¿Plomo o Plata?

54 thoughts on “¿Plomo o Plata?”

  1. Some were pitting country folk against city. I think that skews the conversation. The questions are if you can a) produce anything and b) work together with others. All you need is enough space to make things but not so much space that you’re lonely. That and the ability to put a lot of your pride aside so you can get down to the business of life, doing some of those things you find distasteful – whether that’s building annuity skills or sharing your life with others.

  2. I think this pandemic will ultimately be pretty great for our country. I used to work for a big audit firm. Up until 10 years ago, to perform an audit meant creating dozens of 5 inch thick binders full of financial reports & memos, all loaded with handwritten notes & tickmarks.
    We’d have 40 auditors in a sweaty windowless conference room, sighing & coughing, while perusing the paperwork for 14 hours per day. It took a full 5 YEARS to get off paper, but every other aspect remained.

    That just doesn’t work in the era of corona. Nor should it have ever. We’re watching sclerotic processes & institutions pivot in weeks what it would take years to do under normal conditions. Some might be temporary, but some of this stuff is going to stick.

    I suspect coming into work sick is completely over among the professional classes. Buy online/curbside pick up will be a standard service. Who needs amazon prime 2 day delivery? Our main streets just jumped into internet age in 2 weeks.

    1. Quite a few ‘impossible’ things have suddenly become possible in our brave new world. It was ‘impossible’ for millions of people to work from home, until it happened. Here in Australia, the conservative government fought increases to unemployment benefits until an extra million voters became unemployed overnight. Suddenly the unemployment payment DOUBLED.

  3. It feels like you enjoyed writing that post. Like it’s been waiting in the wings for the right timing.

    Also, put me in the “maybe?” group of commenters. Since finances are a human abstraction, the cause of failure must also be an abstraction. I.e. failure comes from within.

  4. Thanks for the slice of life. I’m not in the USA so it is great to see the pictures of the neighbourhood and what life is like. Two comments. Why all the boarding up? Are these closed for good, and is it temporary and if so the landlord or the store/restaurant choosing to do this? Second it looks like mask usage is very high – a good thing! But with all the stories about PPE one wouldn’t think all the rank and file would have gotten their hands on it.

  5. Given your last post on how easy it is to get sued if you rent, I don’t think I’m going to buy property except maybe a semi-improved rural hunting property. But then I’ll owe the bank. Even though my house is mostly paid-off, I still owe some. And the government has its hand out for property taxes. I think the income uncertainty is the biggest problem most people have. The states now have the same problem since they don’t have a printing press.

  6. One question, especially with all of the food-related issues, is whether the US will continue to make… lawn its #1 crop by land area. The US spends $100 billion on landscaping (for comparison, auto industry revenue is $500 billion). What do we get for this money?

    I love a beautiful park or garden, but almost all of this landscaping is related to the swaths of land set between buildings that are spaced too far apart in the suburbs. These areas are too small to become nature and not useful for anything.

    Will this recession cause us to reevaluate whether every highway median needs to be mowed once per week?

      1. Anecdotally, I have heard a lot of talk from non-gardeners about starting gardens this year. If Covid-19 forces people to become more thoughtful about their sources of food and gets them started gardening, that could be a nice benefit of a terrible situation.

        On the flip side, I’ve also got non-firearms-owners asking me about firearms, so there is that.

        Personally, I’m inclined to think that the seeds and soil would be a better use of limited funds, but to each his or her own. Haha.

      2. Where I live landscaping is considered an essential industry. All of the office parks are empty, and they are surrounded by freshly planted flowers.

    1. Yes of course dear. My point is that lots of people have special needs that are real while many other people drift in and out of peculiar dietary parameters because it’s fashionable. I’m waiting for the F350 dually people to call me a dick since such vehicles are essential to their personal survival.

      1. What I admire about Sue is that she came to the table and made her comment instead of slashing your tires while you sleep. These days it’s often as close as we come to having a real conversation. One that must and will happen more as we hitter leaner times is that we have to learn how to relate to other people again.

