Financial FAQs
There is little doubt that this fall and winter will show a surge in pandemic illnesses and deaths. States in the Midwest and South will hurt the most, but also some northern states like Montana, North and South Dakota that don’t have statewide mask-wearing requirements.
At least 793 new coronavirus deaths and 65,327 new cases were reported in the United States on Oct. 15. Over the past week, there has been an average of 54,399 cases per day, an increase of 25 percent from the average two weeks earlier.
And this is just at the start of the flu season. As of Friday afternoon, more than 8,036,100 people in the United States had been infected with the coronavirus and at least 217,800 have died, according to a New York Times database.
Who is listening as the holidays approach? Dr. Fauci has warned that “This is an outbreak of historic proportions, the likes of which we have not seen in 102 years,” he said, referencing the 1918 flu. Death rates are actually increasing in 23 of those states at this writing.
Just look at the numbers. There are now 40 states with increasing infection rates, and 22 states with increasing death rates. North and South Dakota, Kansas, Montana and Alabama are the deadliest states, according to John Hopkins.
CovidTrackingProject
There were 913,976 test administered this Friday, and a positivity rate rising above 5 percent again; anything above that infection rate is not considered controllable by epidemiologists. So what does this pandemic surge mean for economic growth?
We will be looking in the rear-view mirror with the upcoming Q3 GDP forecasts that predict on average a 35 percent GDP growth that could fool US into thinking the pandemic-induced recession has ended. A 35 percent annualized increase in Q3 GDP is about 7.8 percent QoQ, and would still leave real GDP down about 3.3 percent from last year’s Q4.
The Q3 growth surge is partly due to a huge and probably temporary jump in retail sales, up 1.9 percent from August to September (seasonally adjusted), and were up 5.4 percent from September 2019.
So what should be done? Harvard Professors Larry Summers and David Cutler predict a much worst outcome if more pandemic relief isn’t passed this year.
They have just published a study in The Journal of the American Medical Association that says the total cost of the pandemic is estimated at more than $16 trillion, or approximately 90 percent of the annual gross domestic product of the US by the fall of 2021 when the pandemic is predicted to have subsided. Approximately half of this amount is the lost income from the COVID-19–induced recession; the remainder is the economic effects of shorter and less healthy life.
“However, increased investment in testing and contact tracing (approx. $100m) could have economic benefits that are at least 30 times greater than the estimated costs of the investment in these approaches,” they said.
Professor Summers said in a recent Sunday Fareed Zakaria CNN interview that the total cost of the pandemic — including more than 10 weeks of near total lockdown across most of the country, which caused the GDP in second quarter to drop by more than a third — will eclipse the money the U.S. has spent on every war since September 11, 2001, including those in Afghanistan, Iraq and Syria.
Now is the time, they say, to borrow more when the cost of money is so cheap—at almost zero interest—to start the projects that will bring down the pandemic infection rates and bring back longer-term growth and prevent the enormous wastage in life and property that present inaction is costing Americans.
There is really no alternative, or we will end up approaching the horrific 1918 Spanish flu death count when we were much less prepared.
Harlan Green © 2020
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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