Progressives (Liberals)

Will The Costs Of A Great Depression Outweigh The Risks Of Coronavirus?

Federal and state governments are making a massive gamble about a little-understood new virus. They are betting our future on the most extreme worst-case scenario without considering the costs. The current gamble seems to be to shut down the nation indefinitely to suppress a virus that is especially deadly to some demographics and experts agree cannot be contained, only slowed.

A report from Imperial College London, and other models that spit out similar results say that to contain the virus it will be necessary to quarantine Americans for two- to three-month stretches repeatedly over the next 18 months.

The alternative, says the report, is 4 million Americans dead, half who would otherwise have lived but instead die for lack of medical capacity such as ventilators. If we merely quarantine sick people and those at risk, a “mitigation” strategy, it projects the U.S. death toll at about 2 million, again half from lack of ventilators, not depth of disease.

But start extending these bans to one and two months, and then to four and six months, and people are going to revolt as they sit chained to their houses, watching their jobs, businesses, and retirement accounts disappear, replaced with funny money taken from yet-unborn generations and no end in sight. Numerous people are already skeptical and fed up with the lockdowns, and we’re not a week in.

Plus, these are just estimates, not a crystal ball. Just one competing projection, from the Hoover Institution, suggests “the total number of cases world-wide will peak out at well under 1 million, with the total number of deaths at under 50,000″ (emphasis added). This is near the annual death rate due to flu in the United States alone. We don’t know if that estimate is accurate either, but that’s the point.

John P.A. Ioannidis, a professor of medicine, epidemiology, and statistics at Stanford University and co-director of Stanford’s Meta-Research Innovation Center said: "If we assume that case fatality rate among individuals infected by SARS-CoV-2 is 0.3% in the general population — a mid-range guess from my Diamond Princess analysis — and that 1% of the U.S. population gets infected (about 3.3 million people), this would translate to about 10,000 deaths. This sounds like a huge number, but if we had not known about a new virus out there, and had not checked individuals with PCR tests, the number of total deaths due to ‘influenza-like illness’ would not seem unusual this year. At most, we might have casually noted that flu this season seems to be a bit worse than average.

It seems a fool’s errand to pre-emptively and indefinitely risk everyone’s livelihoods without hard information about what is happening and a risk assessment that includes the serious dangers of killing the U.S. economy, not what computers project will happen with lots of missing, unreliable, and rapidly changing information.

Would it be more prudent to severely shelter those at risk while the rest of us keep the country going? We can take steps like this while not choosing to crush small businesses and employees who cannot telework for one or two months, let alone 18.

What if the real scenario is one of these: 1) We plunge the nation into a depression that kills many businesses and addicts millions to welfare, in a nation that has already pledged more welfare than it can afford for at least the next three generations. Because of this depression, many people die due to poverty, lack of medical care, and despair. Millions more transform from workers to takers, causing a faster implosion of our already mathematically impossible welfare state.

I would rather have a flu I am 99.8 percent likely to survive than the nation plunged into chaos indefinitely because we pulled the plug on our economy during a stampede. Prudence suggests a measured, wait and see approach to policy until we have better information, not chucking trillions of my kids’ dollars out the window “just in case.”

billrichardsonwriter
@billric36028987
54m
here in vancouver, a strange calm-before-the-storm confluence of emptiness, i.e, major streets are empty & emergency rooms are empty. never again, in our lifetimes, will there be so ideal a time for those of us north of 60 to take up skateboarding.

Nothing will ever be attempted, if all possible objections must first be overcome."

Sweden is look'n smarter all the time

Coronavirus fear is lowest in Sweden, according to a new YouGov poll of 26 nations around the world. To be specific, only 31% of Swedes say they are “very” or “somewhat” scared that they will contract COVID-19.

Why is Sweden an outlier in this regard? While one might assume that it has to do a lower risk factor, this conclusion is not supported by the data. Sweden ranks fifth out of the 26 countries measured by YouGov in terms of Coronavirus deaths per capita

According to a recent WSJ article, Sweden’s government has adopted a “business as usual” mentality in response to the pandemic. Schools, restaurants, malls, and ski slopes all remain open until further notice. The only rules in place are a ban on gatherings of more than 50 people and an order forcing restaurants and bars to seat all customers to avoid overcrowding.

This suggests that people are taking their fear cues from their government more than they are from the actual risk of the disease. The country of Malaysia lends additional support to this hypothesis.

This is in stark contrast to other nations where fear is virtually ubiquitous. Malaysia tops the list of fear-ridden countries, with 90% of its population indicating they are afraid of contracting the disease. However, there have only been 45 confirmed Coronavirus deaths. That’s a vanishingly small proportion, given that the country has over 31 million people.

How has the Malaysian government responded to the COVID-19 threat? Aggressively, to say the least. A recent CNN article reported the following measures taken by the Malaysian Prime Minister, Tan Sri Muhyiddin Yassin:

An aggressive travel ban
A ban on all religious, sports, social, and cultural activities
A ban on non-essential businesses (excluding supermarkets, wet markets, grocery shops and convenience stores)
A temporary closure of all educational institutions

Today Senate Minority Leader Charles Schumer (D-NY) wrote to Trump to urge him to appoint a “senior military officer” as a “czar” to coordinate a federal response to the crisis and to use the DPA to increase production, procurement, and distribution of medical devices and equipment. “America cannot rely on a patchwork of uncoordinated voluntary efforts to combat the awful magnitude of this pandemic,” Schumer wrote. “The existing federal void has left America with an ugly spectacle in which States and cities are literally fending for themselves, often in conflict and competition with each other, when trying to procure precious medical supplies and equipment. The only way we will fix our PPE [personal protective equipment] and ventilator shortage is with a data-driven, organized and robust plan from the federal government. Anything short of that will inevitably mean this problem will remain unsolved and prolong this crisis.”

