Entropy

The destruction of so many lives this week will come as a result of many decisions made in the last decade.

The mess in the system is slowly unravelling. As the “value” of many businesses, assets and currencies evaporates it is the market pricing in what has happened and what it thinks might will happen. As no one knows, volatility has entered the realm to encourage people to act in order to once again find an equilibrium of sorts. The economic bubble is contracting but the human kind has been battling to move the plot line up and to the right, and will continue to do so. The alternative is deflation, continued contraction and a terrible zero sum game where no “value” is created. One can only succeed from capturing rent from another.

Economic boom bust cycles are inefficient. The thought consensus is as many large businesses are “too large to fail” they carry huge overhead costs with minimal reserves on the books. If they save up too much cash they risk a RTO or activist investor forcing a buyback or pay out. There is no winning on this large scale. Although small businesses are being hit the hardest at the moment. I strongly believe that they are also the most efficiently run, conservative and least rent seeking of the business types. I predict that many of the economies of scale that large businesses possess can be emulated for small businesses through smart outsourced micro services.

This month, the energy that was borrowed in excess during the past 4 years has to be repaid. Not enough savings were put aside for a black swan event. With no clear end of the COVID-19 in sight, I am curious to see what it takes to get the world back on it's feet. I don't think life will be the same after this. Do governments maintain the smoothing out of bust times, with limited tools left in their tool box?