“Economics is a subject that does not greatly respect one’s wishes.” – Nikita Khrushchev

The Corona Economy, Part I: Will America Survive It?

New York City is losing billions in tax revenues, and Mayor Bill De Blasio is going to have to lay off thousands of city workers. He is upset about this. He’s calling on the Trump administration to bail out the city. “We can’t do anything about this,” he pleaded. (I’m paraphrasing.) “Only the federal government has the power to help us.”

Many in my family feel that we should keep the economy shut down “for as long as it takes.” They also say that the federal government should keep cranking out financial aid “for as long as it takes.”

“Human life is more important than money,” they say.

The trouble with mixing ethics and economics is not that they are incompatible. Quite the contrary, they are inextricably linked. The problem is that if you talk about them simultaneously, you never get anywhere.

Both subjects are important. Neither is dispositive or scientific. But economics has the advantage of a vocabulary of facts and a language of numbers. Thus, if you want to have the conversation about both, it’s better to start with the facts and numbers.

So let’s do that.

* As of April 13, 1.1 million small business loans had already been approved, totaling $253 billion in bailout money. By the time you read this, the federal government’s $350 billion small-business relief fund will be nearly exhausted.

* The total “relief package” already enacted will cost about $2 trillion. There is good reason to believe that we will have a second and perhaps a third one at that same level.

* On April 17, we learned that more than 5.2 million Americans had filed for unemployment benefits that week – which means that the virus put more than 22 million out of work in less than a month.

* There are about 127 million households in America earning, on average, about $150,000. (That’s the mean, which counts the rich people. The median income is $60,000.) Ten million unemployed, multiplied by, say, $100,000, is $10 trillion. At an average tax rate of 20%, that’s $2 trillion in lost federal tax revenues.

* Tens of thousands of small businesses, representing hundreds of billions of dollars in tax revenues, have been shut down. Many of them will not reopen.

* For some years now, the federal government has been running at a deficit of about $1 trillion a year.

* Total US debt is nearing $24 trillion and rising fast.

Would You Invest in This Company? 

Think of the federal government as a business. I know that it’s not a business, nor is it intended to be. But hear me out.

You are an investor, trying to decide whether you want to buy this company.

The first thing you do is look at a spreadsheet of the financials – a P&L (profit and loss) statement and a balance sheet (assets minus liabilities).

You look first to the bottom line of the P&L, which tells you how profitable this company is. Hmm. Can that possibly be true? Is this company really losing $1 trillion a year?

Maybe they are investing for future growth, you tell yourself. Maybe, like Amazon in its early days, the Feds are spending money they don’t have in order to acquire income in the future. But when you look at the company’s projected income, it’s going the wrong way. Projected tax revenues are going down. Way down!

And what about its balance sheet? What about the company’s net worth? You glance at the liabilities and what do you see? You see $24 trillion in debt!

Surely, the company’s assets must offset this figure. You check that side of the ledger, and you see about $500 billion worth of gold (by today’s prices). Okay. You also see that the company has a great deal of valuable property (national forests and monuments and buildings and so on). But that property is  encumbered. It can’t be sold.

From this perspective, the US looks like a terrible business opportunity, right? It’s big-time broke and losing billions of dollars every day.

And thanks to the Corona Crisis, that debt and those losses are going to pile up faster than ever. The current bailout package is estimated to cost $2 trillion, bringing the projected loss for 2020 to $3 trillion. But to make matters worse, tax revenues are crashing. As I said above, it’s likely that they will drop by as much as $2 trillion this year.

Meanwhile, Mayor De Blasio is facing a fiscal crisis. Tax revenues are down more than $8 billion. And even with firing thousands of city employees, New York will still be short more than $6 billion by the end of this year… just to pay its upcoming bills.

That’s why he is complaining about Trump. He knows he doesn’t have a magical way to create the dollars he needs to solve his problem. But the federal government does.