Trump responded with a letter that was remarkable, even by his standards. It began: “Thank you for your Democrat public relations letter and incorrect sound bites, which are wrong in every way.” Trump denied that there was anything wrong with his administration’s response to the crisis. “As you are aware, the Federal Government is merely a back-up for state governments. Unfortunately, your state needed far more of a back-up than most states.”

He went on: “If you spent less time on your ridiculous impeachment hoax, which went haplessly on forever and ended up going nowhere (except increasing my poll numbers), and instead focused on helping the people of New York, then New York would not have been unprepared for the ‘invisible enemy.’” (Schumer called for a declaration of a public health emergency on January 26.) “I’ve known you for many years, but I never knew how bad a Senator you are for the state of New York, until I became President.”

“I’ve known you for many years, but I never knew how bad a Senator you are for the state of New York, until I became President.”

Schumer goes on MSNBC to blast Trump for criticizing him: ‘I’m just appalled’

Senate Minority Leader Chuck Schumer was aghast Thursday night after receiving a letter in which President Trump accused him of being a “bad” senator and asserted that Schumer was vulnerable to a primary challenge from within his own party.

“No wonder AOC [U.S. Rep. Alexandria Ocasio-Cortez] and others are thinking about running against you in the primary. If they did, they would likely win,” Trump wrote.

“I spoke to the president late this afternoon and explained it,” the senator added, “and the result is this letter.

The medical care system in the United States is not broken--it functions exactly as intended.

Without realizing it, we’ve become a nation of monopolies. A large and growing part of our economy is “owned” by a handful of companies that face little competition.

They have no incentive to deliver better products or to get more efficient. They simply rake in cash from people who have no choice but to hand it over.

This would be impossible if we had true capitalism.

Even if we admit some businesses are natural monopolies, most aren’t. Most of them found some non-capitalistic flaw to exploit.

In theory, this problem should solve itself as technology and consumer preferences change. Yet it isn’t happening. Axios outlined the problem in a recent article on farm bankruptcies.

Across industries, the U.S. has become a country of monopolies.

- Three companies control about 80% of mobile telecoms. Three have 95% of credit cards. Four have 70% of airline flights within the U.S. Google handles 60% of search. The list goes on. (h/t The Economist)

- In agriculture, four companies control 66% of U.S. hogs slaughtered in 2015, 85% of the steer, and half the chickens, according to the Department of Agriculture. (h/t Open Markets Institute)

- Similarly, just four companies control 85% of U.S. corn seed sales, up from 60% in 2000, and 75% of soy bean seed, a jump from about half, the Agriculture Department says. Far larger than anyone — the American companies DowDuPont and Monsanto.

As we have reported, some economists say this concentration of market power is gumming up the economy and is largely to blame for decades of flat wages and weak productivity growth.

Gummed-Up Economy

“Gumming up the economy” is a good way to describe it.

Competition is an economic lubricant. The machine works more efficiently when all the parts move freely. We get more output from the same input, or the same output with less input.

Take away competition and it all begins to grind together. Eventually friction brings it to a halt… sometimes a fiery one.

Normally, companies grow their profits by delivering better products at lower prices than their competitors. It is a dynamic process with competitors constantly dropping out and new ones appearing.

Joseph Schumpeter called this “creative destruction,” which sounds harsh but it’s absolutely necessary for economic growth.

Today, the creative destruction isn’t happening. And as companies refuse to die and monopolies refuse to improve, we struggle to generate even mild economic growth.

I think those facts are connected.

Uncreative Destruction

Some of this happened with good intentions.

Creative destruction means companies go out of business and workers lose their jobs. Maybe a new competitor will hire them eventually, but they suffer in the meantime.

Politicians try to help but finding the right balance is hard.

I assign greater blame to the central bankers, not just the Fed but its peers as well. For whatever reason, they kept short-term stimulus measures like QE and near zero rates (or negative in some places) for far too long.

The resulting flood of capital bypassed the creative destruction process.

A lot of this happens under the radar. You’ve probably seen stories about the Lyft IPO and other unicorns that will soon go public. This is news because it’s now so unusual.

The number of listed companies is shrinking because (a) cheap capital lets them stay private longer and (b) the founders and VCs often “exit” by selling to a larger, cash-flush competitor instead of going public.

An economy in which it is easier and cheaper to buy your competitors rather than out-innovate them is probably headed toward stagnation.

Drive for Scale

My usually bearish friend, hedge-fund manager Doug Kass, wrote last week that Amazon will be at $3,000 within a few years and $5,000 by 2025.

If it was anybody but Doug Kass, I would have probably ignored such a massively bullish analysis. But when Doug makes a case, I take notice.

Doug’s prediction got me thinking about scale. How do you compete with that?

It is like watching the small farmer disappear. Your heart is with them but the market demands scale. Can small farmers producing locally grown food survive? Absolutely. But it is a niche market.

And as the world demands scale, cheap money helps it go even faster. Understand this: Cheap money is not going away. Neither is technology and the drive for scale.

We can cheer for the “small farmer,” but the reality is that the world is moving to fewer competitors and larger businesses.

And as I write that, I literally find myself sighing. I hate writing those words. But I can’t avoid reality. The world is changing, and we must deal with it.