Panic.
It’s a word that’s been making the rounds in the news cycle lately.
The coronavirus is, of course, at the center of it all. But in recent weeks, the focus has shifted from the human cost of the virus to the economic cost.
China’s economy continues to struggle in light of the virus’ spread, with no sign of relief in sight. It’s only been in the past few days, however, that other countries have begun to feel the impact on their own economies.
Earlier this week, the World Health Organization tried to ensure us that the outbreak was not yet a pandemic. The markets didn’t care.
Indexes across the board dropped to the point where months of gains have already been wiped out in days. It’s likely you’ve heard about companies slashing projections. You’ve probably seen your own personal accounts take big hits to their balances.
Some see it as a short-term trend, while others think this might last for however long the virus remains a threat.
The reality is that the signs are pointing to this possibly being the start of something bigger that, ultimately, has very little to do with a virus.
A Look Behind the Curtain
The U.S. economy has enjoyed a decade of growth, reaching heights never before seen. Companies enjoyed headline-making quarters, politicians got to brag that everything was awesome, and the good times continued to roll.
It didn’t matter that, underneath it all, the foundation was shaky. It didn’t matter that the good times only continued to roll because central banks were keeping their fingers on the scale.
And it certainly didn’t matter that very clear signs of trouble afoot were ignored, suppressed, and swept under the rug for the sake of saving face and keeping with the idea that everything was fine.
But that all matters now, because the cracks are getting too big to ignore. What we’re seeing with this emerging economic downturn is the start of something that’s going to shift the relationship we have with money.
The public health crisis that we’ve been witnessing these past few weeks is one thing, but the monetary crisis just underneath it is something else entirely.
The Day Everything Changes
In these pages, we’ve long said that the world was overdue for an economic correction. There’s been a lot of guessing as to what form that would take, or what it would look like when it begins.
While no one can answer those questions with 100% certainty, this ongoing crisis we’re in the middle of now is certainly a strong candidate for it. All because of the word I mentioned at the beginning of this article.
Panic.
Investor panic, like any virus, is contagious. Investors the world over will see what others are doing and follow suit. Even as central banks continue to interfere, the masses will do what the masses will do.
Disruptions take all kinds of forms, but they almost always have negative effects on the markets. We saw it with past government shutdowns, rumors of war, and severe weather events.
So it makes sense that a viral outbreak could lead to investors panicking.
And that mass panic is all it will take for things to change.
Even if officials try to continue propping up their economies to stave off panic, it likely won’t do much.
Investors will see that central banks are out of options and have no more answers.
What they won’t see is that those same banks are making moves to protect themselves from the damage they caused in the first place.
The countdown has already started. It’ll only be a matter of time before the way we look at money has to be completely restructured.
What we’re seeing now is just the beginning.
