Covid 19... A Little Perspective

Source links below

Below are the sources for most of the data listed above.  Please take a look at the data yourself and if I've made any errors please email me.

1) https://www.cdc.gov/coronavirus/2019-ncov/hcp/planning-scenarios.html

2) https://www.kekstcnc.com/media/2793/kekstcnc_research_covid-19_opinion_tracker_wave-4.pdf

3) https://www.worldometers.info/coronavirus/country/us/

4) https://covidtracking.com/data/charts/us-daily-tests 

5) https://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm

6) http://www.crfb.org/blogs/covid-money-tracker-policies-enacted-to-date

Government Largess Can't Keep Economic Blood From Spilling - Particularly With Petty Fascist Autocrats in Charge

The stock market, after dropping 35% from its all time high on February 19^th sits today up about 30% from its March 23 low.  Overall the S&P 500 is down a mere 14% from its apex.  Everything being equal, things must be pretty good…

Not so much.  Although the world is slowly thawing from its government imposed freeze, the truth is far less sanguine than the stock market might suggest, i.e. that this Coronavirus scare was just a minor speedbump on our economic march to prosperity and beyond…

The reality is far darker, and the only reason that’s not readily apparent is that the federal government and the fed have poured $10 trillion or so into our economy via direct payments, loans, bonds and guarantees and governments around the world have taken similar steps. 

The fact that 30 million Americans today find themselves out of work will not be quickly fixed.  Jobs are not the kinds of things you can simply switch on and off… at least not in a capitalist economy. Businesses create jobs by trying to meet market demands in hope of earning a profit.  The Coronavirus shutdown has obliterated that entire dynamic.   

Restaurants are possibly the best resource to look to in order to get a picture of what the future holds.  Why?  Because restaurants are among the most entrepreneurial aspects of the American economy and they employ fully 10% of American workers.  There are about 1,000,000 restaurants in the United States and 13,000 more open each year, while a similar number close annually.  Of those million restaurants, 70% are single unit operations, 90% employ fewer than 50 employees and 6 in 10 adults have worked in a restaurant.

So what do restaurants tell us about the future?  It doesn’t look good…

Imagine you own a restaurant.  Not a fast food chain restaurant where 70% or more of the business was drive thru even before Coronavirus hit, but a restaurant where patrons come in, look at a menu, give their orders to a waiter and then eat on the premises. 

You’ve been largely idled for much of the last two months.  You might have been able to retool a bit in order to serve some take out or delivery orders, but odds are you simply closed.

Over the years you’ve adjusted your floorplan, you’ve tweaked your menu and you’ve trained your employees to upsell everything from wine and add ons to desert and cappuccino.  All for a business that probably gives you a 3-5% net profit or twice that if you’re lucky. 

Now you’ve been closed for two months and you’re wondering where you go from here.  Even if you laid off your staff so they could collect unemployment, you were probably still paying (or trying to…) your rent, pest control, outstanding invoices and making payments on the debts you incurred to open the restaurant in the first place. If you didn’t make the payments, they didn’t just disappear; they accumulated and will be waiting to be paid once you open back up. 

Now you find yourself in a quandary.  The governor has said that you can reopen, but in doing so you must take into account social distancing, i.e. your restaurant can only operate with 25% or 50% of the customer capacity.  That means that other than less labor and food, your restaurant has to operate with outlays almost exactly where they were before the virus, but do so with only half or less of the customers and revenue, plus now there are added costs of masks, extensive cleaning operations and perhaps even disposable silverware!  For most restaurants, that’s a money losing proposition.  Even if to-go business were to pick up, there’s little chance that the additional revenue would make up for that lost business.

More important than the revenue, is the margin.  Dine in restaurants make big profits on alcohol, sodas, coffee and desserts, all things that take out customers are less likely to buy than dine in customers.

Adding to all of that, your employees, who are collecting state unemployment plus $600 a week from the federal government, are now earning twice what they earn while working for you, and may well do so for months to come.  Given the economics, many will decline the opportunity to return and lose half the income they’re currently making, which generates pressure on you to offer higher wages.  So now your formerly relatively robust 5% profit margin restaurant business has transformed into a money losing albatross. 

