This worries me. And it will freak out Trump. If the Economy Tanks his chances of another term go down the toilet.
We are mainly talking about Chinese supply chains. Initially, they hoped that severe restrictions and quarantines would control coronavirus and prevent it's spread. This did not work. They will soon force their workers to go back to work with similar draconian measures, hoping to bring economic activity to normal levels, regardless of the spread of the disease. On the one hand, their fledgling economy is not as resilient as those of Europe and the U.S. But their one advantage is that they can force their people to go back to work. Trump and Xi are similar in that they both place economic success and their own popularity above the lives of a few individuals who might die from the disease.
So people ARE the economy. We always see and hear how the “Titians of Wall Street” and the VCs and the CEOs ARE the economy. And how THEY (the anointed) use data and smarts and reason to command and control the markets and the global economy. Nope. One little VIRUS and the PEOPLE staying home (from shopping and work)—and the market traders freaking out (not using reason) and the economy quickly turns into nothing—fast. So when all of this goes away, remember the PEOPLE are the economy. The PEOPLE are at the CENTER of the economy.
7
I imagine it will help a lot of folks that the Fed cut interest rates .5% today. Unfortunately for me, I strongly doubt either of the credit card companies i do business with will lower the interest rate they are charging me.
4
The Hate Bernie effect has been in play.
Feb 22, he won big in Nevada. The market tanked 3000 points through the following week. Biden won in S. Carolina on Saturday, Feb 29. The market went up 1000 points on Monday.
The next day, the overwhelming speculation was that Sanders would sweep super Tuesday that evening. The market tanked again by 800 points.
As the reports came in during the evening, showing that Biden was winning the early states, the futures have flipped from several hundred down to 200 up----The Hate Bernie effect.
Wall Street hates the prospect of a Sanders presidency.
I agree; he would be pariah to the economy.
1
Why did you bring in politics.
1
A lot of hype and speculation here. It's hard to believe that markets weren't due for a correction even without the supply issues this epidemic has created. Market valuations may have been artificially high due to the prevalence of unduly low interest rates and the debt-driven consumption growth they have been fueling. All such bubbles run their course and correction ensues.
Based on previous experience it is likely that the supply interruptions will be temporary. While it may cause some business bankruptcies, it's a long leap to say this will induce a general economic recession. The growth rate is likely to dip, but that isn't a recession. Not to say that a recession can't happen, but perhaps not for the reasons emphasized in this article.
1
Many small businesses, restaurants especially, barely get by. The inevitable slowdown in business that is going to happen will cause many of them to fail. My family will not be going out to eat until this thing blows over.
4
This is a bit tongue-in-cheek and I fully understand the repercussions of a large downturn in demand - but I think many of us can use a valuable lesson in just how well we can all get along with all the stuff we already have at home.
6
An intellectually stimulating read and laid out well in layman terms. A few of the top comments provide interesting takes from readers too..In this context, would call this article an ironic stimulus!
5
First, I think that Professor Sanders doesn't understand economists very well. Perhaps some of those who are most in the public eye "don't know how global supply chains work," but that should not be used as a broad brush. Many (most?) of us are quite aware of the supply side of the economy, including from a policy perspective; we've been raising red flags for decades. (Besides, ask her whether it was specialists in "supply chain management" who first came up with the basics in her field, like EOQ, and where she thinks her profession would be without the groundbreaking work of economists in her own field. Uh, huh.)
Second, Mr. Irwin, do you really think that lowering interest rates is going to induce banks to loan more money to unemployed consumers or firms with insufficient cash flow? I think not. The Fed can't fix this.
Do you really think that more government spending is going to suddenly stimulate supply? Fiscal policy can't fix this (and besides, one side of the aisle would start screaming about deficits again).
"Supply-side economics" has always been a sham, except in a centrally controlled economy like China's. How has it been working out for them lately?
We are entering into an unprecedented phase in macroeconomics, and the tools to resolve it aren't yet available. However, do you think that anyone other than economists are going to be able to propose viable solutions? Again, I think not.
(Neil, I know that you can do a lot better than this article indicates.)
3
Even before signs of an economic slowdown or a pandemic appeared, the traditional tools to blunt & reverse a recession (i.e. fiscal stimulus & monetary easing) were fully deployed in the US to prolong the economic recovery until the 2020 General Election is over.
With the 2020 US Federal deficit projected to be one trillion dollars & monetary easing already at historically aggressive levels, little room remains to safely deal with a deep recession should this now threaten.
Domestically & internationally, the Trump Administration will be justly to blame for the economic damage its lack of foresight will likely cause.
15
So let's say the Fed stimulates the economy so that my job stays secure. Is that supposed to overcome my reluctance to travel to Italy, or travel in the US for that matter? In fact, all in all, I think I feel safer staying home and streaming movies than going out and engaging in crowded, virus-filled shopping centers. I am just not getting how Fed policy can fight an economy set back by a pandemic.
2
@Scott Werden to a point, your consumption will simply shift from public venues to at-home ones (Netflix, Amazon Prime, etc.) so it's not a partial offset. Agree that certain sectors will definitely get slammed like leisure and hospitality
Normally, increased unemployment pushes down personal earnings, which reduces consumer demand, and prices then fall in response to the reduced demand.
Normally, shortages of goods drive up prices for those goods if and when they are available.
If the worst were to happen, supplies of goods would be reduced which tends to push up prices for the few goods available.
If unemployment or shortened work hours increase because the raw materials needed for gainful employment are lacking or because people are told to stay home for fear of getting infected, that would simultaneously push down personal earnings, making those purchases even more problematic.
The net result could be inflation (rising prices for the few goods available) combined with reduced personal earnings.
At worst, that amounts to no goods on the shelves, high prices when the goods do appear, and little money in the hands of the public.
They have conditions like that in Russia, don't they? Hmmm ...
3
The conventional wisdom is that the major effect of the virus will be supply disruptions. I think the demand shock is being way underestimated. If or probably when the virus breaks out in the US, people are not going to shop for anything but daily necessities. Car sales, movies, home sales, and on and on will drop off. Netflix and food delivery will be fine, but overall consumer demand will drop as people stay home and put large parts of their life on hold. That sounds like a pretty big demand shop to me.
1
So what should the President and the Fed be doing?
1. Encouraging companies to follow the WHO and CDC guidance on workplace practices, which are basically to work from home, wash hands a lot, make employees whole if they stay home due to illness, and avoid travel.
2. It's time for the infrastructure bill! A real deficit-financed bill, making lots of wind farms, replacing coal plants with gas plants, and making buildings energy efficient.
3. The Fed should be prepared to print money to pay for mortgages, car loans, and student debt. Let's also see a half-point (50bp) cut in rates if this gets worse.
4. Do a real supply-side stimulus: pay for college and trade school (human capital), and do a 25% tax credit for industrial equipment (fixed capital) and software investment.
5. Get a competent team with a regular media communication window so we can get the response organized and let everyone know the smartest people are in the (virtual) room.
10
Thomas Friedman wrote The World is Flat in 2005 about the globalization of the economy. The current economic crisis is driven by the supply chain disruption. There is no short term solution. Unlike the financial collapse on 2008 driven by subprime mortgages, the worldwide shutdown of industries due to the coronavirus cannot be mitigated by government bailouts.
7
I've been sick of cheap, shoddy goods made in China for years, now we have a killer virus, also made in China, and causing a recession because we can no longer get the cheap, shoddy things China makes. This situation would be ridiculous if it weren't so serious, and exemplifies why in the game of Globalization we are all losers. Why do we have to live in a "global village" and be "interconnected"? Only downsides to that!
4
@Roberta
Apple- cheap? Shoddy?
5
@Mattie
We showed them how to make quality. They've started using it against us.
5
I can remember we said the same thing about Japan 60 years ago. China will climb up the quality curve soon enough.
6
I am still pondering but it seems more likely today that I will have to cancel a business trip to Edinburgh in six days. It's a prepaid trip, and as travel insurance doesn't cover pandemics, I'll be out that money. Scotland has a new case but according to the UK information site it is is anticipating others.
W.H.O changed the UK's status yesterday from low to moderate risk due to an increasing infection rate throught the UK. That's not why I'm canceling. I flew twice as soon as flights reopened after 9/11, just out of cussedness. I was intending to go last week.
But I have had a bad cold. I am still coughing and hacking, far less often but on occasion. I'm afraid I will be pulled out of line in one of the airports and put into quarantine. That would terrible given my work schedule right now.
However, I did learn today that the UK National Health Service will not charge foreign visitors for virus checks.
I don't have that virus, but it's a measure for the safety of the British that this policy is in place.
Nothing like the US "sink or swim" method of telling people to show up for screening and then charging $1400, as happened in FL.
15
Its time we learn two leassons out of this situation. When it comes to deseases, there are no boundaries due to the large number of people living on this planet, horded in mega cities (high density living) who can travel easily and cheaply across continents. Stopping a contageous disease requires full transparency and cooperation across borders.
And when it comes to business we need to spread assets and capacity for critical components / products to multiple regions instrad of concentrating it in one country. With our integrated supply chains focused on efficiency and lowest cost, we have largly ignored the inherent risk of concentrating capacity. Exposing ourselves to huge supply side shock risks.
Now these solutions are simple in theory and practice. But do we have the political will to open up and the economic will to pay a few cents more to stavenit off?
6
They say that wet markets cram live animals like edible bats and edible pangolins in close proximity.
Is it time to stop ridiculing animal rights activist and vegetarians?
Food for thought. Bats should not be food for humans.
14
I'll be very interested to see how the American tax payers get to bail out industry this time. Surely it will be the responsibility of the serfs to save the greedy overlords one more time, and every time, because that is what slaves are for.
I say more tax cuts for the rich so they can build bunkers to live away from us filthy masses. They will need those for the climate change catastrophe anyway.
20
Please enumerate exactly what will we not have enough of? Hens keep laying eggs. There should be plenty of grain the them silos. And cows and bison to slaughter. Less Fiji water would be a godsend.
Less clothing and shoes-- OMG someone is going to wear hand-me-downs?
Yes isn't it interesting how the CEOs convinced the govmt tht drugs should not be made here - ditto commuters. #how stupid and greedy can you be.
Ever heard of sow, reap... or is all about lowering interest rates and making Wall Street the only game in town... Lower is safer thus better.
3
@Anna
It goes deeper than that. Sure, the chickens keep laying eggs, but what happens when the machinery that sorts the eggs needs a spare part or the high calorie chicken feed runs out? What happens when the truck carrying them needs new tires or needs brake-pads that are made in South Carolina but the metal blanks for the pads and steel belts for those tires are made in China? Or, we use Indonesian rubber, but the processing plant in Thailand doesn't have spare machinery? Etc.
It takes a mind-boggling number of people to get those eggs from Indiana to your local Whole Foods. Like it or not, we are all in this together.
11
Prescription medications is one thing...toys, clothing, electronics....and China normally buys TONS of our products- when they have money to spend.
3
@Anna Where do you think all those generic pharmaceuticals are made? China. We don't make them here. That's why they're so cheap; they're made abroad and mostly in Asia.
Do you like paying several hundred dollars a month for the branded drug when you could pay less than $10 for the generic? Of course you don't. And your insurance certainly won't indulge you by paying for the branded medication.
So have at it.
Wow been reading for a while and haven't seen a single commenter call this article for what is: 100% speculation that contributes to the overall media effort to panic rather than calm the populace.
1
Paul
Knowledge is power. We need to be kept informed by people like the CDC and WHO.
6
@Paul
You sound like you're inches away from calling the virus a hoax, as Trump has done multiple times.
5
@Semper Fi Yeah, we do need to be kept informed by people who know what they're talking about.
Sadly for us, all information has to be cleared and released via VP Pence's office. Pence doesn't believe in science. He doesn't believe in evolution, doesn't think tobacco causes cancer and shut down Planned Parenthood in Indiana, only to see HIV cases increase dramatically.
Heaven help us all.
2
Companies aren't going to just pay everybody when they're not working. They're going to staunch their own bleeding by dumping payroll asap. Besides, many folks are self employed, or on commission or what not. Finally, the companies themselves will drastically cut spending. So there's also going to be a demand shock, as everyone either quickly loses income or prepares for the axe.
5
Goldilocks economy has been the name given to an economy with good growth but surprisingly low inflation.
It would seem to me we could easily see this turned upside down:
A supply shock could set off stunning inflation at the same time as the economy contracts.
What will we call it? The three bears economy?
Or just Woe unto us?
5
@kvolpert
It already has a name: "Stagflation"
It has been 40 years since we saw it and had to deal with it, far more than long enough for the memory to be extinguished from the public consciousness.
Those who do recall it remember that it was a tricky problem to solve, and required leadership, will, and wisdom.
5
@Econ John
Last time, solving it decimated American industry as Paul Volker set the federal funds rate to 20%.
2
The equation is pretty simple, if you don't have the component parts you cannot build your products. No products equals no deliverables which equates to zero profits. Companies used to second source their supply chain, but with the low costs and reliable shipping from China many have not and if they did second source those sources more than likely are one of the Pacific rim countries which are also affected.
Mr. Irwin is absolutely correct, lower interest rates will not help companies if they don't have products to ship. This is no Democratic hoax this is a fact of life.
This will eventually pass, but it will do some some damage to our economy whether Trump likes it or not.
17
This is a perfect time for SCOTUS to rule the ACA unconstitutional, and toss those on expanded Medicaid off their insurance. Another few million uninsured will certainly help this crisis.
3
This shows how fragile the stock market is, a house of cards. While he who must not be mentioned, occupying the White House, calls the new virus a hoax. They say a country gets the president it deserves...
20
This economic downturn is a perfect storm of factors-
1- An overvalued stock market that was ready for a correction under any circumstance.
2- The impact of the virus on international trade.
3- The impact of the virus, likely soon to begin here, on going out to restaurants and events, resulting in lower profitability for companies and lost jobs.
Note that all of these are separate from our healthcare preparedness.
10
Hey, Reaganites, government is the problem. For 40 years you demanded government cuts.
Time to deal with coronavirus on your own.
30
@BWCA
"Government is your enemy, until you need a friend"
Former Senator William Cohen (R-ME)
21
Is it true that the coronavirus is more dangerous than any other infectious diseases? Don’t people fear extremely so that recession comes? How vulnerable our society and economy for unseen threats!
1
@ Matsuda
The threat may be “unseen” as in not visible, but pandemics have been predicted. Our governments need to do more to be prepared.
2
Restarting supply chains obviously is key. The Feds have pretty much everyone's address from their tax return. Send a check for $1000 for the first major step down in GDP or similar test of economic activity. Thus folks can pay some rent/car payment and so on. Declare a 2 month moratorium on various debt payments, with Fed liquidity loans available to banks. Make working capital at a very low interest rate available to some critical businesses like dairy production, transportation, the usual to farmers.
The Feds directed the entire US economy during WWII from rationing to major weapons innovations. If we could do it then we can do it now.
14
Supply shock is what happened from the oil embargoes in the 1970. That led to stagflation and economic pain for most Americans. Sadly I doubt that many members of the Trump cult remember that. Thanks Trumpkins.
12
The government haters wanted Trump. Now they expect "government" to help?
40
It is rather calming to see the recent Warren Buffet interview. He is wise to look at the long view. In part of the interview he said the market was heading for a correction anyway; the virus happened to come at the right time to be the catalyst; if it was not this it would have been something else. Of course Trump claiming credit for the stock market means he will accept the responsibility when it falls. Right? Wrong.
This why Presidents including Trump are told not to take credit when it is riding high.
But of course this will be everybody else's fault.
Here is the WB interview. It is very calming:
https://www.youtube.com/watch?v=JvEas_zZ4fM
10
Everyone believes the sell-off is virus related. Can we stop and imagine for a second that asset prices were driven unsustainably too high? I mean most people in America are living paycheck to paycheck, the wealthiest few own more wealth than the bottom half combined, and somehow that adds up to a stock market that should continue an 11 year run? This needs to be fixed before America heals. CEOs can’t make 300x the median employee before America heals. Corporations need to pay more I tax before America heals.
21
When (not if) the Fed lowers rates again in response to the China virus, it will be a mistake.
