Tuesday Night Update: Some relatively good things happened today, and one rather disturbing thing happened today, from a financial perspective. Let's start with the bad news. Why? Why not? The US Treasury Secretary Steven Mnuchin reportedly dropped a bomb.... 1/
As the report goes, he told Republican senators unemployment could reach 20% and the crisis could be worse than the 2008 crisis if they didn't take swift, bold action. As a comparison, unemployment was at roughly 25% right before FDR's New Deal in 1933. 2/
In 1982 the unemployment rate was 10.8%, and those were some pretty brutal times. 20% would be world changing today. BUT, Mnuchin likely used this number, whether he could back it up or not, to "motivate" the GOP to lead a massive stimulus package of nearly $1 trillion. 3/
We always like to think we understand how big $1 trillion is because it's just past the billions, but it's monumentally more than you think. The proposal sounds like it will include direct payments to the American people. Neat. 4/
I think that will happen, but I honestly fear congress will bicker over the amount and waste precious time. Once that money comes through though, if it does, there will certainly be a sense of relief and immediate indecision. Should you save it? Spend it? Pay bills? 5/
A one time stimulus injection of, say, $1,000 per person, while nice, won't solve that many problems? Why because a ton of people don't need $1,000 right now, myself included, and others need a helluva lot more than that. 6/
Yet the people who need it, need it to survive, although it doesn't buy a lot of survival, and the people who don't, could theoretically stimulate the economy. I'm still concerned about figuring out the best way to do that, but I'll leave that for another update. 7/
The other piece of good news involves the stock market, kinda. The market liked the idea of the stimulus in principle and bubbled-up 1000 pts or so, but the market hasn't seen the actual detailed proposal, so it could still spit the idea back out and fall precipitously. 8/
The market simply wants to see an end in sight. And once that starts to become clear, it will stabilize and start to reflect confidence in the economy's chance at recovery. This is good news, although it seems tempered. 9/
My current biggest concern revolves around how people who are in the biggest trouble will start to triage their problems. The best way to understand what could go wrong is to examine a grease fire. 10/
To the uninformed, fire is fire, and fire needs water. Oddly, that's not true. A grease fire, for instance, is not easily extinguished with water. And if you've ever made a horrible mistake of putting a flaming pan of grease under the faucet... 11/
If you've never been in the worst financial emergency of your life, or arguably in modern history, then you likely don't know how to triage major financial problems. Some "solutions" will feel like solutions, yet they're simply water on a grease fire. 12/
That's my biggest fear. Well-meaning, earnest people, who are hurting very badly will do what seems like it makes sense with whatever financial resources they've got, but it will be objectively a big mistake. Then a big problem somehow gets markedly worse. 13/
This is why the most marginalized people in our society in this moment, people in the gig economy, hospitality industry, & freelancers, must get significant & direct help. I don't know how in the hell the government could do it, but I also don't understand how $1 trill works. 14/
But if the this population could receive 8-12 weeks of stability, I think we could weather this storm. I'm not an economist, and I don't fancy myself to be politically-minded, but sooo many people don't need a stimulus, myself included, and admitting that could save us all. 15/15
