Monday, March 16, 2020

The Reverse-Bill-of-Materials conundrum

This is a reverse-bill-of-materials moment for the economy. A BOM is usually intended to show what one needs to Build something, and often a BOM is largely composed of many 'kits' - sub-assemblies, and that recursion can go many layers down to arrive at the ultimate content. That's what makes such a nonsense of trying to, for example, derive a 'carbon footprint' for a finished product of any complexity - too many ultimate components and thus far too many assumptions needed.
A dis-assembling economy. OTOH, crucially has no BOM's which specify the componentry which will ultimately be affected. So the unravelling of entire sectors (events, festivals, tourism) is inherently unable to be predicted in the precision needed to direct remediable action or arrange substitutions.
That's what makes this whole thing so not-amenable to ordinary economic modelling. Because BOM's only work during Assembly, not for Demolition. Hence the headless-chicken circling seen from prognosticators of all stripes, and from not a few commenters right here on Interest.....
As a thought experiment, imagine an AirNZ engineer, a barista, and an RE salesbot (sorry, Personage). 
  1. The engineer has two mortgages, two cars on HP, an overdraft and significant CC debt, but owns two residential rentals and is now jobless. 
  2. The barista has zero mortgage and moderate CC debt, but a student loan and a small overdraft - little to no other assets beyond a motorscooter, and her boss has just announced a 3-day week. 
  3. The RE bot has a thumping mortgage, no rentals, a large Amex balance, two leased vehicles and a few other toys/assets, and the firm has just cut the commission rate by 50%. 
Now, kindly predict the economic effects of this small sample's situation. Then multiply that by a million.....
And here's the real kicker. It's far, far easier to Demolish than to Build.....

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