/biz/ - Business & Finance

>>17956005
unemployment rates will be at record highs
god forbid if mass companies need to default on their loans, bond-holders default, then banks fail.

I feel like this crisis is showing how for the past twenty years we have built an economy based on efficiency rather than resiliency. Many corporations have moved slowly from traditional inventory, to just in time inventory, because just in time is more efficient, you have less money tied up in inventory and are less likely to have a pile of inventory you can't sell in the event of things like technological obsolescence or changing customer preferences.

This is much more efficient than the old system of making a pile of inventory then slowly selling it over the course of a year or more. However, the second a single cog in your supply chain goes down for a day or two or a couple weeks like what happened in China, your whole system is completely shot. The economy is now less resilient to shocks from catastrophic events, whether those be natural disasters, political crises or in this case, a pandemic.

The question is whether we see this tradeoff as a good thing or not, especially after what is happening right now. I know this is not the only thing affecting the economy, but it is just something I noticed/thought about the past couple days.

Globalized specialization of tasks has made economies more interdependent and sensitive. Shocks can’t be contained geographically or by sector, much like Covid-19 can’t be contained because of the efficiency of global transportation.