Lowering rates is normally done to stimulate consumer demand and business investment. But when the reduced demand and investment is because of this China virus, there may be neither increase in consumer demand nor in business investment because consumers will not be spending on the typical items of consumption when they are confronted by the risks disease from doing anything in public. Business investment will not occur because even if lower rates ameliorate the disease caused decline in consumer demand, the total demand level will still be much below current level.
All that will be accomplished by lowering rates is that stocks will become even more over-valued compared to the reduced earnings of the companies. That may seem a positive response, but it simply means that the eventual fall in stock prices will need to be even more severe in order to return stocks to reasonable values.
Other measures to stimulate the economy, like increased government investment in infrastructure would also likely fail to increase demand. Alternatively, if any stimulus measures, monetary or fiscal, did succeed in stimulating the economy then that would be counterproductive for control of this China virus since increased economic activity would mean increased interaction between people and increased opportunity for the China virus to spread.
4
The virus itself is not Trump's fault. His calling it a Democrat hoax is blameworthy. It makes you wonder about the other so called hoaxes. It is a colourful word with that x in it. That is why it is his go-to word. Well he went to it recklessly because it obviously NOT a hoax at all.
Rather hysterically Don Jr said "But for them to try to take a pandemic and seemingly hope that it comes here, and kills millions of people so that they could end Donald Trump's streak of winning, is a new level of sickness."
That is the ultimate straw man- to claim that the Dems want millions to die; ludicrous because they would want their own deaths as well. With Don junior saying that and Daddy Don calling it a hoax the market IMO is reacting to the uncertainty of a good response more than the illness itself.
18
Coronavirus may be new, but Murphy's law has been around for ever! The Central Bankers led by the Fed has been pumping the market for more than 10 years with QE and super low interest rates. There is no yield on any remotely safe asset so investors have been pushed further and further on the limb in their hunt for yield. Greece is borrowing money for 10 years at less than 1% per year interest! The world is drowning in all kinds of dubious debt, Junk Bonds, Commercial Loans, Sovereign debt. Investors have forgotten about risk in their hunt for yield. Suddenly there appears a 5-Sigma Black Swan event which is what the Coronavirus is. Guess what is going to happen tomorrow morning when the markets open. Everybody will try to dump all this iffy debt and run to the safety of cash or treasuries. We will soon find out what the value of all these assets are when everybody is a seller and there are no buyers. The hubris and stupidity of the central bankers will be taught in textbooks to future generations.
4
@Rahul
Murphy's law is nonsense.
Think of all the times something could have gone wrong, but didn't.
1
So...Republicans who wanted to keep service industry wages down can celebrate? After all, those people losing their jobs won't decrease goods purchased...since salaries were too low?
Only when Covfefe-19 means that Republicans can't get an Uber driver or a double cheese to go will they care.
13
If Pence were the God-fearing man he claimed to be, he would have had it in him to tell Trump that he wasn't the person to oversee the Coronavirus response.
20
A coronavirus recession could have very deep negative impacts in many economic sectors.
Consider, for example, what is going to happen to the travel and tourism businesses as more and more both business-oriented and vacation trips get cancelled.
This will cripple the airlines, hotels, convention venues, tourist sites, restaurants, rental cars, taxis and other for-hire driver services etc. Many of these business survive on very tight margins and have little capacity to outlast a business slowdown.
Of course, then there will be the follow-on effects on the insurance industry. Take for example the costs to pay out on business interruption policies.
7
I don't think that people really get the difference between a supply side shock, and a decrease in aggregate demand.
With a supply side shock you invariably end up with inflation and lowered real GDP, in other words simultaneously high unemployment and inflation.
You can't use the demand side tools to stimulate consumption spending or investment, because it will cause more inflation. That leads to an inflationary spiral compounded by a deepening recession.
It's not likely to come to that, at least I hope not, but I believe all the people thinking this type of problem can be fixed with an interest rate cut or increased money supply are mistaken. In fact, the opposite is required.
That's what Volcker realized would slay the stagflation of the late 70s. You have to hammer inflation with high interest rates and open market operations selling high yield bonds. Anything else is folly. Look it up.
14
It’s funny how we don’t need experts on pandemics... until we do. Just like the Fed doesn’t need high interest rates or a low national debt during times of plenty...
10
Invisible Man
Exactly. That TRILLION dollar debt, created unnecessarily by trump so he could bribe or payoff the rich, will cripple our ability respond to national disasters and emergencies, let alone maintaining our infrastructure, which includes the public health system, the CDC snd the NIH.
5
I keep reading that the Coronavirus virus is no worse than the flu. But I’ve never seen healthcare providers wear hazmat suits when treating the flu. I believe other people are suspicious as well. A recession may be the least of our problems.
19
@Sue
Agreed and we don't stop air flight each flu season. Somehow I was not reassured by Pence this morning.
11
@Sue
Health care workers who treat influenza patients usually have been vaccinated against that particular strain. Consequently they have little need for hazmat suits.
There is as yet no vaccine for coronavirus so these medical people need to take extra precautions.
There's a logical explanation no requiring speculation.
11
@George S.
Thank you for that explanation. I think I just learned more from your one comment than I have from all of the Administration's messaging.
7
If Corona virus becomes pandemic the middle class would pay dearly financially. The rich can stay home and weather through.
Exactly, what these African Americans were thinking when they backed Biden? Are these people still mentally enslaved?
Medicare for all is to go to emergency and checked for coronavirus and not get slapped with $3,522 (negative result) as some reported.
Rich exploits the middle class and the middle class willingly let them do this.
8
Perhaps people will figure out that they don't actually need a lot of the STUFF they feel they can't possibly live without, such as ahi steaks, the latest gadget, or a new car.
Perhaps people will figure out that the globalized economic model that brings them all their can't-do-without STUFF, also means they are dependent on foreign sources for stuff they actually do need, such as many medicines and medical supplies, a supply chain out of our control.
Perhaps people will figure out that if they lessened their consumption of all the latest STUFF, it would do much to lessen anthropogenic global warming, more than the feel-good banning of plastic straws for instance. ["Dramatic fall in China pollution levels ‘partly related’ to coronavirus"; https://www.theguardian.com/environment/2020/mar/01/dramatic-fall-in-china-pollution-levels-partly-related-to-coronavirus]
Perhaps I'm just doing you-know-what into the wind. No, make that likely.
7
All good points and should be at the forefront of our thinking vis-a-vis China going forward. The real possibility of recessionary economic contraction given already disruptive actions in supply chains in the short term is the existential political/economic question: do you want less risk through democratizing it or more risk posed by cheap authoritarian thugs.
3
i am heavily invested in the stock market. my mutual funds were barely effected but my stocks all tanked last week. my netflix stocks seem the least effected and i’m reading my 3m stocks may actually go up because they make face masks. but i went from 290k to 260k in a week. losing 30k in a week is pretty mind boggling to me. on the one hand that’s a huge amount of money relative to my income and lifestyle, on the other hand with stocks they’re only worth what the market says they’re worth and i still have way more now than i did 5 years ago. i have enough cash to live off for 6-9 months even if i don’t work a single day and my expenses are low so i am not in immediate financial trouble. i had at some point wanted to sell my stocks to put a down payment on a house but where i live housing is really inflated. i am conflicted if i should sell my stocks now before they go down more or wait out the panic until things calm down. i know that my problems are hardly dire. but i don’t care about any of the companies i’m invested in it’s just been easy money for a while and i’m priced out of real estate.
3
@kate The best method for losing monies in the stock market is to sell low (when everyone is selling) and buy high. The second best way is to try to time the market and forecast how much further down it can go and when it will start going up. In other words, don't panic.
8
@kate it would be unwise to sell, that's for sure. However, I am NOT a financial adviser. Seek one out if you think you should.
2
@kate
From 290K to 260K is 10%, about what a normal correction is the market would do to you. I expect more market drops this week.
You say your mutual funds were fine, but your stocks tanked? Mutual funds are bundles of stocks, bonds, etc. Buying individual stocks seems pretty risky for you, perhaps index funds and stay in mutual funds. Picking stocks is like fortune telling, only the fortune teller wins.
8
The economic impact of this panic will be quickly nullified once the panic ends. The new virus, according to the NJM, is perhaps somewhat more deadly than the common flu - although possibly not -- and can be handled with a similar prophylaxis.
Trump is right to stick with what we know and not treat this virus as the Plague. The economy will recover more quickly if the Yellow Press M/M takes an approach similar to the president.
2
@Observer
What are you talking about! The lethality and infection rate for this virus is comparable to the Spanish Flu.
7
Trump thrives on chaos.
Who is happy now?
5
@Leslie Shulman
That sounds like a line from Joker.
Who is laughing now?
2
really powerful article !!
lets hope marshal law isnt on the table,,,,,supply would be rationed, and demand high...for everything.
to bad the US corporations, took profit (and consumers took low price) over american made goods.
as the author says, the USA has become a service industry, i cant really name many things, totally made from the raw material to finished goods made in america , can you?
6
On the plus-side, global recession will reduce carbon emissions. It is already doing so in China, which is far-and-away the world's largest consumer of coal.
8
As the virus spreads, a not insignificant portion of the public with the means will in effect self-quarantine itself and this will not insignificantly suppress demand. It’s hard not to forecast an economic downturn, especially with an inept and untrustworthy WH at the helm.
19
You focus upon a supply shock, but in this case it is combined with an even more severe demand shock.
The most obvious one is that the world’s largest consumer market - China - is no longer engaged in tourism and travel. So, bye bye, airlines and hotels and restaurants and all the luxury goods businesses that rely heavily on tourism, first. The rest of the world will soon follow suit on this.
Then we have, along with production and, let’s mention, agricultural demand shock, non-tourist transportation shock. The demands for goods in all these sectors have already dropped, substantially.
We’ve also already seen energy demand shock, with oil prices already plummeting, and on the verge of bankrupting the oil industry in the US, along with everywhere else.
People will need food and shelter, but not much else, as we try to isolate ourselves from the pandemic. This precipitates a demand shock for new and resale housing, the auto industry, all consumer goods industries, all arts and restaurant industries.
The demand shock is likely to be far deeper, wider and catastrophic than the supply shocks.
I don’t see a way out of the abyss here, unless and until the pandemic passes. That may well take 1-2 years.
14
Monetary easings or incentives such as interest rate cuts will do little to help sustain economic activity. They will prop-up investor confidence and corporate resilience - but only for so long, a few weeks at most.
Eventually, the economy will succumb to resistance and friction -- inefficiencies -- caused by people out-sick (or supporting those out-sick). Companies need people to produce goods and services. COVID-19 reduces the number of people able to work, and their efficiency at work. All production will be decreased. Productivity is indicated in metrics, especially metrics of the economy.
Our national and world economies will suffer, slow down, and enter recession-territory -- caused by the worldwide COVID-19 spread. It will become a pandemic. It will affect every street-block in every county, every state, every nation, every continent.
We in the US lack a competent president or administration. They are anti-science, and they fear "negative" (but reality-based) news that makes them look "bad". They are working to hide and suppress information -- that can save lives.
This virus took hold so quickly because Chinese authorities originally, and even now to a lesser extent, hid the truth.
trump will also hide the truth.
trump will tank the economy, because he's culled the government's qualified experts, replacing them with unqualified sycophants.
33
Looking back fondly to a time when a virus was something that happened to your computer.
7
"The big problem was economists don't understand how global supply chains work..."
That is simply a stunning statement, and a scathing indictment of the field of economics.
7
I’m struggling to understand the NYT here. Seems sensationalist at best. The market has been due for a correction and it turns out this virus is far less deadly than once assumed. I don’t see people losing their minds over the flu every year. Call me when we are at risk of 10 million deaths. Hasn’t happened and won’t happen. Until then this is just way too overblown.
5
@Greg Giotopoulos
The "correction" that economists talk about is related to valuation relative to profit, not due to an unforeseen global pandemic causing severe disruptions to core segments of the economy.
We should see a second "correction" to deal with that matter, separate from the pandemic, which leads to real questions about when the next recession is coming — or perhaps even a global depression, if the virus has a deeper impact than anticipated.
3
@Greg Giotopoulos
Hmm I assume you mean 10 million Americans. According to the current estimates you should be right. Given there is no immunity to Covid-19, the experts estimate that 1/2 of the population may get sick. With the current estimate of a mortality of 2%, this would sum up to just 3.3 million death in the US, way below your threshold to become concerned. However, that's about 50 times the number killed by the flu (only 15% of the population got sick due to partial immunity and vaccines). Hopefully, the estimates for Covid-19 will turn being too high, but still reason of concern for most people.
7
@Greg Giotopoulos
Flu has a lethality rate of 0.1 % and an infection rate of 1.3 %. Coronavirus has a lethality rate between 1-2 % and an infection rate of 2-3 %. Both rates are closer to the rates for the Spanish flu which killed 30 million people or 1.7 % of the world population in 1918.
5
"Multinational companies typically operate complex supply chains, with lean inventories and essential merchandise that often arrives just in the nick of time. " This kind of system is inherently unstable. Efficiency is not the only virtue.
7
Trump should be very careful about short sighted predictions. If as he asserts, the coronavirus were to "disappear" this spring with the arrival of warmer weather, as many flu-like viruses in the past have reportedly done, is there not also a significant risk that this coronavirus will also follow this flu-like pattern in the fall by returning in force with the cooler weather; that is, just in time to influence the election.
5
@RMiller Trump's predictions are wordy, he seems to cover every possibility with an intentional emphasis on the positive outcomes. He also said it could get a lot worse. Don't get pulled into his emphasis on the more positive outcomes. All I get from his predictions is he has no idea, here's some possibilities, and these are the possibilities I prefer. Useless.
2
the thin edge of the wedge has begun!! went to costco this morning and it was WAY more busy than usual. Checker said that in California they had lines around the building before opening. but still very well stocked.
.
6
The most urgent measure now is to declare and enforce that testing for this virus is free of charge for the patients who request it. Otherwise, the great majority of cases will stay undetected. How early this is implemented will make or brake efforts to contain the spread of the virus. Unfortunately, this will not be easy, as it reveals the Achille's heel of the current health economic system in the US.
28
@SA
Testing? Free of charge? But that would be socialism.
8
Trump and the Republicans are far more dangerous to our lives than any virus could be.
17
@DSD they say the same thing about Democrats. And the vicious cycle continues
The Fed should stay out of this unless Powell has a cure for the virus. More rate cuts would do nothing but fatten the already overflowing wallets of the wealthy. But then, that’s what The Donald wants.
17
Duh. You don’t need a PhD in economics or finance to get this: Tax cuts and lower interest rates will not put sick people back to work. They will not put travelers back on airplanes and in hotels despite ‘travel bans’ and individual misgivings about exposure to the virus.
They will not fill movie theatres, sports stadiums, nightclubs and concert halls that people will avoid ... well, like the plague.They will not reopen schools. They will not make up the lost productivity as tens of thousands stay home from work with symptoms they ordinarily would try to ignore, and as factories and offices close.
Unless the Fed, Congress, the White House and the IRS are developing an effective, affordable vaccine and effective, affordable anti-viral medications for those already infected, there’s precious little they can do to pump up the economy or the financial markets.
And that’s not even considering the fact that the usual tools — tax cuts and easy money — already have been spent and pretty well exhausted to polish a certain President’s apple. You know, that guy who claims he created the biggest, bestest, fastest, most fantastic, growing economy in the history of the world?
We were already at the tail end of a slow, steady as she goes, decade-long expansion. This likely will bring it to an end; and also will dampen the somewhat irrational consumer confidence — in view of stagnant wages and mounting debt — that was keeping the expansion running on fumes for the past 18 months.
22
@chambolle You are mostly accurate but a correction is needed. We are PAST the tail end of an expansion that lives on only due to a massive 2 trillion dollar (or more) giveaway to the very rich, marketed as a tax cut benefitting all Americans.
Was it really neccessary to add several trillion to our already staggering debt for economic growth rates less than under Obama?
This is a question every Democratic candidate should be using as part of their campaign messaging.
12
@chambolle So far our politicians are seeing the usual crowds. Maybe that will end soon.
2
Inflationary factors are an obvious fallout from this also, since a supply shortage would result in price boosts by those who compete for the remain supplies before certain things come to a grinding stop due to lack of supply. (This is more of an issue with items that are discretionary expenditures, but imagine if pharmaceuticals that access chronic conditions are facing a supply pinch. That just adds another punch to the coronavirus.)
