Economist Pleads for Caution in U.S. Reopening Economy
With Georgia already moving to open their economy up more, and most states having their stay at home orders expiring soon, how we do this has become a huge debate.
There is no shortage of people who are eager to warn us about opening our economy too soon, and this situation has become polarized between those who fear that we may be risking public health too much by being too quick to resume normal activities, versus those who argue that we have paid a huge price already and should consider the economic costs alongside the health concerns.
When an economist, who we would normally think would be at least striving to find the right balance between the two and certainly not ignore the economic side like public health officials are bound to do, comes out on the side of Dr. Fauci, this is a lot more interesting than the folks who just want to keep things shut down indefinitely, without even bothering to account for or weigh the economic costs.
While we are at least working our way out of this mess, and we’ve managed to finally set aside beliefs that this wave will be so epic, the focus has now turned to this alleged “second wave” that is supposed to come in the fall, and if such a thing is coming, we at least should account for it in our plans.
Given that we’ve never done this before, not during any of the past epidemics that the U.S. has been afflicted with, we do need to recognize that the threshold here needs to be high enough to justify the costs. As overblown as the initial predictions about COVID-19 ended up being, a lot of people believed them, so it’s at least somewhat understandable that we took these extreme measures with this one, at least to the point where it became painfully obvious that this was not going to be the biggest health crisis we’ve ever faced, or even close.
If you just ignore the economic costs, doing such a thing becomes much easier of course, but the economic cost of all this does need to be reckoned, and we need to at least strive toward some degree of sensibility as we decide when and when not to take such drastic action to protect our people.
It turns out that the horrific projections that were given to us, both the millions of deaths that they told us was coming, and the millions that would die if we didn’t shut down the economy, have all been discredited now, because this massacre did not happen in areas that did not shut down, and we haven’t even been able to demonstrate that this segregation even helps reduce the ultimate body count, and at best just serves to delay it.
The benefits do need to outweigh the costs, or at least provide a reasonable basis to believe that they do, and it is not near enough to just assume that this protects us and especially protects us a lot, as so many have believed.
We have been told that this particular virus has a high spread rate, and that part isn’t something we can dispute. We now have a better idea of how this all started, and it wasn’t from bats at a Chinese seafood market. For one thing, this particular market does not even have bats, which has been confirmed, and it’s a seafood market after all.
Many of those infected in the early stages did have contact with this market, but many did not, including the first person to be diagnosed, all the way back in November before we were ever told that this virus was at large. The first victim worked at the Wuhan Institute of Virology, and among the first group that was diagnosed, a significant percentage of them had no contact with this seafood market either. It was simply not possible for it to originate in that market.
We have evidence from China that, not surprisingly, the Chinese government took strict measures to prevent the word on this from getting out, including providing the genetic code to those outside the country. It slipped out anyway, and together with other information we have learned from those in China who felt obliged to speak up in spite of warnings not to, we have learned that this is by no means your normal virus.
There is at least good reason to believe that COVID-19 was engineered as a biological weapon, especially with this facility being under military oversight. Coronaviruses from bats do not normally infect humans, but this lab did discover one from bats in the south of China that did and brought it to the Wuhan lab. There is evidence to show that they spliced the S protein from this bat virus, the spikes in a virus that penetrates our cells, into the old SARS virus, as well as adding some proteins from the HIV virus that helps that virus break down human cells to create a virus with a much higher spread rate than the original SARS had.
The spread rate of SARS was virtually meaningless, but with this one, also called SARS-2 due to its being identical to the original SARS virus other than these 2 modifications, the spread rate was ramped up by a tremendous amount.
We’re not mentioning this to get people riled up at China, like Trump wants, as it’s hard to imagine the Chinese releasing a biological weapon upon its own people like this on purpose. This is instead to give us a better idea of why this one spreads far more quickly and widely than any of the far more trivial viruses that we’ve experienced over the last while that quickly died off with relatively few infections.