The government has the Treasury, which issues Treasury bonds (IOUs), and it has the Federal Reserve (the central bank) which, among other things, decides how much interest it will charge US banks to borrow money from it. But the Fed can also, if it wants, put “liquidity into the system.” What that means is that someone that has access to a database that keeps track of the money supply (how many dollars are out there) hits a button and billions (or trillions) of dollars that never existed before appear out of nowhere. This is what most economists mean when they say “printing dollars.” (We’ll get into that in more detail in Part IV of this series.)

This is why some people are worried about the economy now. The federal government is in crazy debt and is losing money faster than it ever has before. Millions of people are out of work and tens of thousands of small businesses are dead in the water. That means a lot of pain and suffering. And the possibility of a deep depression like we haven’t seen in 100 years.

You may be thinking, as my brother-in-law said last night, that these facts and numbers must be false. After all, everyone knows that the USA is “the richest country in the world.” It can afford a shutdown of three to six months. You may be thinking, as some have said, that the economy will bounce back to full strength as soon as we get past this pandemic.

Maybe. But I doubt it. If I’m going to bet, and I probably will have to, I’m going to bet that things will get worse before they get better.

I’ll tell you why I am pessimistic on Friday, in The Corona Economy, Part II

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peremptory (adjective) 

Something that’s peremptory (puh-REMP-tuh-ree) insists on immediate attention or obedience, especially in a brusquely imperious way. As used by George Eliot: “There is something sustaining in the very agitation that accompanies the first shocks of trouble, just as an acute pain is often a stimulus, and produces an excitement which is transient strength. It is in the slow, changed life that follows – in the time when sorrow has become stale, and has no longer an emotive intensity that counteracts its pain – in the time when day follows day in dull unexpectant sameness, and trial is a dreary routine – it is then that despair threatens; it is then that the peremptory hunger of the soul is felt, and eye and ear are strained after some unlearned secret of our existence, which shall give to endurance the nature of satisfaction.”

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The following letter – supposedly from F. Scott Fitzgerald, but actually written by Nick Farriella for the humor site McSweeney’s – recently went viral. It was forwarded to me by several people who didn’t seem to realize that it’s a parody.

A Letter From F. Scott Fitzgerald, Quarantined in 1920 in the South of France During the Spanish Influenza Outbreak 

Dearest Rosemary,

It was a limpid dreary day, hung as in a basket from a single dull star. I thank you for your letter. Outside, I perceive what may be a collection of fallen leaves tussling against a trash can. It rings like jazz to my ears. The streets are that empty. It seems as though the bulk of the city has retreated to their quarters, rightfully so. At this time, it seems very poignant to avoid all public spaces. Even the bars, as I told Hemingway, but to that he punched me in the stomach, to which I asked if he had washed his hands. He hadn’t. He is much the denier, that one. Why, he considers the virus to be just influenza. I’m curious of his sources.

The officials have alerted us to ensure we have a month’s worth of necessities. Zelda and I have stocked up on red wine, whiskey, rum, vermouth, absinthe, white wine, sherry, gin, and lord, if we need it, brandy. Please pray for us.

You should see the square, oh, it is terrible. I weep for the damned eventualities this future brings. The long afternoons rolling slowly forward on the ever-slick bottomless highball. Z. says it’s no excuse to drink, but I just can’t seem to steady my hand. In the distance, from my brooding perch, the shoreline is cloaked in a dull haze where I can discern an unremitting penance that has been heading this way for a long, long while. And yet, amongst the cracked cloudline of an evening’s cast, I focus on a single strain of light, calling me forth to believe in a better morrow.

Faithfully yours,

Scott Fitzgerald

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Have you heard of polyphonic overtone singing?

