Perspective on U.S. Economy and the Coronavirus Suicide is NOT Painless!
By Victor Sperandeo with the Curmudgeon
Disclaimer: The opinions expressed in this article are that of Victor Sperandeo. The Curmudgeons views are NOT in any way stated herein. Interested readers may email questions or comments to the Curmudgeon at firstname.lastname@example.org.
This Time Suicide is NOT Painless:
If you were born in the 1950s or earlier, you will remember the great movie Mash. Its theme song was Suicide Is Painless (click to play the song), written by Johnny Mandel. The basic verse is haunting:
I realize and I can see...That suicide is painless...It brings on many changes...And I can take or leave it if I please
More telling of todays global pandemic environment is this verse:
The sword of time will pierce our skins...It doesn't hurt when it begins...But as it works its way on in... The pain grows stronger.
This is what America is facing now, as Governors of these United States have shut down so many non-essential business to (supposedly) combat the coronavirus by halting its spread.
In Japan, when the Samurai committed suicide it was called Seppuku aka Hara-kiri. This ritual suicide involved stabbing the abdomen with a short sword called a tanto or wakizashi and cutting across ones intestines. It was a horrible yet honorable death, and it was NOT PAINLESS.
In my humble opinion (IMHO), this is economically what the U.S. is doing to its people and all non-essential business today.
It is hard to find words to describe the insanity of what Americas leaders and much of the world, are doing to their people for no valid reason. They are on a path to economic suicide in order to fight a virus that did not need to fight in a hara-kiri fashion. The devastation is self-inflicted. Its tremendous overkill- like using an atomic bomb to stop the spread of the virus, when all our leaders had to do was follow the Asian model (details below).
Stock Market Discounts a V Recovery:
To think, as the stock market is suggesting, that this will be a V economic recovery is completely ignorant of history or understanding of human nature. The belief that tremendous amounts of Federal Reserve money printing (without expecting any inflation in the future) and unlimited government (Trillion $ deficit) spending of fiat paper currency will lead to a lightning quick recovery is very naive indeed.
Most economists measure the U.S. economy in terms of real GDP. Its important to note that consumer spending comprises ~70% of total GDP. Consumers cant spend money they dont have, especially when theyre unemployed and have great difficulty borrowing money.
There are approximately 30 million small business in the U.S. which employ half of all American workers. By my estimates the U.S. will lose 2.0 million businesses a week with most of the nations small business shut down.
In the last four weeks, 22 million Americans filed for unemployment insurance. The total job losses since the pandemic wiped out more than a decade of job creation. [From 1/10-12/19 non- seasonally adjusted new jobs totaled 22,260,000 or 186,000 jobs per month including the Birth/Death model jobs which are estimates.]
However, the U.S. unemployment situation is actually worse than that described above. Consider how many people have lost their incomes because they are self-employed in this gig economy; like self-employed Uber drivers and other contractors who cannot file for unemployment insurance. Think about the house cleaners; nannys; event caterers; workers at conferences, concerts, and sports events (like NBA, NHL, MLB, NFL which have all been shut down); odd job workers that cut your grass, do handyman work around your house/apartment, wash your car(s) and do the other tens of thousands of work people pay for. Those jobs have vanished with all the stay at home/shelter in place orders. Also, the many workers in the underground/cash or crypto-currency economy are not going back to work for a very long time.
This current (un) employment situation cant even be compared with what it would be during a major war, because jobs are more available in war time than they are now during the shutdown. For many, the capital that was used to start their small business is gone. Wiped out. To start anew will be a huge stretch for many small business owners and independent contractors.
The problem for the V recovery mentality, which we debunked in Sperandeo/Curmudgeon: No V Recovery in US; Perspective on the Economy and Bear Markets, is that when the economy gradually re-opens, it is doubtful that those fortunate to be able to return to work will spend money like they did before the pandemic hit hard. Many others, especially those that work in crowds, will remain unemployed or without earned income. Hence, consumer spending will be tepid at best/horrifically bad at worst.
People will likely pay down debt, save and be very cautious. Many will assume the virus could return and the shutdown will happen again in the winter, as many health experts, doctors and scientists say.
The history of human action after horrific events is clear...Fear of the past Rules the Future.
