U.S. Small Businesses in Great Danger from Shutdown

Shutdown

While the country turned their heads from the massive economic damage that the coronavirus quarantine has been causing, we won’t be able to look away forever.

Before this year, if you asked anyone what the threshold would need to be in order to shut down most of the country like we have done lately, it wouldn’t even be that easy to imagine an event bad enough to make us want to inflict this much damage upon ourselves.

We did figure out a way to do it though, which was to tell everyone that a plague has fallen upon us, allegedly worse than humanity has ever seen, and we all need to lock ourselves in our homes to avoid an apocalypse.

If any of this were true, then we might want to consider such an option, where inflicting great damage upon our economy may be worth it to save millions of lives. Even after the event ended up being nothing like they told us it would be, there are still many who not only do not want to take account of the damage, they still treat those who do with contempt.

Most of the major media outlets are still doing their best to sell their horror version of this movie, even to the point of accusing those who want to see us begin the recovery from this massive economic attack from within as wanting to kill people.

It doesn’t matter that this outbreak has been, for the great majority of people, no less risky than the common viral infections that we see year after year. In a country founded upon principles of personal liberty, liberties that are protected by the constitution, we have a situation where the risk really isn’t much more significant than the common cold for most, with a high percentage of them not even experiencing symptoms at all from this virus, and we put them out of work and forced them to stay in their homes.

A lot of people haven’t been able to manage the basic necessities of life, food and shelter, and when they beg for mercy, and when some politicians such as President Trump hear their call and want to help by just allowing them to slowly regain their constitutional rights, they get accused of being murderers.

The left-wing media’s hatred of Trump is so outrageous that they have done their best to vilify the best hope we have right now to treat people who have been infected seriously by this. They For those who get seriously afflicted, COVID-19 is very dangerous in itself, and has taken almost 100,000 American lives so far. Trump is in favor of hydroxychloroquine though and this is enough, and they are more than happy to not only look to spread misinformation such as the safety of this drug not being proven in spite of 50 years of its use, or that all the studies have shown it doesn’t work.

There are studies that have indeed shown this works quite well in fact, in addition to all of the anecdotal evidence we have from physicians who have successfully treated many of their coronavirus infected patients. People not being saved by this is a small price to pay it seems for doing everything to can to prevent the reviled Trump from being re-elected.

While some have pointed to the pharmaceutical industry as being behind this madness, poised to make untold fortunes from vaccines to treat this, all we have to do is compare the rhetoric between CNN and Fox to realize what is really going on here. Both get a major part of their revenue from pharma, but what separates them is CNN’s degree of hatred towards Trump, while Fox supports him.

CNN and just about every other popular media organization other than Fox have left no stone unturned to promote paranoia over this, where the task of helping defeat Trump has gone from a goal to their primary directive. This has proven to be a very powerful force, and thanks to their efforts, the Democrats could probably beat Trump with a mannequin, or perhaps even with Joe Biden, who may represent an even bigger challenge.

It used to be that people would say that money rules politics, and it certainly did, but this was nothing compared to today’s reality. The media have always been very powerful, overwhelmingly so, but this is the first time they really have used this power to look to bring down a President so obviously and shamelessly, and are doing very well indeed.

Trump wants to open up the economy, and having the economy closed works against Trump’s chances, so they go all out to battle this, to oppose the man on every turn, to make him look as bad as they can. This abuse of power under the guise of journalism, where they no longer even pretend to be unbiased, used with such overwhelming power, should scare us much more than COVID-19 has.

As if this wasn’t all crazy enough, these people tell us that we need to maintain the lockdown because that’s what the science says to do, but they have mistaken science for propaganda. There isn’t even any reason to believe that this quarantine effort has helped at all, and the science we do have on this suggests that this may make the situation worse if anything.

Quarantines have been used for virtually all of human history, where the sick who suffer from infectious diseases have been isolated from the general public. The new version of this seeks to quarantine everyone, and as long as we don’t think about what we are doing, we will easily miss the drastic amount of damage that such a thing causes.

We Are Facing a New Frontier, And an Ugly One

We’re not even sure how bad this will be as this has never been tried before, but just from what we know so far, the damage will be very serious, especially among the tens of millions of small businesses we have. These are the folks who are leading the charge to re-open, because for them, it really is a matter of survival, and a lot will not.

There is a defense in criminal law called necessity, where you can be excused from breaking the law in order to obtain the basic necessities of life. If it was necessary for you to steal food to survive, so it simply is not reasonable to punish you because this wasn’t an act of normal volition such as stealing for profit.

This defense doesn’t fly when you are in a state of emergency though, when you aren’t even breaking the law but just want to get back to work to feed yourself and your family, where the normal and necessary constraints on state power get pushed aside in favor of a dictatorship with no real limits.

If a state governor tells you to stay home, it’s not that it is against the law to go out, but the rule of law is set aside under the power of these states of emergency. There could come a time where ignoring the normal limits on state power would be justified, in an extreme emergency, but using this in the way it has this year is a long way from how this extreme measure was designed to be used.

While this has been going on, both those who are at all concerned with human rights as well as those who are familiar with economics have been shocked and appalled. We can never just ignore the practical consequences of our actions, as sooner or later we will have to face their aftermath, and that time is becoming nearer each day.

