Guest Post by Simon Black
On November 6, 2000, then US presidential candidate George W. Bush told a crowd of cheering supporters, “they misunderestimated me.”
Now, if English is not your native language, allow me to clear the air: ‘misunderestimate’ is not a word. But then again, George W. Bush was legendary for hilarious slip-ups like this.
There are entire books dedicated to his ‘Bushisms,’ the ridiculous made-up words and incomprehensible sayings that became routine for the 43rd US President.
‘Misunderestimate’ seems to be a conflation of the words ‘misunderstand’ and ‘underestimate’. And while that was utterly hysterical 20 years ago when Bush first said it, ‘misunderestimate’ may be the most appropriate word of today.
The entire world has completely ‘misunderestimated’ the Corona Virus.
In terms of misunderstand– that’s obvious. There’s so much that we don’t know about the virus (officially known as SARS-CoV-2) and the disease that it causes (COVID-19).
For example, a group of researchers published a “peer-reviewed” research paper earlier this month stating that the virus had split into multiple strains.
(Peer-reviewed is a type of self-regulation among academics; it means the paper had been evaluated by other experts before it was published.)
But other specialists in the field strongly disagreed with the paper’s conclusions.
Swiss biologist Richard Neher described the research as, “wrong, misleading. . . downright dangerous inferences,” while Australian virologist Ian Mackay called it a “weak paper and poor science.”
Another peer-reviewed study released in the Journal of Medical Virology concluded that the virus originated from snakes. But plenty of experts disagreed with that assertion too.
The scientific community has learned so much about SARS-CoV-2 since it first surfaced a few months ago.
But there’s still so much that’s unknown– and that makes perfect sense given that this virus is brand new. They’re trying to figure it out as quickly as possible, but that’s naturally going to lead to some disagreements and conflicting conclusions.
But then the Internet takes over, and suddenly everyone’s an expert. People who have no background in medicine and biology Tweet with a level of certainty about the virus that’s just plain silly.
US television personality Jimmy Kimmel joked about this last week, saying, “I speak [about the virus] as if I’ve been a professor of immunology at Stanford for 35 years…”
There’s still so many things that the experts don’t understand, or don’t agree on. The answers are coming, but it’s still early days.
But in addition to misunderstanding, the world has also totally underestimated this virus… and continues to do so.
It started in China back in December, with the government trying to keep the outbreak quiet and taking steps to silence the first whistleblower.
As the virus began to spread, Western nations complacently shrugged it off and assumed it would remain in Asia.
Even the World Health Organization refused to call this a ‘pandemic’ until March 11… only a week ago.
Investors around the world ignored this for months, completely underestimating the massive, worldwide economic impact the virus would have.
Even now, after one of the worst stock market crashes in history, people are still woefully underestimating the effects.
And I’m not talking about the stock market (though there could easily be more losses ahead). I’m talking about something far more serious: banks.
Banks are about to drown in an ocean of defaults. I’ll talk about this a lot more in the coming days, but briefly:
- There’s $250 TRILLION in global debt right now– mortgages, credit card debt, business loans, government debt, etc.
- And banks own a large portion of that debt.
- This virus crisis is going to trigger a wave of defaults from consumers, businesses, and even governments.
- Think about it: tourism alone makes up 10% of global GDP. Revenue in that entire sector– hotels, airlines, cruise ships, etc. has collapsed, and many of those companies aren’t going to survive.
- The crash in oil prices is going to wipe out countless oil companies.
- Many large retail chains, which were already struggling in the age of e-commerce, will likely declare bankruptcy.
- Countless businesses around the world have ‘temporarily’ closed due to public health policies, and many of them will go out of business entirely.
- MOST of these businesses owe lots of money to the banks, whether it’s a small business working line, or the $34 billion in debt that American Airlines owes. So the defaults are going to be massive.
- On top of that, millions of people are going to lose their jobs and be unable to make payments on their credit card debt, auto loans, and even mortgages.
- Again, there’s $250 trillion in global debt right now. Total bank capital worldwide is less than $10 trillion.
- So if the coming defaults trigger a mere 4% loss in total debt, it will exceed the entirety of global bank capital.
- And this doesn’t even take into consideration the impact of the $1 QUADRILLION derivatives exposure.
Misunderestimate? Absolutely.
This looming wave of loan defaults over the next few months could spark a crisis in the global financial system that completely dwarfs what happened back in 2008.
I desperately want to be wrong.
And it’s possible that public health officials radically shift their positions in the coming weeks and tell all the young, healthy people in the world to go back to work, get infected, and start developing immunity.
They may be forced to do this to avoid destroying the global economy.
But at this point, every possible scenario is on the table. Nothing is out of the question… especially when the arithmetic is so obvious.
And continuing to misunderestimate the effects of this virus could be far more dangerous than the virus itself.
