Coronavirus
April 2, 2020
The impact of this coronavirus, COVID-19, can’t be understated. The health impact has been great and economic impact profound. As I write this, over 1 million people worldwide have tested positive for COVID-19 and 244,000 in the US alone. 53,000 deaths in the world and 6,000 in the states. It’s not a hoax or a joke, and perhaps the larger impact is the degree of hospitalization required for those fighting the virus. Because this has been a worldwide event, supplies of both basic protective and lifesaving equipment have been in short supply. I have no reason to doubt the governors and nurses and doctors who say they do not have the materials they need. This is not the most contagious virus, or most deadly, but it’s still overwhelming our capacity for treatment.
We have entered an unlikely, unprecedented period of self-isolation. Previous examples might include London during WWII, or Houston before and immediately after Hurricane Harvey. But this is so widespread. Almost everyone in the world, except the most remote, will be under a stay-at-home order at some point. And this has all happened within the last month or so. It is another month or two (May or June 2020) before experts think we can start to go back to normal.
The result of isolation has, not surprisingly, caused massive upheaval in the marketplace. Obviously, this is a secondary concern to the very real health risks of the virus, but when money quits moving and people start losing jobs, an economic crisis quickly leads to a health crisis. Access to safe shelter, food and medical care is paramount to keeping people healthy. This is the argument that some have made to support a return to normal. It could be the subject of a cost/benefit study, if our medical facilities and staff weren’t already reporting being overrun. We do not currently have the capability to safely treat those who are sick with this new coronavirus in addition to those afflicted with other conditions.
So we’ve ‘locked down’ most of the country. Similar orders have kept people inside all over the world. An economic standstill of this magnitude has occurred only a couple times in modern history. It’s not hard to see why we’re here now. I think of ‘the economy’ as how fast money changes hands. In a good economy, it’s spinning all over the world at rapid speed. A slump in any industry impacts the whole economy because money quits moving amongst those affected. This pandemic has effectively stopped the flow through restaurants, movie theaters, retail, other small businesses, and more. When businesses don’t make revenue, they can’t pay rent to their landlords, who can’t pay the banks, who report decreased earnings and increased foreclosures and stock price goes down. But more importantly is those who work at these establishments. These are the people that put almost every dollar of their income back into the economy through groceries, rent, entertainment, etc.. When these people lose their income, the local economy takes a massive hit and quickly drags on the national economy.
What we’ve found, and what is still the case, is that the United States Government is the greatest economic force in history. Even with massive spending and enormous debts, institutions worldwide believe in the US Dollar and Treasury Bonds as safe haven. This should be both exploited and protected. The US has the ability to float unfathomable amounts of money to those affected by this virus. And to it’s credit, it has already started to do so. With appropriate oversight, much of this can be recouped via very low interest loans, with only some of it described as a handout. The government’s role in this is to keep money changing hands. We help restaurateurs, they keep paying their staff, who keeps paying their rent and buying groceries. This all keeps money changing hands, and the economy in general.
The government direct payment of $1200 is more correctly titled relief rather than stimulus. The jobs have gone away, while the rent and groceries stay the same. There’s nowhere to spend the money if people wanted. Correctly learning from the 2008 bailout, government money is tied to the continued employment of those impacted. The slow trickle of an economy we’re experiencing in these times is predicated on people being able to access the basic necessities. The eventual recovery is dependent on regular people being employed and spending money locally and also over the internet. An economic stimulus would have to happen after everything has opened back up. Calling anything a ‘stimulus’ right now would be incorrect as many businesses are shuttered.
This discussion has been focused on the economic impacts of the global pandemic happening now. It’s important to continue to follow advice given at a local and national level. The spread of this coronavirus has been slowed by these measures, the spread of seasonal flu has been slowed by our actions. After shutting down a large part of this country, the only reasonable resolution is to continue doing what is working and slowing or otherwise mitigating the virus spread.