Countries may need to decide quickly that not pinching supply chains is more important than restricting the flow at the border to slow infection arising from infected people entering the country. The type of broad quarantining that China used is unlikely to work in non-authoritarian countries. What is needed then is voluntary quarantining of infected people in their own residences, and with a big injection of money from the government to carry people over the infected period when they will be out of work. The majority will pass through this thing relatively unscathed, but there will be vulnerable people who have higher likelihoods of it causing serious issues or death. (In some respects allowing the strong and healthy to get it and then passing through to becoming immune - and a natural firewall - would not be a bad thing.)
This thing is going to be extremely challenging, and I'd feel a lot better with a science respecting POTUS at the helm.
11
@Nicholas
"In some respects allowing the strong and healthy to get it and then passing through to becoming immune - and a natural firewall - would not be a bad thing."
Really?! Since obviously there is no way to get only the "strong and healthy" infected, your sentence seem to consider the loss of the "vulnerable" as acceptable collateral damage. Being in the 70-80 age bracket (up to 4 times higher risk), I do consider it a bad thing...
And your premise is also wrong. We do not know if having survived Covid-19 gives immunity and for how long. Many corona viruses do not, e.g., those causing some the common cold. So you cannot count on any firewall to protect the economy...
I suspect a disruption in supply chains is our biggest worry. In spite of Trump and friends this fear was not generated by Democrats. It was a shock to an already bubbly market.
The virus will run its course but I suspect the economic disruption will last at least a year maybe more. I do hope Americans judge their media personalities and politicians on how they behave in the next year. Will they unite the country or work towards even more division.
12
In essence, this virus will cause our behavior to mimic what the world has experienced in time of world war and/or great depressions. We are faced with the choice that will test our ability to cooperate with one another. Regardless of the shared economic pain, our best approach will be to recognize upfront that we are all in it together. World leaders would be wise to announce this fact early and behave that way for the foreseeable future. The faster that a safe vaccine is developed, the sooner we will be able to turn the tide on this brewing catastrophe.
11
@USNA73
According to the Trumps the democrats are in it together. Leave Donald out of it.
2
Vaccine is needed before it mutates.
4
Once it mutates you need a new vaccine- each time it mutates you need to update the vaccine
With the novel virus the first thing I thought of was how would Bernie handle this crisis or any other crisis, if he were president??? Bernie's performance in South Carolina was hurt by novel virus and the great fear of having Bernie as president during a crisis. Most people can't even imagine Bernie handling a crisis of this nature.
2
@David Interesting how you project your opinions onto "most people" and the outcome in S.C. Do you have *any* objective basis for these claims?
I think all of the democrats now running would do a fine job of this, because all of them would be surrounded by first-rate science advisors and cabinet members, as Obama was. Trump doesn't even have a science advisor, and his cabinet is full of sycophants. All of them are capable of rational decision-making that focuses on the needs of the nation, not on narcissistic nonsense.
19
@David
Medicare For All would be a much stronger way to fight a pandemic than our current Great American Healthcare RipOff system.
With tens of millions of uninsured and underinsured Americans afraid of medical sticker shock , the number of undiagnosed and untreated Americans will mushroom.
Heckuva job, GOP !
19
@David
Well, I partly agree with you about Bernie... but still, he'd sure be better than Trump. I am quite scared about where this is likely to go with Trump and Pence dismissing science and otherwise mismanaging things. This is a potentially very serious challenge and I sure wish we had someone who actually uses their brain in charge.
9
..but unlike China most of the American economy does not “supply” anything. It’s all services, most remote, digital bureaucratic stuff.
3
@Me
"Stuff" like food? We still have a massive agricultural industry.
1
This article was surprisingly uninformative. It kept on alluding to it, but never explained with a meaty example, say, pharmaceuticals, how Supply Shock, would come into play.
Please get someone who understands logistics and supply chains to write the next article on this subject.
12
@Richard - How do you think that all of the things you buy at Amazon and Cosco and Instacart come into being? The complexity and interconnectivity is enormous. The food has to be harvested, transported (in trucks that rely on a steady supply of parts of fuel), processed (using ingredients that constantly have to be themselves produced and acquired), packaged (again, using things that rely on their own supply chains), transported again, put into warehouses and stores, and picked off of shelves. And that's a far less complex chain than you find with medicine or electronics.
But in any event, even assuming all of that happens, I hate to break it to you but the "delivery gig employees" are amongst the MOST likely to get sick, as is anyone who spends their days incessantly interacting with people and surfaces, under immense time pressure so unlikely to use the best sanitary practices, and very likely without health insurance.
If this virus continues on the path it seems increasingly likely it will, and your only plan is relying on Amazon and Instacart, your life is about to become very, very difficult.
23
International and in-country tourism is already taking a big hit. For example, my wife and I have canceled a Baltic cruise for this June because:
1. Most cruise lines reserve the right to alter or curtail the schedule/itinerary without refunds; and cancel-for-any reason insurance will be about half the cost of the cruise.
2. We are both over 70 and thus at higher risk of becoming seriously ill or even dying from COVID-19 if we catch it.
3. In the best of times cruise ships are floating Petri dishes that easily spread noroviruses; note the current COVID-19 transmissions on the Diamond Princess.
4. While our cruise ports are in countries that now have fewer than 25 cases, the coronavirus could become a pandemic affecting many countries, including those on our itinerary. Our nightmare scenario is that we or other passengers contract the disease prior to boarding the ship, aboard or in port. Do we want to be treated or quarantined on the ship or in Europe where Medicare is not accepted? No way.
For us the medical/financial risks are just too great, so for 2020 we are planning to limit our travel to US destinations we can reach easily by car or short flights. Over time we will evaluate the coronavirus situation and see how cruise lines and foreign countries are coping. There’s always next year.
59
I have an aunt traveling on those 130 day around the world cruises and they have been denied entry to most of Asia, SEA, Middle East, and Pacific Island nations. They are now headed to Africa in hopes of making land fall.
18
@Mon Ray
Reason #3 is more than enough for me to be happy to never go on a cruise ship. Already the concept of being trapped with 3-4000 others on a big tin can makes me ill.
6
The CDC website shows less than 500 people have been tested in the US for COVID-19 versus tens of thousands in China alone. With VP Pence controlling the federal response to COVID-19, that is suppressing information and politically spinning it’s all great, the states are going to have to fend for themselves. A wealthy state is going to fare much better than a poorer state.
15
@dyeus
It’s all over for Arkansas, Mississippi and Oklahoma.
9
Though, aren’t they a bit isolated if they are no one’s destination and the locals don’t travel much? Generally speaking, those aren’t very cosmopolitan states.
Just like the stock market there’s perception versus reality about covid-19 and that’s what will determine the direction of public thinking and the markets.
Right now, perception is that we’re facing a disastrous pandemic.
Until reality affirms or changes the perception, chaos and havoc will remain the operative forces.
Nobody sane believes trump’s lies. The boy who cried wolf is illegitimate.
That’s another reason trump must go.
20
The best economic solution is to put everything we have into beating back the threat of covid 19 as soon as possible to enable the economy to keep working. This will enable the stock markets to settle down and people to feel safe to be out and about. Until this happens, we will have plenty chaos.
4
@NOTATE REDMOND Well, good luck with that! With a president who cares more about perception than reality, he'll nix anything that he thinks makes him look weak, anything that doesn't make it look like he's doing a good job, and anything that he thinks might negatively affect his re-election campaign. A man who spins conspiracy theories at every turn, blames everything on his political rivals and the stranger danger from the south is not a man who can be trusted to effectively lead us out of an actual crisis.
9
With the lying , sinful and evil culpable President we have here, I have no hope for things regarding the Virus to get anything better.
8
According to The Guardian, "When Donald Trump Jr said Democrats hope coronavirus “kills millions of people” in the US because they want to bring his father down, he was merely “pushing back” at politicisation of the viral outbreak by Trump opponents, Mike Pence claimed in an interview broadcast on Sunday."
This is why we can't contain the Coronavirus or the recession that will soon hit the US. We have incompetent, petty people trying to run the show.
35
Do not worry. Our Great Leader, the Chosen one, the Stable Genius himself, Donald J. Trump knows what to do. He knows more about this coronavirus than the virologists and epidemiologists. He will get us through this unscathed and by November the markets will be humming along above the highs of January. He has taken credit for everything else, he must now take credit for the effect this epidemic has on the American economy and national well-being. It's happening on Trump's and McConnell's watch. Of course Trump will blame Obama, the Fed and the Democrats if things start to look really grim in a few weeks.
15
Trying to stay sane in a crazy world.
9
Perhaps people will figure out that they don't actually need a lot of the STUFF they feel they can't possibly live without, such as ahi steaks, the latest gadget, or a new car.
Perhaps people will figure out that the globalized economic model that brings them all their can't-do-without STUFF, also means they are dependent on foreign sources for stuff they actually do need, such as many medicines and medical supplies, a supply chain out of our control.
Perhaps people will figure out that if they lessened their consumption of all the latest STUFF, it would do much to lessen anthropogenic global warming, more than the feel-good banning of plastic straws for instance. ["Dramatic fall in China pollution levels ‘partly related’ to coronavirus"; https://www.theguardian.com/environment/2020/mar/01/dramatic-fall-in-china-pollution-levels-partly-related-to-coronavirus]
Perhaps I'm just doing you-know-what into the wind. No, make that likely.
6
Trump is evil
So evil the world is in peril
It keeps things interesting
For an old man
2
We have both a supply shock and a demand problem. The streets of Venice and Milan are not empty because of lack of supply, but lack of demand, because frightened travelers would rather stay home. The closest economic analogy is the Boeing Max, because Boeing cannot supply a safe version and persons don't want to fly it now anyway. Putting tariffs on Airbus has been a completely ineffectual economic response.
14
You didn’t mention that many, many food service workers have no health insurance and make poverty wages so they: A. Can’t afford to go to the doctor, and B. Can’t afford to take time off.
How can a society where so many people are living such tenuous, uncertain, scary lives contain the spread of a pandemic?
46
@Ann M They also come into contact with lots of people, making them more likely to contract and spread the virus.
8
That's one example of a benefit of Medicare for all.
24
“Two weeks ago I told people this was coming. The big problem was economists don’t understand how global supply chains work, how intertwined and interconnected they are.”
Interesting that Nada Sanders thinks this when just about anyone with a basic understanding of the economy knows that this is the state of affairs.
8
The disruption has begun but the extent and duration are uncertain. If a recession does occur and if the pandemic is short lived and remains as serious as it has seemed, then there will be considerable unmet demand to quickly recover from the recession. We shall see.
But let’s be reasonable. We have evidence that China’s totalitarian regime allowed this disease to develop and spread before they allowed anyone to know. The intense communicability of this infection without noticeable symptoms and a two week delay before symptoms are presented in those infected means that it might have been spreading weeks before anyone was aware of it. That would explain the high number of community acquired verses the documented contact acquired cases in our country. By the time China disclosed the infections, infected people may already have arrived in our country.
6
I don’t see why shopping should be a problem with the virus. I have been using Amazon for years and I can switch my Costco purchases to online buys. I just signed up for Publix delivery through Instacart, so staying home will be easier than my current life, if all the delivery gig employees don’t get sick.
2
@Richard If everyone just stayed home who will fill your online orders and deliver them?
23
E commerce should be the beneficiary of the crisis because online shopping avoids human contact. Corona will exacerbate the death knell "brick and mortar" is experiencing and "hammer" commercial estate. That "safe haven" may not be so safe any longer.
Trump ordered Powell to lower interest rates last year and rather than face Trump's wrath, Powell meekly capitulated. With the long bond down to 1.29%, lowering short term rates is not going to make a difference. Given Trump's inability to absorb complex issues & accept reality, the fed has limited tools left to deal with this selloff w/o completely debasing the US dollar.
According to the Chinese news, economic activity is restarting but Premier Xi dealt with the virus forcefully and comprehensively. Our 50 states will deal with the virus 50 different ways and with a president whose business expertise was limited to bankruptcy, America has no "Xi". Trump would probably deny resources to Blue States if he could and selecting Pence as corona CZAR made as much sense as asking my 10 year old to fly your airliner.
All things considered, I predict bedlam in the US if corona strikes hard.
32
Best argument yet for medicare for all and a wealth tax on billionaires to pay for it.
48
Diversification strategies were ignored by short-term incentives.
4
What will the big box retailers, even Amazon, do this spring and summer when they're ramping up for the end of summer, fall seasons and China is already not meeting all its previous supply obligations? Add the tariffs...and what "plans" are in the pipelines?
So many products - be they manufacturing components, or shelf ready items, are already being effected first by; #1. the Trump tariffs on Chinese and European goods. Inexorably raising prices for consumers, and slowing down domestic buyers already constrained by market wary budgets (due to Trumps irrational behaviors).
Now compounded by #2; COVID-19 virus. Which has shut down whole towns in China, kept workers at home, supply routes closed. The spread into Europe, and with Italy as a locus, likely 'round the Mediterranean basin and therefore into the Middle East. (With Iran on the perimeter...spreading it to all points Southwest Asia...?)
What will the US retailers and food suppliers (pork, chicken processed in China) do this summer when the likelihood of shortages become real?
Add tourism hits!
Will Trump fire-off EO's, claim another Nat'l emergency, and waste more taxpayer money, or force borrowing from other programs and subsidize these industries? Which won't amount to a hill of baked beans at a cook-out.
I'm fully hopeful that the real complexities of Managing the US truly come home to roost for The Trump Circus, he/they will continue to inflict more self-inflicted wounds, bleeding away more support.
Yay!
10
Coronavirus recession would be hard to contain for some sectors like the travel industry with increasing travel restrictions. So the recession will be selective to certain industries like the tourism industry, mainly the airline and cruiseline and hotel industries and those dependent on the supply chains from China, S. Korea and Italy. So if you were thinking of buying a Ferrari or Alpha Romeo, I say hold your thoughts.
Right now there is a fabulous Trifecta of GREAT NEWS for stock investors. At least it is not "Here comes Bernie". Fear of Bernie nomination is not a sure thing. End of USA, longest war and Corona virus (Cov) causing more than one/uno death in the USA, I would like to quote Mark Twain "The reports of my death are greatly exaggerated" and I modify that quote for CoV. The news media's fearmongering news is totally exaggerated.
1
@Girish Kotwal
Mark Twain was very left leaning. He defended the Filipino Muslim Moros and started a club with that as the main purpose. Bernie proposes no more than what is already established in other western industrialised nations. The thing that is exaggerated is the supposed radicalism of his sensible proposals. It would hold up the epidemic if everybody was universally covered. People could afford to self quarantine thus slowing transmission.
1
The most immediate supply shock may be the availability of prescription medicine. Much of our drug supply is manufactured in China. Not being able to buy a MAGA hat might be frustrating for the Trump base. Just wait til they find out they can’t get their cardiac meds, insulin, or viagra.
35
For Trump, the solution will be simple. Before November, just send big checks to factory workers in the swing voter states, like they did for farmers with the tariff fiasco. Same principles, or lack thereof.
8
Unfortunately no model exists for this crisis. Most people looking towards 2020 election probably thought we've hit rock bottom. It seems not.
12
The economic shock waves of an interrupted supply line will be an issue in a potential, and long overdue, recession, but the tools that the Fed would normally have in combating downturns are now meager. It has cut interest rates in a time of relative prosperity in order to susain growth at the behest of our game show host president. As a result, investors got out of bonds and into stocks, driving up the market. That, and all the buy-backs that corporations made with those tax cuts that were supposed to be used for expansion, have driven up stock prices artificially.
Now, it will be difficult to reduce interest rates, making a recession much more difficult to recover from.
Our "great economy" has been a house of sticks chugging along on debt. The average American owes $17,000 just on credit cards. Guys doing drywall are driving trucks that cost $60,000. We can't sustain this kind of growth forever. It's not just the coronavirus that is lurking to bring the economy down. The awful moves made by this administration, tax cuts for the already wealthy, and cutting interest rates inappropriately, are coming home to bite us. MAGA indeed.