How can one stay in business with numbers like that?  You can’t of course… And that’s the math quandary facing businesses across the country, and of course it’s not just restaurants.  It’s hair stylists and barber shops.  It’s nail salons and massage parlors.  It’s karate classes and dance instructors.  It’s accountants and business consultants.  Its gyms and movie theaters and many other businesses.   And don’t be surprised if schools, churches, hospitals, and government agencies don’t pile on.  Sure, those aren’t businesses, but they are all buy substantial goods and services from businesses…

All of this is particularly important for small businesses because unlike big businesses who often can tap into debt or equity markets, small businesses often face high hurdles when it comes to financing.  And, small businesses (as defined by the SBA as those with under 500 employees) are the lifeblood of the American economy.  They make up 99% of all businesses, employ half the workforce, and generate 70% of all new jobs.  And they are the ones most likely to have been sidelined by this lockdown and will have the most difficult time emerging. 

While government loans and guarantees are helpful, they can’t replace customers who are not there.  They can’t replace demand that has evaporated.  They can’t keep a business in business… and they can’t do any of that for any sustained period of time.  If printing money was the solution to this problem the Weimar Republic and Zimbabwe would be poster children for growth and prosperity.

Hence the divergence of the markets and main street.  Government largesse may work in the short run to keep the markets calm and the breadlines from forming, but it’s no recipe for prosperity or even economic growth.  Indeed, big businesses aren’t doing that badly under the current plan because they have legions of lobbyists who can ensure that they successfully navigate the restrictions and find the nuggets in the fine print of outlays, and Wall Street can see that.  But on Main Street, Adam Smith is coming, and he’s bringing Hell with him…

At the end of the day, all businesses depend on customers.  Customers spend money they’ve saved, earned or borrowed.  The first will eventually run out, the second can’t happen without a job and the third will soon be limited to those with pristine credit scores.  The Coronavirus lockdowns and government restrictions haven’t just killed the world's most prosperous economy since World War II, they have kneecapped the basic premise of free markets, that customers are free to buy what they want and sellers are free to sell their goods and services however they see fit.  True, we were hardly a free market before all of this, but now with government edicts about when you can open, what you can sell and how many customers you can have, we’re far closer to Karl Marx than Mr. Smith. 

There will be economic blood in the streets as America realizes that prosperity and economic growth can’t be dictated by government and that in most cases government action is a hindrance to both.  Prosperity requires entrepreneurs who are willing to risk their sweat and treasure to build something in pursuit of profit.  Economic growth requires markets that match consumer demands with businesses who can meet them.  Lockdowns and government edicts hinder both and the longer they go on and the more restrictive they are the more carnage there will be.  Business failures.  Bankruptcies.  Loan, mortgage and credit card defaults.  Tens of millions of Americans who can't find work.  And those are just the things you’ll see.  Imagine the new companies that won’t ever get out of the starting blocks.  The jobs that won’t be created.  The demand that’s simply not there…

Wall Street might imagine this Coronavirus disaster (the lockdowns, not the virus) is just a bump in the road, but it’s not.  It’s a cliff that we’ve been pushed off of, or more accurately, jumped off without much of a fight.  And it looks like the bottom below is littered with jagged rocks and glass.  Sadly we're not Road Runner in a cartoon where we can simply turn around in midair and run back onto solid ground.  It appears that we've become Wiley E. Coyote.  History will not look back favorably on the petty fascist autocrats and their delicate snowflake supporters who used a marginally dangerous virus in their march to undermine capitalism and decimate freedom and prosperity.  

Coronavirus may well become a disaster of historic proportions, but probably not in the way you imagine...

Today, on the 6^th of April, 2020 the national death toll from Coronavirus is sitting at approximately 10,500.  My guess is that we're probably less than a week away from the oft discussed apex of the curve and whenever the end of this virus pandemic is eventually declared, the country will have suffered fewer than 50,000 deaths, possibly far fewer.  I could be wrong on both counts of course, and perhaps by a lot… but we’ll have to wait and see.

