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When it’s over…

May 27, 2020

When it’s over, what will your life look like?  The great lockdown is, and always has been, unsustainable.  There is no getting away from the fact that the lockdown was poorly managed from the outset.  It may, correctly, be argued that it wouldn’t have mattered who was in charge, mistakes would have been made.  Blaming a particular political party or leader is a fruitless exercise.

If the government were to repeat this lockdown, in the event of sustained (viral) activity, it would have to do so far more thoughtfully and considerately or risk far more, non COVID, deaths and a complete financial collapse.  People have lost a great deal of money and opportunity during the lockdown.  There are, of course, pockets of success that have been created by the government botching relief efforts, as well as a few industries that have emerged or thrived. 

It is hard to think of some government relief packages as being anything but electioneering devices.  The CERB has been grossly mismanaged, so have other payments that strangely provided additional funds to poor people or those who remained, financially, unaffected by the virus or the ensuing lockdown.  Yet, the positive effect has been to stave off bankruptcy for, lower income, folks who have been reliant on payday loans to get through the month.  Seeing family incomes jump from $2,000 per month to $6,000 per month has allowed these folks to clean up their debts and improve their quality of life – if only for a few months.

Millions of Canadians have lost their jobs and many more have had reductions in incomes.  Salespeople have seen their commissions and bonuses melt away.  Overtime has been reduced, restaurants, clubs, pubs, fitness centres and many other businesses have been closed altogether.  Some large franchises have been able to negotiate “zero rent” with landlords, using the clout they have as anchor businesses.  Small business owners have had no such opportunities, government rent programmes are voluntary, asking landlords to take a hit in favour of a floundering tenant.  Many smaller businesses have already closed, permanently.  Whichever way you look at it – somone is losing.

“The end is nigh”, it has to be, as painful as it has been – it has always had to come.  Hopefully, lessons will be learned from the science, that was already available to politicians and health care policy makers.  We know for instance that 96% of people at risk of death from the virus have at least one comorbidity.  We know that about 90% of deaths, always have and always will, occur in long term care facilities, nursing homes and among hospital patients.  We know that the virus is contagious and that the vast majority of people carrying it will have either no symptoms or exhibit only very mild symptoms.  We know that the flu vaccine is only 1% effective even after almost 100 years of development – it is delusionary to think that a miracle vaccine will be developed for COVID anytime soon.

After the final curtain is pulled away, we will stumble out of our homes into a world that is very different from the one we left behind a few short months ago.  Our job, if we still have one, will be different, more hygiene, physical distancing, face masks, suspicion – every time someone sneezes or coughs.  Many workers will be encouraged to continue working from home.  Some folks will be afraid to participate in social activities, many have already said they would be unlikely to travel by plane or eat in a restaurant.

When it’s over many of our old habits will be gone, we will be forming new ones.  Some changes will be for the better, getting out of the work cubicle, more handwashing, more awareness and respect (if not fear) of people who are not well.  For most folks some of the financial changes will be positive, less eating out, less spontaneous, and expensive, vacations, less group activities – movies, sports, shows, bars, clubs, concerts.  Our lives will likely become even more dependent on virtual social interactions – social media. 

Hopefully, as we rebuild and reshape our lives and social interactions, we will move forward more mindfully. Particularly mindful of the need to be better informed and mindful of the positive changes we can make in our own lives.  Hitherto, for the last 4-5 decades we have had debt foisted on us by unscrupulous bankers.  The consumer debt mountain has been predicated on shaky accounting principals that allow banks to lend something that does not exist to people who have absolutely no hope of ever being able to repay it.  As we step away from the most common areas of wasteful spending, we can work towards building assets and financial security instead of impulsively wasting what little surplus we have.

Perhaps legislatures will take the time to review the ongoing problems faced by our banking industry and re-introduce rules and regulations to protect it from itself.  It is worth repeating, if it is too big to fail and too big to change its behaviour, breaking the industry down into components that can be sold off makes a great deal of sense.  Insolvencies have been expected to spike, the media has been rife with stories of millions of Canadians cusping on bankruptcy.  But that is nothing new, consumer debt has been growing, unabated, every single year for at least the last fifty years.

I have already discussed the low-end bankruptcies being deferred, thanks to CERB.  Banks are actively entering into alternate payment arrangements with debtors, reducing interest and allowing smaller, irregular payments to be made.  For some folks that will be enough.  Some have been able to forcibly curtail credit card spending and reduce balances during the lockdown.  In all likelihood we will see a minor surge in the higher end of the proposal spectrum – coming from the folks whose incomes have dropped significantly.  Banks will be more likely to allow people to stay in their homes, even when they have significant equity, allowing for reduced proposal payments on unsecured credit.  The logic being that they would not want to cause a major correction in the real estate market that would hurt their own bottom lines far more than just taking a haircut on credit card repayments.

I am, of course, just speculating, we will not know how things will look until the final whistle blows and we return to our “new normal”.   It would be interesting to hear your thoughts on the subject…