It is easy to overdo COVID-19 quarantines

We have learned historically that if we can isolate sick people, we can often keep a communicable disease from spreading. Unfortunately, the situation with the new coronavirus causing COVID-19 is different: We can’t reliability determine which people are spreading the disease. Furthermore, the disease seems to transmit in many different ways simultaneously.

Politicians and health organizations like to show that they are “doing something.” Because of the strange nature of COVID-19, however, doing something is mostly a time-shifting exercise: With quarantines and other containment efforts, there will be fewer cases now, but this will be mostly or entirely offset by more cases later. Whether time-shifting reduces deaths and eases hospital care depends upon whether medical advances are sufficiently great during the time gained to improve outcomes.

We tend to lose sight of the fact that an economy cannot simply be shut down for a period and then start up again at close to its former level of production. China seems to have seriously overdone its use of quarantines. It seems likely that its economy can never fully recover. The permanent loss of a significant part of China’s productive output seems likely to send the world economy into a tailspin, regardless of what other economies do.

Before undertaking containment efforts of any kind, decision-makers need to look carefully at several issues:

  • Laying off workers, even for a short time, severely adversely affects the economy.
  • The expected length of delay in cases made possible by quarantines is likely to be very short, sometimes lasting not much longer than the quarantines themselves.
  • We seem to need a very rapid improvement in our ability to treat COVID-19 cases for containment efforts to make sense, if we cannot stamp out the disease completely.

Because of these issues, it is very easy to overdo quarantines and other containment efforts.

In the sections below, I explain some parts of this problem.

[1] The aim of coronavirus quarantines is mostly to slow down the spread of the virus, not to stop its spread.

As a practical matter, it is virtually impossible to stop the spread of the new coronavirus.

In order to completely stop its spread, we would need to separate each person from every other person, as well as from possible animal carriers, for something like a month. In this way, people who are carriers for the disease or actually have the disease would hopefully have time to get over their illnesses. Perhaps airborne viruses would dissipate and viruses on solid surfaces would have time to deteriorate.

This clearly could not work. People would need to be separated from their children and pets. All businesses, including food sales, would have to stop. Electricity would likely stop, especially in areas where storms bring down power lines. No fuel would be available for vehicles of any kind. If a home catches fire, the fire would need to burn until a lack of material to burn stops it. If a baby needs to be delivered, there would be no midwife or hospital services available. If a person happened to have an appendicitis, it would simply need to resolve itself at home, however that worked out.

Bigger groups could in theory be quarantined together, but then the length of time for the quarantine would need to be greatly lengthened, to account for the possibility that one person might catch the disease from someone else in the group. The bigger the group, the longer the chain might continue. A group might be a single family sharing a home; it could also be a group of people in an apartment building that shares a common ventilation system.

[2] An economy is in many ways like a human being or other animal. Its operation cannot be stopped for a month or more, without bringing the economy to an end. 

I sometimes write about the economy being a self-organizing networked system that is powered by energy. In physics terms, the name for such a system is a dissipative structure. Human beings are dissipative structures, as are hurricanes and stars, such as the sun.

Human beings cannot stop eating and breathing for a month. They cannot have sleep apnea for an hour at a time, and function afterward.

Economies cannot stop functioning for a month and afterward resume operations at their previous level. Too many people will have lost their jobs; too many businesses will have failed in the meantime. If the closures continue for two or three months, the problem becomes very serious. We are probably kidding ourselves if we think that China can come back to the same level that it was at before the new coronavirus hit.

In a way, keeping an economy operating is as important as preventing deaths from COVID-19. Without food, water and wage-producing jobs (which allow people to buy necessary goods and services), the deaths from the loss of the economy would be far greater than the direct deaths from the coronavirus.

[3] A reasonable guess is that nearly all of us will face multiple exposures to the new coronavirus. 

Many people are hoping that this wave of the coronavirus will be stopped by warmer weather, perhaps in May or June. We don’t know whether this will happen or not. If the coronavirus does stop, there is a good chance the same virus, or a close variation of it, will be back again this fall. It is likely to come back in waves later, for at least one more year. In fact, if no vaccine is found, it is possible that it could come back, in various variations, indefinitely. There are many things we simply don’t know with certainty at this time.

Epidemiologists talk about the spread of a virus being stopped at the community immunity level. Harvard epidemiologist Marc Lipsitch originally estimated that 40% to 70% of the world’s population would come down with COVID-19 within the first year. He has revised this and now states that it is plausible that 20% to 60% of the world’s population will catch the disease in that timeframe. He also indicates that if the virus cannot be contained, the only way to get it under control is for 50% of the world’s population to become immune to it.

