to the extent pandemic policy is driven by biomed academics, don’t expect it to be very flexible or abstractly reasoned. And my personal observation is that, of the people I’ve seen who have had insightful things to say recently about this pandemic, most are relatively flexible and abstract polymaths and generalists, not lost-in-the-weeds biomed experts.
Read the whole post. He offers many interesting hypotheses, including an explanation for why you have to fire many of the generals who rose through the ranks during peacetime.
From the March 4 and April 8 Fed H.1 data, we learn that the Fed held $2,502 billion and $3,634 billion Treasury securities on those dates, an increase of $1,132 billion. From the Treasury debt to the minute page, we learn that debt held by the public (including the Fed) rose from $17,469 billionaires to $18,231 billion — a (huge) rise of $762 billion. $9 trillion at an annual rate. The Fed bought all the Treasury debt, printing new money to do it, and then some. On net, the government financed the entire $762 billion by printing new money and printed up another $370 billion to buy back that much existing treasury debt.
Later, he writes,
Inflation comes basically if the US hits a debt crisis.
I would say that we only get hyper-inflation if there is a debt crisis. But I believe that we can get at least a 1970s-style inflation without a debt crisis. We are keeping people home and getting them laid off, which means that they are not producing anything of value. Yet we are giving them funds as if they were still producing, which they will then spend on stuff that other people produced. Regardless of what games the Fed plays with interest on reserves, we have more money chasing fewer goods, and that means inflation.
As it stands now, inflation is being repressed by a form of price controls, in the form of laws and social norms against “price gouging.” If it weren’t for those laws and norms, prices would be soaring for the things that people want to hoard (masks, toilet paper), many grocery products, and stuff that we used to get easily from China.
In the midst of the COVID-19 pandemic that has already prompted Congress to hike spending by $2.2 trillion (with more likely on the way), and with revenue collections likely to drop in a big way as a result of the coronavirus-induced economic shutdown, the federal government is facing the prospect of a budget deficit of nearly $4 trillion this year.
4. Concerning age and obesity as risk predictors, Christopher M. Petrilli and others write,
In the decision tree for [hospital] admission, the most important features were age >65 and obesity. . .Age and comorbidities are powerful predictors of hospitalization; however, admission oxygen impairment and markers of inflammation are most strongly associated with critical illness.
The most recent NYC data show only 133 deaths out of 6589 were among people who were deemed as having no underlying conditions. The footnote in the table lists only medical conditions such as cancer or heart disease, but it does not include obesity. Also, the table includes 1422 deceased individuals who are not classified as either having or not having underlying conditions but instead are deemed “underlying conditions unknown.”
Thanks to commenters for pointers.
5. The WSJ reports,
CVS—where Mr. Lackey heads up talent acquisition—is now taking on the most ambitious hiring drive in its history. To recruit the 50,000 staffers it needs to meet a coronavirus-fueled surge in business, it is partnering with Gap Inc., Hilton Worldwide Holdings Inc. . .Delta Air Lines Inc. . . . and dozens of other companies to employ their laid-off workers. More than 900,000 people have applied for CVS jobs in just the last few weeks, including roles stocking warehouses and stores, answering phones at call centers or stepping in for CVS staff who end up sick or quarantined.
As the government and many pundits try to figure out how to make the economy revert to what it used to be, the market tries to find patterns of sustainable specialization and trade.
6. Meanwhile, Olivier Coibion, Yuriy Gorodnichenko, and Michael Weber write,
the employment-to-population ratio has declined sharply. Using the adjusted metrics described above, we find that the employment ratio fell from 60% of the population down to 52.2%, a nearly eight percentage point decline. . . this decline in employment is enormous by historical standards and is larger than the entire decline in the employment-to-population ratio experienced during the Great Recession. Given that the US civilian non-institutional population is approximately 260 million, this drop in the employment-to-population ratio is equivalent to 20 million people losing their jobs. This drop is even larger than the 16.5 million new unemployment claims over this time period.
Any model of optimal policy should be “what should we do now, knowing the lockdown can’t last very long?” rather than “what is the optimal length of lockdown?”
But we are still flying blind. I am hopeful that asymptomatic spreaders are unlikely to kill people, other than those who are very old or very obese, but this is just a conjecture. As far as I know, we still don’t know the prevalence of the doorknob effect, or the importance of viral load. We have no idea whether there are 1 million people in this country with immunity, or 20 million. We don’t know about the effectiveness of masks and scarves.
We need to replace the peacetime public health leadership, which only knows how to scold and cower, with some actual scientists determined to answer these urgent questions.
