CEN National Financial Officer Steve Marr is a best selling author, business consultant, and former President and CEO of the fourth largest import export company in the U.S.
When the CEN National team asked Steve about his biblical perspective on the economic situation facing our nation and the subsequent effect on personal crisis and security, Steve responded by saying:
Those who have read my previous economic analysis know I haven’t been optimistic regarding the economic situation facing the nation. While COVID has been a major hammer, my view is the economy was struggling even going into March 2020. As King Solomon wrote:
“The prudent see danger and take refuge, but the simple keep going and pay the penalty.”
Proverbs 27:12
FOOD SUPPLY:
As of early November, 2020 The U.S. Census Bureau reported 12% of Americans do not have adequate food supplies. Given the U.S. population is approximately 328 million this equates to
39 million Americans are without adequate food supplies. Those with adequate food need to acknowledge we are truly blessed. However, we will all be affected as food insecurity will result in:
Increased suffering
Increased desperation
Increased crime
News reports already show massive lines of families waiting for food in states such as New Jersey, Rhode Island, and California.
UNEMPLOYMENT:
We are experiencing an increase in unemployment. Jobless claims in February 2020 were 225,000. In October they were 748,000. New unemployment claims in November numbered 778,000! Currently, 32 million of the 328 million are now receiving jobless benefits while only 5.8 million were receiving unemployment benefits in February 2020. Hollywood, generally immune to large-scale layoffs, is also experiencing major job losses.
Not only are individuals out of the workforce but they are not producing goods and services which customers want to buy. The unemployed workers are often being kept afloat by significant unemployment payments, moratoriums on loans, increased student debt and credit card balances, adjusted mortgages, car loans or other consumer loans.
PROPERTY LOSS
Yahoo reports on the avalanche of looming evictions as 17.9 million homeowners and renters are now behind on payments. And, 5.8 million say they are likely to face eviction. The moratoriums by state local and federal governments has allowed millions to remain in a property long after payments are delinquent to the property owner. If additional moratoriums are in place, landlords, which are still required to make mortgage payments, taxes and upkeep, will continue to be decimated.
SMALL BUSINESS LOSS
Small businesses are being decimated by the week, with more carnage occurring based on additional lockdowns. A detailed report is found in the Womply Report: 21% of small businesses have been closed permanently up from 16% which closed in June. The report documents that consumer spending and local business is down 27% this month from a year ago, worse than the 20% reported just last month. In New Jersey, which has been subject to even more severe lockdowns, 31% of small businesses have closed. Since Small business makes up 44% of the overall U.S. economic activity, the economy cannot grow on the strength of e-commerce sales alone.
This situation will likely result in:
Increased bankruptcies with associated bank credit losses
Increased unemployment for both business owners and employees
Reduced consumer goods and service choices
Reduced spending as business owners and employees lose income
Pressured landlords with less business tenants or with hard negotiating for lower rates
STOCK MARKET
Main Street is getting hammered while Wall Street continues to move upward. The question for an investor or economic forecaster should be: “Is this increase fundamentally sound, or a mania which will come back to earth?” Electric car maker Tesla is now valued nearly equal to all of the world’s automobile manufacturers combined! One may never know how high a stock will run, or how low a correction may be, but looking back from a distance when you combine the output, profitability and size of Ford, General Motors, Mercedes, Honda, Nissan, Toyota, Volkswagen and many others does this valuation make sense? I may be wrong in believing the Tesla valuation is silly, and time will tell.
But, as investors and students of the economy we must ask ourselves is the current stock market totally out of sync with Main Street? Either the current stock market will need to correct significantly or will the layoffs and business closures need to stop but they will need to rapidly increase to rebuild the economy. For all the talk of a “V-shaped recovery” just ask any business owner on Main Street or the unemployed, and they will tell you very quickly the “recovery” touted by some talking heads in the media has not helped them.
GOVERNMENT POLICIES
Assuming the election results are as projected, the Biden administration is proposing some significant tax changes including an increase in the corporate tax rates, limiting tax deductions by corporations, and increasing the capital gains rate for investors. The Tax Foundation estimates these proposals if enacted would reduce the GNP by 1.8%. if enacted these changes are likely to negatively impact the stock market.
So far, the federal government has infused tremendous amounts of money into the economy. The budget deficit for the 2020 fiscal year was $ 3.1 Trillion, more than twice the highest budget deficit on record. Political pressure will be immense to continue unemployment benefits, provide safety nets and provide federal relief for mortgages and other debt responsibilities. As these deficits continue or accelerate it will continue to cause tremendous additional damage to the economy through distortions.
The situation will likely result in:
Significant inflation with rising prices as the Federal Reserve is likely going to monetize all or part of this increased debt.
Less funds available to other borrowers, when the treasury borrows money from investors there’s less money for businesses and individuals to obtain which will slow other business growth.
Family budgets will be increasingly pressured as the increase in prices generally will hit necessities first.
Credit markets will significantly contract as lenders will not want to lend money in a time where cash is depreciating. Lenders will demand increasingly high interest rates or credit will not be available.
SUMMARY:
Whether it is food supply, unemployment, property loss, business loss, stock market instability, or government overreach, the situation in the coming months will likely mean increased:
Crime and a lack of safety
Movement to home based employment even with large corporations,
Cost pressure on commercial landlords and property values
Migration of individuals from high tax and crime states to lower density population areas
Unemployment and finding new employment will be incredibly difficult
Pressure on small businesses with new lockdowns setting off another wave of business failure and the associated pain
Pressure on retail as landlords cope with these business failures
Federal deficit (we looked in horror at a $1 trillion deficit, now ignore a $3 trillion deficit)
Prices as the Federal Reserve Bank continues to monetize the debt
Cost of commercial and personal loans or will be difficult to obtain as the federal government bonds suck up more of the available capital investment
While I do not claim prophet status, when asked for advice I refer to the words of Solomon, “Since no one knows the future, who can tell someone else what is to come?” (Ecclesiastes 8:7) Regardless of what the stock market indexes are, the personal pain and suffering of the unemployed, the increased needs of the hungry with the shutdown of businesses - the associated and accumulative pain will create ministry opportunities that we haven’t seen since the Great Depression. Because our Hope is in the Lord we can have His peace in the midst of these uncertain times as He has given wise advice on how to live our lives through His word. The Bible is clear on what we need to prayerfully do given these uncertain days:
Cut spending as much as possible.
Reserve cash as much as possible.
Become a ReadyChristian sharing Hope when asked: “Where is God in this?”
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