First, I came across this video on YouTube. I expected to hear a pretty voice. Instead, I heard this:

I sent it to Number Two Son, a composer, and he introduced me to something called the “harmonic series.” He did his best to explain. I couldn’t get it. So he sent me this:

That helped some. I still don’t understand it well enough to explain it. But what struck me most about this second clip is the fact that these vibrations are not arbitrary. They follow a precise mathematical order. The universe is, in this sense at least, ordered.

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An email from DR:

I’m a copywriter all the way from Brunei Darussalam. I just want to say thank you for all the resources that you put together through books & courses. Not only have you played a main role in the industry, but you help others to improve as well.

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“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” – Albert Einstein

The Questions Nobody Is Asking 

I meant to write today about the economic impact of the Corona Crisis. But I feel compelled to continue with yet another discussion of the mysterious logic and undisclosed arithmetic that has been part of this crisis since the beginning. 

Answer This 

Here’s a question: If knowing that the lethality rate is important in plotting a strategy to deal with coronavirus, why haven’t we done the right kind of testing? Why are we testing only frontline workers and people that are exhibiting symptoms?

I’m serious.

Why aren’t we conducting a large random study to determine what percentage of the population has COVID-19? If we knew that, we could answer the critical question: How lethal is it?

If you’ve been following the major media, your answer will be: We have to test people with symptoms to save lives.

But is that true?

Think about it. This is the current protocol…

Step One: You feel that you have symptoms. You call your doctor or some public health service. You describe your symptoms. They ask your age – i.e., if you are over 65 – and if you have diabetes, cancer, asthma, or any other relevant comorbidity issue. If your answer is no, they tell you not to worry.

Step Two: You answer yes and get an appointment for a test. If the test is negative, you are sent home. If it is positive but your symptoms are not severe, you are sent home.

Step Three: Your symptoms are severe enough to be admitted to a hospital. They may, if you are lucky, give you an unproven medication like hydroxychloroquine to get more oxygen in your blood. If that doesn’t work and you get worse, they put you in ICU and keep an eye on you. If you can’t breathe, they intubate you. Your chances then of living are, at best, about 50/50.

Here’s the thing: If you are diagnosed with coronavirus today, your chances of being hospitalized are about 10%. Of those hospitalized today it looks like about 20% of them die. (This percentage is based on the states that are reporting this data.) So that sounds like your chances of dying from coronavirus might be 2%.

But again, this assumes that we have diagnosed 100% of those that have coronavirus, which we’ve seen is an understatement by a factor of 10 to 100. Factoring those numbers into the equation means that hospital intervention, though heroic, is effective for fewer than two-tenths of 1% (0.2%).

That’s sounds terrible, but it’s just another way of saying what the medical establishment has been saying all along: There is no statistically valid medical intervention for successfully treating coronavirus.

So why do tests?

There’s actually a very good reason. If, as I’ve been arguing, the real fatality rate of COVID-19 is a fraction of 1%, we need to know that. It could suggest another protocol for ending the disease than the one we are on now.

The Test We Need 

We can find the real mortality rate with a different sort of testing than we are doing now. If, instead of testing only those with symptoms (and even severe symptoms) we tested a good-sized random sample of apparently healthy people, we could arrive at the number we are searching for.

If we tested 50,000 Americans that don’t have symptoms, we could find out how many of them have been infected and use that percentage as the multiplier we need. Say, for example, that we found out that 10% of those tested had the virus. We could then assume that 10% of the population – about 33 million people – have been infected.

If we do that and discover that the fatality rate is 0.02% (see my April 13 blog), we could then begin an intelligent discussion about the best way to battle the virus.

We still wouldn’t have a treatment. But we would have the three most important facts: How lethal is it? How infectious is it? And how many people have already been infected?

I’m talking here about a big random test, big enough to come up with reliable answers to those questions. But you should know that there have already been several tests on smaller populations. And the results of those tests indicate that the real mortality rate is not the 10% that was first reported, nor the subsequent estimates of 6% and 3%, nor the 1% that Dr. Fauci and Surgeon General Jerome Adams have started using, but just a small fraction of that.