        1. drewster, I’m not sure slinging insults at the blog host qualifies as “real conversation”. To me, it IS the blog equivalent of slashing a neighbor’s tires. The same comment could as easily have been made without namecalling.

          1. Chris,

            I understand. No, name calling is not ideal, but it’s a step above silent hate. I once heard someone say that having an argument isn’t a sign of a bad marriage; it’s when they stop talking altogether that it’s over. Though Sue wasn’t gracious, at least she was still talking. That’s all I’m saying.

            1. There’s a difference between telling “hard truth” and just being a jerk.

              That has taken me decades to learn (the hard way). 🙂

  7. I agree. But it would appear that older generations, the rich, and the C-suiters will let others take those inflated asset prices out of their cold, dead hands.

    I’m not sure if we are heading for Japan-style stagnation, or a mass inflation, but those who cashed in this country and left that choice should no longer be in charge. And yet they are, across the board.

  8. Regards from The Midwest.
    I clean and pet sit. Doing neither right now or for the last 4 weeks. If the gig economy compensation help actually happens, I may apply. (Schools closed, I am home skooling a 4th grade grandkid. Have caught a little crap from people on that, but I’m 50 not 80 and she’s in our germ circle as is. And, she has nowhere else to go.)
    Fortunate to have spouse who is still employed, tho at the 50% reduced staffing. (he is salaried, again, very fortunate).
    Home and cars paid-off, thankfully. We are already talking about home improvements and possibly upgrading a car, next year, when it may be a cash buyers market. If we all survive.

    Daughter, in real estate title closing, is very busy at work, at least right now. Re-Fi calls all day.

    When this whole deal first began, I reached out to a neighbor who works in food distribution for restaurants, asking if he’d considering selling to individuals. First response was the amount of product would be too much for a household. I asked that he keep us in mind, if he ever opted to do a split order among a few different families. He reached out today. A brand of high grade beef & pork is offering smaller sized “griller kits” for homes. I feel a little like the rodent that you described yourself as, in the video that KD made, which also featured your favorite past tenants; I’m sorry to learn they’ve moved on.

  9. Johnny, I’ve been a subscriber for a few years now and a fellow multi-family owner since my mid-twenties (35 years now.) Your ability to sort wheat from chaff is admirable. You seem comfortable in SF but can see through it’s excesses. My town, San Diego, tanked in 1990. It then took four years for values to bottom out. While I hope you are wrong, your speculations appear reasonable. Yikes! BTW, you might enjoy my blog that focuses on multi-family housing and urban geography, http://www.theurbannavigator.com

  10. On the flip side, get ready for big price increases. Right now there’s huge pent up demand for dining out, travel, etc., all the stuff we’ve been denied. When the restrictions are reduced/eliminated I expect that the demand for those services will skyrocket, with corresponding price increases. And in the case of restaurants, supply will be reduced, further pushing up prices to eat out.

    1. I wonder about that pent-up demand. I think that many of us are ready to get back out there, maybe a little more conscientious about hygiene, but still, can’t wait to go to a concert or enjoy restaurant table service or get a nice leisurely pedicure. On the other hand, I think many will be skittish for some time, even after the all-clear (whatever that actually means) has been sounded. I wonder how high unemployment/personal austerity/etc will combine with residual germ fears to affect restaurants, nail salons, movie theaters.

      1. People have the memory and attention span of a gold fish. Twelve seconds after the all clear and folks will want to mud wrestle for meatballs at IKEA. The problem is many businesses may no longer exists regardless of demand. Only the strong, lucky, and well connected will endure.

        1. Haha. “…folks will want to mud wrestle for meatballs at IKEA.” You crack me up! Thank you for sharing your thoughts and insights. Your posts are one of the few things I look forward to in these crazy/dull/uncertain times.