The big issue with containing the coronavirus is that we cannot really tell who has it and who does not. The tests available for COVID-19 are expensive, so giving the test to everyone, frequently, makes no sense. The tests tend to give a many false negatives, so even when they are given, they don’t necessarily detect people with the disease. There are also many people who seem to spread the disease without symptoms. Without testing everyone, these people will never be found.

We hear limited statements such as “The United States surgeon general said Sunday that he thinks the coronavirus outbreak is being contained in certain areas of the country as cases of the virus rise across the United States.” Unfortunately, containment of the virus in a few parts of the world does not solve the general problem. There are lots and lots of uncontained cases around the world. These uncontained cases will continue to spread, regardless of the steps taken elsewhere.

Furthermore, even when we think the virus is contained, there are likely to be missed cases, especially among people who seem to be well, but who really are carriers. Getting rid of the virus is likely to be a major challenge.

[4] There is an advantage to delaying citizens from catching COVID-19. The delay allows doctors to learn which existing medications can be used to help treat the symptoms of the disease.

There seem to be multiple drugs and multiple therapies that work to some limited extent.

For example, plasma containing antibodies from a person who has already had the illness can be injected into a person with the disease, helping to fight the disease. It is not clear, however, whether such a treatment will protect against future attacks of the virus since the patient is being cured without his own immune system producing adequate antibodies.

Some HIV drugs are being examined to see whether they work well enough for it to make sense to ramp up production of them. The antiviral drug remdesivir by Gilead Sciences also seems to have promise. For these drugs to be useful in fighting COVID-19, production would need to be ramped up greatly.

In theory, there is also a possibility that a vaccine can be brought to market that will get rid of the virus. Our past experience with vaccine-making has not been very good, however. Out of 200+ virus-caused diseases that affect humans, only about 20 have vaccines. These vaccines generally need to be updated frequently, because viruses tend to mutate over time.

With some viruses, such as Dengue Fever, people don’t ever build up adequate immunity to the many disease variations that exist. Instead a person who catches Dengue Fever a second time is likely to be sicker than the first time. Finding a vaccine for such diseases seems to be almost impossible.

Even if we can actually succeed in making a vaccine that works, the expectation seems to be that this will take at least 12 to 18 months. By this time, the world may have experienced multiple waves of COVID-19.

[5] There are multiple questions regarding how well European countries, Japan and the United States will really be able to treat coronavirus.

There are several issues involved:

(a) Even if medicines are identified, can they be ramped up adequately in the short time available?

(b) China’s exports have dropped significantly. Required medical goods that we normally import from China may not be available. The missing items could be as simple as rubbing alcohol, masks and other protective wear. The missing items could also be antibiotics, antidepressants, and blood pressure medications that are needed for both COVID-19 patients and other patients.

(c) Based on my calculations, the number of hospital beds and ICU beds needed will likely exceed those available (without kicking out other patients) by at least a factor of 10, if the size of the epidemic grows. There will also be a need for more medical staff. Medical staff may be fewer, rather than more, because many of them will be out sick with the virus. Because of these issues, the amount of hospital-based care that can actually be provided to COVID-19 patients is likely to be fairly limited.

(d) One reason for time-shifting of illnesses has been to try to better match illnesses with medical care available. The main benefit I can see is the fact that many health care workers will have contracted the illness in the first wave of the disease, so will be more available to give care in later waves of the disease. Apart from this difference, the system will be badly overwhelmed, regardless of when COVID-19 cases occur.

[6] A major issue, both with COVID-19 illnesses and with quarantines arising out of fear of illness, is wage loss

If schools and day care centers are closed because of COVID-19 fears, many of the parents will have to take off time from work to care for the children. These parent will likely lose wages.

Wage loss will also be a problem if quarantines are required for people returning from an area that might be affected. For example, immigrant workers in China wanting to return to work in major cities after the New Year’s holiday have been quarantined for 14 days after they return.

Clearly, expenses (such as rent, food and auto payments) will continue, both for the mother of the child who is at home because a child’s school is closed and for the migrant worker who wants to return to a job in the city. Their lack of wages will mean that these people will make fewer discretionary purchases, such as visiting restaurants and making trips to visit relatives. In fact, migrant workers, when faced with a 14 day quarantine, may decide to stay in the countryside. If they don’t earn very much in the best of times, and they are required to go 14 days without pay after they return, there may not be much incentive to return to work.

If I am correct that the illness COVID-19 will strike in several waves, these same people participating in quarantines will have another “opportunity” for wage loss when they actually contract the disease, during one of these later rounds. Unless there is a real reduction in the number of people who ultimately get COVID-19 because of quarantines, a person would expect that the total wage loss would be greater with quarantines than without, because the wage loss occurs twice instead of once.

