SAN MARTIN, ARGENTINA – Last night at midnight, a ban went into effect here in the Calchaqui Valley. (As it did in California.)
We were already under house arrest. Now, everyone is.
Yes, a decree went out from Caesar over all the land. People are to return to their homes and shelter there for a fortnight.
A panicky pow-wow was held on our porch. “What are we going to do?” asked our capataz (foreman).
“You can’t stop working,” pointed out a neighbor who had ridden over on horseback to see if we needed anything. “The cattle must be fed. We’re farmers, we have to work no matter what the government says.”
“I know,” continued the capataz. “The grapes are ready to harvest. If they don’t get picked next week, the whole year’s production may be lost.
“But the road up to the ranch is so bad that the truck can’t get up there to pick up the grapes. I called the local government. They said they couldn’t do anything because everyone is supposed to stay home.
“And our grape pickers come from a different town, so they’re not supposed to come up to the ranch.
“And if you get caught out on the road, they’ll put you in jail. At least, that’s what they’re saying.”
Grapes not picked. Wine not made. Bottles not shipped… nor stocked on shelves… nor bought by consumers. Even in our dinky operation it still represents a whole year’s worth of work – lost.
Calchaqui wine may become even rarer than we thought. Fortunately, Will still has some in a California warehouse.
Sales revenue is used to pay wages… buy fuel… and keep the enterprise going. Now, it may disappear. Multiply that by millions or billions, and you have today’s economic crisis.
All over the world, restaurant ovens are cold. Factories are as quiet as churchyards. (The big automakers announced yesterday that they were halting their assembly lines.)
Unearned wages are unspent. And the Bank of America says a recession has already begun.
All of a sudden, the economy that depended on “more” finds itself with a lot “less.”
Taxes are not paid on profits not made on sales of products never produced by workers not working, truckers not trucking, and buyers not buying. And we are just at the beginning.
What Lies Ahead
So here is the executive summary… our best guess about what lies ahead:
The world of getting and spending is shutting down. Without revenue, neither businesses, households, nor the government will be able to pay their bills.
Stocks will rise (“a dead cat bounce”, the old timers call it) on all the “bailout” news, and then give up another 50% of their value.
Business will default on its $16-trillion-debt pile. Millions of people will lose their jobs. The Secretary of the Treasury, Steven Mnuchin, says that upwards of 20% of the workforce could be unemployed.
The feds will print money by the trillions to rescue the situation. Spending will rise. But lower output… and more currency in circulation… will raise prices.
In the summer, the virus will slow down. Then, the economy will begin to recover. But people all over the world will begin to mistrust the dollar (and other “paper” currencies). Prices will rise as real growth is suppressed by inflation fears.
Most likely, the virus will return in the autumn, though there’s no way to know how bad it will be. But at some point, there won’t be enough “cash” to keep up with the rising contempt for it.
ATMs will run out. The economy – still fragile, with interest rates below inflation – will need more bailouts and more helicopter money to keep going.
Then, the feds will face a terrible choice. Printing more money may bring a hyperinflation, like Weimar Germany, Zimbabwe, or Venezuela.
But not printing will risk a deep depression… a “throw out all the bums” shock in the next election… or even a revolution.
What Paul Volcker will stand up and bring a halt to the money-printing? What Ronald Reagan will back him up? What Horatio will stand at the bridge and say “enough?”
The bond market will collapse. Debts will be wiped out by inflation. So will debt-based credits.
Scenes of financial depravity, economic debauchery, and orgies of social degradation, violence and chaos – now unimaginable – will flash across every big screen in America.
That is, of course, a future. The future is something we wait to see.
Meanwhile, back in the valley…
Confined in the Calchaqui
People must return to their place of domicile. And there they must remain for 10 days.
The carpenters who came to work on our screen doors packed up and left. They came from the province of Jujuy, at least seven hours from here.
Now confined to their houses, the Argentines are getting a little stir crazy. Comes this message from a friend:
How difficult it is to work from home! Lots of distractions. I can no longer stand my wife, children, dogs, cats…
In Wuhan, China, in which people have been confined to their houses for as much as two months, the divorce rate is said to be soaring.
But all the news is not bad. Bloomberg reports that at least three U.S. senators were able to avoid stock market losses:
U.S. Senators Sold Stock After Coronavirus Briefings in January
Critics say they put protecting their wealth before their duty to protect public health.
How nice for them!
Enjoy your weekend in confinement.
A ray of sunshine over the valley
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