16
Reductive to the financial system (you know, instead of focusing on the sick and dead) is interesting only as it relates to the long term impact on the country, not on the equity market, no matter what Trump and Pence thinks will buy them votes.
Given that 25% of the US has no sick leave, if these people have an opportunity to stay on a job, they will regardless if they are ill, amplifying risk co community spread. Additionally, knowing they could be ill or terminated near term, they will not spend any income they can conserve. Further, the impact on the healthcare system, from uninsured (25 mm) not being employed and unable to pay their charges anyway, will start its own shock to its financial systems.
Massive perfect storm and the first national crises Trump must deal with that he did not intentionally cause.
9
Enough already about the "economic fallout" of a disease that may end up killing millions of human beings. It's the singular focus of the GOP on profits, over people, that has left us so ill prepared for this outbreak in the first place. If we can't set aside our concerns about financial capital long enough to focus on human capital, then, eventually, financial capital may be rendered utterly meaningless.
Just watch Rod Serling's "Time Enough at Last" to see why.
15
I think the GOP has a good solution for this. Lower taxes on the rich, and the dismantling of Obama Care, Medicare, Medicaid, and Social Security.
(Then again, that's their solution for everything, isn't it?)
15
Neil Irwin, all seem to agree: debt and equity markets are extended, world wide. So, we were due long before Covid-19.
Air travel, trains and boats, concerts, Yankee Stadium, schools, hospitals, stores, the MTA, buses, shopping for food, the doctor’s office, all restaurants... any contact... involves risk.
Carriers may not have symptoms. Hospital workers may be carriers. Constant testing is required. We do not have the test kits.
A contraction is over due. Federal debt will rise as the FED plays doctor and monetises. That process is just starting. But this will not matter. Markets are governed by market participants. More sellers than buyers, down. More buyers, up. When so-called quantitative easing is used, the Fed portfolio surges. This is another tale of woe.
Then we have the Free Lunch Party of Sanders and Sanders Lite, Senator Warren. Regardless of COVID-19, they want to slam the accelerator.
Sadly, when we flood markets with free credit balances, prices rise, interest rates often decline. And we have negative rates in Germany.. coming to a bank nearby soon.
Deflation is a four letter word. Use it.
Read One Art, by Elizabeth Bishop. The art of losing...
We are losing... and we are trapped. The cupboard is bare.
Stimulation can cause collapse of bond pricing.. as the value of cash declines in the flood.
This, too, shall pass. Remember Carter.
1
The "good" economy has been nothing but a facade, plastered over a house of cards.
An economic crash and deep recession have been imminent, and the COVID-19 virus is a convenient scapegoat to deflect the blame from where it really belongs: The deregulation of the financial industry, the CNBC market boosters, the supply-siders, and our inept Administration.
11
Why were tests not available in the US? There were only a few hundred. Other nations had thousands? What happened here?
15
If nothing else, covid 19 is showing us the economic interdependence of nations. I didn't realize so much of our manufacturing depends on parts from China. In a global, interdependent economy, what is the sense of Trump's doctrine of every nation for itself.
The concluding thought of this article is that we need public health to control this virus to save the markets. But I wonder if economists, bankers, politicians ever gave thought to the importance of public health before their stocks started falling. Did it ever occur to the powerful and wealthy and those that distribute public funds that a healthy economy depends on a healthy nation and institutions to guard against community wide threats to our health.
Furthermore, Trump is hostile to science, silencing and punishing any information that wounds his fragile ego. A whistle blower leaking information on the breach of contagion protocol was ousted from her position and Fauci of NIH is required to clear all public comments with Pence.
So whatever the challenges of this epidemic, we have a major drag on our national response in the form of this president and his got it alone attitude and the wealthy and powerful seeing need for public health only in the service of their profits.
Covid 19 is showing us where the blind spots are in Trump's MAGA concept and how these blind spots can be life/death matters to many of us.
15
If there's a virus-related recession, I wonder if it will have
been created by journalists. There's a weird similarity between the news stream about the virus and the newspapers of the summer of 1947 when what I call the "modern UFO" was born in an international epidemic of sightings. I wrote up my research and posted it on my website 23 years ago. See cpacker.org/misc/roswell.html.
Oddly enough, the UFO epidemic started in Washington state, where the first US coronavirus death has just been reported.
Ironic how affluent Americans bemoan their international vacations are disrupted while modest to low-income Americans may lose their jobs.
Supply chains were supposed to be the efficient way to do business.
We're all supposed to have 6-12 months of savings safely sitting somewhere.
Which economic group do you belong to?
7
Expect inflation and price gouging if shortages occur.
9
Even fully funded and effectively communicating public health officials are greatly challenged by pandemics. Trump has already compromised the CDC and NIH with reductions in funding and a pattern of ignoring scientific advice. With Pence in charge of the overall effort we are headed for more trouble.
As to be expected Trump and his cohorts are already blaming the media for the problematic info that is coming out. How long will it be before he claims the situation is ‘rigged?!?’
I do not wish for things to get that bad. But perhaps this is what is necessary for so called moderate Republicans and independent voters to realize what a disaster Trump has been.
8
Your editorial is correct but misses one of the most define impacts of the spread of the virus. You can lower taxes and reduce interest rates but dead people do not increase economic activity.
This crisis demonstrates that Trump's administration does not have either the mental or strategy capabilities to handle this crisis.
The president either blames Democrats, the deep state or just about anyone who talks the truth and exposes Trump's lies and worst not understanding the facts. One can see his treatment of front line experts in the Hurricane Dorian issue. What government employe is willing to go the extra mile? The unspoken word of the bureaucrat is head down and do not make waves.
This is not a credit crisis and no amount of government monetary simulation will solve the problem. Now health care rebates, more health care workers on-site, and non-interference by Trump's minions will help. I do not personally see this happening and the squandering of the trusted word of the White House is patient number 1.
As Rome burned Nero played his harp.
Soon as the economy in funerals pickup. As we go down the long skinny curving road around the tombstone the passengers will look at their phones as see a tweetstorm blaming poor people and immigrants for the deaths.
2
All along I’ve been saying and thinking that the worst effects of this pandemic are and will continue to be economic and these will last a long time. This article is great in that it points out how little control the country’s economic tools have to mitigate the problem, and how our service-oriented economy is especially vulnerable to disaster due in great part to multinationals’ greed and short sightedness. Who is working these problems through?
I do know that the crisis we are seeing unfold is making Americans just that much more enraged at the selfishness and incompetence of the elites.
This might just be the straw that breaks the camel’s back as those with any savings or retirements left then lose all in the stock market crash. What about those with no heath insurance facing the possibility of death or crippling debt when they become ill? What happens when all those sick people lose their jobs and bills stop being paid?
What happens when this hits the homeless population? The social breakdown is bad enough now, but what happens when the weak and elderly start dying alone and uncared for? Who will care for the kids if the only breadwinner dies or becomes incapacitated? What happens to the unfed, abandoned pets? My mind reels at the potential disasters awaiting us.
3
And it’s conceivable that a crash — along with hospitals being overwhelmed by the uninsured — could lead to the election of a real populist promising Medicare for All.
Bern On!
Keeping its citizens alive preserves the profits they generate for the ultra-rich.
2
Perhaps the potential pandemic, and associated increase in human population decline is beneficial to the survival of the planet. 2 billion people is the estimated number of people that could be sustainable. The current earth population is 8B+. So in the grand scheme, the decline in population results in a better planet. Meanwhile, invest in: tobacco, alcohol, firearms, disinfectant, toilet tissue, and hand sanitizer manufacturers. As these will be growth industry leaders in the new panic/hoarding/apocalypse economic climate.
4
Everyone needs to start working and doing everything just like normal but in hazmat suits until this virus goes away.
1
@BJ
Can you get them at Costco?
Here’s an unexpected side effect of this situation. Satellite maps of China show much decreased pollution. The global oil markets are tumbling because the 10 million barrels China imports per day ( more than the next 3 importers combined) has been slashed. We could say this is a good thing and if you care about the planet it is. OTOH, it points out what many have been claiming all along. That is, there is no way we will do anything serious about climate change and the environment that won’t basically dismantle the worlds economy which is, let’s be honest, dependent on oil. If it weren’t politically incorrect we’d have to confront this and acknowledge the underlying problem of over population, which is making the pandemic not only more likely but inevitably worse. We are, without trying, running an experiment of what happens when the oil based economy is turned off. It will fix many problems. It will create many more like what do all these people, do now, and how do we feed them and on and on.
2
I truly do not understand why people are panicking so much over a virus that is only slightly more lethal than the strains we endure on a perennial basis. If anything, I would hope this will improve employer sick-leave policies. If folks are sick, they should be able to stay home with pay to prevent infecting their coworkers, not only for Covid-19, but in all cases.
4
@Tim I share your bewilderment. Quite frankly, the increasing panic seems to be doing far more harm than good. Instead of simply being more vigilant about handwashing, covering coughs and sneezes, and staying home if unwell (assuming the employer cares enough about employee well-being), folks seem resigned to sackcloth, ashes, and the rending of garments.
2
Well, on the plus side, with a Republican in the White House McConnell & company should be willing to do needed stimulus.
Whether they do effective stimulus is anybody's guess.
With Coronavirus/CORVID, we are moving toward a major global crisis of both health and economics.
Where are the testing kits? The US is not prepared.
Cutting back on international travel is equivalent to shutting the barn door after the horse has bolted.
We need to work together with our allies and trading partners on this.
Trump is completely incompetent – things will continue to get worse.
Leading Democratic candidates such as Biden and Bloomberg should announce clear policies on how to move ahead.
5
Simple: The very stable Genius is neither. Imagine He and his Collaborators in charge, after Pearl Harbor. Or during the Cuban Missile Crisis. And I’d bet every single penny I own that HE would NOT be able to explain either of those Events, even in very simple, Grade School terms.
Sure, it’s all just a great Reality TV Show. Until an actual Disaster, Natural OR Manmade, Occurs. Then, it’s every Man for Himself. Women and Children are really out of Luck.
NOVEMBER.
3
There is a probability we will see a classic example of shutting the barn door after the horse has been stolen. Since this administration has seen fit to gut federal agencies dedicated to fighting global health dangers, our country is pretty much left twisting in the wind. If, as it can be projected, the number of cases begins to mushroom and the number of mortalities to follow, we can only wonder what - if any - response the current WH toadies will invent to cast the blame elsewhere.
3
I have been a transportation and logistics journalist for 23 of the last 37 years. I can’t tell you how many conferences have had sessions on supply chain resilience.. the traction has been halting at best
1
Why does the mainstream media defend capitalsim and free markets at all costs....except when it might begin to affect their own bottom line?
When it affects their own bottom line...then all of a sudden government intervention is required at all costs.
Pressure must be immediately applied to the Fed to lower interest rates....because we can not allow the stock market to ever drop. We must protect the top 10%...who own over 80% of all stocks.
Everyone else...you can't have universal health care or get a federal minimum wage increase. That is "socialism".
But "socialism for the wealthy" is perfectly acceptable.
What a joke of a country we live in.
5
The "traditional tools" are routinely ineffective. Economists are generally clueless about what works and what doesn't, and the undue emphasis on monetary policy just underscores how clueless they are.
1
The very nature of supply chains, maximized for efficiency, hides risk until encountered. Breakdowns are novel and cascading. A sand pile’s first loss is a single grain. Slowly at first, then all at once. The unimagined connections reveal themselves only under failure conditions. A single weak link in a supply chain can be fatal. This is the unknown risk. We are in the process of discovering the nature and degree of disruption. Opinions that presume otherwise misinform. The greater the near-term disruption the greater the counter-response for redundancy and resilience to create “home-grown” supply chains which will be inflationary for hard assets and employment costs.
President Trump might find out that members of the Federal Reserve Open Market Committee are not the same as Federal Judges with regard to their willingness to ignore criticism by the president.
Both the judges and the Federal Reserve Open Market Committee members always claim that they ignore political pressure and comments from the president. However, it would not be inconceivable the Fed Chair Powell and/or the others might decide to respond to Trump’s taunts and whining by deciding to “give him something to really complain about.” That could be not cutting interest rates now, thus crushing the financial markets and the economy.
As I said in Investing In The Era Of Trump - Do Bad Economic Outcomes Necessarily Mean Bad Investment Outcomes?
"It may be that the race is not always to the swiftest, nor the fight to the strongest-but that's the way to bet."
1943 Version
"It may be that a government led by protectionist populists with very little understanding of economics, does not always result bad economic outcomes- but that's the way to invest."
2017 version
The famous statement above attributed, in its' many forms to various individuals and cited in a 1943 publication as being from Damon Runyon, has an updated 2017 version.
One can think of numerous scenarios in which bad economic outcomes result from Trump Administration policies…”
https://seekingalpha.com/article/4053084
Since he took credit for the economy he inherited from Obama, I assume trump will also take credit for the coronavirus slump.
4
Hey, I got an idea: rebuild the financial safety net of average Americans that the fools have been tearing down for a generation.
In many other advanced countries that have these systems, the coronavirus thing would be a negative but it would not be potentially disastrous.
5
Trump decimated the CDC and NIH budgets that could have contained the pandemic.
He badgered the Fed to cut interest rates while proclaiming the economy was the strongest it had ever been.
He is simply a bad steward of the economy and the nation.
The Federal Reserve has far less power to offset plummeting consumer, business and investor confidence,
His reckless record of fiscal deficits undermined his ability to use more fiscal stimulus without causing stagflation.
He ran 6 businesses Into the ground with similar debt, and took money from Russian mobsters to avoid yet another collapse during the Financial Crisis.
He reaps what he has sown, but as usual others will pay the price for his utter incompetence and corruption.
Monetary policy changes will create a short term blip that should be sold hard because it cannot address Trump”s global pandemic.
9
It's obvious we're going to be hearing a lot about supply chain vulnerabilities in a time of quarantine. On a very practical level, medicines are especially critical and vulnerable. It will be interesting to see what Trump and his clowns dream up in the waltz to this November's election.
2
Well, at least it will help reduce carbon emissions.
2
donald trump has been whining for the fed to lower rates for almost 2 years now, presumably for his own self interest, but lowering rates won't bring people back to the eateries, theaters, concerts or shopping venues if this gets any worse. what it will do is further reduce the income of bond holders, retirement plans, pension funds and savers who rely on interest income for some portion of their income stream. this isn't an economic problem, it's a biomedical problem and the supply shock won't matter if people stay home and reduce their spending out of fear or because their income has been reduced by poor, incompetent, self serving decision making.
3
It’s incongruous to think cutting interest rates will stimulate an economy that is seeing growth impaired by a pandemic/epidemic/outbreak or whatever the fools in Washington want to call it. Covid-19 is creating havoc regardless of how serious it may be.
Manufacturing has been slowing. Job growth has been in low paying positions, and wage growth is poor. But expenses- real estate taxes, rents, and many other costs are rising. I haven’t made an insurance claim on homeowners in more than 20 years but my premium went up 20% this year and I would like to know why.
The fear alone has hurt travel. I just left Costco when I saw the lines at the cash registers and heard people talking about empty shelves. Empty shelves at Costco? Unheard of!
It’s a panic and our leaders have not given us any confidence in how it will be dealt with.
Telling us it’s a hoax or that it’s mild or that it’s someone else’s fault aren’t answers. Gagging the officials hides the truth. These actions exacerbate the situation. We have no reason to trust our government. Picking pence to lead the charge was a huge mistake. trump has shown he doesn’t care.
This administration can’t deal with a crisis. Imagine what would be happening if this was a military attack. We would be dead because nobody in charge has a reasonable response. Can you nuke a virus?
7
“That means American companies that rely heavily on Chinese suppliers might begin facing shortages of key goods in the weeks ahead...”
Why is Tim Cook still CEO of Apple? Everyone has known for years that China is fickle, and that, for the tiniest of reasons, China will cease all commerce with a company or an entity: just ask the NBA. Cook’s excuse for not diversifying is rather lame: he says cannot find the talent. With Apple’s billions, Cook can create factories and train workers in Vietnam, Mexico, or India and rival anything Foxconn has in China. If Steve Jobs were still with us, I doubt he would pat Cook on the back and tell him, “Well, you tried.” More likely, he would be screaming at the top of his lungs and belittling the excuses that Cook has served up the past few years as he commits more and more of Apple’s livelihood to China.
