Relevant and even prescient commentary on news, politics and the economy.

Coronavirus dashboard for March 26: southern “red” States resist effective measures

Coronavirus dashboard for March 26: southern “red” States resist effective measures

Here is the update through yesterday (March 25)

In order to succeed in containing the pandemic, I believe that the US needs at least 2 weeks of China (nearly complete lockdown) followed by at least a month of South Korea (very aggressive and widespread testing).

At minimum, that means at least 50% of the US population under lockdown and a ratio of 15:1 in tests to results showing infection. The recent exponential growth of about 35% per day must be stopped. Those three most important metrics are starred (***) below.

Yesterday we crossed two out of three of those thresholds – just over 50% of the population is under lockdown or near lockdown, and the rate of increase in new infections decelerated substantially. The amount of testing continues to fall are short of what is necessary.

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)

  • Number: up +13,972 to 69,197 (vs. +11,705 on March 25)
  • ***Rate of increase: day/day: 25% (vs. 34.6% baseline and vs. 19% on March 24)
I am using Jim Bianco’s excellent exponential projection of 34.5% growth from March 10 as my baseline. It appears that “social distancing” strategies as well as State-mandated partial and total lockdowns may have begun to put a dent in this, as yesterday’s +25% and Tuesday’s+19% have been 2 of the 3 lowest rates of increase in the past two+ weeks.

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Congress and the Fed Could Ensure Universal Protection During the Pandemic

Congress and the Fed Could Ensure Universal Protection During the Pandemic

No matter how well or poorly the federal government addresses the overall economic crisis, millions of vulnerable people will be left unprotected.  Homeless people, incarcerated people, immigrants, people in fringe, off-the-books employment like day labor—unless steps are taken that specifically target them, they are staring into the abyss.

This is fundamentally a local problem.  States, counties and cities know where the needs are.  They have existing ties through social service agencies and their connections to nonprofits.  This is where the expertise lies, but their budgets, lean in good times, are in free-fall right now.

The solution is straightforward.  Congress should authorize the Federal Reserve to purchase specially designated state and municipal bonds floated for the specific purpose of serving the health, housing, food and other essential needs of vulnerable populations.  There should be no limit to the amount that can be borrowed.  And the Fed should purchase these bonds with the intention  of retiring them.  Effectively, the Fed would be using its money-creating power to finance social protection at the local level.

This facility can be created immediately, with auditing to follow when practicable.  There should be no delay in meeting the urgent human needs that will otherwise go unaddressed by more conventional policies.

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AFL-CIO has a Plan

AFL-CIO has a Plan

From the AFL-CIO website:

PRIORITIES OF THE LABOR MOVEMENT TO ADDRESS THE CORONAVIRUS:

PROTECT FRONT-LINE WORKERS
  • Streamline approaches for allocating and distributing personal protective equipment to working people in greatest need.
  • Issue a workplace safety standard to protect front-line workers and other at-risk workers from infectious diseases.
  • Provide workplace controls, protocols, training and personal protective equipment.
  • Provide clear, protective federal guidance for different groups of workers with different needs.
  • Increase funding for the Occupational Safety and Health Administration and Mine Safety and Health Administration for additional inspectors and health specialists, and for developing and implementing an infectious disease standard.
MITIGATE THE BROADER PUBLIC HEALTH CRISIS

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For a Universal Debt and Rental Moratorium

For a Universal Debt and Rental Moratorium

Incomes are collapsing throughout the economy, and both businesses and individuals face a crisis in meeting fixed payments they can’t control.  The most direct step we can take is to temporarily suspend these payment obligations.

Suppose the government were to announce that, starting immediately, all stipulated debt and real estate rental payments were to be suspended for all borrowers and renters.  This moratorium could have an ending date of, say, two months in the future, with the option of extending it if circumstances require.  No interest would accrue to any of these obligations; in effect, we would be stopping the clock on them for a period of time.

Of course, if nothing else were done this would shut down the credit and rental systems completely for the duration of the moratorium, so a stipulation would have to be added that it applies only to debt or rental obligations established at the time of the announcement.  We’d all have to keep two sets of books, one for pre-announcement loans and rentals, the other for post.

International obligations are somewhat more complicated, but the economic heft of the US is great enough that these conditions could probably be imposed unilaterally on foreign counterparties, especially if the logic of this step persuaded other countries to adopt a similar course of action.

A debt moratorium would dampen some channels of financial instability and provide greater security for most participants in the economy.  By itself, however, it would not address the gaping hole in the real economy caused by shutting down whole sectors of goods and services production.  That requires other forms of stimulus.

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Coronavirus dashboard for March 22

Coronavirus dashboard for March 22

This is a new daily or nearly daily update I hope to post, including the most important metrics to show how controlled – or out of control – the cononavirus pandemic is. Hopefully the numbers will move ever closer to the tipping point where the epidemic is under control.In order to bring this pandemic under control, and prevent both health and economic catastrophes, in my opinion the US needs 2 weeks of China (total lockdown, preventing community spread) followed by 1 month of South Korea (extremely aggressive testing). The metric to be watched for testing is a ratio of 15 tests administered for every infection found (the ratio at which South Korea turned the corner).