Furthermore, businesses will suffer financially when their workers are out. With fewer working employees, businesses will likely be able to produce fewer finished goods and services than in the past. At the same time, their fixed expenses (such as mortgage payments, insurance payments, and the cost of heating buildings) will continue. This mismatch is likely to lead to lower profits at two different times: (a) when workers are out because of quarantines and (b) when they are out because they are ill.

[7] We likely can expect a great deal more COVID-19 around the world, including in China and in Italy, in the next two years.

The number of reported COVID-19 cases to date is tiny, compared to the number that is expected based on estimates by epidemiologists. China reports about 81,000 COVID-19 cases to date, while its population is roughly 1.4 billion. If epidemiologists tell us to expect 20% to 60% of a country’s population to be affected by the end of the first year of the epidemic, this would correspond to a range of 280 million to 840 million cases. The difference between reported cases and expected cases is huge. Reported cases to date are less than 0.01% of the population.

We know that China’s reported number of cases is an optimistically low number, but we don’t know how low. Many, many more cases are expected in the year ahead if workers go back to work. In fact, there have been recent reports of a COVID-19 outbreak in Shenzhen and Guangzhou, near Hong Kong. Such an outbreak would adversely affect China’s manufactured exports.

Italy has a similar situation. It is currently reported to have somewhat more than 10,000 cases. Its total population is about 60 million. Thus, its number of cases amounts to about 0.02% of the population. If Epidemiologist Lipsitch is correct regarding the percentage of the population that is ultimately likely to be affected, the number of cases in Italy, too, can be expected to be much higher within the next year. Twenty percent of a population of 60 million would amount to 12 million cases; 60% of the population would amount to 36 million cases.

[8] When decisions about quarantines are made, the expected wage loss when workers lose their jobs needs to be considered as well. 

Let’s calculate the amount of wage loss from actually having COVID-19. If workers generally work for 50 weeks a year and are out sick for an average of 2 weeks because of COVID-19, the average worker would lose 4% (=2/50) of his annual wages. If workers are out sick for an average of three weeks, this would increase the loss to 6% (3/50) of the worker’s annual wages.

Of course, not all workers will be affected by the new coronavirus. If we are expecting 20% to 60% of the workers to be out sick during the first year that the epidemic cycles through the economy, the expected overall wage loss for the population as a whole would amount to 0.8% (=20% times 4%) to 3.6% (=60% times 6%) of total wages.

Let’s now calculate the wage loss from a quarantine. A week of wage loss during a quarantine of the entire population, while nearly everyone is well, would lead to a wage loss equal to 2% of the population’s total wages. Two weeks of wage loss during quarantine would lead to wage loss equal to 4% of the population’s total wages.

Is it possible to reduce overall wage loss and deaths by using quarantines? This approach works for diseases which can actually be stopped through isolating sick members, but I don’t think it works well at all for COVID-19. Mostly, it provides a time-shifting feature. There are fewer illnesses earlier, but to a very significant extent, this is offset by more illnesses later.  This time-shifting feature might be helpful if there really is a substantial improvement in prevention or treatment that is quickly available. For example, if a vaccine that really works can be found quickly, such a vaccine might help prevent some of the illnesses and deaths in 2021 and following years.

If there really isn’t an improvement in preventing the disease, then we get back to the situation where the virus needs to be stopped based on community immunity. According to Lipsitch, to stop the virus based on community immunity, at least 50% of the population would need to become immune. This implies that somewhat more than 50% of the population would need to catch the new coronavirus, because some people would catch the new virus and die, either of COVID-19 or of another disease.

Let’s suppose that 55% would need to catch COVID-19 to allow the population immunity to rise to 50%. The virus would likely need to keep cycling around until at least this percentage of the population has caught the disease. This is not much of a decrease from the upper limit of 60% during the first year. This suggests that moving illnesses to a later year may not help much at all with respect to the expected number of illnesses and deaths. Hospitals will be practically equally overwhelmed regardless, unless we can somehow change the typical seasonality of viruses and move some of the winter illnesses to summertime.

If there is no improvement in COVID-19 prevention/treatment during the time-shift of cases created by the quarantine, any quarantine wage loss can be thought of as being simply in addition to wage loss from having the virus itself. Thus, a country that opts for a two week quarantine of all workers (costing 4% of workers’ wages) may be more than doubling the direct wage loss from COVID-19 (equivalent to 0.8% to 3.6% of workers’ wages).

[9] China’s shutdown in response to COVID-19 doesn’t seem to make much rational sense.

It is hard to understand exactly how much China has shut down, but the shutdown has gone on for about six weeks. At this point, it is not clear that China can ever come back to the level it was at previously. Clearly, the combination of wage loss for individuals and profit loss for companies is very high. The long shutdown is likely to lead to widespread debt defaults. With less wages, there is likely to be less demand for goods such as cars and cell phones during 2020.

