AT THE COVID-19 JUNCTION: WHICH TURNING DO WE MAKE NOW ?

Recently the world has been overtaken by events triggered by the onset of the COVID-19 infections. No one anticipated the avalanche that has followed after it. In fact, to the best of my knowledge, since the second world war ended, the world has not been brought to such a standstill as this. But God speaks in the calm of the storm.

One evening as I got into my bed, so tired from my days’ work, and wanting to immediately shut down my “systems” and join “the other world” where dreams meet with men, my already tired brain for some reason was taken over by a swift trend of thoughts; my thoughts run away with me but into the future however mostly around this COVID-19 thing and its impact on our global economy. Eventually it came to a stop; at this point the thought in my mind went something like this:

    "The world has no idea what it is going to have to handle when COVID-19 is done with it; the Global Economy will be so shaken that to reboot it is going to take huge sacrifices across the globe. No economic model drawn before now really has a clear solution as to how this recovery will happen. It will take serious inertia to get this machine moving again." 

The thought was so weird and yet so profound for me. I dropped it and went to bed. Two weeks later I now realize I was not by myself at that moment. Fast forward: President Trump locked down the U.S borders, then was swiftly followed by multiple European nations, Asian and now, Africa has followed suit. Stock markets have crushed, panic has set in, conspiracy theories are rife, and confident trading is not happening. All this is having cumulative shutdown effect on the Global economy; at some point the shutdown effect becomes exponential and then it runs away and now has a mind of its own. But what does it really mean when you stop a machine like the Global economy? Interesting thing is that it is formed by all the smaller economies across the world.

Money 101: The money cycle has credit somewhere in its structures. When credit is given, often there is terms that govern it to ensure that it is paid back with added value compared to the prevailing environment. This means that a shilling or dollar or any currency given in 2005 should have an equivalent value if it is repaid in 2020. Value of money is determined by what it can do for you at the moment. Thus, often you will find that because of inflation, 1 shilling in 2005 may translate to perhaps 6 shillings in 2020. The figure should have stayed the same, but if it does then the value it returns with the passage of time is significantly less. Then enters Interest rates; these were primarily designed to protect the value of money with the passage of time. Credit is also designed to build in profit for the creditor, so that their money makes more money for them. Now because of stability, the credit system gets ingrained into many of the workings of money and soon it is a given that life must run normally with credit being managed responsibly.

The problem with an adhoc shut down like the one currently imposed on the world by COVID-19 circumstances, no one saw this coming, therefore no one planned for it.  All the disaster recovery plans are relatively so decentralized and narrow is scope and have nothing close to a central command beyond the entities they serve, as they presume nothing of the kind we are currently facing. So suddenly there is a shut down and yet the credit counters keep running; there goes your problem number one. Credit is often paid back by the earnings from one’s business dealings and transactions. But since the system is shut down, earnings are reduced to a mere trickle until eventually, if nothing stops the trends, there is no earnings; in comes the other word "Penalties". Penalties are designed to safeguard credit and ensure that the debtor pays back, or else sink. So the cycle now is loaded further with penalties, but still the debtor, even with all good intentions to pay back, cannot pay since they are not earning.

The thing though is that the lack of earnings also has another perspective and pressure point to it. Debt is not the only need being serviced by a debtors earnings; they also have normal operating costs that consist of the very basics like food, housing, health, transport, utilities, etc. But remember that there is severely impacted earnings. Thus, whatever small earning is managed from other sources, this will most probably go to servicing those other needs first, but this leaves the debt growing. Perhaps, even now new lines of debt keep opening, given that the debtor must survive; so they keep taking more debt to service their necessities as highlighted above already. But also note that many peoples wealth is held up in the Global Stock markets, that are right now slumping and crushing, and there is no telling as to what happens to this value after COVID-19.

Remember that this cycle is not at an individual level this time, but is at a global level. You have many such distressed debtors and investors. Soon, the debtor can't service the debt, so it keeps growing. But remember the debtor cannot earn and possibly now are running serious operating losses because revenues are significantly below projections. The manufacturers as well are not moving their stock due to this ailing cycle, and thus are running high Operating costs. Their projected revenues are well are significantly reduced. They too now must cut back, but remember there is always that optimum minimum, below which you only keep losing capital. So, at some point the manufacturers shutdown the production lines to stop the bleeding. This triggers another event; scarcity of goods, which also eventually triggers shutdown of dependent services, and after a little while services also ail, slow down and grind to a halt.  So now, no goods, no services, but people must survive, etc, etc. the cycle keeps working itself.

Eventually the cycle can only be stopped by those privileged enough to have leverage (read "real wealth"). They now must reboot this entire system up by “sowing seed” back into the system to get it running again. Goodwill at all levels must prevail; penalties must be foregone, interest might be written off by debtors, debts will probably be written off, credit must be restructured to align with the prevailing circumstances. There must be patience, and to that understanding by the creditors. after a while, the system begins to come back online, but only this time working differently, and as well with a new set of class of society being born. In this new world, it is those that really know how to work, how to serve, how to handle others, how to make friends, how to see opportunities, that now take over the new "wealthy class".

COVID-19 is going to reconfigure the world. I am not an economist, and perhaps an economist needs to build a model that will run the worst-case scenarios against futuristic parameters and then project for us how to get out of this one. What remains to be seen is how long will it take for COVID-19 to be wrestled down so the world can begin opening its doors, which in turn will trigger the recovery.

Perhaps the good that is likely to come from this is that the world must learn then to return to real community. People must once again break down the barriers of selfishness and work together to lift each other up. I do not see how anyone can be self-reliant in this scenario. The would be a rise and a return to true leadership away from the political leanings of the world today. Law and order is likely as well to return as it is not possible to achieve recovery from this pit without an adept focus on the things that matter, like collective responsibility. The world is also most likely going to return to true work, true earnings, true community, true worship of God and wholesome living.

Save for the benefits above, God help us that this lock down is not sustained for a long time, otherwise this world may not remain the place that we currently know it to be for the reasons above. Rebooting the world economy is the real issue to worry about; COVID-19 is simply a catalyst that must be swiftly stopped as soon as possible. The leaders of the world must put on their thinking hats and get real teams of solid thinkers around them. This transcends selfish interests and will only sink those that keep that old way of thinking.

At a Global level we need God! We also need men and women of wisdom to prevail over nations leadership. This new world abhors vacuums created by a lack of wisdom and brains. At this point I would advise any leader at the helm of nations to get rid of the political types and surround themselves with real leaders, brilliant leaders that are not afraid to deploy strategic thinking, and as well that are not afraid to make the right decisions and recommendations in-spite of political correctness; nations shall need many of those kind of leaders. At an individual level too, this is when having wisdom and a personal net worth of physical fixed assets that far exceed one’s credit may be the game changer when COVID-19 lifts. 

Let us watch and pray !