As I’ve been saying for two weeks now, if it turns out that the actual fatality rate is this low, it would mean that just about everything we’ve been doing so far to stop the disease hasn’t made any significant difference.

Not in terms of the final death toll.

I know. That’s sounds crazy. It contradicts everything you’ve been told. But hear me out.

Another Question That Nobody’s Asking 

Slowing the spread of the virus would mean fewer overloaded hospitals. That’s for sure. And that would mean, for example, a better chance that hospitals would have enough ventilators available for their COVID-19 patients that needed them.

But has a lack of ventilators actually been a problem?

I spent an hour this morning looking for cases where hospitals ran out of ventilators. I found none. As far as I’ve seen, everyone that has needed to be on a ventilator was put on a ventilator – even in New York City.

But let’s say, for the sake of argument, that 100 patients have been denied ventilators and that half of them died. Since we know that, at best, ventilators save half of those that are put on them (the consensus is between 50% and 10%), that’s 25 people out of a population of tens of millions that were infected. It’s not a statistically significant number.

As I mentioned on Monday, predictions of such shortages is what persuaded me to think that the protocol of social distancing and the shutdown was sensible. But if that isn’t the case, and isn’t going to be the case, we have to consider whether slowing the virus is going to save lives… or possibly increase deaths.

Again, I’m sure this sounds crazy if you trust the information and advice you’ve been hearing from Dr. Fauci and the major media. But what they are saying – that slowing the virus will reduce deaths – doesn’t make sense to me.

The only thing that can stop a virus from spreading is herd immunity.  I hear what you are saying: Vaccination is the way. But vaccination is a type of herd immunity, as I’ll explain in a minute.

Herd immunity is what happens when a large percentage of the population is immune to a virus. Depending on the virus, that percentage can range from 40% to 60%. When you get to those numbers, the virus cannot spread like it needs to because its host population is too small. So it dies off naturally.

This is what happens with the flu each year. Approximately 50% of the population gets vaccinated. And some other percentage catches the flu and gets over it. As I said above, vaccination is not a different strategy from herd immunity. It is an artificial way of accelerating it.

It is also a way to protect the most vulnerable, which is usually the old and those with a compromised immune system. That, too, is standard protocol for the herd immunity strategy. Protect the vulnerable from the higher risk of dying by encouraging them to get vaccinated. Do the same with the general population. But don’t worry if the young and healthy ignore that advice. So long as 40% to 60% of the population becomes immune (by vaccination or by contracting the disease), the virus will die out naturally.

Social distancing is not a way to achieve herd immunity. It is a way to slow the spread of the virus so that hospitals won’t be overwhelmed. But until you have herd immunity – either by vaccinating 40% to 60% of the population or by allowing that many to be infected – the virus won’t die. It will keep coming back until the host population is too small.

This is why epidemiologists are warning us about a second and third wave. It is almost certain to happen precisely because we are slowing the spread of the virus with social distancing.

Put differently, social distancing neither decreases the lethality of coronavirus nor the eventual number of people that die from it. It only decreases the speed at which it spreads.

(Now isolation is another matter. If you are old and have comorbidity issues, self-isolation will definitely reduce your chances of contracting the disease and thus dying. I’ll handle that in a future blog.)

A Final Question 

This brings me to my final question: If we could achieve herd immunity before the middle of next year – i.e., before we can vaccinate 120+ million Americans – wouldn’t that be what we should be striving towards?

If we accept the facts that (1) herd immunity is the only way to kill the virus, (2) the real fatality rate is 0.1% or 0.2%, and (3) that a vaccine is a year or so away, doesn’t it make sense to try to achieve herd immunity as quickly as we can before then, while doing everything we can to isolate those who are most vulnerable?

By achieving heard immunity naturally, by isolating the vulnerable but otherwise letting the virus spread, wouldn’t that render the second and third waves weak or even impotent?

