Marc Cuniberti: The inefficiencies of decisions
It is said one butterfly flapping his wings can alter the course of history. Its random action can cause a host of other outcomes, each one setting in motion yet another.
In economics, hundreds if not thousands of random events effect what an economy does. And just as many not-so-random decisions made by man do the same thing.
During the last four months, the random event called COVID-19 set in motion the need for man to make many decisions.
One decision that could have been made is not to have made any more. Indeed, the outcome of the decision to do nothing would be quite different than what we have today and what the outcome would be is anyone’s guess.
Economically speaking, in the mind of this analyst, many decisions seem random and uncoordinated. The inconsistencies run rampant.
The Federal Reserve has increased the money supply by at least a couple of trillion dollars in yet another attempt to stave off catastrophe. Remember 2008?
We all thought that was the mother of all financial implosions. About five trillion was conjured up to address that event, and much of that went into the banking system. Having survived that, our life returned to arguably, some sense of normalcy.
An entity that has only one mission and everything it does is consistent with that mission: Perpetuate itself by reproduction. That’s it. Pure and simple. You have to admire its purity even though we vehemently strive to eradicate it. An inconvenient truth is that COVID-19 will succumb to a string of correct decisions or spread even more ferociously amongst some bad ones.
The mask debate demonstrates man’s ability to contest everything. Some argue they help, while others debate the mandate itself as being an affront to their basic freedoms. It is said three weeks of masks would eliminate the threat. Others argue it won’t.
Shutdown the economy and stop the spread. Sounds logical. But is the shutdown causing more damage than the virus ever would? Surely the millions of individuals thrown out of work and the thousands of businesses that will go under has to have some limit as to what we are willing to pay in economic terms versus what we are willing to pay in deaths. It is said everything has its price. And economic collapses cause thousands of deaths on their own.
Ban large and medium size crowds to slow the spread. Again, sounds logical. But then allow the largest of crowds under the guise of a protest for an acceptable cause?
It’s probably hard to stop such a determined and stealthy foe like a microscopic entity unless we make up our minds and decide whether we want to stop the coronavirus or adopt social change when the two come into direct conflict with each other.
The decision on who to pay and how much as reimbursement for the shutdown puts us at another critical juncture. Print trillions and give it to who exactly? Save the airlines, the banks or bailout individuals? Some claim we must do one or the other or both. But bailouts have their costs as well. The most feared being inflation later on down the road.
Perhaps the bailouts give more financial rope to Zombie companies to limp on, when for society’s greater good, perhaps should be allowed to fail. After all, just how much is too much? Just how far is too far? And does throwing good money after bad have its limits?
It probably should.
It is said one’s situation is a direct cause of all the cumulative decisions they have made over their lifetime. If true, it’s a painful reality. Indeed, where we find ourselves economically now and in the future will be a direct result of the decisions we have made yesterday, today and will make tomorrow.
If COVID-19 is eradicated or at least acceptably controlled and the economy recovers without too much more damage, will we be able to say we made a lot of right decisions amongst a few bad ones? Or if the damage persists and an unspeakable amount of people are unemployed, too many businesses to count disappear for good, and a global recession occurs, could we conclude we made a lot of wrong decisions based on fear and muddled in inconsistency for whatever the reason?
We can all agree that man is trying to solve the COVID-19 puzzle. How he is doing it is probably not the perfect way of doing it, but this is a road we have not traveled in modern times. Indeed, we will learn a lot about how to deal with future pandemics, but the learning process is indeed a very painful one.
Marc Cuniberti owns BAP INC, an insurance agency and graduated from SDSU with a BA in Economics. Marc can be contacted at 530-559-1214. His website is http://www.moneymanagementradio.com. California Insurance License # OL34249.
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