March 18, 2020

Hey Alexa, Pause The Economy”

Elizabeth and I were FaceTiming with Jane. She asked how we were doing.

We’re fine. We came to Whistler at the beginning of last week. Instead of flying back to SF on Sunday, we decided to stay. A lot has changed since last week, and snow-capped Blackcomb is a better view than the apartment building across Turk St.

We chatted about her dad’s text: Jane. The economy is collapsing.”

I’m actually quite optimistic.

I’d choose this Let’s Shut Down The Factories And All Stop Going To Work For A Little Bit” recession 10/10 times before I’d choose the Whoops We Accidentally Misallocated $1 Trillion Into McMansions” recession or the Damn, Bombing Everybody’s Bridges For 5 Years Had Consequences” recession.

To my knowledge, we’ve never actively shut down the economy like this before. It’s great for the dolphins in Venice and everybody’s lungs in LA, but it’s terrible for restaurants with rents due April 1.

Proposal: we pause all interest accrual and rent payments while everyone sits at home.

  • Cookbook shouldn’t have to pay rent to its landlord. The landlord shouldn’t have to pay Chase for the mortgage. Chase shouldn’t have to pay interest on its capital.
  • Delta should be able to park its unused planes without servicing its corporate debt.
  • The Vancouver Hilton should be able to close its doors, and its private equity owner shouldn’t have to make debt payments.
  • The hostess at Avec shouldn’t have to pay rent to Centrum Management.

Top to bottom, a moratorium on rent and interest accrual. For 6 months. Tack the payments onto the end of the terms.

These massive $700 billion liquidity injections scare me. It’s like pumping gas into a car with no wheels. I’m in favor of mailing checks to all the service workers who are now out of work, but the idea of economy-wide UBI is misguided. Toyota and GM aren’t pumping out cars. Restaurants aren’t pumping out meals.

I don’t understand enough about credit and deflation to know if flooding the market with $USDs while production grinds to a halt is a good thing in the short term, but it seems like a recipe for hyper-inflation long-term. Lots of money chasing fewer and fewer services.

We should be gracefully winding down the economy, not throwing money at the wall and seeing what sticks. The stock market didn’t collapse because we were massively misallocating capital. We all just stopped going to work, which is okay.

Let’s hit pause and slowly turn things back on as they come online. This wound will heal.


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