Buying used nails: What impact will COVID-19 have on our relationship with money?

As we navigate the COVID-19 pandemic, people are trying to compare this situation to what’s happened in the past. From a health perspective, there are parallels to the 1918 Spanish Flu; but from an economic standpoint, many are bringing up the early eighties and even the Great Depression of the ’30s.

My grandfathers lived through the Great Depression. It was a terrible time: there was drought, economic depression, people were hungry… and it impacted the way that generation looked at money for the rest of their life. I often would joke that, for my one grandfather, it ruined his attitude around money. He was someone who would go to an auction sale to buy used nails and take them home and straighten them. It drove me crazy.

I wonder how this crisis — and we’re not even through it yet so it’s a little premature, but this is a good question —  how does this crisis impact the way that we look at money and risk going forward? You could never plan for this level of risk out there right now. Who had in their risk management plan “what if a pandemic happens this year”? If you said you were planning for this, you’re lying. In terms of spending behaviours we’re seeing right now with consumers, we’re already starting to see dips in demand of certain products in the grocery store and, people losing jobs en masses (there are over 500,000 Canadians who have applied for a deferred mortgage already, and unemployment claims have spiked sky high). All of it is going in the wrong direction for the economy.

I recently heard an economist on Bloomberg Radiosay that when we’re talking about getting back to the previous job numbers in North America, we’re talking about two years. So there’s some substance to what’s in front of us. A V-shaped recovery is less likely than what we heard from J.P. Gervais of Farm Credit Canada; we are talking about a long U, and it will take a while.

Crises impact people differently in many ways, but they are not forgotten. There was the 2003 BSE crisis, it was 1998 for hogs, the 1980s’s for interest rate spikes and farm bankruptcies. Some people learn and adapt from the experience and others are never the same again.

In a recent conversation with Jim Mintert of Purdue University:

“I was on a call not too long ago with a producer who was in his late 60s, and obviously was starting out in agriculture in the relatively early stages of his career in the early 1980s, and he pointed out that some of the things he went through then, and in particular some of the things his dad has gone through and experienced going back to the 1930s, had helped him prepare for some of the difficulties we are currently experiencing,” Mintert says. “Whereas folks that really started their career in the so-called good times here of about ten years ago, maybe are a little bit more challenged, because they didn’t go through a period of stress at some point in their career.”

So does COVID-19 change the way we look at money? All of a sudden, will we start to be penny-pinchers like our grandparents were? Will we start to see people look at debt differently and have more of a focus on working capital? Pre-COVID-19 we were already seeing farmers back away from new machinery but I believe more substantial systemic change in mentality might happen.

Agriculture has always had ups like the 1910s or the 2010s but also severe downs like the 1930s or the 1980s, and those experiences influence the way that we make decisions in the future whether you realize it or not.

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