that number? The US labour force is about 165 million people. So about 10% of the labour force has filed for unemployment. Ten percent.

Worse, all that has happened In just three weeks. That’s a rate of about 3.3 percent per week. At that rate, a quarter of the economy is unemployed in another three and a half weeks or so. What happens when a society reaches about 25% unemployment? Usually, it tips into chaos and upheaval. 40%? It implodes into autocracy.

That’s stark proof of a simple, grim fact. Coronavirus is a shock the likes of which modern economies have never seen. Never is a big word — but in this case, it’s true. Even wars and earthquakes don’t crater a whole labour force in weeks. We have no experience of such an event, really, in modern history.

And so — crucially — the old rulebook isn’t and wasn’t going to work, either. We are way outside the boundaries of yesterday’s placid normal now — and so playing by yesterday’s rules is a recipe for adding disaster to catastrophe. And yet…that’s exactly what the American government did.

The stimulus that was passed supported businesses and households for just one week. Furthermore, it was badly designed: so opaque, nobody really knew how to get their hands on what meagre funds were offered, full of conditions, which made getting funds hard. It should have been easy to be supported, instead it was hard, it should have been simple, instead it was complicated, it should have been straightforward for everyone — instead, everybody was left in a haze of confusion. The result of all that?