The U.S. stock market has apparently discounted 4 to 5 months ahead of the unknown of when jobs and spending will return to any reasonable degree.
More Pie in the Sky Assumptions about the Great Restart:
There are many invalid, overly optimistic assumptions being made once the economy restarts. For example, that the airline industry and restaurant industries will come back to normal anytime soon.
The airline industry assumes that in ALL of May 2020, less people will fly than any ONE DAY in May 2019! Flights are 90 % canceled by some reports. Those that are not may have only 15 passengers on board. Will the June to September time period be much better for the airlines? Will they be forever dependent on government bailouts to survive?
U.S. restaurants employ ~15 million workers before the pandemic. The ones still open only serve take-out orders, but there are not many of those with shelter in place orders being observed by most Americans. As a result, the restaurant industry, especially the middle to high end, has been decimated. When they are permitted to reopen, social distancing will be in effect resulting in occupancy/table space reduced by 50-66%. In many cases only 2 or at most 3 people will be allowed to sit at one table. But the rent and utility bills will still have to be paid. As a result, perhaps 75% of U.S. restaurants will disappear. Thats not to mention bars and pubs, which have all closed and not likely to reopen when other non-essential business do. What happens to bar owners, staffers, waiters and cocktail waitresses?
The problem is not only with the workers, many of whom will never get their old jobs back, but also with the food suppliers, manufacturers of equipment, menu printers, liquor and wine sellers, marketers, and on and on!
Politics, the Bourgeoisie, and the Small Business Owner:
This is primarily about power in politics. What Karl Marx wrote in the Communist Manifesto was about How to overturn Capitalism. The target was the bourgeoisie [1.] -those who control Capital, and thereby the means of production. Today, thats the small business owner.
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Note 1. In Marxist philosophy, the bourgeoisie is the social class that came to own the means of production during modern industrialization and whose societal concerns are the value of property and the preservation of capital to ensure the perpetuation of their economic supremacy in society.
Joseph Schumpeter saw the incorporation of new elements into an expanding bourgeoisie, particularly entrepreneurs, who took risks to bring innovation and capital to industries and the economy through the process of creative destruction, as the driving force behind the capitalist engine.
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Whether state governors, county/city officials, or others foresaw the economically devastating effects of the stay at home orders and non-essential business shutdowns, the effect, and outcome is the same. It has destroyed small businesses, wiped out vast amounts of capital, and cost tens of millions of people to lose their jobs. Thats not to mention a setback for the U.S. of 5-10 years to rebuild its economynot the 4 or 5 months the stock market and V recovery pundits are assuming!
House of Representatives Speaker Nancy Pelosi has stated that the money to pay workers who did not file unemployment and are using the Paycheck Protection Program (in lieu of unemployment insurance) has run out of money. No more funding will be permitted unless the federal government wants to pay the debts the states have run up. That might mean that those who were waiting for government checks to pay workers wont get them. Hence, more workers will now be fired, and the unemployment rate will skyrocket to depression like numbers of 20% or more.
The excuse the Governors and Mayors give in shutting down the economy is to protect the people.
On April 16th, Fox News journalist Tucker Carlson asked New Jersey Governor Phil Murphy: By what Authority did you nullify the Bill of Rights in issuing this quarantine Order? Governor Murphys answer was Thats above my pay grade. You can watch that video interview here.
Similarly, Michigan Governor Gretchen Whitmer clearly doesnt understand the First Amendment [2.]. Many are protesting her tyrannical edicts (like you can canoe or kayak on a lake by yourself, but cant be alone in a motorboat?). Yet she is not backing down. Asked by the NY Times if she thought she was prepared to be vice president (assuming shes picked by presumptive Democratic Presidential nominee Joe Biden), Ms. Whitmer, a former Democratic leader of the State Senate, replied:
Honestly every ounce of energy I have is being put into protecting people and saving lives in Michigan, she said. Im not thinking about politics. Im not. I dont have energy for any of that right now.
If thats not a cop-out answer, I dont know what is?
Note 2. The First Amendment states- Congress SHALL MAKE NO LAW respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people PEACEABLE TO ASSEMBLE, and to petition the Government for a redress of grievances.