China was having difficulty before the new coronavirus was discovered to be a problem. Its energy production has slowed greatly, starting about 2012-2013, making it necessary for China to start shifting from a goods-producing nation to a country that is more of a services-producer (Figure 1).

Figure 1. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.


For example, China’s workers now put together iPhones using parts made in other countries, rather than making iPhones from start to finish. This part of the production chain requires relatively little fuel, so it is in some sense more like a service than the manufacturing of parts for the phone.

The rest of the world has been depending upon China to be a major supplier within its supply lines. Perhaps many of these supply lines will be broken indefinitely. Instead of China helping pull the world economy along faster, we may be faced with a situation in which China’s reduced output leads to worldwide economic contraction rather than economic growth.

Without medicines from China, our ability to fight COVID-19 may get worse over time, rather than better. In such a case, it would be better to get the illness now, rather than later.

[10] We need to be examining proposed solutions closely, in the light of the particulars of the new coronavirus, rather than simply assuming that fighting COVID-19 to the death is appropriate.

The instructions we hear today seem to suggest using disinfectants everywhere, to try to prevent COVID-19. This is yet another way to try to push off infections caused by the coronavirus into the future. We know, however, that there are good microbes as well as bad ones. The ecosystem requires a balance of microbes. Dumping disinfectants everywhere has its downside, as well as the possibility of an upside of killing the current round of coronaviruses. In fact, to the extent that the virus is airborne, the disinfectants may not really be very helpful in wiping out COVID-19.

It is very easy to believe that if some diseases can be subdued by quarantines, the same approach will work everywhere. This really isn’t true. We need to be examining the current situation closely, based on whatever information is available, before decisions are made regarding how to deal with the COVID-19 outbreak. Perhaps any quarantines used need to be small and targeted.

We also need to be looking for new approaches for fighting COVID-19. One approach that is not being used significantly to date is trying to strengthen people’s own immune systems. Such an approach might help people’s own immune system to fight off the disease, thereby lowering death rates. Nutrition experts recommend supplementing diets with Vitamins A, C, E, antioxidants and selenium. Other experts say zinc, Vitamin D and elderberry may be helpful. Staying away from cold temperatures also seems to be important. Drinking plenty of water after coming down with the disease may be beneficial as well. If we can help people’s own bodies fight the disease, the burden on the medical system will be lower.


About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Financial Implications and tagged , , , . Bookmark the permalink.

4,403 Responses to It is easy to overdo COVID-19 quarantines

  1. Harry McGibbs says:

    “South Africa emerged from the 2008 global financial crisis in strong position thanks to robust economic growth and a budget surplus when the downswing came. A rapid deterioration in public finances over the past decade means the opposite is likely after the coronavirus pandemic.”

    • Harry McGibbs says:

      “South Africa’s central bank began to buy government bonds on Wednesday in a bid to unblock strained local money markets as Africa’s most industrial economy braces for a three-week national lockdown to stem the spread of coronavirus…

      “South African bonds may face a further test on Friday, when Moody’s could strip the country of its last remaining investment-grade rating.”

    • I think that the real issue in South Africa is peak coal. Prices have not been high enough to keep increasing production. Without growing coal consumption and exports, the economy does poorly. High priced electricity doesn’t sell well.

  2. Harry McGibbs says:

    Pakistan is another nation badly placed to cope with the economic fall-out from this crisis:

    “While Pakistan’s economy is already on ventilator, the coronavirus which is bringing the world economy to a standstill, can destroy our economy like it destroys human body’s immune system and similarly this monster will hit adversely and make irreversible damage and all at once.”

    • Harry McGibbs says:

      Mexico and Brazil are also vulnerable, which is, one imagines, why their presidents are so resistant to lock-downs:

      “The presidents of Brazil and Mexico, who govern more than half of Latin America’s population — Jair Bolsonaro of Brazil and, to a lesser degree, his Mexican counterpart, Andrés Manuel López Obrador — have… scoffed at calls to shut down business and sharply limit public transportation, calling such measures far more devastating to people’s welfare than the virus.”

      • Xabier says:

        Sheer mental incapacity.

        • thestarl says:

          Bolsonaro is an evil man.

        • JesseJames says:

          And what is shutting down the economy going to do? Will the virus go away? Will it disappear?
          No, it will continually come back….so why shut down. The whole concept is silly and dangerous to all the people that need to work. All of them will get sick with it eventually.

          • psile says:

            With one, you get an economic and a medical catastrophe (mitigation, herd immunity)
            With the other, maybe, if you’re lucky, you get just an economic catastrophe (flatten the curve)

            The problem is that the debt bubble had burst now, and it’s going to be very difficult to reinflate it, given that it was on its last few puffs anyway.

