Now The Hard Part

| April 20, 2020

Now for the hard part. The disruptions in the financial markets have been largely soothed by the extraordinary efforts of the Federal Reserve. Forward-looking market participants are following the adage “don’t fight the Fed.” Yet, we should all be prepared for painful dips as investors judge the efficacy of government strategies to reopen our economy.

We know that many people object to comparisons of our current efforts to those taken during World War II. Indeed, there are as many differences as similarities. Yet, we face a challenge that is global in nature and for which we found ourselves unprepared. Virtually everyone is impacted and success will emerge only from our collective will. During Vietnam and the many police actions we have conducted since, the burden of implementing geopolitical strategies of choice fell on a noble few, their families and their friends. Vietnam, Iraq and Afghanistan are far away and for most exist only as images on our television screens.

The fact is that we are more cooperative and connected than popular images would lead us to believe. Tim Harford, an economist who writes for the Financial Times, notes that “there are some terrible people in the world, and some ordinary people behaving in a terrible way, but they make headlines precisely because they are rare. Look more closely and the evidence for mass selfishness is extremely thin.”1 Where the comparisons to World War II fall short is by wrongly denigrating our current generation of citizens. Just as our parents and grandparents did before us, we will draw on our innate spirit of cooperation and make sacrifices for the greater good. During World War II, our leaders underestimated our resilience and willingness to help others at our own expense. As Harford observes, the wildly incorrect estimates that the population would collapse in panic during the Blitz matches the severe miscalculation of the number of people willing to volunteer for the National Health Service today.

Correctly estimating the nature of our people will be essential to developing sound policies. Harford recounts how “many people and businesses took voluntary action on social distancing while both the British and US governments dithered.” Long experience with group behavior informs us that when people are told how most others are cooperating, we overwhelmingly cooperate too. Harford concludes that he “would not be at all shocked to learn that scolding reports of sunbathing only encourage more of us to sunbathe.”

We find that the spirit of cooperation is widespread among our clients and our staff. By following the federal guidelines and making minor adjustments, we are able to operate in a fashion at least as efficient as before the Covid-19 disaster. Tax season has gone well in spite of the time requirements unexpectedly placed on our CPA associates as they have answered a deluge of Paycheck Protection Program questions. We have been diligently combing through client accounts to find tax-saving opportunities that may also position us for a recovery. As always, call us with any questions and thank you for your business.

1.) Tim Harford, “In a Crisis We Mainly Keep Calm and are Kinder Than Ever.: The Financial Times, April 17, 2020.