n-cov notes:
China Central Bank Orders Lenders To "Tolerate" Higher Bad Debt Levels To Avoid Financial Cataclysm.
Coronavirus: asymptomatic Wuhan woman shows why outbreak 'will be hard to stop'
Case study of 20-year-old who infected relatives despite not showing signs of illness – and testing negative – stokes global pandemic fears
Despite what the unprecedented lockdown of areas in China that produced 70% of its GDP, and the use of hazmat suits, revealed about what Chinese officials were seeing, the rest of the world remained oddly complacent about what the novel coronavirus meant for them. How reassuring was it really if the disease had moderated as a result of the effective quarantining of the population, a condition that was clearly not sustainable? And there was the oddly optimistic view that a country of 1.2 billion could effectively be cordoned off from the rest of the world…particularly after it became clear the lockdown was implemented after the cornoavirus was meaningfully underway?
Easily overlooked issues regarding COVID-19
When Will We Admit Covid-19 Is Unstoppable
If we asked a panel of epidemiologists to imagine a virus optimized for rapid spread globally and high lethality, they'd likely include these characteristics:
1. Highly contagious, with an R0 of 3 or higher.
2. A novel virus, so there's no immunity via previous exposure.
3. Those carrying the pathogen can infect others while asymptomatic, i.e. having no symptoms, for a prolonged period of time, i.e. 14 to 24 days.
4. Some carriers never become ill and so they have no idea they are infecting others.
5. The virus is extremely lethal to vulnerable subpopulations but not so lethal to the entire populace that it kills its hosts before they can transmit the
virus to others.
6. The virus can be spread by multiple pathways, including aerosols (droplets from sneezing/coughing), brief contact (with hotel desk clerks, taxi drivers, etc.) and contact with surfaces (credit cards, faucets, door handles, etc.). Ideally, the virus remains active on surfaces for prolonged periods, i.e. 7+ days.
7. Those infected who recover may catch the virus again, as acquired immunity is not 100%.
8. As a result of this and other features, it's difficult to manufacture a vaccine that will reliably protect against infection.
9. The tests designed to detect the virus are inherently limited, as the virus may be present in tissue that isn't being swabbed.
10. The symptoms of the illness are essentially identical with less contagious and lethal flu types, so people who catch the virus may not know they
have the novel pathogen.
As you probably know by now, these are all characteristics of Covid-19, and this is why it is unstoppable.
The Regular Stuff:
Treasury Yields Plunge To Record Lows As US PMI Collapses Into Contraction
Recession "Tipping Point" Triggered: 10Y Yield Crashes Below 1.40%; Countdown To 0% Rates Begins
Goldman: Imminent Market Correction Now Looks Much More Probable. (well worth reading the whole article)
Weak business investment continues to weigh on growth.
Philly Fed Unexpectedly Soars To Second Highest On Record.
Largest Shipping Decline Since 2009 and That's Before Coronavirus.
GnS Economics: The stages of the collapse.
Could the coronavirus act as a catalyst for a new global economic crisis? It certainly has that potential—but how would the crisis proceed?
In December 2019 we outlined these stages, which are likely five: the onset, counter-attack, flood, calamity and recovery. Here, we briefly define the characteristics of each.
Excerpt of the week:
Edwards notes, "it is the change in the cyclically adjusted primary deficit – which economists think measures the discretionary fiscal impulse – that slows or stimulates the economy (see right-hand chart above). The almost 1½% US fiscal stimulus a couple of years back has given way to a slight tightening of policy. Indeed, it is notable that in contrast to all the market chatter about fiscal expansion – and with central banks pressing governments to do more – all major countries are basically fiscally neutral this year. But fiscal neutrality won’t defuse the ticking government debt bomb of their 1980s bubble. This does indeed mark a new level of fiscal debauchery for the US."
“...I expect the US will likely join Japan in giving up any serious attempt to reduce its government debt to GDP ratios back to the historically ‘normal’ levels. It simply ain’t going to happen. Does anyone seriously believe that any democratically elected government would be willing to raise taxes or cut government spending and future pension/health benefits in a bid to delay the fiscal timebomb? Of course they wouldn’t! And any government that attempts to do so will be hounded from office by an indignant public armed with pitchforks and much else besides.
