March 19, 2020 is the first day of spring, as marked by the apparent sun crossing over the equator heading north. We call it the vernal equinox.
But it hardly feels like a day for celebration, and even optimism seems imprudent until we grasp the full measure of what we are in for.
I will look instead at what we might already recognize as lessons. I see these four as most important.
One: The stock market isn’t nearly as important as we are told.
It has troubled me for some time now how hourly and half-hourly news broadcasts include several mentions of the Dow Jones stock average including how many points it is up or down. On a market valued above $20,000 dollars we hear even the smallest incremental change. The Dow is up two and a half points, or down a half-point. These are inconsequential numbers. Even if it is hundreds of points, these are intermediary numbers referencing only what is transpiring on the trading floor at the time. It will have almost no bearing on what the end of the day trading will be, nor effect in any meaningful way the lives of all but a few people. It would be like a semi-hourly update on the number of cars on an expressway in your city. Or checking your blood pressure every half-hour. It is only noteworthy if it is significantly lesser or greater than typical. But it is treated to this position of importance as if it is relevant to our daily lives and economic vitality.
The last weeks have been devastating for the stock market indices. The fear of economic recession in concurrence and in the wake of the pandemic has caused the markets to lose all of the gains, which were considerable, made since Donald Trump took office. And for all of those who have been buying stock during that stretch, they now own stock worth considerably less – on paper – than they were a couple of weeks ago. And many millions of people are counting on having that stock to sell in time for their retirement. Millions have their pensions and 401K plans invested in the markets and are watching their paper wealth vanish before their eyes. Of course it is only paper wealth. Or perhaps we should call it digital wealth these days. But in either case it isn’t real wealth. You have to sell those stocks to use the money they are worth. You still own the same stocks. Or better put, you haven’t lost anything until you sell them at a loss. And the money you sell them for needs to buy what you expect it to buy for it to matter. Hopefully people heed sound advice and avoid volatile markets when they are close to needing to withdraw money for retirement.
But while there may be some wailing and gnashing of teeth amongst the investor set and some fretting about retirement from others, most people are much more concerned about how they are going to survive if and when they lose their jobs.
With all the people in the country whose lives are balanced on a blade of competing credits and debits, the immediate future looks bleak. Almost instantly their children are home from school on a long term basis. I don’t have exact numbers, but it may be that most households have both parents working, and then you add in the single-parent ones and that is a huge number of people who need to become homeschoolers. At the very least they no longer have a place where the kids will be guided and guarded for six or so hours a day. Even daycares are closing. Many parents are going to have to stay home.
As it happens many of those parents are going to stay home anyway, as thousands of businesses close their doors. Anyone whose job it was to serve people, entertain people, arrange travel for people, or mind the places where people go to visit such as museums or sports venues, are already out of work or will be very soon. The people who make things that are not essential will also be sent home. Perhaps this will be short term, but it doesn’t look like that. And while some companies are keeping people on the payroll, most are not or cannot.
These people are in serious financial trouble. Paper wealth in the markets is not their chief concern. Paper money in their wallets is.
Two: Gathering our needs on a daily basis is imprudent.
People seemed to be woefully short of everything it takes to run a household. The moment the idea of quarantine became news, people rushed to the stores in panic mode and hoarded everything they feared running out of. People fought over toilet paper. This, by the way, is a product that a hundred or so years ago people didn’t even want at all. It isn’t that we didn’t wipe our bottoms, it’s just that we had millennia of experience with other utensils and contrivances. And many of these people were buying far more of that product, as well as many others, than they could use in a year, as opposed to the month or so they might be facing.
Panic buying and ill-conceived hoarding is endemic in a culture used to instant gratification and on demand access to goods. In the past several decades it is rare to find our markets short of even one or two items on our list. On these rare occasions we simply choose from another brand to satisfy our needs. To reach a store and find empty shelves in America is so rare that people are taking pictures of those empty shelves to share on Twitter and Facebook.
And based on the propensity for people living from paycheck to paycheck, I have little doubt that much of the hoarding was done on credit. People borrowing money to buy things they should have had already.
A far cry from our ancestors of even a few generations ago. There was no running to the corner store for most people in America at the turn of the previous century. Excepting those numbers who lived in the bustling cities, most people made trips to the store on a weekly or even less frequent basis. They had staple goods and made food from scratch. What they didn’t have they did without.
And not having money to buy things is another problem. While real wages for working people have remained flat or declined over the decades, Americans have had it fairly stable since WWII. Yes, the 2009 recession was rough and many people were out of work, but unemployment insurance, and other social programs did much to help avoid the kind of national distress we had during the Great Depression. And few remain who remember the rationing and general shortages of WWII. In fact, it is that ignorance of history that has exacerbated the current crisis.