Please note these Governors never even passed legislative laws to allow them to invoke edicts on any of their pandemic protection proclamations. They just declared them- as tyrant kings and queens would do.
The Asian Model for Fighting the Virus: Winning with -MASKS AND TESTING -- WITHOUT SHUTTING DOWN BUSINESSES!
The alternative to suicide was to look to many Asian countries for what they did...WEAR MASKS to prevent the virus from spreading and make TESTING widely available!
Here are some impressive Asian COVID-19 statistics as of April 15th.
In some Asian countries, like China, a foreigner not wearing a mask is arrested and immediately deported. Vietnam and Hong Kong residents all wear masks.
Equally or more important is the availability of accurate testing for the virus. Cases in South Korea spiked initially. However, the country swiftly developed a test for the virus.
As of April 19th , over 559 thousand coronavirus tests were conducted in South Korea. South Korea is using various methods, a drive-thru style of testing or using at-home testing kits, to test probable infection cases. Since most of all infections were related to Shincheonji Church in the early stage, the government of South Korea announced that it will test all of the over 200 thousand members of Shincheonji for the coronavirus.
"The way they stepped up and screened the population was really remarkable," says Ooi Eng Eong, a Professor in emerging infectious diseases at the National University of Singapore.
South Korea was prepared. They had a rapid test approvals system in place for infectious diseases, following an outbreak of Middle East Respiratory syndrome in 2015 that left 35 dead.
On Sunday, April 19th, China and South Korea reported their fewest new coronavirus cases in weeks, after the countries had been hit with the earliest spreads of the coronavirus. China reported 16 new cases of the virus and no deaths, one of the smallest recorded daily increases since the outbreak began. South Korea confirmed eight new cases, the countrys first single-digit increase since Feb. 18, The Associated Press and Reuters reported.
Now contrast the above Asian coronavirus death vs population numbers with those of NEW YORK state (population 20 million) where 17,131 have died from COVID-19 as of April 17th. Most of the New York state deaths are in New York City (population 8.54 million) with 14,636 dead. NYC [3.] has just required wearing masks as many other states and cities have belatedly done.
Note 3. NYC is the hometown of both Victor (Queens) and the Curmudgeon (Manhattan). Each of us went to public school there and graduated from high school the same year. We also went to college in NY state. Hence, we are particularly sensitive to whats going on in that area. The Curmudgeon later went to graduate school in Massachusetts where he obtained MS and ScD EE degrees.
Also, testing in the U.S. was delayed and only available in a few locations. Initial test kits were faulty, and private laboratories found it hard to get their tests approved. Many U.S. residents struggled to get a test, and they were expensive. Testing is still not widely available in the SF Bay Area (where the Curmudgeon lives). Many with COVID-19 symptoms still cant gain access to tests! To see if you can get tested for free in the U.S. go to this website (you will need to sign into your Google account).
In summary, flawed tests, scarce supplies and limited access to screening have severely limited the U.S.s ability to monitor Covid-19 cases let alone to have enough hospital space and respirators to deal with them.
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The Curmudgeon is much older than 65, with a serious heart failure condition, and other ailments putting him at ultra-high risk of contracting and dying from the virus. Yet I still cannot get tested. Here is the message I got today when applying yet again for testing after logging in to my Google account:
You don't qualify for testing through this program at this time. Based on state and federal health guidelines and due to current testing capacity, you are not eligible for testing through this program at this time. Please note that this is not a recommendation of whether you should be tested. For additional information please see the CDC guidelines.
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IMHO, this is without a doubt the greatest loss of life, and economic decline due to ignorance and or politics in the history of the U.S.
Be prepared for a depression that was not necessary to fight this virus.
The Constitution with the Bill of Rights is part of is the Supreme Law of the land. It is above every other statue, law or edict. A Governor is not above the Bill of Rights, which cant be nullified except by Constitutional Amendment.
The U.S. revolution was fought not to protect the people from harm, but for LIBERTY from exactly this kind of tyranny. Death by armed insurrection, above giving up your liberty is what the Constitution was written for.
Permit me to quote my favorite U.S. founding father:
Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death! ―
Good luck, stay healthy, be safe, and till next time ..
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever changing and arcane world of markets, economies and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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