There are two questions that are resonating in my head about when this unprecedented overreaction is finally over.  The first is the economy.  How long will the economy take to rebound?  On the one hand, 60% of the economy is still functioning…  Supermarkets, hospitals, police stations, restaurants – of the take out or delivery variety – Facebook, Google, Amazon, Netflix, UPS, the military, gas stations, lawn maintenance, construction and many more pieces.  Nonetheless, a lot things are idled:  Gyms, movie theaters, schools, churches, dine in restaurants, countless small businesses, everything wedding related, the NBA, MLB, Golf, NASCAR and many other pieces.  Every one of those shuttered businesses, and many of those still functioning have a long list of suppliers - of both the service and goods variety - who have been impacted by this shutdown. Some of the businesses who have found themselves shuttered will never reopen.  Those that reopen will likely find challenges getting back on their game, not only from the perspective of the ramp up in demand from customers, but simple logistics and figuring out how to get their supplier pipelines moving as well. 

Whatever is the case, the economy will come back, and given the combination of government largesse and pent up demand, there could be a short term surge in many areas as people leap out of their homes and dash into coffee shops, restaurants and possibly stores.  The question is however, how long will it take to ramp back up to the point where we return to the trajectory we were on the end of 2019 and a $22 trillion economy, and what will that economy look like?

That last point brings me to the second of my questions… and the far more important one.  What will the economy and the country look like?  After Uncle Sam injects $2.2 trillion into the economy and the Fed greases the wheels to the tune of twice that, what will come of the free market?

Assuming that the economy doesn’t do a complete face plant, which I don’t expect but is a realistic possibility, Keynesians and progressives of all stripes are going to assert that if stimulus works during an emergency, we should use it – including guaranteed universal income – all the time.  Taxes could easily be raised on millionaires and billionaires to cover any outlays and the stimulated spending by the working class would help drive the economy.

Those faulty economics and their inflation and stagnation inducing polices are not even the biggest concern for the nation!  The real concern is that this staggering overreaction will have set a precedent.  Without a serious, demonstrated threat to the wellbeing of the nation as a whole, going only with models that predicted millions of dead, governments across the country have essentially quarantined more than 80% of the American population and 100% in the largest metro areas. 

Months or years from now, when history shows us that the Americans were basically quarantined, $10 trillion of stock market value was wiped out and trillions of dollars of economic activity evaporated almost overnight because of a virus that ended up taking fewer than 50,000 lives, what will politicians, activists and the media do for something like global warming, which we’re told for certain will cost the lives of tens of millions of people around the world?  Or how about the next Chinese virus?  I can hear the argument now:  “Covid 19 only killed 50,000 people BECAUSE of the lockdowns… This new XYZ virus is even more virulent and we need to do the same thing otherwise tens of millions of Americans will be dead within a month.”  Lockdown!  Shut down the economy.  Close schools, theaters and every other meeting place!  Churches too!  And churches that refuse refuse to comply with service cessation orders? Close them!  First Amendment be damned! 

Nor will it necessarily be a virus that causes the next lockdown(s).  How many times have we heard that the carnage from murder in cities like Baltimore or Chicago is an emergency or a crisis?  How much resistance would there be to mayors or governors deciding that they have the power to supersede the Constitution to deal with their “crisis”?  And pointing to the Covid 19 precedent as proof that they have the authority.  Second Amendment be damned! 

No longer will science have to prove that something is an actual threat to humanity or Americans or even a city or town in order for the government to mandate anything.  From forcing employers to hire certain workers, to compelling companies to make these or those products, from seizing assets to  coercing citizens to curtail activities protected by the Constitution… where does the line get drawn?  Make no mistake, precedent can be a bear, particularly in the hands of progressives who seek to use the power of government to undermine the individual rights of virtually every American, except of course, criminals.

Coronavirus may well turn out to be a disaster of epic proportions, but probably not in the way you imagine.  It very well may be the nose that allows the progressive camel of tyranny into the tent under which the American experiment flourished for so long.  And once the likes of Nancy Pelosi, Ralph Northam, Bill de Blasio and the rest of the progressive fascists on the left take control freedom as we understand it and the Constitution as a functioning document will be but mere memories.  “Constitution? Federalism? Individual liberty? Free markets?  Sorry, we’re temporarily suspending them… We’ve got a crisis to deal with!” 

Economic Armageddon: How Many Lives is $10 Trillion Worth?

I heard or read somewhere this week someone ask what would someone think if they had fallen asleep in December 2019 and awoke today to discover that the United States and the world had willingly shut down almost its entire economic engine and “encouraged” or demanded that their citizens stay in their houses except for buying groceries or going to the hospital.  No gatherings of 500 or 200 or 50 or 10 people were allowed.  Apple had closed all of its stores outside of China, movie theaters were vacant, Disney World was closed and air travel had fallen off a cliff. The stock markets had collapsed by 1/3, Catholic churches around the world were cancelling masses during Lent, the Olympics, the NBA, NCAA, MLB, Nascar and the PGA all cancelled or postponed their seasons.  All in less than a month, in some cases just a couple of weeks.

