On the June 1st episode of the podcast, TRIGGERnometry, Peter Hitchens made an interesting observation on the the current attitude of many people in the UK (but it applies equally to any other country undergoing government Kung Flu largesse):
He describes many people as living in a happy dreamtime where most, if not all, of their wages are being paid for by government relief schemes, the weather is pleasant and the consequences of incurring the biggest peacetime national debt have not yet been felt.
His opinion is this cannot continue and, when the plug is pulled on these various furlough schemes, there will be a difficult and tragic reckoning to be had.
The likely timeline for this mean reversion differs by jurisdiction but the 3rd and 4th quarters of 2020 is generally when these government cash drops are due to either finish or begin to taper off.
I say this without any hint of glee, but there are individuals and entire industries that are going to experience the financial equivalent of cold turkey.
What’s cold turkey feel like? Let’s ask a professional:
I can’t imagine what other people think cold turkey is like. It is fucking awful. On the scale of things, it’s better than having your leg blown off in the trenches. It’s better than starving to death.
But you don’t want to go there. The whole body just sort of turns itself inside out and rejects itself for three days. You know in three days it’s going to calm down. It’s going to be the longest three days you’ve spent in your life, and you wonder why you’re doing this to yourself when you could be living a perfectly normal fucking rich rock star life.
And there you are puking and climbing walls. Why do you do that to yourself? I don’t know. I still don’t know. Your skin crawling, your guts churning, you can’t stop your limbs from jerking and moving about, and you’re throwing up and shitting at the same time, and shit’s coming out your nose and your eyes, and the first time that happens for real, that’s when a reasonable man says, “I’m hooked.” But even that doesn’t stop a reasonable man from going back on it.
Governments and central banks are about to discover restarting an economy is a significantly different prospect to stopping one.
I have no doubt our money, our children’s money and our grandchildren’s money will be generously thrown at the problem.
Some of it may even stick.
In fact, the Australian Government is mooting plans to throw figures like $20,000 at new home builds or to renovate existing homes. Obviously, this will have the effect of increasing the price of everything by a leveraged ratio of $20,000.
I understand the Keynsian theory is it doesn’t matter what the money is spent on but, now we’ve just run the biggest experiment to prove most people don’t need to live 8km from the CBD to be productive, why are we installing granite kitchen worktops in Mosman rather than building high speed rail links to an open plain in the middle of nowhere for developers to build around?
In the meantime, this organ has been sadly missing a previous regular commentator from Brisbane who frequented this place with gleeful tales of his investing prowess and acumen.
If he were to return, we might ask him to review this updated chart and answer the question, “what happens next?“.