1
The ridiculous faith in Wall Street and unfettered capitalism has led to everything bein g produced in China and India which in the case of drugs might qualify as super dumb... and also probably in terms of computer products. But a penny saved can be spent on some ridiculously over-priced objet d'art demonstrating one's amazing taste as well as wealth... The luxury tax is long gone. Meantime the poor across the world are poor and often have their lives disrupted by drug cartels or wars... so we have zillions of refugees who protest the situation by producing more children.
We need a major fall in the stock market which has nothing to do with a recession except possibly in the category of fewer luxury goods sold. If American families learn to live within their means - bravo. If industries are brought back to the USA because foreign labor is no longer cheap bravo and a smaller carbon footprint. The Fed with its too low interest rates should be ashamed of itself -- and for years now going back to Clinton. Frankly, Madoff treated his investors better than Fidelity treats its. I am sick of the fascination with Wall Street, sick of conspicuous consumption, sick of substandard food in many cases (and expensive.)
However, we have a recession great. but Biden instead of Trump? -- no victory for the little guy at all.
4
Great article. Thank you!!!
1
The government can't seriously expect to quarantine everybody. Doing that would cause way more damage than the Corona virus. People need to be able to get out to work or civilization just collapses.
1
We have more to learn about this virus. The data so far indicates an illness like the flu but which results in about 2 percent fatalities instead of one tenth of a percent. But let’s be honest about this, China has been lying about this outbreak and so we have no realistic ability to predict what is coming next. The politicians in China were more concerned about controlling the population than by learning what they could about the problem. We see Trump and the right trying to do the same, here. So the control freaks with political authority are impeding everyone’s ability to control the crisis.
The sober strategy is to seek to know what can be known and to prepare accordingly. It would be helpful if Trump and Limbaugh would shut up.
4
I want to see Trump's personal supply of hand sanitizer run out because the chemicals from China haven't arrived...not to mention our generic drugs.
2
Not sure which comparison fits trump’s response best. Trump doing his best impression of Kevin Bacon in National Lampoons Animal House screaming “All is well” or Trump as the mayor in Jaws telling folks it is safe to get back in the water.
Either way, when you have trashed trust in our government and played on conspiracies for political advantage, it is laughable that trump is asking Americans to put their trust in the likes of Mike Pence or any of his other toadies. No amount of Koolaid can take the place of science and health care professionals.
Trump and his administration are the disease, and corona is the cure.
5
Growth growth. Growth and debt debt build on more debt. This economy and the world need a population reduction and big recession to get rid of all the excess. All the bank ruptcy and highly leverage needed to go. The fed will push rate to 0 and qe 5. And If by any unlucky this thing still Goin gon around the world year long killing 2% of population. We wi have a reset does not matter what fiscal and monetary policy. The only health policy helping
These are Japans Corona virus rules
“People with a fever or other flu-like symptoms:
Do not go to school or work
Measure and record body temperature daily
People with the following symptoms should contact consultation offices or the Japan Visitor Hotline:
Flu-like symptoms and a fever over 37.5 degrees Celsius that continues for four days
Severe lethargy or breathing difficulties
Phone numbers for consultation offices in the different Japanese prefectures are available at the MHLW website. (Japanese only)
The Japan Visitor Hotline is also available for consulting about COVID-19 in English, 24 hours a day, 365 days a year.
If after consultation you are suspected of being infected, you will be instructed to visit a specialist medical clinic to be examined. When traveling to the facility, wear a mask and refrain from using public transportation.
Seniors, people with conditions like diabetes, chronic respiratory disease, and other medical conditions, people receiving dialysis, and pregnant women should contact a consultation center if fever or lethargy continue for two days.”
And you can bet that the Japanese will follow these rules to the letter, they trust their leadership, and feel they have an obligation to keep their society safe.
And you can bet Corona will never become an epidemic in Japan.
Are the American people United? Do they feel an obligation to protect their society and their fellow man. Look who is leading us, if you want the answer,
10
The article talks about paying unemployed workers as a potential solution to the economic catastrophe that could occur. I laughed out loud. This government is getting its entertainment by trying to starve children. Paying unemployed people? Ha Ha Ha Ha!
2
The Old Testament God of wrath who sent the Egyptian Pharaoh more plagues than he could handle and finally drowned the fool for his hubris in the Red Sea seems to be at it again, as He prepares for our bloated Pharaoh of Mar-a-Lago to get his. God is not mocked, as they used to say.
3
1) It still amazes me that people still believe economists give honest, objective analysis -- that is not how endowment grants, consulting contracts, and research grants are obtained. Look at the documentary "Inside Job" for economists' role in the financial policy changes that caused the 2008 crisis.
2) Harvard faced $10 billion in losses in its endowment fund in 2008 due to derivatives bets. So it dumped $1 million into Obama Presidential campaign , Obama made Harvard Dean Larry Summers the Big Bailout Czar ,and Shazzam! Harvard recovered its losses. Goldman Sachs executives must crack up laughing wheneverHarvard Professor Elizabeth Warren
criticizes them -- they and JP Morgan merely followed Harvard's lead. Of course, that didn't leave much money for the common citizens --- so Fat Larry got Christana Romer's Jobs Program cut in half -- from $1.8 billion to a mere 800 million.
3) Economies are like ships. When the USS Cole had a big hole blown into it by Al Qaeda, it remained afloat and returned to port. Because warships are a honeycomb of individual compartments. Our economy used to be like that but economists' globalization has turned it into the Titanic -- in which a leak in one place threatens to drop our economy into the the abyss.
4) When banking was state level, corruption in one state did not threaten the entire country but when deregulation made banking national we got banks that are Too Big To Fail. Same with replacing nation economies .
@Don Williams The analogy’s even worse. The Cole was transported for repair on the back of another ship.
This is what they voted for - nothing else mattered but hatred and division. They got what they wanted - #TrumpVirus - and now we will all pay.
1
In a sense you could say that CV has done damage to the US economy. I think a more accurate and realistic observation is that media outlets, predominantly CNN and NYTs have done their usual good job of creating panic. Why? Because dirty laundry and crisis attracts attention. One might wonder why so many are so willing to join in on celebrating the catastrophe.
They've already stopped testing in France, Europe is no more excited about this than they are about pneumonia, flu, or other rhino viruses. Staying calm is going to turn out hard to do for the liberal minions who love to be victims. It's a real curiosity that has had significant negative impacts on the US economic stock market.
@DED You’re dead wrong.
1
@DED
Europe is no more excited about this than they are about pneumonia,
Says someone obviously sitting thousands of miles Europe.
In UK, we're just seeing the uptick in diagnosed cases that characterised the outbreak in Italy and Iran. 12 cases in the last 6 hours. And, yes, people are starting to panic.
I know of no reason why any country should 'stop testing', unless they've effectively been overwhelmed by the pandemic. Massive testing going on here in England.
2
These crises -- pandemic and economic meltdown -- are starting to look like the challenge Barack Obama faced in 2008-2009. Obama rose to the occasion and brought us through, despite Republican efforts to block recovery. He then handed off a great economy to a narcissist who bragged falsely that it was he who turned things around. Now that Mr Trump faces a real challenge, we see clearly how incapable he is of leading us through any crisis
4
Cutting rates, which everyone on the Bloomberg has been clamoring for, us not appropriate for an exogenous shock like this virus.
Snake Oil Fraudonomics never solved any problems, and that's all the Republican Party and their Snake Oil champion believe in.
If only they believed in those quaint things known as science, expertise, universal healthcare, good government and common good, America could have a shred of confidence in Trump's Confederacy of Greedy Dunces driving America into the ground.
Not to worry, Pastor Pence will save us.
"let us pray"
Oy vay.
39
Confidence is what is needed. Tell us the truth. Let us know we a soldiers in the battle. Let us know the government has our back. Toil, sweat and tears speech would go down in history. But Trump is a coward and not a leader. So what do we get, it's a hoax, Democrats hate me and are stirring things up, it not so bad, low risk, it will just go away. Wow. Would you want Trump as your Sargent or Lieutenant under fire. Of course not because he would be the first to let you down and blame someone else if things went bad and first to claim victory if the troops he left behind actually won the day.
5
2PM EST 3-1
I just bounced around the country via CBS news (insert city here) (IE: CBS New York...or CBS Chicago).....
Pull up the local station and educate yourself how many new cases.
There are cases popping up all over now.
I guess the Hoax didn't get the message.
4
Hey, at least we'll see a downturn in CO2 production and Trump will be dumped. This is what Trump, in all his incompetence, has brought us. How ironic that he is a hypochondriac of the 1st order too.
4
Too bad we have a liar as chief executive during this fraught time, when trust in what the government will say on this issue is paramount.
I guess this is the time when the antiquated American Electoral College will reap what it has sown by putting this second rate duplicitous thug in office after the voting public voted for someone else.
You'd think they might have learned something from the disaster that was George W. Bush, but instead they doubled down with someone who was actually worse.
I guess when countries and civilizations decline, they then plunge... reminds me of the apocryphal story people told about how they went broke during the Stock Market Crash of 1929: "...slowly at first then all at once."
4
hmm seems like most of the economic experts have been counting on nothing bad ever happening and are now going to be dumbfounded that something bad happened. this is definitely a system run by experts that know what they're doing and not greedy pigs gouging themselves at the trough.
6
@Concerned Citizen Love the snark
1
Trifecta of GREAT NEWS for optimists. Bernie is not going to be the nominee. Fear of Bernie nomination is not justified. End of USA's longest war in Afg. and Corona virus (Cov) causing more than one/uno death in the USA, I would like to quote Mark Twain "The reports of my death are greatly exaggerated" and I modify that quote for CoV. The news media's fearmongering news is totally exaggerated.
Yes many more CoV infected people with weaker than a normal robust immune system due to immunodeficiencies are more likely to die. For example
1) Those with genetic immunodeficiencies.
2)Heavy smokers and those consuming alcohol or/and drugs excessively.
3) 70+ Seniors in nursing homes or those not optimally cared for and not receiving a balanced diet.
4) Those on triple immunosuppressive therapy following allograft transplantation.
5) Those with acquired Immunodeficiency syndrome (AIDS)
6) Those with inadequate protein, vitamin and mineral, and insufficient vegetable fiber intake.
Ignorance about viruses and vaccines in the general population in the USA is mind boggling to me, understandably due to the complexities of viral diseases. With that level of ignorance even among the highly educated, it is no surprise that there is a panic pandemic eg. my response to a question "will Flu vaccine protect me against CoV" is given below
The seasonal flu vaccine will protect only against flu (not CoV) for that season and in just that hemisphere. There is currently no vaccine against CoV.
3
Times like these demand public cooperation to minimize the spread of the virus, which means putting the needs of the group over the needs of the individual.
After 9/11, President Bush rallied the country against a common threat. In this case, the president is rallying his subset of the population not against the virus, but against Democrats: blaming them, declaring yet another "hoax," and worrying less about the lives of Americans than his re-election chances. His insatiable personal needs could end up costing us a lot more than $$.
4
Well we are now, finally spending $$ and paying attention to the C-Virus. But we are doing stuff that might have been worthwhile a month ago. What we have is LeBron James on a breakaway, 8 feet from the basket and we are back at the mid court line hoping SOMETHING stops him from that circus slam dunk we know is coming. The breakaway has happened folks. Time to shake it off and move on to the next play: Spend out efforts and money figuring out how to treat this thing and how to vaccinate against it. And how to work with another serious flu like disease. Shuttering business and travel ain't gonna get it done.
@Steve Biasini I think the call to "contain" it was wrong from the get-go. The day China admitted it had known about the disease for a month or two, containment was a fantasy. How many people go to work with a cold that is really the flu, or "allergies"..."its just my allergies". China has come a long way, but with the best of intentions, which we can reasonably doubt, containment was impossible before they figured out what it was.
Trump offers help to Italy!
Really, Mr. Trump? They’d be crazy to take US help. We have no plan here even. Mike Pence is “no plan” and if we do have medical experts here lined up the last thing we should be doing is sending them somewhere else!
We don’t even have enough testing kits! Italy? Really?
Mr. Bigshot Trump. Reckless, careless, big mouth nonsense. An embarrassment!
5
The fact that Trump is treating this as a personal nuisance should be far more impeachable than his bribery and extortion of Zelensky. Trump needs to be removed and we need to replace him with a president who knows and cares about this crises.
3
Everything is going to be fine people.
Mike Pence is praying for guidance.
5
I hope that the recession caused by the virus is finally what topples Trump. The irony is that he's a big germaphobe!
4
What if we discover we don't need all the stuff from China and we start swapping and selling to each other? What if we discover we don't need the latest phones? Secondly, there was supposedly a worker shortage. If there's a recession, well, more demand from workers for jobs.
2
1. Liquidity crises: big firms cant pay interest; small ones cant pay rent (both happening in china); 2. Layoffs: lower interest rates wont help - nobody buys a car in a pandemic. 3. Food/medicine shortages: lack of labor/transportation. 4. Health care demand exceeds capacity. 5. Transportation becomes problematic as air travel shuts down.
Direct cash transfers to individuals would help (not tax cuts), but this administration is incapable of that.
4
If there's a silver lining in COVID-19 it may be that only a crisis of this magnitude could wake some people up to the vital importance of maintaining healthy international relationships during the good times, and not squeezing vulnerable friends and allies at every turn for economic advantage, and the vital importance of credible domestic leadership at all times. Fundamentalists like to say Trump is an imperfect messenger doing God's work. What will they be saying in six months? Or even in six weeks?
16
@Leigh "imperfect messenger" is being extremely;extremely kind. The World is closely connected;Trump and GOP denies it and pushes for America First. Travel industry;Airlines; Hotels;Restaurants;Tourism are already taking a hard hit.Pence says 15,000 test kits are "in the mail". Is that like when you tell your ex spose the alimony check is in the mail?
3
One of the biggest unaddressed questions is what happens in the US if/when those who don't have health care get sick (off work, can't pay for doctors or hospital care) and die (no one knows yet how lethal and what age the virus will affect most).
As bad as it is in itself for the unfortunate struggling families and people that haven't made the elite upper class here in the US, one can only hope that it won't get any worse. However, the long term effects both financial and phsycological could be significant, or worse.
13
“A recession, defined as a significant decline in economic activity lasting more than a few months...”
A recession is defined as negative GDP for two consecutive quarters. How much effort does it take to properly define an economic concept as simple as this?
17
@Rocco Hey Rocco;when you have no job and bread is $20 a loaf; what does a definition matter?
2
As a small individually owned retail business owner in a mall in Denver, I am nervous. Not just for supplies, but for customers.
People have to have money BUT also have to have confidence in safety to shop. Once that confidence is undermined, especially by an administration that notoriously lies about even unimportant things, it will be hard and slow to rebuild.
People hunker down, change their habits, and it takes a long time to get them back as customers. Malls have been hit hard with changes in traffic due to on line purchasing but they have been adapting by adding a broader range of stores and services. The corporate mall owners are going to need to work with their stores if they want to keep them when this virus spreads.
If the COVD 19 has a long dormancy, and more people are infected, and our government does not get a handle on MASSIVE INDIVIDUAL TESTING, the additional uncertainty does not bode well for a quick health or economic recovery.
19
When I went to my local Trader Joe's yesterday, there was a lot of panic buying of soups, pasta, lots of things in cans and containers. The people up front told me it reminded them of the buying patterns before Superstorm Sandy.
Today, at my CVS, most thermometers sold out.
At another supermarket, many fewer soups and canned goods on the shelves, and a run on cough drops and tissues.
10
@Andrew Porter
I would not call it panic buying. Simple, easy preparation.
1
Lot of interesting news coming out of Washington State. It appears that the virus may well be carried in the community for several weeks before popping up somewhere. The teenager who tested positive thought he had the flu. He was also tested for COVID-19. The two infected had the same virus but a relatively uncommon mutation when compared to the 59 samples China sent over. This suggests that it was the same viral strain that was introduced into the state weeks earlier and had been spreading quietly (so far). The estimate is somewhere between 150-1500 people infected (300-500 seems reasonable.) What we don't know yet is the time when people are infectious and the viral load needed to infect, although the higher death rate with medical workers and high infectivity in a cruise ship suggests prolonged close contact.