Fortunately, while COVID-19 does have a very high spread rate compared to other similar viruses, it hasn’t been shown to be as lethal as the original, where about 10% of those infected did not survive. If it was, the worst numbers that anyone dreamed up would be far worse, as this would have the potential to kill over a half a billion people worldwide, and tens of millions in the U.S. alone.
It wasn’t hard at all to figure out, even early on, as we did, that the infection rate is high with this, and the virologists have been telling this from the start as well. The mistake that a lot of epidemiologists made was to grossly underestimate how many people were infected by this, using known infections from a tiny slice of the population as data and treating these numbers as representing a large part of the infected population, assuming that the great majority of people weren’t infected, and then using mortality rates based upon understating the infected population.
We’re starting to understand this error more as we test people for antibodies, and even Governor Andrew Cuomo is starting to understand when he is told that 15% of the people in New York City have been infected based upon this testing. He even admitted that we seem to have overestimated the mortality rate of this, something we told you in the early days of the infection, and it wasn’t hard to figure out just from the numbers we had at the time.
If you test a tenth of a percentage of the population, during the time when the huge numbers emerged, and you discover that about 1 in 5 people are infected, this has to be just the very tip of the iceberg. This tells us that while there may not be 1 in 5 Americans infected already, due to our focusing on just the people with symptoms, but the actual percentage of Americans infected at that time had to be much higher than the numbers people were using. This is especially the case now that we know that this virus was engineered to maximize spread, but we already knew from scientific study that this spreads twice as fast as influenza, which spreads plenty fast itself.
There’s also the evidence of how fast this spread around the world, in a way that showed up even the Spanish flu. Our most recent guess of 15% happens to match exactly what the New York study showed, and it no doubt grows every day.
We also know that this virus spreads plenty fast even when we shut things down, and it has spread plenty fast in areas that chose to do that over areas that did not. The New York study clearly shows this, although shutting down the state likely did slow this down somewhat. We need to ask what this slowing down accomplishes though with a virus that is so contagious, and this is exactly what we need to be looking at closely as we prepare to move toward more normal interaction.
You Just Can’t Stop Something This Contagious
One of the things that we focused on during our earliest discussions of this was that, with a virus this contagious, there is only one way out of the mess, and that’s for us to develop herd immunity. This is much like a monster in a horror movie that you can keep shooting, which slows it down a bit but does not stop it from coming for us anyway until enough people can gang up on it.
While many are hoping that a vaccine will rid ourselves of this, vaccines do not prevent viral infection. The best we can hope for from a vaccine is to allow us to fight off a virus more easily, but this is of limited benefit overall and especially isn’t all that effective among those most prone to dying from it, the elderly or others with weakened immunity generally. Even this benefit is suspect as we know that vaccines reduce our immunity toward other pathogens, and studies have shown that more people get infected generally that get vaccinated than not.
We vaccinate against the flu widely each year, but this does not stop the flu from taking tens of thousands of lives each year, and it is the elderly that takes the brunt of this as they do with COVID-19.
While the biggest issue with vaccines is their other ingredients, things like ethyl mercury and aluminum, in a manner that has not been shown to be safe or even tested, other than our showing their harm, exposing ourselves to pathogens in a vaccine is also thought to serve to weaken our natural immune response by depriving us of the real thing.
Our immune systems depend on regular workouts like our muscles do, and there are studies that show that our children are experiencing a number of negative effects by avoiding the relatively tame infections that kids of prior generations were exposed to and got a good workout from, aside from all of the toxins we expose them to by way of so many vaccines so young. This is particularly important with children whose immune systems rely on common stressors to develop properly, and have instead become riddled with autoimmune conditions which do their damage by way of creating excess inflammation throughout the body, attacking phantom threats and preying on our own cells by default.
There are surely situations where the benefits of a vaccine would still outweigh the risk of this collateral damage, and if a virus is potent enough, and the workout it gives you sends too high of a percentage of us to the grave, a little poison with our jab is surely preferable to dying.