8. Maybe we do know something about the effect of enclosed spaces. Hua Qian and others write,
Home outbreaks were the dominant category (254 of 318 outbreaks; 79.9%), followed by transport (108; 34.0%; note that many outbreaks involved more than one venue category). Most home outbreaks involved three to five cases. We identified only a single outbreak in an outdoor environment, which involved two cases. Conclusions: All identified outbreaks of three or more cases occurred in an indoor environment
Pointer from Tyler Cowen. Also from Tyler and possibly related: Travis P. Bagett and others write,
testing of an adult homeless shelter population in Boston shortly after the identification of a COVID-19 case cluster yielded an alarming 36% positivity rate. The vast majority of newly identified cases had no symptoms and no fever on a single point-in-time assessment
9. From the Hollywood Reporter,
California Gov. Gavin Newsom on Tuesday announced a broad six-point plan to reopen the state’s economy and relax strict Safer at Home guidelines.
The six points sound more like conditions that must be achieved before relaxing restrictions. For example,
the ability to monitor and protect communities through testing, tracking positive cases, properly isolate and support individuals who are positive and/or exposed to COVID-19.
A few weeks ago, the focus was on avoiding hospitals becoming overwhelmed. But that is only one of the Newsom’s conditions. Somewhere along the way, we went beyond the goal of reducing infection risk as a means to preserve scarce medical resources. The goal now seems to be reducing infection risk as an end in itself. Once we accept that as a vital government objective, the default becomes indefinite infringement on liberty.
“relatively flexible and abstract polymaths and generalists,”
—
Where is my banana?
—-
The Fed bought all the Treasury debt, printing new money to do it, and then some
—-
This is single entry accounting, the government is packing a channel of unknown size and has no S/L function to track liquidity, like a fission experiment. S/L function cannot be reassembled without a meeting of the elders.
—
Inflation comes basically if the US hits a debt crisis.
—-
What we call inflation is price variance uncontained, yet. Whet we call default results in a real loss of money, true inflation. If the former does not converge, we get the later.
—-
the federal government is facing the prospect of a budget deficit of nearly $4 trillion this year.
—
The charts predicted a 2 trillion dollar deficit for a few years, even without the virus.
We seems we have a problem of queues not inflation right now. Excess dollars cannot clear the market. Do shortages alleviate inflation?
If the result of a shortage is a decline in the velocity of money, then shortages do alleviate inflation.
Thank you. That seems right. There has to be a decrease in velocity, right? That seems addressable by Fed policy. Eventually, we need to find new patterns or specialization and trade too, but COVID has clearly impacted the rate we circulate and exchange.
Private sector innovation:
https://www.espn.com/mlb/story/_/id/29036123/mlb-players-team-employees-participating-coronavirus-study
Without a “high trust society” (which is not possible in the U.S.), the default might just be a “high trust government” instead. Time to start thinking about a move to Sweden?
“A high-trust society, it turns out, also allows Swedes to get by with less government when it comes to social distancing. Sweden has banned crowds and bar service, and has tried to protect the elderly and vulnerable. But other-wise it has expected business owners and their customers to decide how best to deal with the virus.
…
New York, in a sense, represents an attempt to impose high-trust government on a low-trust population. More than 40% of residents rely on Medicaid, nearly a third of whom may be ineligible on income grounds, accord-ing to a recent study. Former Mayor Mike Bloomberg might even say they further abuse the privilege by not looking after their health. (His bans of smoking, trans fats and Big Gulps were framed at the time partly as solicitude for the tax-payer.)
https://www.wsj.com/articles/sweden-is-a-viral-punching-bag-11586905784?emailToken=f58c51c1c848b219b99e32dff2deb6969QLTMEJQfv2hLK/WWM1eapjGQ3ofLQ+pD2LNgq4xMLj7/tICo3UWr1VVKoevaVyvfw9YtPQe5W2rtHp8IaCmNQ%3D%3D&reflink=article_copyURL_share
Arnold, i see lots of talk of “economic costs” these days. We like to think we can know that with some precision because it’s easy to add up lost wages, wealth, etc. While recessions obviously pull down such measures, it seems to me they also accelerate coming out of recession. How could we hope to know if the end result is really any different? I once looked at countries that didn’t have many technical recessions (e.g., australia, israel) and didn’t see anything that would suggest quicker per-capita GDP growth over the long-term relative to the US.
One might go even further and say recessions usher in a period of rapid productivity gains and creative destruction. Certainly there are some benefits as well.
If we’re going to have this debate about lives vs “economic costs,” i think economists need to think a little harder about the costs. All i see are simple aggregates….which strike me as even less informed than a lot of the junk epidemiological work out there on the virus. How do you think about the long-run costs?
“I would say that we only get hyper-inflation if there is a debt crisis. But I believe that we can get at least a 1970s-style inflation without a debt crisis. We are keeping people home and getting them laid off, which means that they are not producing anything of value. Yet we are giving them funds as if they were still producing, which they will then spend on stuff that other people produced. Regardless of what games the Fed plays with interest on reserves, we have more money chasing fewer goods, and that means inflation.”—ASK
On some levels, this observation make sense. But certainly the markets do not anticipate inflation. And Japan, which chronically runs budget deficits and which is planning to send a large check to everybody and in which the central bank owns half of that nation’s heroic levels of debt, the prospects are for deflation.