We’ll talk about this more in the coming days, along with some sensible suggestions to reduce risk.
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A great video about the bank scam…
More clever propaganda. The bankers, Politicians, and investors were careless and dumb rather than criminal and complicit.
It’s not like Admin hasn’t been pounding the desk for years railing against all the leverage in system and those ridiculous stock buy backs on cheap credit being a real dumb fucken idea…
May they reap what they have sown.. those execs deserve it..
Do you really think it matters if the American people like it or not?
Fuck Boeing.. if they need 60 billion they can sell some of their shares.. they have loads to unload
Please God, please let me live long enough to see these criminals get it up the ass.
Notice how they stopped buybacks in September.. it is almost like they knew something big was coming…..
RiNS- It’s not ALMOST like they knew this was coming, and I’m not saying they knew this was coming but they KNEW this was coming. Yes, I noticed right off that it stopped in September.
We will be fine as a country, soon as the Government get’s off it’s ass and hot tracks cheap Visa workers, i hear 5 million Chinese fled there homes recently, i’m certain we can find enough pig farmers to hold us over…
The corona virus and it’s effect on the markets is a question of “good timing”. The economy was in trouble before the corona virus started as the actions of the FED showed late last year 2019. The virus has just brought forward an already inevitable effect, being a massive market crash. It has been brewing for nearly 11 years following the last “botched” propping up of the crisis from 2007/8 or “kicking the can down the road”.
An opportunity was presented in 2008 whereby the financial system (which really is only a shadow of the real economy) was at breaking point. As Roosevelt (who was a reasonable man) did in the 1930s around the Great Depression, he took reasonable action by breaking up the banks. The banks got too big to be an accurate shadow of the real economy. Recognising this, he took action. And what followed, was real growth.
Unfortunately, when the same opportunity was presented in 2008, our leaders at that time relied on logical outcomes, instead of reasonable ones and DIDN’T break up the banks. The result of such is likened to a forest fire.
There is a natural sequence of events in a forest. A forest grows and grows. When it grows to big and the conditions are right, there is a fire. The fire “thins” out the excess growth and creates the ground for a new growth to occur. That’s the natural sequence.
In our financial system, when the fire took hold in 2008, instead of allowing it to be, they put the fires out by adding more money to the financial system. If we liken this back to the forest, to put the forest fire out, they quickly planted loads more trees which the logical argument of, “well if we create enough trees, there wont be enough oxygen for the fire to breath”. This is logical and makes sense. However, it is not reasonable and creates an even bigger problem. Now we have 10 times as much fuel available for the next fire.
What we are seeing now is a new fire. The financial system, swelled with so much “fake money” means that the shadow it produces of the real economy is completely, and madly out of proportion.
The fires have started, and they are taking hold. But this is precisely as it should be. If we look at the forest again (and we do this in real forests too) we put the fires out. But then we have created the grounds for a “super forest fire” when the next one strikes and there is little chance of putting it out. Because there are only so many trees we can plant before there is no more space.
The only real, and sensible and reasonable thing to do, it let nature takes it course and let the fires burn. This is painful but necessary. Once they have burnt out all the excess, we can then start re-growth. And re-growth will actually mean something this time because it will be “real” growth, not just a growing of the shadow.
If we use logic without reason, we are insane in our actions. We can use reason on its own, or we can use reason and logic together to solve our problems. But we cannot use just logic to solve our problems.
Lifeboat – You would not make for a very good Vulcan. Reason and logic don’t make a tinker’s damn in a stacked deck. It all depends on the owners script.
When you talk about the “banks” you need to understand the banks are not one group, they are divided between the larger banks, who are member banks of the Fed, and all the little guys…
The member banks will always be bailed out because that is what the Feds purpose is, to look out for the interest of their member banks. The smaller banks much like 2008 will probably be on their own.
Default on debt is going to be on a larger scale than we have ever seen. Zombie companies that for all purpose were bankrupt have been able to continue to operate and pay CEO salaries because of the cheap credit they were able to access and the growing economy. They will now default and fail.
Sub prime auto loans were increasing in delinquency and reaching danger levels prior to this, and now will skyrocket. The result will be repossessions will flood the market at a time when sales will plummet.
Retail real estate already suffering from the brick and mortar melt down will now have a whole new wave of properties come on the market as businesses which were struggling give up and close. If owners cannot sell, they will eventually default on their loans.
People who are within 20yrs of retirement will see their 401K’s and IRA’s shrink to levels that will crush their retirement dreams. Their confidence in their financial stability shattered, they will cut their lifestyle and increase savings to try to regain lost ground.
Everyone will know someone who is devastated by what is happening, and the need to help friends and family members will place strains on those who are not directly impacted.
This is a train wreck. For some it will happen quickly, and for some it will happen in slow motion, but it will impact us all, and it will test our humanity, and our wisdom.