Governments aren’t leading the people, the people are leading the government, Ed Harrison said during today’s Real Vision Daily Briefing.

He said that both the locking down and opening up of countries in response to the virus has been driven by consumer behavior. We were frightened at one point in time so governments locked down; now the lockdowns have become economically unviable and people can’t take it anymore so governments are releasing them.

The problem is, what’s happening on the ground with the virus will be the real determinant in everyone’s prospects for economic recovery. Where we see new outbreaks of cases, we will see changes in consumer behavior again and that negative consumption will eventually be felt in the financial markets.

Harrison said he’s looking at patterns and trends in consumption – not financial markets – to try and gauge the reality of the situation. He said he expects airlines, tourism, and restaurants to be hard hit with bankruptcies.

Sweden is already seeing a surge in bankruptcies despite being a country with fewer restrictions in lockdown, which Harrison said suggests will be a trend that plays out in other countries in the coming months. 

He also said that suppressed consumer demand would lead to oversupply, which will cause a drop in corporate revenue, which will motivate leveraged companies to try to pay down debt quickly, and we’ll start to see defaults, liquidations, a credit crunch, and potentially debt deflation as a result.

Harrison said that J. Crew and Neiman Marcus are the tip of the iceberg and that we’re now in a phase where bankruptcies are going to continue.