I am no fan of large government ( including the military) and I am a fan of liberty for business and citizens. But there is something about inflation and budget deficits and quantitative easing that orthodox observations do not capture. Let’s face facts: some very intelligent observers have been predicting higher rates of inflation for 40 years. Instead the opposite has happened.
It may be that the MMT crowd is correct. Unfortunately, the MMT crowd has chosen to cover itself with left-wing socialist ideas rather than with the concept of limited government, and tax cuts as an instrument of stimulus.
Re: “Somewhere along the way, we went beyond the goal of reducing infection risk as a means to preserve scarce medical resources. The goal now seems to be reducing infection risk as an end in itself. Once we accept that as a vital government objective, the default becomes indefinite infringement on liberty.”
You hit the nail on the head. This is the crux of the matter.
And the word, “indefinite,” captures the situation, because (a) we don’t know the prevalence of infection, (b) we don’t know the threshold of herd immunity, (c) we don’t have excellent test-trace-isolate systems in place or even on the horizon, (d) we don’t have clear timelines for identification or adoption of effective treatments, (e) we don’t have clear frameworks for immunity passports, (f) we don’t allow controlled experiments about transmission modalities, initial exposure dose, different viral strains, etc.
What the goal used to be was defensible. With the new goal, there’s no answer to the pesky child who asks why we don’t apply the same standard to road fatalities, or to alcohol, or to the common cold.
How is this coronavirus in a different category to that coronavirus, once the hospitals have been emptied out? And why not just ban cars entirely? Why not bring back prohibition, and bring back the Temperance Union? If safety is our only value, and we value nothing else, then grandparents should never be allowed to see their grandkids. Obviously.
The clampdown wasn’t even a policy. It was a placeholder. It was what you did in the absence of any strategy. It was a blunderbuss, plus a long wait until a vaccine shows up.
I think we are starting to know enough that the risks to the very many are few and the risks to the very few are many. We also know a lot more about what the very many can do to keep the interactions with the obvious among the very few safe. And all the very few know what they need to do, and most of what they want is that the medical care they need is available. Step aside from a few media and chattering class bubble and the People are starting to know what makes sense to do and what does not. A ratcheting of objectives may suit Governor’s Newsome’s political constituency but will not play very well across America (or even across California).
I pray you are correct, and fear you are wrong.
I would think that higher inflation is helpful in establishing new patterns of trade and specialization, especially given downward wage stickiness and fixed debt payments. Is there something I am missing? My assumption is that more inflation right now leads to a more adaptive economy and one that is more productive. Shouldn’t prices be rising for things like PPE and hand sanitizer?
Hell, shouldn’t the government be stepping in to help finance expansions in manufacturing capacity for those things if the private sector isn’t? Or relax price gouging laws, other regulatory barriers, etc.?
Why aren’t all options on the table, even for a Republican administration (and Republican controlled states) that have a stated and long term commitment to reducing regulatory burden on business? Why are they letting this crisis go to waste, when they can simultaneously burnish their public image and achieve long held goals?
One downside to inflation is that it puts people into higher tax brackets, bumps them out of assistance programs, etc., All without increasing their spending power. If Congress wanted to pass tax reform bumping all the brackets up ten percent of something that’d be fine perhaps, but I am not optimistic.
I am pretty sure that tax brackets and the standard deduction are now indexed to inflation. The federal poverty line is updated every year for inflation, and that is what is used in a lot of calculations for government assistance.
Logic dictates that there is close-range, poorly-ventilated space transmission through breathing in suspended virus nuclei over a period of time. Far more logical that people spittle in each other’s mouth and nose without the recipient knowing it. Or touching a surface and then sucking your thumb. (rhinoviruses (common cold) has apparently been shown to be transmitted via surface to mouth, nose, eye transmission, but not influenza or SARS, which are only deemed plausible based on stability on surfaces).
Here is what the CDC says:
“It may be possible that a person can get COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose, or eyes. However, this is not thought to be the main way the virus spreads. COVID-19 can live for hours or days on a surface, depending on factors such as sun light and humidity.”
Here is what a site that is working to synthesize the various findings says on random transmission:
“The risk of transmission with more indirect contact (eg, passing someone with infection on the street, handling items that were previously handled by someone with infection) is not well established and is likely low.”
Secondary infections have been from: household members of an ill person, healthcare workers, closed environments, e.g., cruise ships. Clusters have been found from “family, work, or social gatherings where close, personal contact can occur.” Examples are two family gatherings in Illinois with communal food, embraces and extended face-to-face conversations with people later confirmed to have COVID-19.
So, yes, poorly ventilated enclosed spaces where the virus is being, or has been, shed are a risk with 10s of minute exposure (dosage). But, to admit this would severely implicate public transportation.
Solution, negative pressure ventilation, but that would negate the energy efficient building dogma since it will take energy to condition the incoming air.