      • There are definitely different opinions on whether closing down the economy is helpful.

  3. Yoshua says:

    Global industrial production and trade were tanking last year. The repo market blew up. Central banks were cutting rates and doing QE.

    There were protest around the world, because economies couldn’t provide for people’s basic needs.

    Today governments and central banks are basically taking control of their nations economies… while people are locked up, in quarantine because of the common flu.

    The bat flu…the Wuhan flu…the military lab flu…the killer flu…

  4. NikoB says:

    My Thai massage today with social distancing was shit.

    It was as though she didn’t touch me.

    • It would be interesting to see what the real change in death rate is by age group.

      There are multiple offsetting impacts. All kinds of “regular” procedures are being postponed indefinitely. These include organ transplants. People whose surgery does go on (for example, cancer surgery) face an increased risk of catching COVID-19 while in the hospital. The longer the virus is around, the greater the risk.

      Auto accidents are down. Work related accidents are way down.

      But the many people whose work disappears, but cannot really get unemployment benefits, cannot afford adequate diets any more. Their risk of dying rises.

      The big effect is that the economy cannot be restarted.

      • JMS says:

        Excerpt from the article:

        Dr Sucharit Bhakdi is a specialist in microbiology. He was a professor at the Johannes Gutenberg University in Mainz and head of the Institute for Medical Microbiology and Hygiene and one of the most cited research scientists in German history. What he says:

        We are afraid that 1 million infections with the new virus will lead to 30 deaths per day over the next 100 days. But we do not realise that 20, 30, 40 or 100 patients positive for normal coronaviruses are already dying every day.

        [The government’s anti-COVID19 measures] are grotesque, absurd and very dangerous […] The life expectancy of millions is being shortened. The horrifying impact on the world economy threatens the existence of countless people. The consequences on medical care are profound. Already services to patients in need are reduced, operations cancelled, practices empty, hospital personnel dwindling. All this will impact profoundly on our whole society.

        All these measures are leading to self-destruction and collective suicide based on nothing but a spook.

      • Bill Sodomsky says:

        Hi Gail,
        Please explain a bit more precisely why “the economy cannot be restarted.”
        This is the most important statement we need to understand and I trust your judgment in this regard.

        • The world economy was in a terribly damaged condition, before the virus started. This is part of the problem. Remember all of the protests around the world, because pensions were being cut, or because wages were too low?

          Closing down businesses and laying off workers adds greatly to the damage to the economy.

          The lower oil and other commodity prices badly damage businesses and exporters trying to deal with those products.

          There are an awfully lot of supply chains that are broken. All of the various elements would need to be in place simultaneously, plus the needed debt for financing, to fix the supply chains.

          The WSJ is reporting, China Is Open for Business, but the Postcoronavirus Reboot Looks Slow and Rocky

          Yet many Chinese factories find demand for their products has evaporated. Consumers in China and elsewhere are reluctant to spend over worries about what they have lost and what lies ahead.

          As the coronavirus spread in Europe and the U.S., overseas buyers abruptly canceled orders with the company. Mr. Wong told his factory manager in Sichuan to begin layoffs. So far, the manufacturer has dismissed 250 of the factory’s 500 workers. “The world is falling apart,” Mr. Wong said.


          Subway ridership in major cities is still down by nearly half relative to 2018 and 2019. Property sales remain more than 50% below their average level since 2015, according to Goldman Sachs

          • GBV says:

            It just occurred to me Gail that there’s absolutely nothing standing in the way of the economy restarting again – other than faith / trust / will, which actually may be the most important drivers in any functioning economy.

            What I mean is that we’re already well past the carrying capacity of the Earth, over-consuming nearly exhausted resources, financializing any junk we can, issuing trillions of electronic IOUs every day, exploiting the poor and marginalized to the extreme, etc. … and despite all that, our “economy” has chugged along come hell or high water (until now). There’s nothing “physically” stopping the economy, really.

            So I don’t think shutting down the economy for some unknown “too long” duration is what stops it from restarting at all. I think it is when everyone loses their faith in the future, their trust in their leaders / government, and their will to continue to participate in an insane system that a return to the economy which we’ve grown accustomed to becomes impossible.

            I lost my faith in the future and my trust in our leaders / government a long time ago. Only question now is whether or not I’ve lost the will to contribute to an insane and corrupt system.


            • The faith in the debt bubble, in particular. Once a huge amount of output is cut out of the system, the Real GDP drops dramatically. It becomes more and more obvious that the huge amount of outstanding debt cannot be repaid with interest. In particular, the car payments of all of the waiters and waitresses can’t be paid. Neither can the college loans of the many young people with jobs that don’t pay much.

