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The Post-Pandemic World ?

On September 11th, 2001, I was in my 5th floor office on King Street in Alexandria.  From my window, I could see the Capitol and Washington Monument, as well Potomac side of the Pentagon.  Early that morning, everybody began rushing to the conference rooms, watching television coverage of the World Trade Center in New York.  Then, they rushed into my office to see the Pentagon.  I didn’t see the plane impact, but watched the huge columns of smoke billowing out it.  As the day wore on, one member of my staff asked me how the future was changed.  I answered honestly that I didn’t know, except that big change was inevitable.

The slow-motion pandemic of 2020 has an even more profound impact than 9/11.  Today, we’re losing more Americans every single day, as we did on 9/11.  The economic and social costs of the pandemic are far greater than 9/11.  Here are a few preliminary thoughts:

The value of asymmetrical warfare has never been more obvious.  Despite the vast superiority of our military, Russian hackers have infiltrated us.  Despite the vast superiority of our biomedical technology, China has unleashed unimaginable losses on America and the world.  Vast superiority apparently means little.  Contingency planning, flexibility, and rapid response have never been more important.

The value of research has now been proven beyond doubt.   The miracle of developing the vaccine in only ten months was built on years of unprofitable and uninteresting research.   They did not start from scratch.  Better tax treatment for R&D is coming.

The value of real estate has never been more questionable.  The out-migration from big cities will reverse but only partially.  Remote working has both advantages and disadvantages.  Regional working may become more commonplace.  More offsite meetings in hotels would help the limping hospitality industry.  The key word for retail real estate will be “repurposing” — other uses for a box of space.

The nature of investing will change, as sector rotation becomes more attractive than straight index investing.  Fear of the stock market collapsing will fade, after witnessing the impact of the Fed asset purchases.  A collapse becomes more optional, instead of cyclical or inevitable.  But, increased control of the stock market comes with increased risk of a financial crisis.

The gradual decline of the dollar over the last year will recover slightly as long-term interest rates rise toward year-end 2021.

The pandemic has increased already excessive overall capacity even more, making inflation very unlikely.  However, inflation is no longer of a shotgun.  Inflation is a rifle and will increase in selected areas, such as batteries.

Estate planning is becoming as important as retirement planning . . . finally.

With church attendance so restricted for so long, the church business will spike up, at least temporarily.

Politically, the Imperial Presidency will become less so . . . slowly, which is good.

The shotgun-marriage of Modern Monetary Theory (MMT) of unlimited deficits with the governing political party (either Republican or Democratic) will become more apparent and accepted, unfortunately.

Relationships . . . post-9/11 vs post-pandemic . . . will be different.  After 9/11, we hugged our loved ones.  After the pandemic, we actually looked into their eyes.