Of course, I don’t know the answers to those questions. But it bothers me that so few people are asking them.

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Some of my friends are arguing about the administration’s response to the Corona Crisis. I’m not interested in that discussion, except from a social and psychological perspective – i.e., how social myths affect rational thinking . But here are some of the facts:

US COVID-19 Case and Death Timeline 12/31 to 4/14 

December 31: China reports virus to WHO

Case and Death Toll: 1 case, no deaths 

January 6: CDC issues travel notice to Wuhan

January 17: CDC starts health screening at SFO, JFK, and LAX

Case and Death Toll: 1 case, no deaths 

January 20: Dr. Fauci says NIH working on vaccine

Case and Death Toll: 5 cases, no deaths 

January 27: CDC announces Level 3 travel notice

January 31: Trump announces travel ban to start on 2/2

February 6: CDC starts shipping testing kits

February 24: Administration requests $2.5 billion to combat the virus

Case and Death Toll (2/28): 9 cases, 4 deaths 

February 29: FDA allows certified labs to begin testing while pending applications; Trump raises travel advisory to Level 4

March 6: Trump signs $8.3 billion coronavirus spending bill

Case and Death Toll (3/7): 407 cases, 27 deaths – 6.6% case fatality rate (CFR) 

March 9: Administration asks Congress for payroll tax cut

March 11: Trump announces travel restriction for Europe

March 13: Trump declares national emergency to access $42 billion in funds

March 13: FDA approves Roche AG and Thermo Fisher tests

Case and Death Toll (3/14): 4,240 cases, 63 deaths – 1.4% CFR 

March 14: Coronavirus Relief Bill passes House

March 16: FDA allows testing in state labs

March 18: US Navy deploys two hospital ships

March 19: Trump announces hope for hydroxychloroquine

March 21: Administration places orders for millions of N95 masks through FEMA

Case and Death Toll (3/21): 45,093 cases, 297 deaths – 0.65% CFR 

March 28: Trump and Cuomo talk

Case and Death Toll (3/28): 107,930 cases, 2,001 deaths – 1.8% CFR 

April 2: Trump invokes Defense Production Act

Case and Death Toll (4/4): 229,268 cases, 8,379 deaths – 3.6% CFR 

April 5: 3,000 military and medical personnel deployed to NY

Case and Death Toll (4/11): 522,843 cases, 16,593 deaths – 3.1% CFR 

April 12: FDA authorizes devices to decontaminate 4 million N95 respirators per day

Case and Death Toll (4/14): 602,473 cases, 25,668 deaths – 4.2% CFR 

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verbing (noun) 

I’d like to interrupt all this Corona Crisis coverage to raise an objection to something bothersome that has been accelerating during this time of stress. I’m talking about the soon-to-become ubiquitous “verbing” (the practice of using a noun as a verb) of pivot – e.g., “We may have to pivot here and change our marketing strategy.”

I’m not crazy about impact or medal as verbs, either. But pivot is an odious development. Please join me in resisting the temptation to use it. If we can keep a good social distance from it for at least until the Corona Crisis has passed, perhaps it will die out naturally.

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The Fault in Our Stars by John Green

A synopsis of the plot that I found on Shmoop.com crystalizes my initial impression of this tender, teenage novel:

“Dying girl meets hot boy. Hot boy and dying girl fall in teenage love and go on adventures to Amsterdam together. Dying girl is disappointed by her meeting with a certain author whom she idolizes. Dying girl and hot boy admit their love to each other and have physical relations. In a horrible twist of fate, dying girl lives while hot boy dies. The end.”

Yes, it’s a novel for teens. No, I don’t know why it was a selection for our all-adult-male book club.

Actually, I do. Although the plot, diction, and characters are appropriately aimed at teenagers, the central theme – finding meaning in an apparently meaningless universe – is always worth an earnest discussion. And we had one. (After we japed at those that enjoyed it.).

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