              There is also the issue of economies to scale. As long as the world was growing, and there was no coronavirus, economies of scale made it obvious to expand-expand-expand. This coronavirus is going to be with us a long time, I expect. We are constantly being reminded that there are an increasing number of drug-resistant illnesses, such as tuberculosis and urinary tract infections. There are also many other viruses, such as swine flu killing off large numbers of pigs worldwide, and avian flu which can affect humans. These things work against reglobalzation. People are already thinking smaller. This may get even worse.

              Once the world economy starts falling apart, then there will truly be other issues, I am afraid. Perhaps many hungry people with guns and ammunition, for example.

  5. Very Far Frank says:

    Over 3.2 million Americans claimed for unemployment in the last week. Over 10% of the working population, just extraordinary..

  6. CTG says:

    3.3M filed for unemployment benefits. The highest ever recorded was 695,000 during the week that ended October 2nd, 1982.

    If you look at the chart in the link above, some commented somewhere that since the line is straight up and so long FCC, people mistook it as an axis of the graph.

    How to “undo” this? Within 1 month? 6 months? Or never ever? V shape recovery?

    • dolph says:

      All that matters is the flow of dollars to the connected people. That is financial fascism at work.
      Remember, most people around the world are totally surplus. The system needs 2 to 4 billion people, depending on what you count as important. So, already 3, maybe 4 billion people are surplus.

      So my response: there will be no recovery for most people. Just like there was no recovery for most people following the 2001 crash, and following the 2008 financial crisis.

    • if we accept that money is just tokenised energy, then any cash pile available to any government is in effect an energy pile

      In normal times this cash/energy pile is replenished by taxation revenues of one sort or another.

      But right now those revenue streams are drying up. unemployed people don’t pay taxes, or if they do, those taxes come out of ‘benefits’ cash in the first place.

      but governments are promising to pay out unemployment benefits from a depleting ‘energy pile’ rather than an increasing cash pile.

      some governments might manage this for a few months, but eventually they must go broke.

      add to that the situation that as supplies get tight for basic necessities, prices are bound to rise, while ‘benefits’ will not.

      so moneyprinting will start, and the economic fabric will disintegrate

      • Artleads says:

        Thanks Norman for breaking the matter down so clearly for the laity among us.

      • Right, unfortunately!

      • 09876 says:

        The energy still exists. The charade of individual claim on it goes away. THe energy still exist and its representation in a token will continue. That token will be different in the near future. SDR? who knows?You wont get your hands on those tokens. I wont get my hands on those tokens. That doesnt change the fact the energy still exists it will be extracted and tokenized. We are just cut out of the pie.

        We all knew it was not sustainable. Mad max? I think not. Learn to love big brother.

        • The energy exists only if the entire system to extract and distribute it can be funded by the system as a whole. There is too much wage disparity now, for this to happen.

          It takes a huge amount of complexity for almost any of our types of energy. Today’s renewable energy is probably among the worst. Wage disparity goes with complexity. The only kind of renewable energy that can last for the long term is burned biomass and other very easy to capture energy. Perhaps trained dogs and horses.

          • 09876 says:

            “The energy exists only if the entire system to extract and distribute it can be funded by the system as a whole”

            Distribution only has to occur on a much more limited scale if individuals have lost purchasing power to buy the energy. What is the disconnect? The disconnect is that a barrel of oil that possesses thousand of human labor hours is priced at what one human can earn in a hour. This disconnect is the product of debt based economy and debt based money. Both of these are toast.

            “It takes a huge amount of complexity for almost any of our types of energy.”

            THe amount of energy found in oil is a fact. It reflects the real world. It doesnt go away because complex systems fail. Simpler ways of life lower standard of living and purchasing power destruction are just ahead. Purchasing power was imaginary. THe real world dictates otherwise. Simpler systems with less energy distribution are implemented.
            Why?. Because their is too much energy in oil not for it to be utilized. Yes complex systems are toast. That doesnt mean the energy potential in oil goes away. Yes it will continue to be tokenized. The token will have to reflect the real world in some manner. I think gold is out. You cant eat it. A way of making sure the token stays honest. Honest means limits based on the physical world.

            A transition is ahead. I dont think its mad max. It may be very very stark. Some people will adapt. Some wont. I think it will reflect physical realities that debt based societies have worked against. Standard of living will fall dramatically. This reflects the real world. Now we hit limits. Change is coming. It was and is inevitable.

          • Entropy is a harsh mistress.

        • ultimately our energy is drawn from the sun—in that sense it will exist for billions of years

          but energy requires a conversion factor.

          That can be anything–a tree, a mollusc, an antelope, or us. That conversion is relative to the species using it.

