By failing to prepare, you are preparing to fail.
- Benjamin Franklin
Last month we discussed the very long-term secular trend towards lower interest rates and this month planned to discuss if there is a lower bound on negative nominal rates. Given the current environment, we’ll get back to that.
Last August, we discussed the “absurdity” of calling climate change an “existential” threat, as it has been identified as such repeatedly in the media and in recent political campaigns. After discussing more serious threats (asteroids, earthquakes, volcanoes, and tsunamis) that we concluded still don’t rise to the level of “existential”, we stated that “unfortunately, there are two very serious risks we face that, if not existential, certainly could end modern life as we know it: a viral pathogen and a large-scale power blackout.” For once, we wish our prescience had been misplaced. That said, we will survive this (as a species and as a country), but the damage will be great, and many people (we won’t know how many for months yet) will have died. We should have been better prepared, the world has been here before. Let’s hope that when we emerge from this crisis we will get prepared for the next pathogen, it could be even worse in terms of lethality. Hopefully, we can avoid finger-pointing and recriminations and just get to work on making the system more resilient and able to respond faster.
That brings us to the second threat we cited. A large electro-magnetic pulse (EMP), either man-made or solar in origin (see “Carrington Event” of 1859), has the potential to severely weaken the power grid, even shutting large parts of it down for extended periods. Such a state of affairs would make the current quarantines seem like child’s-play. For a frightening vision about how such an event might play out, read the trilogy by William R. Forstchen that begins with the book One Second After, which has an introduction by Newt Gingrich and was discussed during the 2008 Presidential campaign. Even though such discussions about the seriousness of an EMP have been ongoing for more than a decade, we are less prepared for it than we were for the current pandemic. This really needs to change and politicians of all stripes should be asked about their thoughts (if any!) on it. Maybe we will get “lucky” and have a relatively minor event (say from a solar flare) that does significant regional damage before a major global crisis. This might wake up governments and corporations everywhere to realize the severity of this threat and prepare for it seriously.
We fervently hope that everyone stays well and that a “V-shaped” recovery is in the near future. I long for the days when the bad news is about the existential threat of climate change!
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