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Post Pandemic World

How life will be different post covid19
May 2020
 Why post pandemic economy will be different?

People who will continue • A sizeable portion of

to follow strict social population will be
distancing nervous to mix freely in
All people = society even when lock
Total consumer market down is lifted.
when people were
moving around freely • It could be mitigated by
without any social People who will go back
to pre-pandemic normal
vaccine or proof that no
distancing in place
life new infections, which are
unlikely as it stands.

Pre Pandemic Post Pandemic

 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.
Breakeven
Variable cost usually increases with volume of
point
sell.
Money £

• A business needs a minimum number of sales

Profit in order to reach the breakeven point. Before
zone that is reached, the business runs at a loss.
Loss
• Every business aims to be in far right of
zone
break even point in order to maximize profit.
Units of products (or service) sold

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.
Money £

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

zone till they have reserve cash (because
businesses go bust not because they make
loss for sometime but because they run out
of cash).
Units of products (or service) sold

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.
Profit
zone
• However, as there will be fewer consumers
Breakeven buying products/services (in short term for
point
sure, if not long term) most businesses will
Money £

take even longer to reach profitable zone.

• Those businesses which requires achieving a
high number of consumers to reach
Loss
zone profitability, may not even reach that point
ever – resulting in folding up of the business.
Units of products (or service) sold

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
Profit = Revenue from sales – (fixed cost + variable cost) – debt interest - tax
Investors’ securities (e.g.
Inflation rises slowly Investors lend house mortgaged against loan)
during normal economic money to values plummet and they Deflation = economy
growth businesses refuse to lend anymore contracts
Businesses borrow
money from
Investors Businesses start getting default
investors and on debt repayment and once
produce savings are used up, business not
products/services Businesses sustainable anymore.

Businesses sell Number of consumers

products/services reduced due to fear
to consumers. Consumers following pandemic. Overall
sales volume falls thus
revenue from sales also falls.

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?
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.

Hospitality,
Transport,
• Some traditional industries will no longer be Sports,
Fintech, Real
profitable. Estate

• Some new industries will flourish. Delivering services

remotely will gain social acceptance and will
become mainstream.
Healthcare,
• Technologies will be great enablers. Technology

• Overall economy may see a deflationary spiral in

the short term.
 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)

• Government can kick start economy by

Falling
demand 1. Reducing interest rate – making it easier for people to
borrow money and invest in economy (cannot reduce any
further)
Less consumer Falling
spending revenue 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.
Unemployment Debt default 5. Wealth redistribution e.g. raising taxes for riches,
increasing benefits to put money to the masses.

Bankruptcy

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 Economic recovery over next
1-3 years
• Take care of your health.
• Be aware of your health conditions.