As we all hunker down in our homes and wait for the plague of locusts sure to follow the pandemic, a few earthquakes, and a recession, the group anxiety makes it difficult to see the positive forecasts on the horizon. Historically, recessions have been followed by expansion. This was especially true with the great recession of 2008-2009. There are factors that influence the duration of a recession and the speed of the recovery—mostly how much markets have contracted, how many are unemployed, what jobs will be in demand, how quickly governments provide stimulus packages and how effective those packages are.
One thing is for sure, the global economy won’t look the same next year as it does right now. And numbers like Trillion are going to get as common as Billion did a couple of decades ago. Inflation creates big numbers, not only in the cost of goods, but in the earning power. In 1980 the average home in America went for $96,000. That same home today is priced at $226,000. That’s good for the buyer, even through recessions if she can weather them. The average yearly income in 1980 was $14,000. Today it is roughly $70,000 depending on where you live. So while housing costs went up 2.3 times, income increased 5 times.
So forget the locust repellent, we will survive the impending recession. Let’s look at how: Jobs have to stabilize. That means growth in new sectors to replace job loss in sectors that are shrinking, i.e. replacing coal mining jobs with tech jobs. It also means people working in public facing jobs like the food and fitness industries need to get back to work, fast. Second is participating in the global economy. Fair trade, free markets, stable banking. This is akin to diversifying a financial portfolio. And lastly, governments need to invest in infrastructure. Building highways, airports, and energy projects creates jobs and moves money. Highways and byways, whether physical or virtual, keep the traffic flowing so more people can participate in the economy.
For America, this pandemic, as painful as it is going to be, could be just the thing our healthcare system needs: a restructuring. We need to decrease the costs of healthcare while increasing access. We need to practice medicine at the speed of technology, not be hampered by the slow churn of bureaucracy.
And our financial system needs to better serve all of us. Less fees. Less paperwork. More access to banking without giving up privacy. Digital currency is a start, but it has to be backed by the value of an asset or effort. And it has to protect individual privacy and be more secure than the current system. Less susceptible to corruption.
We’re confident these changes are coming. We’re excited to be a part of the solution. Through the dark clouds will emerge changes that will benefit all of us.