Scenario B: A Horror Story

I hope I am wrong. This is only one of many potential scenarios due to the Chinese COVID-19 Crisis.

We may be in an economic war and not even know it, the likes of which has never been seen. This may threaten our sovereign nation, and put us on a path to becoming Greece or Italy: A great place to visit with some amazing agriculture whose government and people are bankrupt.

Ponder this Possibility:

China restarts industry at full bore. We know they lied about the virus, and that they are continuing to lie about infection and death rate, but they take it to a new level. Workers are sacrificed for the cause, and media coverage is not allowed. Families are paid a stipend if someone passes from the virus, and told to keep quiet or pay consequences. Herd immunity is achieved in short order, unlike every developed nation in the world. Preparations are made for an all out global industrial assault on all levels. China does not produce oil, they buy it, so they stockpile oil, sopping up the excess essentially for free, powering their country for nothing, and take advantage of any global shortage in future with price gouging. They gather liquidity through cheap debt, and start buying bankrupt and insanely discounted businesses and property outside their borders, driven by the goals of their hundred year plan. Since they already sacrifice people while spending infinite money on acquiring things in line with their goals, this is not a new behavior that needs to be learned. That will allow them the access to technologies and property they have been willing to steal in the past.

To believe this takes three things. First, you have to believe that China puts economic success ahead of public safety. Check. Second you have to believe that China is willing to produce non factual data and coverage of a situation to benefit them. Double check. Third you have to believe that China will take advantage of any situation to produce economic gain, no matter how morbid. To quote my old pal, Scooby Doo, “Ruh roh…”

On the US side, we elect a president with the following traits: lack of understanding of international business and how to deal with the Chinese government, an increase taxes sentiment, and a willingness to put forth the government as the entity that provides wealth to the masses. Enter Joe Biden, who as a bonus, appears to have lost some of his mental sharpness over the years. Playing chess for all the marbles with China won’t end well. When he gets flustered in a negotiation and starts munging his words together, a pushup contest will not help. The democrats are blinded by their hatred of Trump, putting forth a candidate based on his chance to win, not his skill and honesty. With Sanders you knew what you got; hopefully the convention comes to its senses and realizes a flipped Biden/Cuomo ticket is the answer, and Biden needs to go back to VP and not President, where he is not dangerous.

These bankruptcies have a hidden consequence. The US energy industry, specifically oil and natural gas, loose infrastructure, driving up production costs. With our delivery cost moving well north of $50 a barrel, we never come back on line, completely eliminating the US energy independence and making us pawns of Russia and the Saudis.

In addition, there continues a growing sentiment toward socialism, with policies being implemented that put the government in charge of upwards of 50% of our economy, including health care and private industries. How would you like to see the spluttering operations effectiveness of the United States Postal Service put in charge of FedEx and UPS? The urge to continue to move large parts of the public sector into the government management becomes overwhelming, yet we know from history that the government is incapable of cost effective management and efficiency in virtually every single instance. Have you ever flown Al Italia or looked at its financial history? Did you just shiver a bit, because I did.

Instead of turning on our factories and businesses, bringing people back to work, which will no doubt cause increased exposure to COVID-19 and more deaths, we turn on the printing presses and print money. Large chunks of the population choose not to go back to work because unemployment benefits are lucrative, and these benefits continue to get extended ad nauseum. Business tax rates are increased, dampening the economic impact of even the very successful businesses, holding down employment rates. All this creates a situation of low employment, exacerbated by a lack of workers in areas where they are really needed, essentially killing business expansion and effectiveness.

Personal tax rates of any household with an income above four times the Federal Poverty Rate approach 50%++, crushing consumer confidence and spend, and driving down our economy and the stock market valuation. (note 4X FPL is a rate already relied upon by the government for Obamacare, so it is a pre disposed line in the sand)

In parallel with the stock market tanking, liquidity evaporates as bankruptcies cascade, taking down many of the financial institutions.

The result: A nation with high tax rates on those who have almost any level of success, that struggles with liquidity and is at the mercy of other nations for money and energy. It will have large swath of the population dependent upon the government for wealth, and the economy will be dependent on tourism and agriculture.

There you have it: there exists a plausible scenario where the United States becomes Italy/Greece.