  11. Covid19 is certainly a trigger ,but hardly the cause of the issues we face. Papering over the last downturn with money printing has led to this. This crisis has shown a changing marketplace where we do not need store fronts and commercial real estate the way we once did. Yes , seeing individuals tussle over a pack of tissue is troubling, but its becoming unnecessary.Urban living and pointless globetrotting has its downside. Travel for work meetings , spending all day shopping at the mall may not be the way of the future. Even the idea of safe investment in eldercare and large senior communities could change depending on the outcome of a virus like Covid19. The reverse mortage industury could see some changes with this. Individual citizens and their families will see difficulties ,but the larger players will not, and business is very brisk for some. With more Artifical intelligence even the average worker becomes less needed. Its not about complicated algorithms and science its about simple observations.

  12. I’ve wanted to comment on Johnny’s posts over the last month, but before I can gather my thoughts the situation changes.
    Johnny, keep posting your insights. Your ability to cut through the BS is appreciated.
    I look forward to reading them.
    I’ve had some conversations in recent years where I’ve mentioned that the systemic problems, made more obvious in the ‘2008 recession’, have not been solved. Most people do not believe this. Maybe more will now.

  13. What I find fascinating is the idea of relative self-reliance as an economic principle potentially coming into vogue. How much is a piece of land out in the desert or near a small town? How much is a 3d printed house or a kit house or a tiny house? How much is a solar set up sufficient for a few people? a vertical farm set up? A broadband connection for some distance work? A 3d printer or access to one to make tools or machines or parts or machines or devices to sell? Some chickens and a goat? A VR set up for telepresence work and social interaction? In the future, a cultured meat or fruit or vegetable device to grow your own food? Almost nobody lives this way in America, but something a little bit like this but not so hi-tech was the norm for a very long time. With the addition of today’s modern tech why would the connected hi-tech homestead lifestyle provide more security and stability? Would it be desirable?

    1. last few lines should read:

      With the addition of today’s modern tech would the connected hi-tech homestead lifestyle provide more security and stability? Would it be desirable?

      1. The security you have in the countryside is what you can provide for yourself with the help of your neighbors. The sheriff is 45 minutes away in the country. Residents are expected to handle problems themselves as best they can. Are you tough? Do you have the tools to defend yourself? If you leave, can your family defend itself? Have you even killed an animal? FerFAL calls the “secure” countryside redoubt the myth that will not die. In Argentina, the countryside is being depopulated by roving gangs from the city. Same thing in South Africa where 100k farmers have been murdered. In Germany and a lot of these other N. European countries, the farm houses were built in a cluster so that neighboring farmers could come to each-other’s aid during times of anarchy like the Thirty Years’ War.

        Read “Hidden War” by John Nores and that’ll give you a picture of what goes on in the countryside in CA. I’ve seen it firsthand. I know techies who’ve moved out to a rural valley only to have neighbors get wacked over marijuana disputes. There are bad people in the world not very far away.

    2. A broadband connection for some distance work?
      In much of the rural US, cell phone service is spotty, and high-quality broadband internet is also spotty to non-existent. As for land prices, go to Zillow, click ‘lots/land’, and your desired location.

  14. If you have cash on hand to buy discounted hard assets, it becomes a question of timing. There are several factors at play:

    – Fed money printing, massively debasing the currency, eventually leading to a currency reset of some kind
    – Deep recession, creating fire sale conditions on previously overpriced hard assets that were propped up by debt
    – A cultural reset where we value said hard assets instead of paper wealth, bidding up the price over time

    In other words, your “dry powder” could blow away in the wind if you sit around waiting for a bargain. My personal feeling is to catch the falling knife. I may get cut, but then at least I have a useful knife and not a derivative of a knife.

    1. I have started to wonder about all these dynamics too. Printing money should lead to inflation eventually, but will unemployment reduce demand so much that we get deflation first?

        1. Or they won’t be able to stop the asset price reset in the intermediate run, followed by even more desperate measures in the long run, with mass inflation.

          What people don’t realize is that the only reason NYC recovered from the era when its future was cashed out the first time is 1970s inflation cut the real value of the retroactively enriched pensions and debts in half. Otherwise, it would have ended up as bad off as Detroit.

