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 ajwdct@gmail.com.
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.
...
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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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Personal Note:
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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Conclusions:
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.
End Quote:
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
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The Curmudgeon
ajwdct@gmail.com
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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