There is a great deal of world-wide collaboration, which is good, and I now realize that some of the best science is done elsewhere in the world, where the climate is more suitable than it is here. Glad I have lived nearly all my life before seeing this happening.
First time I have been optimistic about what will happen, although we have a long way to go. It's unfortunate that our leaders can't collaborate as well as the scientists.
13
@Mike S.
This situation parallels the 737 Max crash where no one wanted to send the black box to the US so it went to France. Before Trump we were the trusted nation on that scientific front as well.
2
A major contributor to the US stock market collapse and economic swoon is a justified perception of disastrous mishandling by authorities, that the early response to the coronavirus spread in the USA has been a grossly negligent debacle. This is above all true in regard to America's inexplicable botching of the testing process for SARS-CoV-2. Working test kits, validated per WHO protocols, have been widely available for weeks, with South Korea, France, and Italy alone testing thousands a day. Yet the US set out to create its own, engendering an unmitigated disaster full of technical and bureaucratic failures.
The CDC, gutted recently by cuts and staff shortfalls, produced a faulty kit while dangerously antiquated FDA policies created a Catch-22 that blocked state and academic clinical labs from making their own or importing them from overseas. Precious weeks were lost as likely victims remained untested, while epidemic community spread kicked off with outbreaks in the Pacific Northwest, California, Illinois, and likely many other states, affecting untold thousands of people, of which we remain in the dark due to ongoing inadequate surveillance testing.
The bedrock for all clinical and epidemiological management of COVID-19 is first to ID who's infected. That the US, contrary to our reputation for technical expertise, has so utterly mismanaged this basic initial step, is strangling the institutional trust and security that are the lifeblood of investor confidence.
73
@J. Wes Ulm, MD, PhD Yes, the University of Iowa has had a test for COVID-19 for days and unable to use it until FDA finally approved this week. Who knows how many people spread it while they twiddled their fingers.
6
@Jacquie
That's because it's the law. The law requires medical diagnostic devices to be approved by a body accredited by the US government. That's the FDA. You'd find the same sort of arrangement in Canada, Europe, Aus/NZ and so on. Except with their own regulator, obviously.
It's possible, I imagine, for Washington to suspend the operation of certain laws on the basis of national emergency. But, Washington hasn't done that. Yet. So, the FDA remains in charge.
Remember Theranos? Diagnostic tests that simply didn't work? John Carreyrou's book alleges that Theranos field tested their 'device' in Mexico City because of the much laxer Mexican regulations on medical diagnostic equipment. And then tried to use the War on Terror as an excuse to get the device into US military field hospitals in Afghanistan - and outwith the reach of the FDA. Fortunately the US military was having none of it. It was the FDA pounded the stake into the heart of Theranos.
1
@J. Wes Ulm, MD, PhD
The CDC has not been gutted by cuts because the CDC budget has NOT been cut. Facts, not rumors.
Here's my view: we don't really know how widespread cov-19 is now due to inadequate testing. If fewer than 100 people in the US are infected and extreme measures are taken, then if we are lucky fewer than 2,000 people will be infected 6 months from now. With ineffective response, that number could easily be several times higher. And if many more infections already exist, multiply everything by 10. Whatever the number, my estimate (based on reported data) is 3.5% will die and another 3.5% will be in ICU or on ventilators. In the next few weeks, people will hoard supplies of nonperishable food and necessities. Regardless of the effectiveness of government response, travel will cease, restaurants and public places will shut down and person to person contact will be drastically reduced. So in the short term, the supply chain for essentials will be badly stressed. Longer term (meaning in the next 3-6 months) , if the virus is not under control, the economy will be headed into recession and continued supply chain stress will make that recession deep and long-lasting. Short of a massive government mobilization and lots of helicopter money, I don't see the Fed toying with interest rates and buying securities having any real impact. At the end of the road, companies and governments need to do what should have been done in the past - diversify the supply chain across geography to minimize both political and public health risks.
19
Holy Cow - pass the Hemlock - can you be any more gloom and doom
1
@Joseph L
I totally agree with your comments. One thing you neglected to say is that Trump and his incompetent Administration are totally responsible for the U.S. poor response.
2
@Joseph L
Thank you for the informed explanation. I had wondered why we were not testing more.
Tax cuts and rate cuts for a supply-constrained recession seem like a recipe for stagflation.
9
Stagflation represents big market dominating corporations raising prices to offset diminished sales. Under free market conditions the tactic would be to lower prices to boost sales.
1
@Casual Observer: Corporations like to stretch out product lifetimes because marginal costs of production tend to decline over time. Too early obsolescence is the bane of tech industries.
1
@Casual Observer
Are you suggesting we have a free market? Are we not closer to corporate socialism?
The Trump administration cares only about the stock market and boasting about it. And the Federal Reserve is faithfully obliging Trump’s requests for lower rates simply to counter the market corrections and not to address fundamental economic challenges. Pretty soon the Fed will be left with little to no options to address a recession, when it does come along. Then we will truly be in deep problems.
33
@CD I’ve been saying that all along. The more you cut the rope the less there is to hang on to.
3
@CD thats a signuficant reason the markets reacted the way they did.
Lots of people were trying to ride the wave of easy money but they all knew in the back of their minds that the Fed has almost no ammunition for dealing with a recession.
Its going to be bad.
2
Why doesn't this article mention raising interest rates?
The end result of a supply-side shock can eventually be, as this article states, "shortages of certain items." As basic economics teaches us, when supplies go down, prices go up. In other words: we get inflation.
The textbook response to that situation is to raise interest rates to keep that inflation under control even though raising rates would harm short-term growth and valuations. This is done because long-term price stability is far more important for the health of the economy than a short-term propping up of the stock market and GDP.
(This is why the Fed being independent is important. Making this type of decision to harm the stock market is basically a political death sentence. It's also why the Fed's dual mandate is about stable inflation and maximum employment, not maximum growth and lofty stock markets.)
In that context, given that interest rates can't go much lower, a supply-side shock may be the one type of crisis for which central banks actually do have the right tool: interest rates can go up.
This might actually be the only thing that could enable interest rates to rightfully come off the zero lower bound to which they've been stuck for over a decade.
12
Higher interest rates cannot change relative prices. If ice cream price relative to housing price doubles because there are disruptions in the packaging industry, reducing the price of both goods by the same factor is no solution. Less people will be able to afford ice cream anyway
2
@AGuyInBrooklyn
I'm not good at explaining economics, but from what I'm reading, hearing in the off-front page articles, interviews - most economists are truly bumfuzzled by current conditions not conforming to basic formally understood tenets.
Things are turned upside down these days. Many of the effects expected from near full employment are not occurring. Many of the effects of decently low interest rates are not happening. The sudden Housing boomlet, is not having as great an impact as normal.
All the usual suspects and their effects, seem not to be fulfilling their prognostication roles.
There appears to be a re-writing of the rules, and the experts are bumfuzzled.
We're trying to operate with "old tools," and it appears they are failing us.
2
@AGuyInBrooklyn wrote: “As basic economics teaches us, when supplies go down, prices go up. In other words: we get inflation.”
No. As supply goes down for one good, prices go up for that good. People then either pay more for the good, or, more likely, they seek out substitute goods. So when steak becomes pricey, they switch to pork. When pork also becomes pricey, they switch to chicken. Etc. A few people will still buy steak, but because demand for that good is diminished by the presence of an alternative, the price of steak will not increase as much. The effect of substitute goods is very dynamic: they distribute demand and dampen price increases.
1
I do not understand why the United States has allowed nearly all of our critical pharmaceuticals to be manufactured on foreign soil, much less in a country that has the kind of health, economic, political, sociological, ecological, and criminal/fraud issues that have plagued China for decades upon decades.
If China wanted to hobble the US and become the next superpower, all they would need to do is stop the pharmaceutical supply chain and we would be held hostage in 30 days.
That’s just the pharmaceuticals.
Taking the rest of the Chinese goods, services, and materials in the supply chain that not only drive the US economy, they ARE the US economy, it begs the question of why our elected officials and the decision-makers from American businesses would give China the lock, the key, and the armed guards while the American people build our own prison?
I pray the coronavirus is quickly contained and we are miraculously spared any negative impact from the disease and the measures to contain it.
At the same time, this should serve as a wake up call to our government, elected officials, business leaders, voters, and all Americans that we MUST stop importing everything because it only leaves us supremely vulnerable. It also hurts our economy in the long run. We need to redirect efforts towards MANUFACTURING IN THE U.S. and finding novel ways to reduce those costs.
43
@TopDownRide
Why did we “allow” almost everything we make to be shipped over seas? Easy. It costs less there so companies could save costs on labor and things like labor and environmental protections that we have here. It was the classic race to the bottom. If you wanted to keep your job here you’d better take a pay and benefits cut and keep your mouth shut. The right loved it. The left insisted on lots of low wage immigrants to make the problem even worse. The US consumer was happy because they got to pay a lot less for a bunch of cheap junk made over seas. So in one generation we transformed our economy from one that produced a growing middle class into a barely above 3rd world model. Pharmaceuticals are just one small part of this. With the strangle hold special interests have on the government it is hard to believe this can be changed.
5
@TopDownRide America First. Right. If we make everything here in US that means triple the price on everything.Imports are cheap because of cheap overseas labor costs. Will you pay $45.00 for a workshirt? $2,000 for a cellphone? $1,500 for a basic washing machine? America First; right
@TopDownRide You "do not understand" why manufacturing in all sectors has moved to China, or at least, offshore? Really? How can anyone fail to understand? Because it is CHEAPER. And companies thereby increase their PROFIT! This is the very bedrock of capitalism and for anyone to fail to understand it at this point in the 21st century is something I fail to understand.
1
Positive fed-back systems tend to over-react. The sharp plunge of stock markets was exacerbated by high speed trading arbitrage. The world is probably over-reacting to a mild virus that becomes deadly when improperly treated with antibiotics too.
9
@Steve Bolger
Curious. Whats the appropriate response then to a virus that managed to shut down entire industrial regions and with new cases spreading around the globe?
https://www.bloomberg.com/news/articles/2020-03-01/air-pollution-vanishes-across-china-s-industrial-heartland
1
@Steve Bolger
yo Steve , I see you on many comment lists , very observant and most likely spot on with 2 first sentences .
sentence # 3 is the humdinger !!
here we will learn about the speed of mutation ...
unfortunately , a world-wide field test .
1
Poorly prepared is an understatement.
As other readers have already mentioned the biggest self influcted wound is how poorly prepared the US is for a full-blown pandemic.
I want to draw attention to another issue that has been overlooked by far too many people and how this 'best economy in US history', as one controversial US politician put it, is trully anything other than robust. Two big reasons for that: an out of control federal deficit and bare bone interest rates.
Traditionally, as mentioned in the article, lowering interest rates is what the Fed does when the economy is sputtering. It reduces borrowing costs and gives an incentive for people with capital to make more investments/promote more consumption. When interest rates are already at rates that the fed had traditionally leveraged during sever economic downturns youre in a lot of trouble.
I hold the powers that be at the highest level of contempt for slashing rates and promoting their economy as 'strong'.
Increased government spending or running high deficits is another tool that helps fight downturns. The ideal position to do this is having a government that balanced its books in times of plenty so that in times if scarcity it can act as both consumer and employer until the economy stabilizes and the business cycle restarts.
So many profoundly short-sighted and self-serving moves were made and the people who bare the costs, just like last time, are not those making reckless decisions that caused it.
It's us
85
An interest rate cut makes little sense. The people who need help the most, making lower wages and having little savings, will benefit exactly zero if rates go from 2 to 1 percent. Their credit card debt at 22 percent or student loans at 6 percent will remain unchanged.
Interest rate cuts spur capital investment. This has nothing to do with that scenario, nor will it influence home purchases.
People should calm down and go about their daily business...which will have the biggest effect. The panic, fed by the media, and the lack of perspective is astounding. Howard Ruff, for all his faults, was right in observing human nature.
9
@Mike
An interest rate cut would reduce the number of businesses that are forced to close due to lack of ability or high cost to borrow. This means everyday people keep their jobs.
1
@Emma
Not in this case. Rates are already historically low.
If that were the case, then the virus has nothing to do with it. Rates are already lower today than they were before the virus. Fact.
2
The econ 101 definition of inflation is too many dollars chasing too few goods. With China's production cuts coupled with US lower fed rates and possible tax cuts freeing up dollars, look for a return to double digit inflation.
8
@Jack Horner
Be sure and take into account the lost wages as layoffs move thru the economy but costs like healthcare and mortgages continue. There may not be too many dollars around.
"The core of the economic problem emerging from coronavirus is a “supply shock,” meaning a reduction in the economy’s capacity to make things.."
To me this is classic catch -22. It doesn't matter which comes first, supply shock or demand shock, because once it's set in motion by a virus with substantial quarantines, you are going to continue a downward spiral of shortages and drying demand.
It's as if the virus isn't only trying to kill as many people as possible, but it's trying to kill economic output and national economies as well.
And naturally, no matter how cavalier politicians have been about SARS, MERS, and even Ebola, this isn't something they were really banking on.
17
I'm so glad Neil Irwin has written about the supply side shock and its impact on distribution chains. The Fed lowering interest rates normally encourages investment by lowering the cost of expansion or new ventures, and therefore promoting economic activity. But people are not going to invest in a new venture if they can't get the necessary product inputs. Likely due to scarcity of those inputs the costs will go higher. It's not something the Fed can impact that much just with lowering the cost of money. Others here suggest facilitating alternative supply chains but of course a pandemic affects everywhere. Maybe by the time the virus really hits the U.S., China will have gotten over the worst of it and supply chains will recover.
7
@Jim: Interest receipts support demand. When rates go to zero, people living on wealth have to expend capital to eat.
The tables have turned. If China sneezes even the US catches a cold. A long overdue recession and financial markets pullback could be seen as a resistance-building cure. There’s already loose monetary policy and look where it got us; over-valued assets now threatened by a microcosmic bug. Throwing money at the problem is a palliative, not a cure as the Great Recession proves. If pharmaceuticals suffer supply threats that will hopefully shake up an over-dependence on needless drugs and will further highlight costs playing into the healthcare debate. Most importantly, fear needs tempering with facts. Keeping a finger on the pulse of the patient before quarantining him might be a good idea.
7
@Mortmain: Economies of scale become very fragile at the limit of all production of a product in a single facility.
The effects of supply side disruption short term appear dire, recession causing perhaps, but looking long term it might give American industry time to adapt - and reign in the outsourcing of parts and product to the Third World and bring more suppliers home. If the United States could do anything in the near future on this front it could bring about a massive federally sourced financing fund (or large tax breaks) for established American companies to set up their manufacturing on our shores. Future pandemics look probable rather than possible and we might as well prepare. If this virus exposes anything, it reveals that we are only as strong as our weakest link.
14
@Rick Morris: The US needs to get with global standards of measurement, public health care, and speedy conclusive judicial process. Better schools would help too.
The pandemic is a unique economic challenge. Here are some strategies for dealing with it:
1. In general: The Fed can take a page from the MMT playbook and pay down debts to further boost the economy. The Treasury simply directs the Fed to pay off student loans, or car loans, or temporarily pay mortgages while the disease runs its course, printing money to do so.
2. Treat this like a war: Let's say the disease has a 5% mortality rate, with those older workers having a 10% mortality rate and younger people closer to 1-2%. Rather than try to quarantine and hide out from the virus (which will probably just extend the inevitable), we treat this like a war and we all pitch in by going about our business in the usual way. The economy takes a hit, but we get through it. Our leaders would have to use war language, and demand war-type sacrifice. We're reminded that viruses are the apex predator on this planet. That should inform our decisions on climate change, as we don't know what we unleash while our Republicans keep our country and the world from properly responding.
While it's tempting to hide out at home, which may be effective if you have a free-standing home and have no interaction with the outside world (e.g., don't read your mail, which could be contaminated, or touch deliveries), the vast majority of people in cities share air in their buildings and will be exposed.
9
@David Doney: The Fed prefers to buy federal debt with quantitative easing, because servicing that debt is just book entries.
5
@Steve Bolger
They should be thinking outside the box for the next big crisis, whether this one or another. The Fed's toolkit is limited only by its own imagination.