          The bottom line is a generation has cut deals with itself and given each other pieces of paper that say they are entitled to an ever larger share of anything that later-born generations might have. And of course some got far more of those that others. As long as they are in control, maintaining the value of those pieces of paper will be the primary objective, regardless of the consequences.

          Can you imagine the political and social implications five years from now if they repeat the trick from 2008? If, at a time of mass suffering and downgrading of later born generations, the executive/financial class sees another huge increase in its income and wealth? The political/union class continues to receive lucrative early retirement pensions at a time when others are forced to retire into poverty, their taxes rise, and their services are cut? And the price of housing continues to rise relative to the incomes of later-born people? That’s the “soft landing” scenario.

        2. Maybe?
          I took 6 economics classes in grad school and concluded that 1) I wasn’t smart enough to figure out how novel situations would play out for macroeconomics and monetary policy, and
          2) Neither were most of the economists who wrote the books.

          Especially with the November election coming well before I expect Covid-19 to be reasonably well controlled, we are entering uncharted territory and while history may rhyme (and the 1930s and 1970s may have lessons for us) I think there is no good way to know what will happen. I will listen to Steve Keen, reread Nicholas Nassim Taleb, and cultivate my garden.

          1. I like Pippa Malmgren’s interpretation of events. https://www.youtube.com/watch?v=DNkY3oeWxWU&feature=youtu.be

            I don’t have a crystal ball and can’t pretend to know exactly how things will unfold. But I’m guessing that sooner or later all the accumulated debt is going to have to be discharged one way or another. Paying it back through hard work is the least likely option since no one wants to do that at the expense of continued consumption. So there will be a “restructuring” in the form of a soft default through debasement of the currency. That will create its own problems down the road.

            1. Exponentially growing debt vs. the real world (which cannot grow exponentially) always leads to problems, solved by jubilees, revolts, inflation, etc. (see Michael Hudson – https://www.nakedcapitalism.com/2020/03/radical-imagination-imagining-how-the-world-of-finance-really-works.html).

              I am more concerned that the dollar may lose its “exorbitant privilege” (https://en.m.wikipedia.org/wiki/Exorbitant_privilege) as the world reserve currency. Not that Covid-19 will necessarily lead to such a state, but it is one more stressor that is showing the US to be as fragile as Dmitry Orlov always said it was.

              I am also not too sanguine about a likely contentious election held during a pandemic, when one political party has most of the guns (metaphorical and literal).

              1. This is how they run our monetary system:

                TL; DR = all money is government-generated debt that we owe only to ourselves and we won’t default on our own debt. Obviously, I’m skeptical but we’ve been running it this way for 40 years and it’s not obvious that the Federal public debt will ever be a problem. The states do not have a printing press and cannot run their finances the same way. Neither can the individual where the buck always stops.

                Big entities really seem to benefit from MMT. The rest of us just get priced out of assets or legislated out of them.

  15. Good analysis. I was talking to a friend on the phone yesterday and he said something to the effect that they’re saying this might extend past April! I laughed and said we should be ready for there to be issues through the rest of the year, at least. I think a lot of people are just now beginning to realize that this is not going away quickly.

    I’m fortunate: working from home (now) in a stable industry with a stable job (they just hired another employee for my work group!). Many people aren’t. Right now, my thoughts are on how to help them through what is, according to history, a perfectly normal situation (the occasional plague/virus). I find it interesting that the situation we find ourselves forced into (distancing, closing down businesses, etc.) is almost exactly the same as has happened before in these situations!

    The artificial safety bubble our society has built around us has punctured and is slowly deflating. How far it goes is yet to be determined but I expect we’ll do “enough” to maintain some variance of the status quo by the time it’s “past”. It will be interesting to see how it all plays out.

