Proposals to skip rent payments are rooted in magical thinking

By David McElroy · April 19, 2020

Every time I see suggestions from friends — even bright people who I like — proposing simplistic and ridiculous “solutions” to the current economic crisis, I’m appalled at the level of economic ignorance out there.

We can fix the economy, they say. Just don’t make anybody pay rent for awhile. Banks can let people not pay their loans back for awhile, either. Just put everything on hold. And utilities can keep providing power and Internet service and water and everything else — for free.

See? Just wave a magic wand and decree this. It’s free.

From what I read from such people, it’s clear that they have no understanding of why their proposed magic isn’t possible. And I’ve seen another correlation. People who have to earn enough money to keep their small businesses open are panicking right now, because they know there is no magical Santa Claus who’s going to save them.

But people who’ve never run a business and don’t understand anything beyond getting a paycheck for a job seem to think someone can just wave a magic wand and the economic world can just be on hold for a few months — while they continue to consume resources without paying for them.

If you don’t understand economics — and you misunderstand the interconnected nature of the world — it’s easy to believe in this sort of magic. Populist politicians have promised magic for decades and people have believed them. It’s hard for people to believe that the lies of politicians for decades might finally cost everyone dearly — even though some of us have been warning about this for years.

These well-meaning people propose that landlords and banks and utilities just don’t make their customers pay for a few months. Or more. This is in the same “solution” class as pure magic.

It would make just as much sense for a company short of money to tell employees that they have to work for free for a few months. Does that seem rational or fair or even vaguely possible? Any company dumb enough to try asking this of employees — and some have tried — will have good employees walk away as quickly as possible.

The people making these bizarre populist proposals don’t understand that income from these customers is how landlords pay the mortgages and property taxes and upkeep on their buildings.

They don’t understand that utilities have to have the income to pay their employees and buy whatever fuels their plants, plus pay for the equipment to keep the systems operating.

And on and on and on.

The economy is tightly woven. If you cut off production — as has been the case for the last month or so — the goods and services which fund our lives are not being produced. You can’t wave a magic wand — which is what such a government decree would be — and bring these goods and services into existence. Once they are not produced, they are forever lost. The value is pulled from the system. It simply doesn’t exist — and no amount of magic or decrees can change that.

Just selecting one class of people to help — or even trying to bail out certain big industries, as government does — does not create the wealth which is destroyed when production is shut down. The economy is complicated and interconnected.

If you cut off production, that is going to hit you, too. The idea that some groups can be isolated from economic reality is pure fantasy. Shutting down production and then telling companies they have to pay the price is magical thinking.

This is how you get companies to start shutting down.

If you don’t understand real-world economics, it’s easy to believe fantasies that you believe would protect you. You’re naturally looking at your own self-interest, but you’re interpreting it through the lens of the lies you have believed from politicians for your entire life.

There is no painless solution to what we face today. Production can’t be wished into existence, although politicians and their Keynesian economist friends have acted for decades as though magic would save them. All they’ve done for many years is to push the problem into the future.

Well, the future is getting here.

It’s possible that the federal government and the Federal Reserve will pull one more magical rabbit out of a hat right now. It’s possible that they will print so much phony money that the collapse will be pushed out a bit more.

But the future is coming when that will no longer work. It might be this year. It might be next year. It might be in 10 years. But it’s coming.

If you are ridiculous enough to keep believing the lies of politicians and to keep ignoring what goes on with money manipulation behind the scenes, you will be destroyed along with everything else.

When that happens, don’t blame your landlord for demanding rent. Don’t blame your bank which demands its money back. Don’t blame utilities which have to be paid for the services they’re providing you.

Blame yourself — for ignoring the warnings and believing all your life that magic was going to save you.

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