Dear Reader,
What should Australia DO NOW?
And what should YOU be doing as an investor?
You’ll find answers to these questions in Jim Rickards’ groundbreaking new book: The New Great Depression: Winners and Losers in a Post-Pandemic World.
Advance access to the Australian version of this should be available for you to read tomorrow.
Keep in mind it’s a completely unique Australian edition. Complete with tailored forecasting and strategies for the Australian investor.
It’s a crucial time for all Aussies to get hold of this information.
Consider: if Australia were to open its borders soon, what would happen?
The truth is the pandemic would likely strike Australia worst of all.
That’s what happened to so many of the other nations sitting alongside Australia and New Zealand as countries that had fared well so far.
Think about it.
Eastern Europe went from being top of the class in an academic study on the topic to the COVID-19 hotspot of the world.
The Czech Republic especially.
It’s hard to imagine now, but they were essentially Australia in the early stages of the pandemic — lavished in praise for their initial response.
Seven months later, they were recording 15,000 new cases a day and the highest per capita death rate in the world.
For a more recent example, consider Ireland. The Washington Post reports:
‘Ireland had one of the lowest coronavirus rates in Europe. It’s now the highest in the world.’
I’m not saying Australia is heading in that direction.
I just want to illustrate how quickly things can turn south, even for a ‘successful’ country.
According to The Guardian, it’s even worse than their ‘worst case scenario’ predictions for the Czech Republic.
Meanwhile, Sweden, the nation most criticised for its lack of lockdown, and which saw a mid-level amount of excess deaths in the period covered by the study, looked to be doing rather well since. But then that reversed too as Sweden saw another outbreak.
In The New Great Depression, Jim points out the same phenomenon — success then sudden failure — has occurred throughout the US:
‘Texas and California saw spikes in cases after being applauded for earlier success at containing the virus. California reported over 790,000 confirmed cases as of October 1, 2020, after reporting fewer than 53,000 cases on May 1, 2020.’
Los Angeles has one of the tightest lockdowns around, while also shattering records for new cases.
But my favourite example was Florida.
The governor there was lauded, largely by himself, for implementing precisely the opposite policies to those which had gone badly wrong in New York and New Jersey. While he was busy self-promoting his success, a huge wave began to break out, leaving Florida with the fourth highest death toll since last January…
The point is…
It ain’t over yet
Not by a long shot.
And governments which celebrate success seem to get humiliated in short order.
Unfortunately, I believe Australia, by having avoided the worst of COVID-19 so far, is more vulnerable to a severe outbreak than ever.
Of course, we could stay locked down and isolated.
That seems to be the plan.
That’s how Australia escaped COVID-19 comparatively unscathed so far, as far as COVID-19 infections go at least. Largely by avoiding an outbreak in the first place, other than in Melbourne.
By shutting borders to our own citizens, keeping them confined in a hotel room without openable windows and using the military to guard them, we can ‘stop’ the virus.
The thing is, we don’t just stop the virus.
We also drag down the economy. That’s what a chunk of Jim’s book was about. But where does it leave Australia?
Well, we can’t open borders now. Or we’ll just be the next poster child of disaster. Alongside eastern Europe. Perhaps worse.
So…
What if Australia doesn’t open its borders?
Well, how long can we go on like this?
Isolating ourselves from the world, occasionally locking down parts of Australia, and imposing extreme economic measures to paper over the consequences?
The only honest answer is, I don’t know.
Because so much has changed, any metric to try and measure the impacts of lockdowns are just not accurate anymore. But let’s try to get some idea of what’s going on.
The pandemic fell right between financial years, making the annual statistics very confusing. Aussie GDP fell just 0.3% in the FY2020 which ended in June and is projected to fall just 2.7% in the FY2021.
Not that bad. But this masks what occurred. And what will occur.
The annual statistics include economic growth before the early days of the pandemic, and the projections include presumed growth over the next few months after the pandemic will supposedly have ended. This gooses both sets of data. A quarterly examination is more revealing.
The lockdowns delivered the worst economic performance on record for Australia, when the economy shrank 7% in the three months to June.
A Victorian Treasury Department official told a parliamentary panel that the Melbourne lockdown cut $100 million a day from Victorian economic activity and a loss of 1,200 jobs a day. Demand for mental health services surged by more than 30%.
That is bad. Very bad.
What would the economy look like without the vast government support it’s getting? IBISWorld estimates the government deficit is equivalent to 11% of real GDP.
But how long can that continue? For how many quarters will governments be able to paper over the consequences of their policies?
And what are the longer-term consequences of the vast debt we are incurring to pay for those rescues?
2021 isn’t looking promising either
IBISWorld’s 2021 economic projections assume ‘Pent up demand and the easing of restrictions on tourism, hospitality, and retail are likely to support growth.’
That’s looking rather less likely given the frequent outbreaks of recent months…
While the economists talk up ‘pent-up demand’, we need to worry about pent-up bankruptcies, business failures, unemployment, and evictions. They won’t go away just by being stalled by government policies.
With bankruptcies at 30-year lows during the pandemic, what’ll happen in the ‘recovery’ as the projections are rolled back? What will unemployment settle at?
What do Australia’s true economic statistics look like?
That’s a tough one to honestly answer at this stage.
What’s less tough to answer is what you should be doing right now as an investor to protect yourself. And, in some instances, potentially profit from Australia’s post-pandemic future.
You’ll find these answers in the exclusive Australian edition of Jim’s new book, which we exclusively give our readers early access to tomorrow.
Tomorrow — watch your inbox.
Help is coming…
Regards,
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Nickolai Hubble,
For The Daily Reckoning Australia
Note: Jim Rickards recently spoke with chief editor of The Daily Reckoning Australia, Shae Russell, about his new bestselling book — The New Great Depression. He provides an overview of what the book is about and goes on to discuss the extensive research behind it.
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