Folks, I’m an optimist. Those who know me would classify me as a solid optimist. But in the past few days, there has been a deluge of news that, quite frankly is heavily biased toward the negative.

Let me be clear, I’m not here to propagate fear. But I think you ought to know what is possibly in our immediate future. Armed with that information, you can take steps to protect yourself and your family. So here we go.

Over the past several days, the folks at Moody’s Analytics who provide the bond ratings for much of the debt that is issued in the world have been performing a lot of modelling and analysis on the current market situation.

The latest projection from Moody’s is that if the shutdown of the economy persists another two months, the fall in gross domestic product is estimated at 75%. That would be the largest drop in economic output in global history. All of it having occurred in less than three months.

The impact of the shutdown is coming into focus with each passing day. So far, supply chains for food remain largely intact, but this is unlikely to last.

We know for example that Vietnam had banned the export of rice. That country is one of the top three producers of rice in the world. The US no longer maintains a grain reserve. You can expect that there will be rice shortages in the west later this year.

Much of our food harvesting in Canada and the US is performed by migrant labor, much of it coming from Latin America. Some estimates put the number of agricultural migrant workers in the US at about 3 million people. In an era of social isolation and international travel restrictions, what will happen to food production? This isn’t just an issue in one country. Covid-19 is a global pandemic.

On Sunday evening, the folks at Wells Fargo announced that the loan window had closed for its customers wanting to apply for the SBA Paycheck Protection Program, only a day after it opened. The bank said that it had exhausted the $10B it had capacity to lend for the SBA PPP. Now I have no doubt that the government will realize that it needs to do much more than it has so far. In fact the Federal Reserve announced on Monday that they were going to facilitate more lending to small businesses through the SBA program.

A massive decline in economic output on the scale of 30-75% will require the government to step in and replace that money in some fashion. If cash runs out in households across globe, and commerce becomes inefficient or impossible, we can only expect that a bartering system will eventually take over and a brand new underground economy will flourish. But even before that happens I expect that we will start to see social unrest as people become desperate.

Governments have been slow to react to this pandemic. Here too, they are way behind the curve. Two months of payroll help for small businesses is not going to be enough. It’s not even close.

This evening, my own city extended its official state of emergency until the end of June. That’s a full 3.5 months.

Those of you who know me, know that I’m someone who has a high degree of personal initiative. I don’t wait for permission to do the right thing. This year is going to be a test of emotional fortitude for billions of people around the world. I’m going to be taking additional steps to prepare for a deeper economic stress. I can say with all honesty that I don’t know exactly what that’s going to be. But it will be something.

I told my wife tonight that we were going to be alright. We both acknowledged that this period is stressful. We are going to be alright for three reasons.

  1. We’re in better financial shape than the bulk of the population.
  2. We’re generous and will help others during this time of difficulty.
  3. We have each other.