  16. Interesting observations and thoughtful interpretations, albeit grim in tone. Yesterday’s world in pictures from the UK Guardian showed 33 photos which contrast with yours, mostly families around Europe spending time together as they social distance. It may indeed be families, neighbours and communities which are working this out, not grand theories like capitalism versus socialism or fall and more recent rise of stock markets, the biggest of which is located in the present global epicentre of Covid 19. No one knows what lies ahead. That is a fact. That it will necessarily be a hard lesson to learn? It is already evidently very hard for those who are basing their predictions on what has happened in the past. There was extreme resistance to the discovery that the world was round and in motion. Upheaval and reinterpretations are hard, especially for institutions and empires that are fractured and whose leading voices fear they may be in decline.

  17. Its all about cashflow now. Credit card debt set to balloon, further.
    Hard conversations being had all over. Much head in sand behavior too.

    If you never learned to cook or negotiate, now is the time. Not that hard!

    Travelers Ins offered me a 15% rebate on my car policy for April and May.
    Checks in the mail. $1200 –>$200–>$30
    A little more than they raised my policy last year. How about 15% of $1200?
    More corporate BS.

    Hope the UE$ will soothe the anger and despair beneath the surface.

    Good luck to all!

  18. Great analysis! The only thing that gives me hope is the idea that this is not a “natural” depression, but a “medically-induced coma” that we can be revived from (some day). The government promises are called “stimulus” just because business writers have small vocabularies; these are really just “life support” payments. It’s not time to “stimulate” yet, not while the coma is still being induced.

    I heard yesterday that the last week has seen the Dow stock index increase by 29%, the greatest week since… 1938. This is a comparison that comforts me not one little bit.

    1. Perhaps. I do agree that plenty of marginal businesses will likely fold. I just read Daniel DaFoe’s Journal of the Plague Year, and despite being 300 years old much of it reads like it could be from this morning’s paper. It is a novel, by the way, based on his uncle’s recollections, though it does read like a journal. Dafoe was a small child at the time of the bubonic plague.

      One of the observations was on how anxious people were to get back to their normal lives when it became clear that the plague was abating even if it was still dangerous. What finally brought an end to the plague was the great London fire. Dafoe comments on how busy everyone got rebuilding.

      I suspect you may be substantially correct about the immediate future, but it won’t last long. The Roaring ’20s did follow the Spanish Influenza.

      It might be a while, though, before anyone wants to go to the dentist.

    2. Re 1938: I dimly remember from my economic history that the Great Depression was a double-dip affair, and that only Lend-Lease (Roosevelt putting the US economy on wartime footing in 1939-40 to support the Allies before we entered the war) really saved the US economy.

      We can’t cut rates any lower. We can’t print any more money. And we’ve already been at war continuously for almost 20 years and we’re trying to wind it down.

      So yes…1974-75 is coming back along with price inflation. Last time it took 7 years and the failed presidencies of Nixon, Ford, and Carter before St. Ronnie’s disciples took us to the promised land. Will this failed presidency be replaced with a 4-year holding pattern under the next guy?

      1. Get ready for “deflation” not inflation, this is a uniquely different situation, as Johnny pointed out we have many claims against underlying assets (extreme leverage), when the music stops, and it has, a game of musical chairs is played for each of those real assets and the real owner(s) sit down. With the reset will be a loss in confidence/trust that anyone can pay back a promise (past experience), so when it comes time to sell anything of value, it will be holders of real assets that will bid on them. This creates one part of deflation, fewer bidders, less competition, lower confidence = lower prices. I’m not an economist, nor do I have much education, so read how people like my guru Nicole Foss (an economist) describe this scenario and I should note has been describing it for a decade or more. Our environmental group brought her in twice, years ago to give talks on this coming crisis, and our household followed her advice. Eliminate debt, remove assets from stock market (casino in disguise), build self sufficiency (our group), invest in fixed real property (land) etc etc. Thanks Nicole!

        1. Well, maybe. But the Fed printing presses will prop up the value of debt instruments and maintain market liquidity. Under these circumstances inflation is much more likely than deflation.

          I’m not totally discounting that real estate payments (both rent and mortgage) will be disrupted at least in the short term by massive unemployment. But it’s more likely that will lead to something like 2008 again, a further knock on marginal-value homes and commercial centers. Yes, those will lose value. But I doubt we will enter a deflationary spiral.

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