Into America’s Two Possible Futures With Deutsche’s Aleksandar Kocic
The pandemic has laid bare underlying "social and economic malfunction, which would have remained latent and unobservable without it", Deutsche Bank's Aleksandar Kocic writes, in a note dated Friday.
Kocic's latest picks up on themes he explored both in recent research and in notes published pre-pandemic. Last week, he characterized the current crisis as multifarious, with countless points of intersection. I called it a kind of Venn diagram that, if only we could comprehend it, would describe a
Could it be that Hopper was clairvoyant and anticipated New York under a Covid lockdown.
I lived in the South Bend, IN area growing up and watched what happened when Singer Sewing Machine, Oliver Tractor, Studebaker, and Keds moved on at roughly the same time, killing not only jobs at those bigger firms, but huge numbers of jobs at the SMEs that would normally be supported when those large firms were prosperous. It took a generation to come back from this hit. Later, I was in Waterloo, IA when the so-called farm crisis hit in the early eighties. That bump wiped out Rath Packing, 60% of Deere’s local labor force, a couple of malls and six of the seven area S&Ls. The mortgage defaults were crushing. The labor force shrunk by 20%, many of whom simply left the area. Again, it was SMEs that suffered most. While basic stuff like your bigger supermarkets survive, the businesses that supply life with flavor and nuance go away and mostly don’t come back, at least for ten or 20 years. We will be down to bare bones for the rest of my life, at least. It won’t be any fun at all.
Mr Lucky, I work nearby in St Joe MI, same thing happened there. Auto Specialties and Whirlpool (manufacturing, not corporate) pulled out leaving once proud Benton Harbor in shambles.
2003-2008 I was doing work comp consulting for manufacturing in South Bend, Elkhart, Middlebury, and Three Rivers. They all went down to skeleton crews. Some closed. I remember tearing up when Gunite pulled out. Those losses have never been replaced. It’s heartbreaking watching the community unravel as a result
Trickle up or trickle down… I am simplifying. Fiscal side is the masses safety net. The FED is the wealthy’s safety net. Damaged lives versus damaged egos.
H-Man
Great food for thought but a couple of significant variables in the equation by Kocic have been omitted. First, when does the vaccine arrive? Second, on November 3 political entropy disappears. Third, what is the time horizon for inflation? I agree with his premise these are intertwined but the time horizon controls the variance.
Short term our country cannot afford not to engage stimulus per the Bernanke/Yellen argument.until there is a vaccine. The Fed and Congress are the ventilators. Once the vaccine arrives, the logic for this narrative evaporates. Then we pick up the pieces of what is left over and start to rebuild. Small businesses flourish on the inefficiencies of large corporations. That dynamic will never change.
Once we start to rebuild, that is when we deal with the inflation genie which is farther down the road.
We should know the answers to these questions except for inflation in the next six months.
Risk #3 – Political Entropy / Societal Critical Thinking Entropy.
In what passes for the current political economy, an egalitarian outcome seems unlikely. Large corporate interests “own” the rule makers. They have resources that small ones do not. Capitalism is not at its heart about egalitarianism. It is about winners and losers and competition and part of that devolves unfortunately to advantages that the rich and powerful have. If searching for egalitarian, the current institutions, including government are not going to help. “MBNA Biden” might not be any better than what we have now as far as it goes to redressing the advantages of the big. What we need is the Brandeis-style Court.