These words are often attributed to Winston Churchill but are from a British World War II poster. In 1939, the slogan came to represent the indomitable spirit of the British people facing impossible odds and it became reflective of Churchillian leadership throughout WW II. We are not walking the streets of London or Coventry waiting for the next air raid siren but our worlds have been turned upside down by COVID-19.
I started work at CIBC in 1968 and so I wanted to look at recorded economic recessions in Canada since that date and these are summarized in the table below. The Seventies and Eighties were marked by exceptionally high inflation and the Federal Government introduced Price and Wage controls. In the late Seventies, we were still required to send notices to borrowers when Prime rate was increased and sometimes I was signing notices twice a week. In September 1981 prime hit 21.25% as interest rate policy was used as a sledge hammer to drive down inflation.
The late Eighties and early Nineties brought the great real estate melt down. There was a “build it and they will come” attitude and Lenders were feeding the frenzy with loans against unencumbered pools and non- recourse development loans. Does this sound eerily familiar? The October 2001 Enron debacle and the collapse of the tech sector at about the same time should have been the “canaries in the coal mine” for the perils of unregulated financial engineering and greed that led to the residential mortgage meltdown in 2008. All recessions are uncomfortable and stressful. They are marked by business and personal bankruptcies, industry closures, and workforce reductions; but, they are an expected part of the business cycle. In my experience, there is always a period of irrational exuberance prior to a recession and I have been expecting a recession for some time now as:
And then, along comes the Coronavirus. Nobody needs Stats Can reporting to know that the economy is now in deep recession. All non-essential industries and retailers are closed except where employees can work from home. Shopping centres are closed, high streets are empty, construction sites have been shut down, festivals are being cancelled, the hospitality and travel industry is in a holding pattern, and employment insurance
“Nobody needs Stats Can reporting to know that the economy is in deep recession”
claims are soaring.
Does anyone really think that the NHL or the NBA will finish the 2019-20 season or that baseball will have a 2020 season? Who will want to go to an NFL tailgate party or sit in a crowded stadium this year? I think the irrational exuberance that I have always seen prior to other recessions was there and that a recession was coming but this time its length and depth will notbe cured by economic levers alone. Progress in Covid-19 medical science will be needed to create the right conditions for people to go back to work.
I have spent almost 52 years in finance and worked through the five previous recessions. Most of my career has been in real estate and I have a few suggestions that apply in any economic downturn. Some simple lessons that most readers will know:
Now back to Churchill.for appropriate inspiration for the times:
KEEP CALM AND CARRY ON!! And, as always, wash your hands, practice social distancing, hydrate, and exercise! Keep well!
References:
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