Today is Saturday March 28th, I am located in the northeastern United States, considered a Coronavirus hotspot in the country. The President of the United Stated, Donald Trump, declared a National Emergency Concerning the Novel Coronavirus Disease Outbreak on March 13, 2020. The virus was first detected in Wuhan, Hubei Province in the People’s Republic of China in mid December of 2019, and became a notable problem just one month later. The China Communist Party (CCP) was slow to tell the world of the outbreak and its severity, in fact they attempted to cover up and push out disinformation about the nature of the virus, which stole several weeks from the rest of the world to prepare for the pandemic that was coming.
I can’t emphasize enough the extreme negligence and criminality of this act by the CCP. It didn’t take long for the rest of the world to recognize the potential of this new virus, which no one had immunity, as to its stealth nature, combined with the infectious rate and mortality, that the world had a real problem at hand. Donald Trump issued a travel ban from China in late January, which was largely criticized, but turned out to be a huge advantage to the US’s ability to strategize and mount a defense. Other countries were not so quick to act. Asia then Europe in particular bore the initial wave of infections, and so Donald Trump then banned travel from Europe as well, and urged Americans to come home ASAP.
China and neighboring countries started to feel the impact of the disease, China continued with their misinformation campaign, and South Korea and Singapore and a few others started to introduce draconian measure of testing, social isolation and tagging in order to get control and try to reduce the rate of the virus spreading. Other countries started to implode with Coronavirus cases, particularly in Europe, where they didn’t take things so seriously until the problem escalated to critical levels especially in Italy and Spain. Hospitals became so overloaded that doctors had to choose who they could help and who they couldn’t.
The world rallied and most countries scrambled to increase testing, get needed supplies for doctors and patients, such as N95 Masks and Ventilators. And many countries are trying to find a vaccine and treatments. In the mean time people are being ordered to lock down, stay in their homes, potentially for weeks, or even months. The entire economies of the world have shut down, leaving only essential services running, such as power, hospitals and food and supply chains that support them.
Sounds like a sensational fiction novel, but it’s not, this is real life, and I am living it now under self-isolation with my immediate family, waiting for the government to direct us on the best course of action.
There’s only one way to say it…the situation is dire. Perhaps the worst economic disaster to ever hit our shores, 2nd only to the great crash of 1929. But give it a few more weeks, and we are likely to surpass that infamous mark. Jobless claims were released this morning, we all knew it would be bad, with economists predicting anywhere from 750k to 2,7 million new claims, and a consensus of 1 million, we new it would be bad. However, the number was significantly higher at 3.28 million! That is insane, but still not unexpected by most…I actually was surprised that the range and consensus on the report was so low.
And all of this happened in just a few short weeks, from peak employment numbers that was previously at all time highs, across the board in every category. I guess one could say that if we were to experience the greatest economic disaster of our lifetime, it’s a good thing it happened when the economy was in such good shape. Of course that statement would likely come with much descent on the actually strength of the economy prior to Coronavirus, as many, as well as myself, thought that much of the economy was being artificially propped up by the central banks and the Federal Reserve. It was a bubble waiting for an excuse to pop. And boy, what an excuse!
The Monetary System Is Broken
Regardless of how propped up we were, the monetary system relies one one essential element to stay viable, and that is movement, movement of money and debt through the entire system. Without movement, you could compare it to the movement of blood in the human body, when the heart stops pumping, we die. We are not completely dead, there are essential services running, localized supply chains, power and the internet are there to make sure everyone can communicate and transact electronically, hospitals android supplies can continue. We are basically on life support. But in the mean time, most people are not going to work or have lost their jobs…extreme shock.
The government has passed an aid bill worth $2 trillion dollars, that will guarantee a kind of universal basic income to everyone making under $95K. Payments up to $1200/month for the next 4 months should allow people to provide for their basic necessities. Many banks, utilities, and other creditors are being very accommodative. Let’s face it, they have to, it’s better to string along people, get something, rather than lose that revenue stream all together.
There’s another $4 trillion dollar package being prepared that will provide corporate bailouts, however there’s argument over whether it’s being allocated appropriately, where too much is going to corporate behemoths, and not enough to small and medium-sized businesses. They are after all the biggest employers collectively and the greatest form of capital movement. Remember that it’s the velocity of money that is the critical thing that keeps our economy living.
QE Infinity and Beyond
$6 trillion is a lot of money, but I don’t think anyone thinks that will be the end of it, nope. In fact, that’s just the beginning. And the Fed isn’t distributing the money through dealers or banks, they are giving it directly to the people and to investors that will push it to businesses with non recourse loans. In other words it doesn’t have to be paid back. Its just a big ass give away. This will keep money flowing and debt continually expanding. As crazy as it sounds, we require our debt to alway be increasing.
If we don’t continuously create debt through the banking system, the system will fail. Pushing money to people and businesses might help, but unless people start becoming productive and creating new products and services, all the money in the world won’t resuscitate this economy.
My Speculation On The Future
I believe the Coronavirus situation is even worse than we are currently hearing. By my calculations, assuming 40 percent of people in the US become infected, and I believe that’s a conservative estimate, as it takes 7- to 8- percent to achieve herd immunity, then of that 40percent or approximately 140 million people, here is the breakdown based on current infectious state around the world.
- 70 percent will be asymptomatic
- 15 percent will contract slight cold-like or fever like symptoms
- 15 percent will require hospitalization
- Of that last 15 percent, 1/3 will require intensive care (ICU)
- and of that 1/3 20 percent of them, or 1.9 million people will die
These are honorific statistics that are base don conservative infectious estimates. Our job is to flatten the curve over time, and keep the pressure off of out hospital systems. And the ONLY way to do that is through social distancing and quarantine.
After this is all over it’s going to be a very different world, we will adopt new social norms, procedures and protocols. Restaurants will be different, sporting events, theaters, anyplace where people congregate. The simple act of shaking hands will probably become taboo. Also, Universal Basic Income is here to stay. There’s no way once people become reliant on it, that the government will be able to take it away.
It’s QE to infinity infinity and beyond!, Actually I think the limit will be $60 Trillion, at which point the current system will fail. Debt will need to be restructured and a new monetary system will need to be adopted. Beyond that, everything gets really blurry…gotta go get some Windex and polish up my crystal ball.