how is it that in times of crisis major businesses will go bankrupt within months? Do they have no savings or what?
In: Economics
Depends which businesses you mean. Fact is at any one time there are plenty of businesses skirting close to the edge of ruin, it’s just that we’re not always made aware of it (or we don’t read the business pages). They’re folding because they’ve already exhausted options. For other large house hold names though (e.g airlines) it’s because there hasn’t been anything like this since WWII. 9/11 and so on were short sharp shocks but they didn’t stop the economy from functioning. The credit crunch comes close, but even then the remedy could be applied to the economy directly, because it was the markets that were unwell. In our current situation the social impact of the spread of the virus is far harder to contain or control. Business are anticipating far far lower sales that they have ever stress tested. That means that for many the only way to adjust to a smaller market is to either shed staff or go bust. Unfortunately putting staff out of work exacerbates the situation.
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