We need to ask ourselves whether COVID-19 is a threat of this magnitude, and you might want to argue that it is among the elderly or other persons of high mortality risk, but it is hard to imagine how we could justify widespread vaccination among those whose mortality risk is extremely low, like with anyone who isn’t immune compromised.
This is actually a moot point because the spread of this virus is such that it will have run its course well prior to our being able to widely dispense vaccines against this, and it doesn’t make sense to vaccinate against a virus that is no longer around. Like everything else with this outbreak, time has a way of correcting our beliefs.
Achieving herd immunity, which vaccines seek but don’t really promote well, is not something we could ever avoid with this particular virus, even with as harsh of an economic lockdown as we dare and not deprive people of the necessities of life. People still need to go to the store, and 6 feet apart just doesn’t stop this monster, and there is no doubt about this as we watched infection rates explode with all the social distancing in place we could stomach.
Sweden, which has not implemented any mandatory controls with this virus, is said to be a couple weeks away from achieving herd immunity, according to leading Swedish epidemiologists. They have already discovered that about a third of the residents of Stockholm have been infected already, and they are actually looking forward to the reach of this virus continuing to grow, and believe that this is how we win the war against it. This may scare the heck out of some people, but it all comes down to recognizing that the mortality rate is considerably lower than we believed, and that it is also unavoidable in the end, which the Swedes have recognized.
While the death rate in Sweden, in spite of no lockdown in effect, hasn’t been remarkable compared to other European countries, the Swedes tell us that their death numbers are accurate, counting every one that is suspected to have died from this virus, instead of just counting deaths in hospitals as is alleged to be happening with some of their neighbors.
The most notable insight from Swedish scientists is that their death rate is an accelerated one, where countries like the United States have delayed the inevitable. In any case, we surely have the Swedes to use to gain insight as to what an open economy again would look like, and it’s not that scary, no scarier really than the situation we face right now.
COVID-19 will simply have to run its course, where we move to the state of herd immunity, one way or another. If we really could quarantine everyone, that would surely make a big difference, but we just can’t. Our pretend quarantine hasn’t kept it from spreading widely, and with viruses this contagious, you either quarantine or you do not and it spreads, there is no try. Having people stay home mostly and watch TV and then go out to the store or interact with others just isn’t a quarantine.
Face masks at least seem to be more effective, even though we haven’t studied this and just have the anecdotal evidence from East Asia to go with. Perhaps people don’t believe China’s numbers, but the ones from other countries such as South Korea and Japan surely aren’t made up. They wore the masks over there, and were far less affected.
We Need to Be Concerned, But Our Concern Needs to Be Toward the Right People
This doesn’t mean that we need to wear them generally, but perhaps it may be wise to wear them around the elderly, and have them wear them as well. These are the people that we should have focused most of our effort on, and the people that should be kept at home if anyone was to. We could have taken a very small portion of the stimulus money and delivered their essentials to them while they were in quarantine, more like a real quarantine, and one directed at the people who need it.
Instead, we’re sending infected patients to elderly care facilities, and given how much more important it is to protect this demographic, this is simply shameful and the opposite of what we need to be doing.
For the rest of us, there is no way to prevent most of us from getting infected with this virus. As many states now contemplate when they will at least loosen their restrictions, and especially allowing more businesses to operate that have been prohibited, we need to understand, like the Swedes do, that the goal right now has to be to achieve herd immunity, and delaying it further will only harm our economy more than we already have.
Our management of this outbreak so far has been a series of bad guesses, and we can ill afford our governments guessing badly when so much is at stake. While many of these guesses have been discarded, the story about the second wave in October is very alive and well, even among economists as it turns out.
Diane Swonk, chief economist at Grant Thornton, proclaims that “we know there’s a second wave coming in the fall. What we’re doing is setting things up now so we can manage future waves. If we reopen too quickly, we derail everything we’ve done and potentially set off a wave even before the fall wave.”
She is not only worrying about health risks, she is also concerned about further economic damage if this alleged second wave hits our shores. That first sentence of hers has us wondering though, because we surely do not “know” that a second wave of the significance that she is talking about will come, but we do know that if this is somehow true, going slower will make it worse, not better.