For instance, if during the 2008 crisis the Fed had taken on mortgage payments, there would have been no reason for the mortgage-backed securities on the books of the investment banks to become worthless, and the crisis may have been averted.
This was all very predictable.
Even more bizarre then that US authorities are not even testing for cases.
Trump is not bright enough to understand any of this but that the health professionals treated this as something that cannot happen in the US beggars belief.
My hunch is that once tests are made a huge number of cases will be revealed and the economic impact will be far more dramatic that necessary.
20
@Ronald Grünebaum: If there are a huge number of mild cases already, many are already immune. Once immunity reaches a certain level, diseases like this peter out.
Then US needs to throw everything we’ve got at this virus.
* The Federal Government needs to guarantee the medical bills of every one. And insist that anyone with symptoms phone a hot line in their community.
* Hospitals and Medical Personnel should be paid the amount Medicare would normally pay. Without price gouging allowed.
* Medical Students and nursing students should be mobilized to join the front lines. Under appropriate supervision.
* We should all be warned away from large gatherings, including churches, sports events, etc.
* Each State should pass legislation to ensure voting by mail - to protect us all from gathering in large groups or standing on long lines.
* Congress should pass legislation (veto-proof) to ensure that the CDC is independent of the White House (like other essential government functions that must make decisions without political interference.
* Citizens should be urged to stay home as much as possible, follow infection control guidelines and call a medical hot line if they suspect they have the virus - so first responders and any medical personnel can arrive with appropriate gowns, masks, etc.
* Schools may need to be closed for a time. With education done via the web - if possible.
* The government must guarantee to pay sick leave for any individuals who need to stay home or are hospitalized, but who lack employer paid sick leave.
These are the minimum essentials our govt should be urging.
49
@TheraP: Vaccination for pneumonia reduces complications from viral respiratory diseases. It should reduce influenza death rates as well as those from covid 19.
6
@TheraP While we're at it, I would like a pony. What we've got is Trump, Pence, Azar, Wolf, McConnell, Fox, Limbaugh, and the usual gang of idiots.
Their alternative to your action plan will be mendacious information control.
4
@Steve Bolger Actually that only works if you are sick from bacterial infection subsequent to the viral infection and with flu and Covid19 the virus is the problem, as far as I can tell. Getting vaccinated is a good idea anyhow, but doing it now is probably not going to be helpful. We need more research into the actions of the virus and the infection people
1
This isn’t an economic problem it is first and foremost a public health problem- issues like lack of health insurance or fear of bills from going to hospital should be addressed immediately- care for the virus should be paid be the government no questions asked - medical professionals should be calling the shots - our economy will be best in the long term if public health is taken care of - fretting about the economy represents the myopic vision of our ruling class
74
There are a lot of questions and not a lot of good answers. But a lifetime of investment experience in the stock market makes one thing clear to me. Do Not Panic. Do not impetuously liquidate all of your investments. Be resolute and patient. Good times will return. There will be a rainbow at the end of this epidemic nightmare. Relax.
17
@Milton Lewis
That's my plan.
And, have your affairs in order if you don't already...including contingent beneficiaries.
@Milton Lewis
What you are saying is wrong. One should get out of the stock market now, before it drops by 50% and stays down for years, the way it did in the '70s.
@Howard Loewen
This is the kind of childish superstition that if alllowed to sway opinion will make outcomes way way worse. Ignorance had gotten us to this point, and how has that worked out?
A coordinated and forceful worldwide response by an intelligent, reasoned medically trained community unrestrained by political or religious ideology is the only solution to this growing crisis. Pray if it makes you feel better, but better to spend your time in the real world, being part of real solutions.
Fully 60% of households have barely $400 in savings to "weather" an unexpected "cost" such as the need for a new set of brakes, a washing machine, etc. Mr. Irwin and others write about the Fed's ability to further cut its FOMC rate (now at 1.50-1.75%, (with the 10-year treasury bond at an historically low 1.19%) to stoke demand. Yet, even when the Fed subjected us to years and years of zero interest rate policy, those very people who can't afford a $400 expense were forced to "borrow" via credit cards carrying annual interest charges of upwards to 22%. Yes, ZIRP for well-healed borrowers who didn't need the money, 22% for tens of millions who were living on the edge to begin with. Please, write about the reality for those who live on the edge and have to borrow at were once usurious rates of interest just to get by.
63
And remember when you vote on Tuesday just who the credit card industry relied on in Congress - Joe Biden.
Quality comment. Well said. Ps- the well to do- do not care one whit. They are special and have merit you see, daddy said so- and look at all their connections!
1
How about identifying the vulnerable supply chains and beginning local production. We’ve frittered away tax dollars on worse things.
19
A redundant supply chain would likely involve the southern hemisphere, like Africa or South America. They would be in their cold and flu minimum when the northern hemisphere is at its peak and vice versa.
Quarantines only delay the inevitable and give people time to prepare. If people are buying food to prepare for a pandemic then that short term consumer demand may make up for lagging Chinese production. Also people may only put off their consumption in China. If they get sick pay then they likely have larger savings and will make larger purchases.
China is ramping up production. Flu season ends after the first quarter. It is unlikely a second and third quarters will see negative growth. Hopefully a working vaccine is being distributed by the fourth quarter.
But yes diverse and redundant supply chains are needed. The only problem is finding suitable countries that have similar comparative advantages and then investing to get them over their barriers to entry.
4
One should not get overly distracted about the right monetary, fiscal, or other economic response. We should concentrate on stopping the spread of the virus.
27
@B Futcher
It is possible to tend to both issues. Tye economic impact will be especially detrimental to the already vulnerable working class and poor.
Yes, for some of the reasons stated in this piece, two weeks ago I also predicted a current financial tornado. Fixing the supply side, with many parts coming from China, is going to be a nightmare.
11
Vice President Pence said the administration will pay particular attention to the stock market, so although interest rate cuts by the Fed may not help spur production or save jobs, they could prop up the stock market which is much more important to the Republicans' key constituency.
19
@Keitr
The key constituency being the 400 families or so who own approximately 20 percent of US stock. That gives them a lot of concentrated power even with respect to the rest of the one percent who own another 30 percent. I'm not sure how much individual power those people have however unless they belong to the Chamber of Commerce, Bones and Skulls or some such organization.
A rocket ship can escape gravity but not the economy. The question is how hard the impact will be when we hit bottom.
8
Demand for high cost medical services will shoot up, and the supply of health workers will be depleted. Maybe there should be contingency plans to redeploy the unemployed as emergency public health workers, if the situation gets more widespread. The government can replace temporarily lost salaries by paying people to assist in the health emergency.
5
@Jazz Paw please clarify what you meant when you stated there should be contingency plans to redeploy the unemployed as emergency public health workers.
You cannot simply take a person with little or no formal health training and place them in public health positions when it seems we are on the cusp of a global pandemic. This might surely cause greater threats to an already threatening scenario.
17
@Jazz Paw
sorry , that north of 30 $B went to the farmer's comp...
@KHW
You would have to do this if the scale gets large enough because you would have no choice. You would run out of health workers who were tired or had died.
There are many levels of assistants that would not require much training to perform and you would be wasting trained personnel to have them do those jobs. People take care of sick family members all the time.
the "supply shock" will probably become a demand shock, a classic recession:
when people fear a recession, they reduce spending to preserve their savings: in case they lose their jobs or suffer from another problem that only money can remedy.
businesses also cut spending, to preserve their resources for a time when investment is more likely to be profitable.
so...the "supply recession," if it comes, will become a "demand recession" like all the others.
8
If we have a true supply shock (meaning fewer goods) and lower rates (meaning more money) won’t we just create a lot of inflation?
You can see this now in specific areas like the price of sanitizer. If you quarantine the entire US, prices for all sorts of essentials will jump like crazy - even as demand for other services like cruises will drop to zero.
When we had the oil shocks, the fed eventually had to raise rates to break the cycle of stagflation of the 70s.
15
Stagflation is a real risk. We may find that taming Inflation is the harder problem than dealing with covid-19.
13
"Macroeconomic policies can’t really do anything about supply shocks like those."
Not in the short term. But policies that discourage industry concentration and monopolies can spread the risk by having multiple supply chains.
Many individual companies have multiple supplier policies, yet we allow entire industries to concentrate to the point where one link in the supply chain can shutter an entire industry.
22
As the virus spreads here and abroad everything will freeze up: no travel and tourism, airlines and cruise ships devastated, along with restaurants, hotels and conference centers. No business travel. All the small businesses associated will be hard hit with unemployment rising. What happens when people aren't working, can't pay their rent or mortgages, and have no meaningful savings to support them? Tax receipts will plummet. The banks are all at risk as business cash flow dries up and loan payments can't be made. And who will be gong to the malls? Anchor stores and small businesses will fall. This will be an 18-24 month shock. Are you really going to "buy the dip" tomorrow morning? Look out below!!!
62
@JD small businesses are typically tech start ups, restaurant start ups using venture capital, law firms, doctor's offices, etc. the idea that "small business" is someone's passion project specialty store is incorrect.
4
@Concerned Citizen
Not all small businesses are described s you stated rather, many are part of an integral web that are all connected in some form to create the “big picture “ as in a destination city or a small community within a larger metropolis. They are not “typically” tech, law, physician-based ones all feeding at the trough of venture capital.
Having lived in SV, all places do not rely on VC cash.
5
Hope this mean diversification of production and less reliance on China. Too much Western dollars flow into that country that has no interest in individual rights.
18
The problem I expected to read about in Neil's piece is that there is political problem to solve for fiscal measures. The 'quarrelling fire fighters' I expected to stand for a tug of war in Congress about a demand stimulation package. Do Democrats have a stomach for demands from Trump c.s. for another tax measure that favors Trump's friends and has no impact whatsoever in solving a 2nd order demand consumer demand problem? Will Trump c.s. in the present, polarised climate support fiscal policies that Democrats want?
6
@Jaap van der Straaten
They will have to work with him whether they like him or not. He also has emergency powers, and no one will dispute that this is one, so he can use the funds from other budgets.
I hate Trump, but denying funds in this one instance would be stupid and just give him a bigger win.
People should have read Marxist economists like Michael Roberts,Tony Norfield, Brian Green and John Smith who have been talking about it for years. The global value chains were the result of the crisis of the 1970s and boost profits of American, Japanese, and European corporations. Now as they have reached another limit in terms of profitability in industrial production, the transfer of value across the globe has become increasingly difficult (evident after the 2008 crash. Trump and other right wing leaders are a byproduct of this stagnation. Financialization, which is a correlated phenomenon, confuses most people as they think it is the epicenter of the so called economy. Although important, it depends heavily on the production of value, which is now centered in China to the chagrin of people who don’t understand this. Value that is not produced is not realized. Meanwhile investment in fixed capital (many corporations are indebted with BBB bonds) might be lost. Investors sense this. Interest rates won’t do it this time.
21
Industrial production creates value and surplus value, which is another name by the profits distributed among investors in industry, those who loan money as capital, and those who simply live of finances. Besides losses incurred in fixed capital, which are long term investments, stopping the creation of value implies the reduction or total loss of profits among the players who appropriate it in the last instance. The financial markets and mainstream economists exclude these dynamics from their consciousness as they are not necessarily evident. Talking about interest rates on the other becomes a limited abstraction when the essence (value and surplus creation) is overlooked. And most of this is tied to the global value chains.
4
@Enri the people who know most about capitalism are typically marxists but this paper and the american media are so reactionary they can't even bear to give it a read let alone considering its points
1
@Enri Thanks for this. Unfortunately a lot of people hear the word Marxust and immediately say bad because their mommy and daddy taught them that.
2
Given how much "stuff" Walmart sells that is made in China, I wonder what happens when the one store within miles runs out of all that "stuff."
My guess is that if the coronavirus pandemic lasts a few months, there are going to be a lot of small towns that turn into "supply deserts."
28
Thinking too about the Dollar Store phenomenon—I don’t have the exact stats on hand but Dollar Stores are now the only “grocery” stores in town in many rural and lower income areas. People now do not have access to fresh food. I imagine this won’t work out well when there are supply chain problems.
18
@Joe From Boston
This is not going to be a phenomenon only of the small towns but big cities too.
1
We have disastrously tied ourselves to China in ways that are often hidden but that will have big impacts on our economy. For example, 72% of the world's plywood is made in China, only 6% is made in the US. As the Chinese economy collapses and is unable to supply the US, it won't be just your Christmas lights that don't arrive, building materials will be in short supply. That is something that will ripple through the economy as construction spending drops and the jobs associated with it go away, and therefore all the suppliers also cut back. You see how this will spread?
This is just one area. Hang on this could get ugly. It will end, our economy is fundamentally sound, but we really need to rethink becoming so dependent on one country for our supplies.
118
The article illustrates the limited capabilities of so-called economic experts to critically think their way through this situation. Welcome to the new era of human civilization where we are dealing with novel situations brought about by global climate change and human overpopulation. We pay these people to think their way out of the bag but all this article said was, “it is dark in here.”
30
The above is even more likely since the president has foolishly blamed the Democrats for over-advertising a dangerous disease. Neither has he told his base support the truth of the matter or even allowed for the medical community to speak honestly.
This dishonesty on his part will lead to a more dangerous result for him politically and even personally. He is not a young man and is NOT immune to this contagion. Yet in his ignorance he goes gadding about the country putting himself at risk and finally his own family.
66
Has there been research on whether humans can pass the virus to animals, possibly endangering our food supply if those animals must be slaughtered?
6
@LadyC There is a case reported of a dog in Hong Kong gibing a weak positive result. It is disputed whether it is a genuine result as for a virus to jump two species in such a short time is very, very unlikely. However there are a number of diseases where animals are reservoirs and they periodically cross over into human populations (plague, leprosy, anthrax, and where I live some mosquito borne diseases).
14
@LadyC Animals can absolutely get the coronavirus and we already have one confirmed case for COVID-19.
First, the coronavirus, and COVID-19 in particular, began as an animal-to-human transmission in the Wuhan food market.
Second, the coronavirus definitely can be transmitted directly to animals and domestic pets as well as from infected humans to animals domestic pets (case in point, the patient with COVID-19 whose dog subsequently tested positive for the disease).
Unlike Bird Flu, Ebola, and other pestilential diseases, no discussions have been published concerning containment measures that include the destruction of the host and/or carrier animals.
Like every other pet owner, I love my pets like human members of my family and the thought of ever being faced with having to put them down, for any reason, is nearly too much to bear. I hope we are never, ever in a situation where domestic pets have to be destroyed to contain an outbreak, pandemic, or anything else.
3
@LadyC
Human to animal transmission of influenza A(H1N1)pdm09 in a turkey breeder flock in Norway.
Sjurseth SK, et al. Infect Ecol Epidemiol 2017.
Introduction: Routine surveillance samples disclosed seropositivity to influenza A virus (IAV) in a Norwegian turkey breeder flock. ...Genetic analyses of haemagglutinin gene sequences from one of the infected farm workers and turkeys revealed a close phylogenetic relationship, and confirmed human-to-turkey virus transmission....
2
Evidence of human-to-swine transmission of the pandemic (H1N1) 2009 influenza virus in South Korea.
Song MS, et al. J Clin Microbiol 2010.
Overall, these results indicate widespread human-to-animal transmission of pandemic (H1N1) 2009 influenza viruses in South Korea. With the significant role of pigs in the ecology of influenza viruses, these transmission events should be closely monitored and minimized to prevent the risk of generating viruses with greater human health concerns....
Left out a few things:
Hard to fix when government is run by self-fixated idiots who:
1. Don't understand or believe in science
2. Aren't smart enough to defer to experts
3. Aren't smart enough to know what they don't know
4. Do not have public safety as their primary focus
5. Seek to block dissemination of important information for political reasons
Did I leave anything out?
Probably yes.
531
@Victor Not willing to learn.
26
@Victor
Blame everything on the media, deep state, and Obama.
Don’t hold any press conferences.
15
Yes. When pence, the vp and coronavirus czar, supports the ranting of don jr that democrats want millions to die in order to defeat trump, the USA has a problem that’s more significant than coronavirus.