Here is the update through yesterday (March 21)

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)

  • Number: up +7,123 to 26,747 (vs. +5,374 on March 21)
  • Rate of increase: day/day: 36% (vs. 34.6% baseline exponential average per Jim Bianco) (and vs. 38% on March 21)

Jim Bianco’s excellent exponential projection from March 10, of a daily 34.5% growth in reported infections for the next 10 days has been almost exactly correct. I am using this as a baseline against which we can tell how well “social distancing” strategies are working as well as State-mandated partial and total lockdowns.

In the last five days, the rate of exponential growth has actually risen from about 28% to 40% and even 50%, probably due to increased testing being able to uncover more infections.

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It is Clear that Hydroxychloroquine and Chloroquine are Currently Used to Treat Covid 19 in the USA

Patient privacy prevents precise calculation of the fraction of Covid 19 patients in the USA being treated with Hydroxychloroquine or Chloroquine. However, Hospitals are purchasing hugely increased amounts

Christopher Rowland reports.

Data gathered in the first 17 days of March by Premier Inc., a large group purchasing organization for 4,000 U.S. hospitals, showed a 300 percent week-over-week increase in orders of chloroquine and a 70 percent week-over-week boost in orders of hydroxychloroquine.

I think that, because of the association with Trump, this is presented as a bad thing. Certainly there is a problem of short supplies. Hydroxychloroquine is used to treat Lupus Erythematosus and Rhumatoid Arthritis and those people have trouble making sure they get their medicine, because of the sudden new demand.

The article begins with the odd reference to the FDA as if the FDA regulated off label prescription of drugs. The only legal effect of an FDA finding that the drugs work when treating Covid 19 is that manufacturers would then be allowed to claim this in advertisements. This is extremely irrelevant. The drugs are off patent and produced by many firms — there are no huge profit margins there. Also the free publicity dwarfs any possible ad campaign. The FDA has no relevant authority here.

It seems that there is an idea among many people that doctors shouldn’t do anything unless it is proven to work in a clinical trial. I recall (but can’t find) and article in which Dr Arnold Relman (editor of the New England Journal of Medicine and pretty much head of the medical establishment) denounced this. Waiting for clinical trials is a decision. It is a decision which has caused deaths. There is no option to stop the clock while the trial progresses. Patients who could benefit from or be harmed by novel treatments exist.

The idea that the practice of medicine should be vaguely like the approval of pharmaceuticals is definitely new. I am 100% sure that the main driver is fear of malpractice suits. It is very necessary to have an official published standard of care — following this standard is the only protection against malpractice suits when outcomes are bad &, you know, we all end up dead in the end.

But doctors must practice also when there is no standard (that is no committee of respected doctors is willing to take the moral not legal responsibility of drafting one). Obviously there is no standard of care for Covid 19. Also obviously many doctors are sensible enough to look at the balance of evidence in the absense of proof and make decisions which they believe are best for the patient in the absence of certain knowledge and knowing that they might regret the decision with the benefit of hindsight.

I don’t understand why official talk about medical care is so different from the current actual practice. I think it is partly about practical action vs scientific research. In scientific research it is perfectly fine to have open questions. If there is a patient on the edge of death, it is necessary to decide now.

But I am more confident than I was that small c conservatism is not killing as many people in the USA as it might.

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Some Ideas for Pandeminomics

Some Ideas for Pandeminomics

The starting point for all of what follows is that government, if it has the will to act, is currently in the driver’s seat.  Much of the private sector is facing a terrifying confluence of crunches: supply breakdowns, demand falling off a cliff for many goods and services, and a looming shortfall of liquidity to service debt.  A wide swath of business is on the ropes and needs a rescue from government.  This puts the power in our hands if we can wield it.  Of course, with Republican dominance in Washington and the continued loyalty of the Democratic Party to the liberal wing of the plutocracy, the likelihood that we will take advantage of this moment is small.  Still, the opportunity is there, and that’s the basis for thinking ambitiously.

1. Debt-equity buyouts.  There’s a lot of business debt, and borrowers face a crisis as their earnings tumble.  Andrew Ross Sorkin proposes a scheme in which the government would offer no-interest bridge loans to any and all comers, with repayment delayed until after the immediate crisis abates.  The key condition, and just about the only one, is that recipients commit to retaining 90% of their pre-virus workforce.  Dean Baker would go further and provide direct bailout support in exchange for quid pro quo’s, like zeroing out shareholders and limiting CEO pay.

Here is another idea.  Have the government offer to purchase any and all outstanding corporate debt, converting it into an equity stake.  Wipe the debt off the books and take a public ownership position instead, which could be used to pursue objectives, like cutting pay at the top and expanding worker benefits, that the vast majority of Americans support.