The CBO chart above showing US federal debt spiralling exponentially out of control screams one indisputable outcome to me (and these sorts of charts are similar for most industrialised countries). Helicopter money is on its way. You can call it Modern Monetary Theory (MMT), you can call it ‘Fiscal and Monetary Co-operation’, or you can call it whatever you like, but there is only one realistic way out of this mess – and that is for governments to inflate away their debts. However, since much of these liabilities will rise with the CPI, like state pension benefits and healthcare, and cannot be inflated away, there will have to be more emphasis on deflating the liabilities that can actually be shrunk via rapid inflation.
Russell Napier reaches the same conclusion. Like him, I believe the regime change will be such a major event that it can only be implemented during a crisis – and for both of us, the next recession will be that crisis as it will be a deflationary bust! But my views are well known on that topic. If this outlook of Russell’s and mine is correct, one other thing is likely: helicopter money, and it will be a very effective tool. Mainlining liquidity directly into the veins of the global economy will be much more effective in boosting GDP than QE, which has largely injected liquidity only into the veins of the financial markets. Helicopter money will work for Joe Sixpack much more effectively than it will for Mike Moneybags – and so it will be much more widely popular. And that is the problem. Once politicians have their hands on this policy tool, make no mistake, they will never ever hand it back to the Central Banks. And any policymaker that ever dares try to turn off the monetary taps would be well advised to read about the fate of Korekiyo Takahashi , Japan’s Finance Minister and former Governor of the Bank of Japan.
Takahashi, credited with pulling Japan out of the early 1930’s depression with extremely loose fiscal policy financed by helicopter money, is regarded as Japan’s Keynes link. He resisted fiscal tightening in 1935 as too early because of the continued fragility of the economy, but by 1936 with the economy having returned to full employment he set about turning off the fiscal and monetary taps and called the helicopters back to base. As in all these things, the beneficiaries of super-loose fiscal and monetary largess were not happy when it looked as if the taps were about to be turned off. The military, who had been a major beneficiary of his fiscal spending, were especially miffed – so they had Finance Minister Takahashi assassinated.
As helicopter money becomes increasingly inevitable, the big news is that we are calling for the thawing of the Ice Age after the next recession
– whenever that arrives. But a deflationary bust, which will take US 10y yields to around -1% (and 30y yields negative), will come first and enable this massive shift in policy to occur.
And within a few years I have not one scintilla of doubt that helicopter money will be so successful that CPI inflation will return like a long-lost relative. But, like a distant uncle we only see every now and again, we will have forgotten just how out-of-control he can become after a few drinks, and woe betide anyone who tries to stop him in his tracks, or in policy terms tries to stand down those confetti dropping helicopters.”
(not just) for the ESG crowd:
The Paris Agreement set an unrealistic target for global warming. Now what?
Other (political) fare:
Once you get thru the part about knitting, it’s a very thoughtful read:
After Attending a Trump Rally, I Realized Democrats Are Not Ready For 2020.
I’ve been a Democrat for 20 years. But this experience made me realize how out-of-touch my party is with the country at large.
I started to question everything. How many stories had I been sold that weren’t true? What if my perception of the other side is wrong? How is it possible that half the country is overtly racist? Is it possible that Trump derangement syndrome is a real thing, and had I been suffering from it for the past three years?
Quotes of the Week:
CNN: "The first hour of the debate was an absolute and total disaster for the former mayor [Bloomberg]. He looked lost at times -- and those were the
best times for him! Warren dunked on him repeatedly. Sanders slammed him. Biden bashed him. It was like watching a pro wrestling match where everyone decided to gang up on a single wrestler in the ring -- and that wrestler was totally and completely caught off-guard. Bloomberg is still very, very rich -- and will continue to spend his money on the race. So he's not going away. But it's hard to see how the momentum Bloomberg had built through his heavy ad spending wasn't slowed considerably by a performance that slid waaaaay under what was a very low bar of expectations."
“The various reflections of last night's debate between Democratic party primary candidates give a consistent picture. Bloomberg lost. He had brought a wallet to a knife fight and made a generally bad impression.”
Photos of the Week:
How Many Attended Trump’s Phoenix, Arizona Rally?
15,000 inside: Plus overflow outside:
No comments:
Post a Comment