Dear Reader,

Joaquin Salvador Lavado, also known as ‘Quino’ made a huge decision when he was 20.

He moved 1,000 km to Argentina’s capital, Buenos Aires to fulfil his dream of becoming a comic writer. But work was hard to come by.

After publishing some of his works in a few magazines, Quino landed a gig with Mansfield, a home appliances company. They asked him to draw a series of comic strips for an ad campaign.

Their instructions were pretty simple. He had to include some of their home appliances in the drawings and a couple of character’s names had to start with the letter ‘M’. He created a family made up of a mother, father and son that also featured occasional appearances of a six-year-old sister called ‘Mafalda’.

The ad campaign fell through though, and Quino was left with his cast of characters, who he then managed to publish in a magazine in 1964.

Interestingly enough, the little girl was a hit…and still is.

While Quino stopped drawing Mafalda in the mid 70s, she remains a favourite comic strip in Spanish speaking countries around the world.

Mafalda is interested in world peace, politics and human rights. She loves The Beatles and hates soup.

With the classic innocence of a child, Mafalda poses uncomfortable questions to try to understand the world she lives in. Remember, this was at the time of the Cold War. Mafalda raised issues many didn’t dare to talk about.

Here are a couple of strips translated into English:

One of her most well-known phrases is this one, which translates from Spanish into: ‘Stop the world, I want to get off’.

I’ve been thinking about Mafalda this week.

Stopping the world always seemed impossible to me…until COVID-19. Our economic world has effectively stopped, we’ve hit the pause button.

I hope you and your families are keeping well in these times.

The virus is a mega black swan event, one no one was expecting. We don’t know yet what the impact of this economic hiatus will be, but I suspect that when we reach the other side we won’t be resuming from where we left off. I think the world will be different.

Things are deteriorating quickly.

Consumer confidence has fallen off a cliff according to the latest ANZ Roy Morgan consumer confidence survey.

In a ‘recent’ survey, by the Australian Bureau of Statistics (ABS), they showed that the virus has impacted (49%) half of Australian businesses, and 86% expect to be impacted over the next months. The most impacted are (unsurprisingly) in the accommodation and food services.  

I’ve highlighted the word recent above because the survey is from mid-March, which is not that recent at all. As you know, things are moving fast these days.

People are losing employment and money fast. We have commercial and residential renters clashing against landlords on who should bear the brunt of the fallout here.

And the crisis is catching consumers overleveraged again after years of low interest rates and rising asset prices.

Bloomberg wrote this week, we could be in for a global consumer default wave, starting in China:

‘The early indicators from China aren’t pretty. Overdue credit-card debt swelled last month by about 50% from a year earlier, according to executives at two banks who asked not to be named discussing internal figures. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year. China Merchants Bank Co., one of the country’s biggest providers of consumer credit, said this month that it “pressed the pause button” on its credit-card business after a “significant” increase in past-due loans. An estimated 8 million people in China lost their jobs in February.

‘“These issues in China are a preview of what we should expect throughout the world,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.[…]

‘Few places have seen a bigger jump in consumer borrowing in recent years than China, where household debt including mortgages soared to a record 55 trillion yuan in 2019.

‘That figure has nearly doubled since 2015, thanks to a housing boom and the rise of online lenders like Ant Financial. While the firm’s risk models rely on reams of payments data, they’ve yet to be tested by a major economic downturn.’

World debt has swelled to US$253 trillion in 2020 according to Institute of International Finance, with much of the increase in the last 10 years coming from emerging markets.

As you can see below, a large portion of this debt is in the government and private sectors. 

So far, central banks have lowered interest rates and are flooding the system with liquidity. But it’s too early to tell if these measures will be enough to stop the fallout.

We solved the 2008 debt crisis with more debt, and now we are doing the same thing again…

Best,

Selva Freigedo Editor, The Rum Rebellion