The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Silver Lining ?

05/19/2020

Ian Bremmer is the founder & CEO of Eurasia Group, an international risk consulting firm.  He is also one of the most original thinkers I follow.  You know he must be an original thinker, if he sees a silver lining to the current pandemic and economic collapse.  Like pain is “good training” in the Army, he sees this viral-collapse is good training for a massive cyber-collapse in the future, which he fears far more than the virus.

It’s a reasonable assumption that unfriendly nations will continue their cyber-attacks against our country and will eventually be successful.  It is probably more likely than some virus from western China would ever kill a hundred thousand Americans in just three months.

Let’s assume this viral-collapse crushes our GDP by 30% and that a cyber-collapse also crushes our economy by the same 30%.  Which is worse?  The majority of analysts expect our economy will be largely recovered, if not fully recovered, from this viral-collapse by next year.  A massive cyber-collapse could mean utilities go down, which put water and electricity at risk.  Computer viruses could be hidden in personal laptops anywhere, which reproduce and re-transmit themselves.  How long would it take to scrub a million laptops?  Computer experts say this is extremely unlikely, and our President said this viral-collapse was also extremely unlikely.

One of the lessons from this viral-collapse is that it exposed the weaknesses in our supply chain.  For example, “just-in-time” inventory management becomes “just-in-case” management, which increases inventory expenses.  (I know I will now set aside room in the garage for emergency provisions.)  We have become keenly sensitive to one of the hidden, implicit costs of globalization – vulnerability to unfriendly governments.  Also, this viral-collapse benefited large tech companies and hurt “brick & mortar” retailers.  A cyber-collapse would do just the opposite.

Once this viral-collapse is over, the only appropriate comment is “NEXT?”

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