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I find it remarkable that global central bankers, who can never seem to coordinate on child poverty, inequality, joblessness and host of other global social ills, can come together on short notice to mobilize heaven and earth after a few international air travelers get a nasty case of the flu.
Dr. King was right: Socialism at the top; rugged individualism at the bottom.
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What will the future hold for the many folks with no economic reserves, no affordable health care and no paid sick leave if they are subjected to a prolonged quarantine?
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@Gravesender More tens on city streets.
4
@Gravesender That would definitely impact the next presidential election.
2
We will have both a supply and a demand problem. People held up at home don't spend as much.
20
With a Stable Genius in charge what could go wrong....
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The article touches on the co-relationship between the supply side and demand side. Currently, there is a common factor, which is the impact of the policies implemented to limit the spread of the virus.
If there are no imports (non local factors), then supply and demand will work together - they adjust together locally, responding to local common factors -- the virus response. In other economic scenarios, the common factor could be a change in foreign exchange rates, less competitive exports, factory shutdowns, etc.
If there are supply side imports, and the virus response of the importer is different than the exporter (or vice versa), then there is a mismatch. This timing difference is temporary, though.
A possible solution will be temporary substitutes locally on the supply side, combined with traditional economic stimulus on the demand side, slightly delayed. Together, these should not be much different than a typical response, though perhaps slightly less efficient -- requiring a little more time to take effect, or together slightly delayed so that they will work together effectively when the supply shocks are less imbalanced.
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@AW Supply shocks are very different and the adjustment times can be very long causing a lot of economic pain. Especially with many companies being very financially leveraged and reliant upon constant refinancing. Credit markets, if a supply shock occurs, are likely to freeze up and then watch the dominos fall as companies go bankrupt.
12
Maybe we need to start to re-evaluate the "just in time" supply chain and start to bring back some production facilities from overseas. People who manage the "old fashioned" way - like having an American plant and keeping 6 months of inventory on hand will fare better than those who rely on having critical components delivered every day from China.
The most egregious and most critical factor which needs to be addressed by Congress and the Administration IMMEDIATELY is the reliance on critical medicine production overseas. American pharma must be REQUIRED to bring production back into the US to assure access and safe production environments. God knows they charge enough for their products - do they have to rip out every last penny of profit by endangering the entire nation's medicine supply too??
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@Joe We'll all likely diversify our supply chain, but it's unlikely to return to the US. There clearly are cheap labor places like India, Mexico, South America, Africa, etc. that will be happy to take up the slack from production in China.
The US tends to have expensive land, expensive workers, regulations about worker benefits and safety as well as pollution/land use.
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@David Precisely. We should pay more for our sustainably and locally produced goods and otherwise do without. This crisis is demonstrating how foolhardy our economic system is.
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@Joe
Even in the best of times, it's nuts to rely on China and India for drug manufacturing and their essential ingredients. FDA oversight in both of those countries is sparse and ultimately ineffectual. Generics have become a crap-shoot.
15
Supply chains are relatively easy to repair--China is already well along--but quarantines are a different matter altogether. Tourism and airlines are going to be hit hard, as well as oil and gas, probably with lasting effect on their growth curves (climate change reprieve by a virus!), and more rounds of lower interest rates are going to impact the financial sector (no big loss there, except for the possibility of another financial recession stemming from lack of regulation and preparedness). As the article notes, local impacts are quite possibly severe but we have no experience to go on.
8
Obviously if the virus continues to spread the economy will suffer. But how would a virus induced recession compare to a financial one, like in 2008? I am not an economist but I think once the virus dissipates the shortfall in supply and demand would be quickly made up whereas the recovery from a finance induced recession would be much longer and painful. And if an impending recession is avoided it will be due to science and medicine, not the Fed or VP Pence.
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@Jsailor
I am not an economist either but I believe that shortfalls in supply take a while to ramp up not only in production but delivery chain. As for demand, that is the big unknown variable so, it really remains to be seen just how this may play out. When there is a gap in demand, many times it never gets back and right itself (exceptions are there such as building supplies, medicine, just to name a few. As for financial aspects here in the US, I believe that the Fed has much fewer arrows in their quiver since they have been lowering rates after being harassed and be,titled by tRUMP.
1
It would take a certain new type of American exceptionalism to believe that even though no other countries have managed to contain the COVID 19, America would somehow be different in this regard and actually contain it. We may as well try to sequester the American air that we breathe. We may be able to slow COVID's spread, but that would only make the spread last longer, and in so doing, lengthen the duration of its economic impact.
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@D M
Viral infection rates are generally lower in summer. Therefore, an effort to slow the rate in late winter is likely to reduce the total number of infections.
6
@5barris Infections are generally lower in summer because people travel outdoors more and move away from confined quarters where diseases spread easily. But a quarantine changes that whole calculus by forcing people back into confined quarters.
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@D M Slowing the spread will help keep us from exhausting our supply of hospital beds. If we can treat those with the most severe cases, the fatality rate can be kept lower.
17
In the US economy, the supply shocks Mr. Irwin describes are related to the neoliberal vision of trade found in US trade treaties and trade policy. The ability of the US government to respond to supply shocks is related to the neoliberal vision of the role of government. The Trump Administration with the support of the Republicans in Congress has weakened the ability of government to take the actions required to prevent demand shocks. Covid-19 highlights the damage done by these policies.
Mr. Irwin's visions of tax rebates and other gimmicks are not the equivalent of sound fiscal stimulus such as shovel ready projects to rebuild infrastructure. Such projects require capable federal agencies, not agencies hollowed by the Trump administration and the Republican Senate.
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@OldBoatMan Your proposing a federal stimulus program for shovel ready grave diggers by the Democrats?
1
There should be some sort of consumer protection law that prevents price gouging during a health crisis.
For example some sellers of Purell are charging 5x the normal price.
26
@Bronx Jon That's harder to do than to say, as lower prices would encourage hoarding by those who don't need so much. Higher prices when supplies are low tend to help ensure those who really need it can get it, while those who are "just to be safe" are discouraged from over-stocking.
7
@Bronx Jon
If Purell is 5x the normal price, use SOAP. Wash your hands, the way they did that before Purell (which is basically gelled alcohol).
1
No, higher prices means that only the rich can buy.
1
So then, how do we encourage resiliency in the supply chain, and in the national (and global) economy as a whole?
Modern business memes and drivers, from hyper-specialization to just-in-time delivery (and little or no stock on hand) to far-flung and single-point sources, all seem to increase fragility. Excess capacity is indeed a cost factor, but "excess" is defined based on optimum conditions. By the same logic, life boats on a cruise ship are excess costs.
36
@Bob Krantz Every economic downturn is not only a product of the failure to recognize risk. They are also a product of short-term thinking.
As you said, the lack of excess capacity and redundancy is the problem. The "excess cost" is a form of distributed "insurance premium" but the microeconomic model of the MBAs do not allow them to think of it that way.
20
The same short term “thinking” is also analogous to seeing that, although you have two kidneys, you only really need one. So why not sell one at profit? What could go wrong?
15
@Bob Krantz This will likely wake up many businesses like Apple to ensure they have a more diverse supply chain rather than say hold larger inventories.
1
Supply chains built on cheap labor and closed US factories needs to be recognized for what they are — corporate greed in action. Let's keep in mind that the supply chains threatened by the coronavirus were built on cost cutting and profit expansion to benefit the few.
On a more positive note, it seems to me that 40 years of Reagan supply side economics may becoming to an end — that's a good thing. Reaganomics was designed to get people to buy things they don't need or can't afford by using debt.
The past 40 years have been good if you resided at the top of the supply side trickle down economy. The deregulation of the banking and financial industries paid for the building of today's extended supply chains and the closing of factories. Reagan's supply side economic system has made trillions for those at the top, while crating a nation of families and individuals in endless debt.
To head off the threat to an economic system built for corporate profits and the wealthy, perhaps our nation's stable genius, Trump, will echo the words of the other great Republican president, W. Bush to combat a looming recession — Go shopping America! I'm sure doing so today will work as well as it did during the W. years.
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@old soldier - "Supply chains built on cheap labor and closed US factories needs to be recognized for what they are — corporate greed in action."
Those corporations that don't lower costs will be winnowed out, leaving only the "greed-based" ones. A kind of natural selection. That's why you need laws and regulations: to prevent a "race to the bottom."
62
@Betaneptune Except all the evidence economically is that we're not racing to the bottom, but more and more are being lifted up and living better lives. We live longer, are better educated, have more food, and less poverty across the world. The race to the bottom is created by central planners who simply cannot forecast all for everyone better.
9
@old soldier
You make it sound so simple. Evil corporations, driven by greed, cut costs and benefit themselves at the expense of everyone else.
But what about the equally greedy consumers, who drive the relentless trend for lower prices and greater value? What about the physical standard of living of typical American families compared to 50 and 100 years ago? What about the reduced work hours and hardships of American workers over the same time period?
And if the idea of "profit" triggers you, tell us how your business would be different if you aimed to simply break even, but faced the same market forces.
12
Well, if it takes a pandemic to finally expose the uncontrolled outsourcing of millions of american jobs over decades, so the price of televisions, trinkets, telephones and toys goes down while giant corporations make billions in profits, so be it. Along with that, we have destroyed our apprentice training and skilled trade programs for workers, while forcing SMALL business to compete with international giants buying Chinese parts made by workers earning ten times less than in the US.
The article mentions tax breaks or direct payments to unemployed workers. What about tax breaks or other incentives to US small business, while plugging the overseas tax loopholes enjoyed by international giants like Apple. They care not a jot for the domestic working class, as long as the Chinese supply lines keep going and shareholders are well fed.
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@Will that's not really the issue here. There are no American sources for a lot of the electronic components, and no one is willing to invest the billions of dollars of infrastructure needed to build, say, a capacitor factory, when globally the demand is slowly decreasing. There will remain a market, but it's not a growth one, so people aren't building. So we continue to rely on China et al.
This is the case with a lot of electronics components. It has nothing to do with loopholes or anything like that -- just about all the small electronics companies buy overseas (if not build too) because there's either no American-made option or there is no way to make it cost effective if it exists.
11
Instead of or in addition to tax breaks for workers, lets have Healthcare!
3
@KM the defense department will find domestic production cost effective - before its too late.
3
I agree that this economic shock is very different from what we have seen before and I have this suspicion that the effects may be also be very different. We are used to reduced inflation and interest rates during a recession, but what if the opposite happened? For starters, limited supply usually results in higher prices. I am also concerned about the high costs to the government from medical care and social services to those unable to work. Combine that with reduced tax revenues from a depressed economy and the federal deficit will soar above it's already huge sum. At some point there many simply not be enough demand for bonds and interest rates will rise. The fed could then buy bonds, i.e. print money, but that would also lead to inflation. And note that similar senarios will be playing out all around the world.
41
@dj sims
Stagflation: gov't prints $ and restricts supply. In this instance disease may restrict supply. Read last section of https://www.thebalance.com/what-is-stagflation-3305964
and then Chap 2 of Mancur Olson, Rise & Decline of Nations, for a start, on why no timely adjustments. Huge academic *and* practical literature on this danger. Not encouraging.
This article seems to call into question the basics of global free-trade policies which encourage manufacturing and labor to sit in the lowest-cost markets in the world in order to optimize profits of materials and products. The problem is that the supply chain is global also, and when disrupted, takes an incredible economic toll.
I do not consider myself an isolationist, but in an over-populated world subject to more frequent extreme climate events, does it not make sense for our businesses and products to be more self-contained, self-sufficient and sustainable (environmentally friendly)? That would stimulate employment at home helping to narrow the wealth gap. As it stands, global free-trade policies reward big corporations, large business owners and Wall Street, not the working man in the US. Prices would go up, but . . .
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@Kent You first need to show real evidence that people are worse off than before. The evidence contracts that notion, that we're wealthier and healthier (aside from those who make themselves sick, such as smokers, over-eaters, couch potatoes, drug abusers etc). No, you suggest all sorts of potential bad things while neglecting the actual good things all around the world.
1
@David What about the people that have become destitute due to outsourcing of jobs?
The worst is yet to come no matter what. The goods China would have produced over the past few weeks should have been coming out of the pipeline in the next few weeks. Some items in the fast (air freight) pipeline, like pharmaceuticals and high end electronic components are already in short supply. Hopefully, the president's trade policies with regards to China will encourage American industries to diversify supply chains and bring the sources of critical parts closer to home.
13
@Greg M. China is also suffering this downturn, much more than the US because they can't rely on their local production. Bringing closer to home is fine, but diversification of locations is better than concentrating any one market, be that China or the USA.
5
I have said. many times on The Upshot the big economic downturn will come.
The faux great economy is based on an insane trade war against friend and foe alike, record national, consumer, corporate, student, credit card debt.
The issue is to tell when it will come and how bad it will be. The two greatest eco. downturns in modern history, the Great Recession and Great Depression took app. 10 yrs. to happen.
The coronavirus is a wild card. It can only hasten the downturn that is coming imo.
Stay tuned.
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@Paul
"I have said. many times on The Upshot the big economic downturn will come."
And well regarded economists have predicted 9 of the last 5 recessions. Predict something long enough and eventually it may come true. The problem is we have an administration that has no real idea of how to manage an economy for everyone. They bow only to their donors.
8
@BigFootMN Thank you for your reply. You kind of proved my point with your last two sentences. Demagogues will always ruin their countries usually with an eco. downturn.
One can dodge tremendous downturns if you handle the economy right like Obama did. What is going on is a continuation of his careful stewardship of the country for eight yrs. without massive national (except in the beginning to stimulate), student, credit card, consumer, corporate debt with an insane trade war.
With careful steward ship of the economy you can avoid massive downturns.
5
The Upshot claims, "The risks loom larger because this particular crisis is ill suited to the usual tools the government has to stabilize the economy."
The "usual tools" of government having nothing to do with the Federal Reserve, and everything to do with the CDC, Department of Health and Human Services, with government support for laboratories searching for vaccines, and government mobilization of police and hospitals to quarantine and treat those infected.
Yet the Trump administration has slashed funding for all of those "usual tools," and put a man in charge, Mike Pense, not only devoid of medical or scientific knowledge to guide him, but bereft of any human compassion for those who will become infected, as evidenced by his heartless policies during the AIDS crisis in his home state of Indiana.
An effective government invests in public health. Trump has done the reverse, starving the country's medical establishment of the funds needed to respond effectively, while lavishing tax cuts on plutocrats.
Interest rates are the least of our worries.
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@Sean
The CDC budget has not been cut. I
@KBronson
In 2018 the Trump administration fired key officials connected to the U.S. pandemic response, and they were not replaced.
Last year, the USAID program known as PREDICT was shuttered. The initiative was launched in 2009 and designed to improve the “detection and discovery of zoonotic viruses with pandemic potential.”
President Trump has proposed cuts in the CDC budget in each of his presidential budgets since taking office, and the FY-21 budget proposed a 16% overall reduction in funding for the CDC.
He may not have been totally successful to date, largely due to adult supervision by congress, but he sure is trying!
13
@Chris Conklin
PREDICT was operational at the time COVID-19 began. Clearly, in this instance PREDICT failed.
I support programs like PREDICT and their goals, but they don't always succeed, and it is simply counterfactual to imply, as you do, a positive link between PREDICT's demise and the outbreak of COVID-19.
1
The key to your analysis is your conclusion that only effective health efforts to contain the virus can make room for economic tools. Fair enough. Problem is the virus seems bound to spread all over the globe sooner or later. Communal transmission and reinfection of recovering patients doom any near term containment cure. Only an eventual vaccine can do it. That's many months -or years- away.
Keep fingers crossed.
5
@AR
With most viral diseases, infection induces immunity to re-infection for a period of decades.
5
Maybe some day our society will champion financial responsibility and teach our children personal finance in school. That way everyone would have 3 to 6 months of expenses saved for emergencies like this instead of being thousands in debt.
23
Not possible on a low wage job. People can’t make ends meet.
70
So Trump and Congress need to pass an infrastructure bill to help boost economy not pressure Fed to cut rates which wont help fill the shelves. Lets try for a green New Deal to boost our technological competitiveness vs China
80
If you’ve listened or read snippets of speakers at the Republican CPAC, any Green New Deal would be dead in the water for them, and they wasted no time telling their base, that’s its a bunch of baloney, even worse.
1