The ripple effects are already evident, but by no means fully affecting the economy to the extent they ultimately will. Loss of income to individuals and businesses has prevented them from being able to pay for rent and mortgages or other bills. Landlords, in turn, are facing the inability to pay their own mortgages or other bills. Although less evident to date but inevitable over time, lenders and investors will be faced with a loss of income from mortgages, mortgage-backed securities, REIT’s and related sources threatening credit and investment. Indeed, lenders are already seen to be tightening credit requirements for home mortgages. At the level of government, ripple effects are multiplicative. Added costs for safety nets and for emergency and public health services, amongst others, as well as cries for economic aid and stimulus are hitting at the same time that tax revenue is plummeting due to a lack of business volume and inability for taxpayers to meet their obligations. At the federal level, this can be met by massive increases in deficit spending. However, this is much less possible at state or community levels due to constitutional restrictions and limits of credit capacity. To be sure, such concerns have largely been set aside in the short-term due to the severity of the circumstances. They cannot, however, be ignored forever, leading either to eventual spending cuts, tax increases, added inflation, higher interest rates, loss of borrowing capacity or some combination of all of the above. Supply chains have been severely disrupted, either by sudden collapse of demand (e.g.: oil or food service) or by massive surges in demand far outstripping production capacity as in the case of medical supplies. The medical supply situation is illustrative of the subtly and complexity of the problem. Much discussed issues with testing capacity in the U. S. have had as much due with lack of mundane and unnoticed components such as swabs or reagents as with problems in testing kits, diagnostic machines and expert labor. In the same way, the sudden discovery and rapid production of a vaccine, if/when it happens, will be hampered in its distribution to the public if the plastic, metal and rubber components of the syringes, the safety gear, the available labor and other necessary elements are not also ready to go. The advantages and disadvantages of modern logistics have been on display during the crisis. Over the last 30 plus years, logistics have been transformed through superior communications, demand forecasting, transportation cost reductions and other elements to fundamentally change the way businesses obtain raw materials and product for sale. The results have been tremendous increases in efficiency as just- in-time ordering as become the rule, reducing the need and cost of storage space, and vendors have increasingly specialized to meet the particular requirements of specific industrial sectors, subsectors, and even particular geographies and individual businesses. This has also led to a global supply chain designed to move production to locations with low labor and other input costs.
∴ PROGNOSIS
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