Big corporations, and to a lesser extent, even more modest sized ones, are able to weather a storm this severe without a lot of lasting damage, even though there have been some casualties already on that front and there will be more. Small businesses have been virtually defenseless against all this though, and the degree of damage that this quarantine will have caused them in the end will be simply terrible.

This is not to say that we did not need a serious response to this outbreak, and even the most fervent opponents of the lockdown aren’t objecting to our protecting people from this, but prefer to do so sensibly and with a sense of proportion.

We definitely should be protecting those at real risk from this virus, instead of treating those whose risk is negligible the same way that we treat those whose risk is much more substantial. What happens is that we go way overboard with one segment and don’t do enough for those who need the help, particularly with those in nursing homes who have paid the brunt of the price of this with their lives.

When we close down schools in spite of this not even being an issue at all with children, you know that we have gone several bridges too far. We seemingly have not even asked why this would make sense, because sense has been usurped by madness. Tony Fauci is warning of doom with a population that is not in any danger at all from this virus.

What has really ticked off small business people is that they are being locked out while a lot of their bigger competitors are allowed to stay open. While big businesses are getting mega bailouts, a lot of them haven’t even been able to get the loans that they are supposed to be getting. In the State of New York, over 40% of their small businesses have been unable so far to get a loan under the program.

Many businesses did not even qualify for these loans because they don’t spend a high enough portion of their budget on payroll, where other costs represent a larger amount than the government prefers. The people who work for these businesses end up being left out in the cold as well.

For those businesses who have gotten funding, the requirement of spending at least 75% of the proceeds on wages has been difficult, given that this leaves so little left for them to keep their businesses afloat by being able to meet all of their other expenses. On average, small businesses in the U.S. only have a month’s worth of working capital, and the clock keeps ticking against them.

There is A Whole Lot at Stake with So Many Small Businesses Sick and Dying

It is estimated that these loans have kept 50 million people employed temporarily, but the scary part is what happens when this money runs out, or when these businesses have to lay a lot of these people off as they succumb to the crisis, either in whole or in part.

Our economy has been attacked on multiple fronts, but no other front even comes close to the pain that we have inflicted upon our small businesses. They represent a full half of our economy, and their being hammered by this will result in all of us being dealt a very serious blow.

We’re not even sure how bad it will be but we know it will be very bad at the least. 38% either won’t survive or feel that their survival is in serious jeopardy. This is a number that will just keep rising as long as they continue to baste in this toxic brew of abnormality.

In spite of things starting to open up more now, a lot of these businesses may still face the guns of abnormality for quite some time yet, including those who will need to figure out how to stay in business with half or less of normal capacity. The margins in these businesses aren’t anywhere as large as they need to be to get through such a thing, and when you can no longer make ends meet, you stay at home for real.

Many of their workers are low-wage employees. As small businesses have taken a disproportional hit from this economic crisis, the same thing has happened to a lot of their workers, and hourly workers have suffered an average loss of income of $1,300 a month. When we consider how many of these workers were barely getting by before this, we shudder at their fate now.

While small businesses still have people on the payroll, for those who are still on it, payrolls have been reduced by 40%, while larger businesses have been far less impacted. They sent their people to work at home, where with small businesses, they been sent home as well, but not to work from home, but to sit idle and go hungry at home.

The employment losses have also hit small business harder. Two thirds of all jobs lost have been with companies with less than 500 employees. They also have a lot higher percentage of them not expected to be regained when the shutdown is fully over, which is perhaps the scariest thing about all of this.

This is really going to hit the restaurant business hard. It is estimated that 1 in 4 will have to close down from this, many of which are family owned businesses that they may have spent decades building up, only to see this all wiped out by our turning into a police state. This number may be a lot higher when you consider how long it might be before restaurants are allowed to operate at the full capacity that they require to stay open.

People aren’t spending as much generally now, and while we might think that this is just due to all the closures, the grocery stores have stayed open and even spending at these stores has dropped quite a bit. People are seeing the need to save a lot more, perhaps good news for them but definitely bad news for small businesses who depend on normal spending levels.

The Democrats, who pride themselves as the champions of Main Street while they claim that the Republicans are champions of Wall Street, have turned their back on Main Street while the carnage on this Main Street continues to pile up. We should find it deplorable that they continue to fight tooth and nail against the efforts by the Republicans to get small business back up again.

This really was made transparent by the Democrats accusing the Republicans of murdering people to help the stock market by wanting to help these small businesses get back on their feet, where amazingly, the welfare of both these small business owners and their tens of millions of employees did not even merit any consideration.

That makes sense though if the overall goal is just to bash the other party as much as possible, where issues of human welfare not only take a back seat but aren’t even seated at the table.

We’re going to be left with a heck of a mess from this, from the way that we have exploded the national debt, to the Fed lighting a fire under the economy that will cause a lot of problems in itself when the issue is over, to all that production and income lost, to all the jobs that will remain lost, to the shocking percentage of small businesses that will lose their lives over this.

What stands out the most here is the vital need for us to place limitations upon emergency powers, where both the constitution and the law becomes subjugated to the mere whim of our political leaders. We have to build in reasonable limitations on this power, and we will soon see just how much harm can be caused if there aren’t any. America doesn’t do so well in a mad dictatorship.

Eric Baker

Editor, MarketReview.com

Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.