          Unfortunately we are the only species that devised a means to do that conversion way beyond our entitlement.
          Fire gave us the key to the energy door. Once we had that, we looted the entire building. We also wrote books to tell us it was legal. We even call our ‘tokens’ legal tender.

          problem is leverage. Energy extraction must have that

          A skilled blacksmith can make an axe (which is just a lever) and use it to cut down a tree. But he can’t eat a tree
          so he ‘sells’ the tree to someone with (surplus) food, or who needs an axe to cut down even more trees, to clear ground to grow still more food.

          That’s how the modern global economic system works. We are all just a few meals away from the food producers. This virus proves that.
          Suddenly we stop buying all the other crap and start scrambling for food

          How more raw and primitive do life’s lessons have to be?

          Our next big leap was lighting a fire under a steam engine, which effectively created an ‘endless’ revenue stream. We were told it was our ‘endless’ ingenuity, but it was just a brief supernova of heat and light that exploded out of planet Earth for 300 years or so

          Whether this current crisis knocks us back 500 years is largely irrelevant, it probably won’t, but something has to in the near future.

          people (if there are any) will certainly look back and see it as one of the ‘bounces’ that brought us nearer the final collapse, if only because our glorious leaders cannot see the link between raw energy and money values

          This was the day we started our terminal decline:

          • Robert Firth says:

            Thank you, Norman, a good review of history. It does omit a few things, though. My Northern ancestors produced iron very cheaply for centuries before 1700: we picked it out of rivers. It is called “bog iron”, and is created by bacteria. And, of course, the first steam engine was built almost two thousand years ago: the aeolipile of Heron of Alexandria. Why did it not launch an industrial revolution? Because it was not “steam engine time”. History is driven by forces far broader than technology.

      • John Doyle says:

        Norman, apart the interesting about cash and energy piles, [cash comes after debt and debt is an energy user], the way you say governments get their money is totally mistaken.
        Speaking for the federal / national government with command of its own currency. Tax has no use as revenue. Tax is collected and if its paid out in full the debt [aka tax] is deleted.It cannot be spent again. it is the end of the line. The space created is filled again, and again, by fresh spending.It is a continuous operation. There is no such thing as a “revenue stream” or anything approaching revenue. The Government instead spends the currency into existence by buying the works or services authorised by the government, under the heading of Deficit Spending.
        Contrary to every /thing and /one, who can go broke, the national government cannot be bankrupted. It’s cheques never bounce
        Now the actual procedure the government must adopt is to take over all the private funds as they face inevitable failure.They can buy the debts with a few keystrokes [just remember all buying has to have a debt to exist]
        so no one needs worry about a failure happening. When we go down it won’t be due to lack of money. Far more likely is resources. We are OK until then!

        • I don’t agree. Governments can and do collapse. Look at what happened to the central government of the Soviet Union in 1991.

          The Soviet Union did have oil, but the price was too low to extract it. This is the same problem we have now. With low commodity prices, it is not possible to access energy and other commodities that a country may have. Farm prices are also too low.

          • John Doyle says:

            You forget that I referred to NATIONAL governments with their OWN currency which have a monopoly over their currency, so they cannot collapse short of a war or similar. You didn’t read it properly. I repeat; The way Norman describes events is totally mistaken!

          • Robert Firth says:

            Gail, I think the poster was trying to explain Modern Monetary Theory. Which of corse is not modern; it was practiced by the Roman Empire, who compensated for a shortage of silver by issuing coins made of base metal. The result, of course, was bankruptcy. The response (by the Emperor Constantine, as it happened), was the “chrysargyron”. The state would pay its debts with dross, but would accept in payment of taxes only gold and silver. In effect, it repudiated the value of its own currency.

            Moving right along, the US repudiated most of its internal debt on 20 April 1933, and all of its external debt on 15 August 1971. It has been technically bankrupt ever since, and survives only because it forced on the world (under threat of war) the worthless dollar as a “global currency”. That is about to collapse, because one of the pillars upholding that scheme was oil, and oil is rapidly becoming worthless.

            • John Doyle says:

              Not so. .The Roman empire tried to avoid collapse after the 2nd century AD, but the did it by devaluing their money. which was not fiat money, but metal money. It’s a different thing entirely MMT is explained by reference to fiat money. the value of which is its worth in the national currency.
              It helps understanding and knowing where the money will go. As our dynasty crashes money or tokens will still be needed. not to mention a government on top of it all or total chaos if the government is lost /destroyed.

            • Robert Firth says:

              Sigh. Once again I do not understand MMT. A base metal denarius with the head of an emperor is not “fiat money”, but a piece of paper with the head of a dead President somehow is. The distinction eludes me. But, once again, Time is the mother of Truth.

    • How about all of the people who were working as contractors and aren’t eligible for unemployment payments? Also, the entrepreneurs that cannot claim unemployment? They are still in a world of hurt.

      • 09876 says:

        Soup kitchen time. Not joking.

