Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Great Economy Reopening Gamble

Economics / Coronavirus Depression May 17, 2020 - 01:35 PM GMT

By: Patrick_Watson

Economics

We knew the April US jobs data would be ugly. Speaking on ABC’s “This Week” program last Sunday, Minneapolis Federal Reserve Bank President Neel Kashkari predicted “the worst is yet to come.”

Kashkari is right; this won’t get better while so much of the economy is sidelined. The stay-at-home orders, while they help reduce coronavirus spread, have other side effects, too. Domestic violence increases, children miss educational opportunities, people with other health conditions go untreated. These are real problems.

The question is how to reopen without making the situation worse. Kashkari had some advice on that, too: “To solve the economy, we must solve the virus.”


Unfortunately, it’s not happening. Which means we are making a massive bet against the odds.

Serious Problem

Let’s start by correcting some misinformation: COVID-19 is not “just the flu.”

Yes, most who get it seem to show only mild symptoms, or no symptoms at all. Similarly, most people who get in cars don’t have fatal accidents. But you probably don’t drive 100 mph down narrow streets without a seat belt. You modify your behavior to reduce the risk.

So, what’s the risk?

Well, the worst recent flu season was 2017–18, when the US had an estimated 61,000 flu-related deaths. And that was over an entire year. COVID-19 has killed 80,000 in just two months.

“Ah, but they were mostly old people,” you say. “I’m safe.”

No, you’re not.

Here’s a Bloomberg analysis comparing risk of death by age group of the 2018 flu season vs. three possible COVID-19 scenarios.  

Let me explain this. Look at the number I circled in red. “1.57” means that in the optimistic scenario, for people age 25-34, the risk of being one of 100,000 COVID-19 deaths is 1.57 times higher than the risk of dying from the flu if this flu season is as bad as 2017-2018. And it gets worse from there.

Bloomberg made similar calculations for auto accidents, drowning, etc. The results are consistent. If you are over age 40 or so, COVID-19 is significantly deadlier than anything else you will likely encounter this year. The odds are getting worse, not better.

The economy can’t recover if that is the case, and it will be the case if the virus is actively spreading. We need a plan to fix this.

Turns out, we have a plan… or at least, we did. 

Abandoned Plan

Let’s review some ancient history—as in “four weeks ago.”

On April 16, the White House released a set of guidelines called Opening Up America Again. It advised governors how to gradually reopen their states while fighting the coronavirus.

The plan begins with a set of “gating criteria.” The key one: a “downward trajectory” of documented COVID-19 cases within a 14-day period. The plan recommends relaxing restrictions in phases with each such period of improvement.


Image: The White House

Those who follow me on Twitter know I’ve been very critical of the Trump administration’s handling of this crisis. But I thought this plan was sensible. Similar methods seemed to be working elsewhere, so it gave me some much-needed hope.

My hope didn’t last because, within days, governors whose states were nowhere near meeting the criteria announced plans to start reopening anyway.

Note, the White House hasn’t withdrawn its recommendations. It’s still the official advice, even though many governors are doing things differently.  

Stranger still, the president has been inviting those governors to the White House to congratulate them. It’s like he is saying, “Here are my recommendations and I’m glad you are ignoring them.”

Why publish a plan and then act like it never existed? The only way this makes sense is if Trump and these governors have decided reopening businesses is more important than reducing virus deaths, but they don’t want to say so publicly.   

That’s a big gamble. They could lose both ways.

No Good Outcomes

Gamblers need to know all the possible outcomes. In this case, we can simplify the next few months to two variables.

  • The economy will either get better or not.
  • The coronavirus will either spread or recede.

That means we have four paths, as shown in this matrix.

Let’s look at each:

  1. If the virus recedes soon and the economy gets back on its feet, then we’ll be essentially back to 2019. That was better than where we are now, but hardly great. The economy was growing slowly and maybe approaching recession, with stocks overpriced and the financial system wobbly.
  1. If the virus recedes but the economy doesn’t improve, then we will pay for all this with a severe recession. Millions will stay unemployed and many businesses go bankrupt.
  1. If the virus keeps spreading but relaxing the lockdowns helps the economy, the mortuary and funeral industry will be hiring as it expands rapidly. This burial boom would be an opportunity for jobless restaurant workers and maybe others, too.
  1. Finally, if the virus keeps spreading and the economy doesn’t recover, we will face a major national disaster: economic depression concurrent with mass sickness and death.

You can debate what the odds are for each scenario. None lead anywhere good. One is unbelievably bad. So, it makes sense to do all we can to avoid that one.

Are we? We’ll know in a few weeks.

The Great Reset: The Collapse of the Biggest Bubble in History

 New York Times best-seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could trigger in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.

By Patrick_Watson

© 2020 Copyright Patrick_Watson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules