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50% of all U.S. Small Businesses Could be Wiped Out by 2021

by John Galt
14.02.2020 23:00 ET

This is not an insane idea. Imagine the largest employer base of American citizens being gone, destroyed, totally eradicated by the year 2021.

Is it by choice?

Of course not.

Will the government be to blame? Somewhat, but it goes far deeper than that.

The outbreak of coronavirus (nCOV-19) also nicknamed the “Wuhan Flu” could be the biggest game changer in world history since the Black Plague of medieval times. The apparent failure of the Chinese Communist government to stop the spread in the fear that it would cripple their economic gains has allowed the genie out of the bottle and slowly but predictably, it is spreading worldwide.

The United States is neither immune from not prepared for such an event. I shall elaborate more on that in another post.

To provide some perspective, allow me to introduce you to Professor Marc Lipsitch from Harvard University who stated the following in a Wall Street Journal article earlier this week (subscription required):

“I think it is likely we’ll see a global pandemic,” Lipsitch claimed, adding that “If a pandemic happens, 40% to 70% of people world-wide are likely to be infected in the coming year.”

Within this quote, let’s parse the numbers just for the sake of argument and analysis.

The United States has an estimated population of 330 million people. A 40% infection rate would indicate an estimated 132,000,000 souls would have to deal with this. With just a 2% mortality rate, that would mean approximately 2.6 million people die. Keep in mind that 2% estimate is a ball park figure because any data from the Chinese government can not be trusted so it could be much higher or hopefully, much lower.

On the flip side, a 70% infection rate would indicate that an estimated 231,000,000 people could be infected and with a guess of a 2% mortality rate, over 4.6 million people would die. While these statistics sound paltry on a percentage basis, keep in mind that 620,000 Americans died during The Civil War, thus making such an outbreak equal to the same death rate presuming a 2% mortality rate.

Either way, the results would send the economy into a great depression and despite central bank intervention and the actions of the government, commerce would grind to a halt. And just who or what entities pay that price first?

That’s right boys and girls, small businesses; who rarely if ever have the durability, capital, or ability to survive such an event. According to the United States Small Business Administration in 2019, employers who have 500 employees or less employ approximately 58.9 million citizens.

If just 50% of those businesses go out of business during such an catastrophe, companies with less than 500 employees failing would result in over 29 million people probably losing their jobs. Also, please remember, the U.S. government would seek to preserve and protect “strategic” and larger companies first, bypassing the small companies to protect political and perceived economic needs first.

And that does not even begin to amplify the side effects of such an event on retirees (the most vulnerable) and the young who were just beginning to enter the workforce. Add in the side effects of a market crash, the obliteration of 401K’s, pension, and other retirement accounts and it gets worse. The domino effects from this would reverberate throughout our society for decades.

A government can provide stimulus, but it can not order an individual to buy a car, a home, much less a boat or an airplane for private use. Foodstuffs will become prohibitively expensive as the agricultural and transportation industries will be obliterated by the lack of global demand and inability to deliver. The luxury, vacation, and other leisure industries will suffer as a result as smaller companies fail, larger ones will also. Manufacturing domestically and overseas will grind to a halt thus leaving only those companies which service medical and government demand as the only viable entities working throughout and just beyond the crisis as it peaks.

The result will be so massive it will make The Great Depression look like a piker.

Think about that and look inwards and wonder:

If we can not trust the Chinese Government to be transparent, how in God’s name can we trust our own with all that is at risk to be just as honest.

Prepare for the worst.