      • Tom says:

        Gail you are so right. My wife and I are self-employed so we have no choice but to live on savings while on lockdown. Our business interruption insurance does not apply to viruses. Fortunately we do have some savings. And rest assured we will not be paying our rent or any other bills unless absolutely necessary to keep the lights on. That will make things go from bad to worse.

        We live in Vermont, a lightly populated state with 78 covid19 cases and 8 deaths last I checked. Yet our governor has put us on total lockdown. Talk about government overreach.

        • psile says:

          Same here, our business insurance not only doesn’t cover us for pandemics, but it also wouldn’t kick in for 6 weeks anyway. There go the savings.

          Our income has declined by 60% in a week already. All unnecessary expenditure is being cut, but it’s not enough to staunch the loss.

          Will not be paying rent, bills, or fees. I will see what can be renegotiated, or put on hold for the time being.

          The Australian government has announced some business relief initiatives, but it’s a minefield to navigate.

          This aid can only help in the short run. Eventually, the country will go broke.

          • I am included in some discussions by actuaries. They are busy trying to figure out how to provide as little coverage as possible for COVID-19. Government lockdowns seem to be preferred over optional closures because with optional closures, employees who get COVID-19 might sue claiming that the business should have decided to close to protect the employees but failed to do so.

        • John Doyle says:

          I think you will find that, perhaps reluctantly, The Federal government will pay compensation to businesses of all kinds regardless of any insurances supposedly there to reimburse you. In this pandemic only a federal government has the means to pay for all the dislocation we have to bear. They just have to understand that it’s the case already. That is to have access to whatever funds are necessary, unlimited by anything like taxes.
          In Australia the PM says he wants businesses that have to close to open again. He used “Hibernation “.

  7. ITEOTWAWKI says:

    To all UK residents on this blog, you have been warned. Leave the UK now!

    British Royal Family Orders Citizens To Leave U.K. Until Prince Charles Recovers:

    • Fortunately, this is an Onion article!

    • Chloroquineinamonthorayearoradecade says:

      a new kind of Brexit…

      • Fastrover says:

        Let me start by first saying I believe the virus is real and many will die but also most of these would have passed away anyway if not this virus then another one. Most would agree you can’t stop a virus only try to mitigate the risk to those most at risk. Because this as now gained unprecedented media coverage it has left government’s stuck between a rock and a hard place damned if they do damned if they don’t. If not reversed and soon people will start to go hungry become weak and more susceptible to viruses making the situation look worse than it already is. Maybe there is an hidden agenda this is up to you to decide. But most of us regular readers and commentators on this site know that if government’s around the world do not change there strategy the death toll from the economic impact will make the death toll from the virus pale into insignificance. Now through the media the virus has taken on a life of it’s own will it be at all possible to reverse it. Let’s hope so.

    • Chloroquineinamonthorayearoradecade says:
  8. Herbie R Ficklestein says:

    A new study shows we’re already in a coronavirus recession — and it has hit S. Florida hard
    new study by the StratoDem Analytics data firm in Cambridge, Mass., suggests economists’ fear was spot-on. The coronavirus isn’t putting us at risk of a recession. The COVID-19 recession is already here — especially in tourism-centric South Florida.
    “There is no question whatsoever that America slipped into a recession in March 2020,” said James Chung, a partner at StratoDem Analytics. “The big question is how deep it’s going to get and where it’s going to hurt the most.”
    Using forecasts from large financial institutions including Goldman Sachs, JP Morgan and Morgan Stanley, the study finds the national gross domestic product (GDP) during Q2 of 2020 (April 1-June 30) will average -18.1 percent. GDP is a common way of measuring a region’s economic output.
    “Ever since GDP has been calculated in the U.S., we’ve never seen a sharper quarterly downturn,” Chung said. “All other recessions were small compared to this downturn
    Miami-Dade and Broward counties, with their heavy reliance on tourism, will be hit even harder. According to the study, Miami-Dade is forecast to suffer a -21.5 percent drop in GDP, or a $9 billion loss. Broward will see a -22.7 percent drop, equaling a $6.1 billion loss.
    The Miami-Dade figure breaks out into $8,000 less spending per household in Q2, mostly due to job losses. In Broward, it means $7,700 per household.
    Chung said the coronavirus outbreak simply accelerated the national bursting of asset bubbles such as real estate and commercial debt.

    I can attest to the above…the Fort Lauderdale Airport is a ghost town! Remember this is supposed to be the height 😂 of the lourist season….Nothing, nada….many businesses will go bankrupt.
    Very real and hard to witness. Many people are being laid off from work and doubt will be called back because the slow summer months are coming up.
    All across the nation record new sales of firearms and sold out ammo.
    Folks are worried…seen nothing like this ever…

Comments are closed.