This Rip Van Winkle would likely have expressed disbelief and posited that other than an alien invasion or world war, only a contagion could have brought this about. 

Winkle:  “How many millions or billions of people had it killed?  25% of the world’s population, 1.5 billion people?”

You:  “No, less”.

Winkle:  “Surely it must have been 10% of the world’s population, 700 million people? “

You:  “Um… no. Less.”

Winkle:  “OK, 2%, 140 million people?  Half a percent – 35 million people.  Seriously, it has to be at least that bad to bring the world to such a standstill.  No Summer Olympics!  No Masters!  No Spring Break!”

You:  “Umm, not quite… the actual number is about 10,000, almost all of whom are in their 70’s and 80’s with underlying health issues…”

Tilting his head and squinting his eyes, Winkle starts looking around for a camera as he’s sure he’s on some modern Candid Camera reboot or is being pranked by those Russian radio shock jocks who conned Prince Harry into disparaging his own family.

When you finally convince him that he is not being pranked and that the world has indeed kneecapped its economy for a less than 10,000 deaths… less than ½ the number of people killed worldwide in car accidents every single week, Winkle thinks the world has gone crazy, recognizing that it has probably lopped off $5 trillion off of its economy, and perhaps a lot more. 

Now of course, the goal of all of that activity – or lack thereof as the case might be – is to keep that number of deaths down.  But the question is, if the world hadn’t imposed such draconian measures on itself, how bad would it get?

Estimates of course vary widely, from tens or hundreds of thousands to 50 million, a little below the total number of people who die worldwide annually from all sources.  Here in the United States the ranges are wide too, from a conservative number akin to what the flu inflicts annually, 70,000 to two million.   

Whatever ends up being the case, one has to wonder, what are the real world consequences of such measures.  Sure, there will be the trillions of dollars that governments around the world print in order to try and keep their economies from collapsing.  But what about all the businesses that fail, both big and small.  The jobs that will never return and the corresponding uptick in alcoholism and suicide induced in those who live on the financial edges of life.  Shipments or deliveries of computers or vitamins or kneebraces that arrive two months late.  The weddings that were postponed and never take place or the relationships that fracture as a result of sudden, ‘round the clock’ close proximity.  The 2-3 months of education that kids around the world didn’t get.  The movies people never see, the dates never gone on, the restaurant meals never served.  Not to mention the mental anguish that 7 billion experienced simultaneously. 

This is indeed a crass way of looking at something, but if one assumes that there is a correlation between economic activity and life & the quality of life, one has to ask, how much damage to both has this shutdown caused?  If we could, before Winkle fell off to sleep, we might ask the question a slightly different way… How many lives is it necessary to save in order for the governments of the world to find it prudent to throw the planet’s entire economy into chaos and essentially destroy between five or ten trillion dollars of economic activity and cause markets to decline by similar amounts? 

At 50 million lives saved – again, approximately the number of people who die around the world annually from all causes – the destruction of $10 trillion in economic activity and value equates to $200,000 per life saved, or approximately 20 times the average “value” of every person as measured by the dividing the world’s $88 trillion GDP by 7.7 billion people.  At 1 million lives saved the cost jumps to $5 million per life and at 250,000 lives saved the cost per saved life is $20 million. 

No doubt if you or someone in your family is one of the lives saved, that $20 million price tag is well worth it, as is the $200,000 tag.  The question is however, today, when the worldwide death toll from this virus sits at less than 10,000, is it prudent for the governments of the world to send the planet’s economy off a cliff and into freefall to arrest a virus that in even the worst case scenarios is projected to kill less than 1% of the people who actually contract it?

We all probably have our own opinion on such things, but our opinions don’t count in “emergencies”.  Governments are sometimes like lemmings, particularly in a world driven by a floundering traditional media that seeks out or creates chaos or anxiety or sensationalism as it struggles to remain relevant.  Only time will tell whether March 2020 is more akin to the launch of the Manhattan Project or the passage of Smoot Hawley.  History will, as it always does, have the last say…