Last March, when the government was considering whether to lockdown the economy, we argued that the longer we stayed locked down the more permanent the damage we would do to the underlying economy.
It is now clear that the cost of the lockdowns is immense. We aren't just talking about the $5 trillion in government borrowing from future generations, but the clear damage done to small businesses and supply chains.
The US economy cannot be switched off and on like a light bulb. Every day, countless decisions are made in order to get the simplest of things on store shelves. One of our favorite economic essays is "I, Pencil" by Leonard Read in which he writes, "not a single person on the face of this earth knows how to make me (the pencil)."
Think about it. We all know the simple components of a pencil (wood, graphite, paint,...etc), but it's a complex chain of people and events that put it together. Loggers need equipment, food, and clothing. So do all the other suppliers. Each part of the process depends on those before, and if just one part is thrown out of whack, making a pencil gets harder.
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