2. Public voucher purchases.  For the small business and self-employed sector, particularly in services, I like the Saez-Zucman idea of having the government serve as buyer of last resort.  Specifically, I would set up a public fund to enable the government—perhaps at state and local levels—purchase vouchers for future goods.  A massage therapist, for example, could sell a quantity of vouchers for future massage sessions, providing an income stream to make it through the quarantine.  When the crisis recedes, the government would distribute these vouchers to the public, either through a highly discounted sale or even free distribution.  Perhaps the vouchers could be for steep discounts, say 80%, off the posted price to all for a bit of post-virus income as well.

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The Coronavirus Recession has begun

The Coronavirus Recession has begun

This morning we got two reports that confirm the beginning of the Coronavirus Recession: initial jobless claims and the Philadelphia Fed manufacturing index.

Initial claims rose to 281,000 one week ago. They are now 15% higher than their low last April, as well as almost 15% higher preliminarily on a monthly basis than last March, and the 4 week moving average is just shy of 5% higher than one year ago.  This meets two of my three “recession warning” triggers for this metric.

The Philadelphia Fed’s new orders subindex came in at -15.5, a big decline from last month’s +33.6, that clearly represented manufacturers’ trying to lock in new supplies. Together with the Empire State’s big decline to -9.3 earlier this week, the average of the new orders subindexes for the five regional Feds is -4.

Other high frequency indicators have also tightened or turned neutral this week: credit conditions from the Chicago Fed, the spread between Treasuries and corporate bonds, the Harpex shipping index, the US$, and of course the stock market, which has continued to crash.

I’ll have the full report up this Saturday, but the bottom line is that with this morning’s reports, it is clear in the data that the Coronavirus Recession has begun.

Two final notes:

1.  When I checked a short time ago, reported cases of coronavirus in the US had jumped 45% in a single day to 9415. This is only -6% below Jim Bianco’s exponential forecast from one week ago. Yes, much of this increase can be put down to increased testing, but the point is, that increased testing keeps finding an increased number of infections. This pace of increase is likely to continue for at least one more week.

2.  On the other hand, I will not leave you with DOOOM. I am working on a piece detailing what data to look for to know when we are turning the corner on this crisis.

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The Coming Fiscal Crisis Of State And Local Governments

The Coming Fiscal Crisis Of State And Local Governments

Yesterday my wife Marina and I met with our personal attorney, a close friend also, to fix  some loose ends in our wills due to some recent family deaths, as well the current situation.  He also happens to sit on the Harrisonburg City Council, as well as having been Mayor for a  while and a longtime member of the city Planning Commission, someone whose competence we have great respect for.  Anyway, he noted that on April 14 the City Manager is to present a proposed budget to the City Council, and that it will have a giant hole in it given that taxes on restaurants are a significant source of revenues for the city, and while not completely shut down, restaurants are now seriously restricted in their activity, not to mention that students will not be returning this semester, and they provide a lot of business.  In short, the city will face severe budgetary problems as the now occurring recession proceeds.  It is not only Harrisonburg that faces this problem, but probably just about every state and municipality in the United States.

Obviously this is currently low on the priority list of most people, and while Congress has now voted for a stimulus bill that will help out indiviuals and businesses, and another may be on the way, so far there  has not been a whisper regarding a likely need to help out state and local governments, who, after all, contribute more to the US GDP (and employment) than does the federal government, which mostly just ransfers money, except for the DOD in substantial terms.  The problem is that unlike the federal government, nearly all state and local governments face balanced budget rules for their current activities, with most needing to pass bond referenda for specific projects in order to borrow money.  So when the revenues fall short, which they shortly will start to do for all these state governments, they will face the choice of cutting spending and laying off workers or raising taxes on populations facing sharply reduced incomes and employment.  The sooner the federal government recognizes this and starts to do something, the better, although probably for now natonal politicians are hoping this will all be over before too much damage happens to the local governments, to the extent they are thinking about this at all, which I doubt.

I note that in the Great Recession, this problem was recognized, and the 2009 fiscal stimulus plan by Obama included as about a third of its spending the distribution to state and local governments of revenue  sharing.  This did help out their  problems that arose at that time.  Doing so again I think would be wise, but again, for the moment this problem is under the radar at the national level.

Barkley Rosser

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In the quaint, pre-coronavirus world of February, the economy was already very weak

In the quaint, pre-coronavirus world of February, the economy was already very weak

I have a post up at Seeking Alpha, taking a look at this morning’s retail sales and industrial production reports for February, and briefly considering their implications for employment in the coming months, even before the impact of coronavirus.

Here’s a graph that didn’t make it into that post, showing the past 25+ years of real retail sales (red), jobs (blue), and real aggregate payrolls (green):

For the past 11 months, real retail sales in February were only up +0.9%. We’ll never know for sure, but it is entirely possible that, even without coronavirus, real retail sales might have turned negative YoY this month, suggesting that job growth might screech to a halt in the next few months.

Also, in the more current weekly data, we got two important reads on chain store sales this morning. Both Redbook and the Retail Economist recorded surges in chain store sales last week, as consumer rushed to stockpile supplies.

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