Wednesday
A comment on the likely path of the debt breakdown. Do hold firmly and clearly in your mind that the problem is debt, not flu. Forget about the flu; it’s a mild one – a non-event for anyone who isn’t old and/or enfeebled.
The debt problem has weighed over nations, central banks and banks for many decades. Now it has been brought to a head.
The shutdown means that many businesses, property owners and hundreds of thousands of recently unemployed people cannot pay their debts. Loans for major infrastructure (oil wells and rigs etc.), for commercial properties, home mortgages, credit cards and simple trading loans (goods delivered to businesses that now have no income) are unpayable.
How does that unfold?
Such debts go through what is known in the accounting business as an aging process. 30 days overdue, 60 days overdue then, at 90 days, it has to be either written down or written off. 90 days overdue, taken from the beginning of the shutdown (in Australia – 24th March, though business slowdowns began well before that) means that write-offs will begin, at the latest, from the middle to the end of June. In Australia, that is the end of the fiscal year when all books have to be balanced – of businesses and banks.
That is when the problem will come into public view. That is when the full scale of the damage will begin to be realised and when panic (and anger) go mainstream.
It is around then that governments are planning on allowing businesses to re-open.
News flash: a message has been received from the international debt on its journey to the moon – “Mission control, we have a problem; we’re going in for a hard landing”.