Post Pandemic World

How life will be different post covid19

May 2020

www.enselsoftware.com

Why post pandemic economy will be different?

• A sizeable portion of

population will be

nervous to mix freely in

society even when lock

down is lifted.

• It could be mitigated by

vaccine or proof that no

new infections, which are

unlikely as it stands.

All people =

Total consumer market

when people were

moving around freely

without any social

distancing in place

Pre Pandemic

People who will go back

to pre-pandemic normal

life

Post Pandemic

People who will continue

to follow strict social

distancing

How it will affect the businesses?

• Every business has some costs. It consists of

fixed cost and variable cost.

• Fixed cost is set up cost and running costs of

the business even before making any sale.

Variable cost usually increases with volume of

sell.

• A business needs a minimum number of sales

in order to reach the breakeven point. Before

that is reached, the business runs at a loss.

• Every business aims to be in far right of

break even point in order to maximize profit.

Breakeven

point

Loss

zone

Profit

zone

Units of products (or service) sold

Mone

y £

Example: for an airline, the fixed cost is high because. The

difference between carrying 1 passenger vs 100

passengers are not big. Hence, airlines try to maximize

profit by flying aircrafts full of passengers.

What happens during pandemic?

• For businesses other than essential services,

the sales volume is either zero or very low.

• This means most businesses are running at

huge loss.

• They can still survive (i.e. not go bankrupt)

till they have reserve cash (because

businesses go bust not because they make

loss for sometime but because they run out

of cash).

Loss

zone

Units of products (or service) sold

Mone

y £

The government is providing emergency loan to many businesses. But keep in mind, these loans are

to be paid back over time. With reduced sale in future, the businesses are likely to make even less

profit.

What will happen after pandemic?

• Once lockdown lifted people are expected to

go back to normal lives.

• However, as there will be fewer consumers

buying products/services (in short term for

sure, if not long term) most businesses will

take even longer to reach profitable zone.

• Those businesses which requires achieving a

high number of consumers to reach

profitability, may not even reach that point

ever – resulting in folding up of the business.

Breakeven

point

Loss

zone

Profit

zone

Units of products (or service) sold

Mone

y £

The debt burden on businesses will grow over time. A

point may arrive whether the revenue generated can

no longer service the debt (i.e. pay monthly interest

payments).

The economic cycle and debt bubble

Investors

Businesses

Consumers

Businesses borrow

money from

investors and

produce

products/services

Businesses sell

products/services

to consumers.

Profit = Revenue from sales – (fixed cost + variable cost) – debt interest - tax

Number of consumers

reduced due to fear

following pandemic. Overall

sales volume falls thus

revenue from sales also falls.

Businesses start getting default

on debt repayment and once

savings are used up, business not

sustainable anymore.

Investors lend

money to

businesses

Investors’ securities (e.g.

house mortgaged against loan)

values plummet and they

refuse to lend anymore

Inflation rises slowly

during normal economic

growthDeflation = economy

contracts

When banks lend, money is created in economy. So debt

creates money. No lending = no debt = no money.https://positivemoney.org/issues/debt/

How lifestyle will change?

Pre Pandemic Life style Post Pandemic

Large offices

Face to face meetings

Work From Home

Video conferencing

Crowded public transport

No commute (WFH)

Personal car transport

Increase wealth at any cost

Health is wealth

What does it all mean?

• Some traditional industries will no longer be

profitable.

• Some new industries will flourish. Delivering services

remotely will gain social acceptance and will

become mainstream.

• Technologies will be great enablers.

• Overall economy may see a deflationary spiral in

the short term.

Hospitality, Transport,

Sports, Fintech, Real

Estate

Healthcare, Technology

Covid19 pandemic is a flying T-Rex event, meaning hugely

disruptive and completely out of the blue! It has far more impact

than Black Swan event.

What Government and Central Banks can do?

The free market economy model in most countries, is based on Keynesian model.

GDP = C + G + I + (X-M) = Consumer spending + Government spending + Investments + (Export – Import)

Falling demand

Falling revenue

Debt default

Bankruptcy

Unemployment

Less consumer spending

• Government can kick start economy by

1. Reducing interest rate – making it easier for people to

borrow money and invest in economy (cannot reduce any

further)

2. Quantitative Easing = printing more money by Central

Bank

3. Increase expenditure on infrastructure to increase

economic activities and indirectly put money in economy

via people employed to government projects.

4. Debt restructuring e.g. writing off debt full or partially.

5. Wealth redistribution e.g. raising taxes for riches,

increasing benefits to put money to the masses.

How economic machine works

https://www.youtube.com/watch?v=PHe0bXAIuk0

WHAT IT MEANS FOR ME?

• Until you catch Covid19, you won’t know whether its effect on you will be mild or severe. Hence, be cautious so that

you don’t get it. If you get infected, don’t panic and follow advise from medical professionals.

• Be aware that life will be different post pandemic

• At least in short term, if not long term

• Better to accept the changes than resisting it

• Enjoy life – don’t ruin your present for an unknown future

• Evaluate how the changes will affect you.

• If positively then explore the opportunities

• If negatively then investigate how you can mitigate the situation

• Understand how it can effect your long term plans

• Take care of your health.

• Be aware of your health conditions.

Economic recovery over next

1-3 years