The truth is, no one really knows whether this virus will make a resurgence in October or ever, and while we are free to speculate on this and are well served by at least considering the possibility, but this is only a threat if this virus is mutagenic enough, like flu viruses are.
The type of virus that COVID-19 is does not tend to be of this sort, and while we don’t just want to ignore the possibility, this is far from “we all know.” We surely have a threshold of risk here that we require to restrict people in any way, and if this virus is virtually gone by then, and it does resurge, it will give us plenty of warning.
Should we actually get to the point where this second wave is upon us enough to worry about it enough to close things down again, and we do need to realize that our closing down in the first place was driven by visions of a monster far bigger than the one that showed up, we could take whatever appropriate action that would be required then. If a second wave does come, it will surely be considerably less severe, with so many exposed already, and the threat needs to be worthy of severe action like this. Whether the original one was, a more minor one is even more questionable, but once again, we will have time to prepare if it does get that dire.
Shutting down economies need to be a last resort, and not something that is ever used preemptively. The risk here is the differential between freeing things up and spotting this second wave if it comes, of a magnitude that is minimal and far beneath any reasonable threshold of this sort of action.
Even with playing it cool, it is not even realistic that the first wave will not be long gone before October. Our projections even tell us this. If you think that the million diagnosed infections are even substantially representative of the population, you might think that we have only scratched the surface, but the data has always pointed to a much bigger infection rate than has believed, and we now have the experimental data to support the simple logic behind this insight.
This is not to say that we should be careless either, and enough caution is wise, just not an excessive amount. We surely need to go all out to protect those at meaningful risk from this, which does require that we particularly focus on the people who have been shown to be a lot more prone to dying from this.
It is not too much to ask that we segregate risk by demographic and not just look at the whole population as homogenous in the face of data that tells a very different story. Among the economic carnage is a massive amount of elderly folks who have fallen victim to this tragedy, and while it may be true that the virus only hastened the inevitable, like pneumonia or the flu does, we still need to ensure that we protect them when it is reasonable to do so.
This isn’t just about age, even though the majority of deaths from COVID-19 have been concentrated in seniors and particularly among those 85 and older. We do hear that those with underlying conditions are at the most risk, and you pretty much need one, as 98% of deaths overall have been accompanied by an underlying condition of note. It just happens that older folks have these underlying conditions a lot more, and being old isn’t enough, and the risk is actually quite low if you don’t have one, no matter how old you are. Among those who have died that are over 75, 99.2% of them had an underlying condition, and the two together is a deadly combination.
It takes a healthy body to fight this off and win, and when we are already ill, the coronavirus piles on this burden upon whatever else we may be struggling with, not unlike sending people into a brawl, with those who can fight holding their own and those who cannot just getting beat up from a given opponent. We give lip service to this but you would think that we would pay more attention to these risk factors than we do.
We could do more for the elderly to protect them against other pathogenic threats as well, and more of our older people die every year from them than the coronavirus will ever cause. We can only hope that we find such a lesson within this pandemic, showing us just how vulnerable our elderly is to this and a lot of other things as well, including things that you can only catch in a hospital.
COVID-19 has been a terrible blight upon U.S., and has killed so many of our older people, but if we really do care, we need to take a big step back and account for all who die from infectious disease and turn our extreme attention that we’ve placed upon infectious disease now and look to better protect those who have these bullets flying around them continually.
We are starting to turn the corner economically at least, with Georgia leading the way among those that did shutter their people in. Just like there is only one way out of the pandemic, when enough of us get infected by it, there is only one way out of the economic pandemic, our sticking our foot into the water and seeing that it does not turn black as many may fear.
Given that we do need to measure and interpret these things, as so many states contemplate opening up again soon, as the April 30 deadline approaches, we owe a debt of gratitude to Sweden for volunteering to be our lab animal, to show us what not being so scared of this virus actually leads to.
Editor, MarketReview.com
Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.
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