As a child of the 1970s, I remember asking the supermarket clerks and managers to check in the back for items absent from the shelves. This was possible because stores still warehoused stock well beyond what the shelves held for commonly sold items. Since then stores have switched to “just in time” delivery. Trucks come in daily and stock hits the shelf every night. There is no back room to check in. Products are automatically ordered when the inventory lowers to a number that varies based on sales history. There is no back room storage.
People are running their homes in much the same way. They eat more and more prepared meals, and cook fewer and fewer things themselves. And by cook I do not mean heat pre made meals in the oven, or slap together burgers or sandwiches. Like sewing, cooking is becoming a lost art, practiced as a hobby by home chefs. Many people I know use their microwave oven more than any other appliance, and it is mostly used to heat foods prepared elsewhere. For years now Americans have spent more money at restaurants than at supermarkets. This means that many people have no more food in their house than enough prepared meals to last until their next shopping trip. And that trip is often just stopping at the store on the way home from work to pick up dinner. Holding stock goods and staple products at home for meal preparation is part of our past for many in this country. At their homes, just like the supermarket, there is no back room storage.
Our habit of devoting as much of our paychecks as we do to pre made meals would stagger our great-grandparents. Our grandparents too if we are old enough. But we do this in part to allow more of our time to be spent on entertainment. Whether it is sports, movies, gaming, or the vast spectrum of cable and subscription channels that deliver shows of every imaginable sort to our homes, we watch or play at a great deal of it. And we can do that while waiting for food delivery or for the microwave to beep. And a generation ago it was a rare treat to have Pizza or Chinese food delivered, today nearly all restaurants offer delivery and people take advantage of that service frequently.
In these ways, along with our compulsion to own more stuff, we now manage our lives in accordance with the world we are in. When we want it, we order it. And instead of saving for the things we want, we charge it against future earnings and pay over time with little thought to the premium we are paying in the form of commercial interest. Only the very rich and the very poor own their cars outright. Everyone else is servicing a note. Four decades ago car notes were 36 months. Today some loans are 84 months. 7 years to pay for a car. Most people who make such a deal will trade it in far short of that date with outstanding debt rolled into their new purchase. Many people are paying monthly to buy their cell phones.
Between the debts incurred for ownership, subscriptions to monthly services, and paying others to do the cooking, Americans are dependent on that next check. Add to that the tendency to whip out a credit card whenever the balance is low enough, and we have a people with a cost of living as high as their earnings with little or no room for error. The classic advice from financial planners is to have six-months savings put away for emergencies. For most Americans that is a farcical notion. Many can’t go two weeks. Most can’t go more than a month.
We are learning that having our outgo match our income does not work.
And having a lifestyle designed around convenience leaves us vulnerable.
Expecting to be able to get what we want at any time is a poor plan to follow.
Three: We are learning that our base health standard is terrible.
Our national obesity rate is approaching 50%. That puts half of the people in the country at risk of diabetes, hypertension, and heart disease just to get started. And this also puts us at greater risk from COVID-19.
We are tied to prescription medicines for our very survival. We must add to our concerns of having enough food to sustain us in quarantine, sufficient refills for the drugs we depend on to keep us from needing critical care. It is speculative to wonder what our ancestors would think if they could have looked into a crystal ball and seen our conditions today, but it seems to me that shock would best describe their reaction. For a hardy people who bore up in the face of disease and famine, it would be a shock to see what we have become. With the incredible surplus available and the advantage of so many conveniences, that we have turned into an obese people tethered to a stream of drugs and debt is a shock to me, and I am watching it in real time.
Our health is more important then we realized.
Four: We are learning that individualism and isolationism are of less value than cooperation and community.
This lesson seems to be one that we need to learn again and again throughout history. While we may aspire to the ideals of Emersonian self-reliance and stand tall to salute our local and national banners, through the ages it is the community of people and the cooperation of nations that has mattered most to our survival. From the small group of boys who bind together against the single bully on the schoolyard, to the formation of governmental plans to aid the most people in times of crisis, we are best and accomplish the most when we work together. We need each other. Even the strongest individual can be brought down by adversity. And even when the sole man survives, the world he is left with is diminished from the deaths of so many others. We are learning again that it is in our best interest to ensure that everyone can get and afford healthcare, and that everyone has protections against economic failure and famine.
Going it alone is an unwise policy.
One: The stock market doesn’t matter that much.
Two: Preparing for emergency is valuable.
Three: Get healthier.
Four: Embrace social welfare.
Jack T. Reason.