COVID-19 and the economy: Where do we go from here?

The COVID-19 story keeps developing. At first, everyone listened to epidemiologists telling us that a great deal of social distancing, and even the closing down of economies, would be helpful. After trying these things, we ended up with a huge number of people out of work and protests everywhere. We discovered the models that were provided were not very predictive. We are also finding that a V-shaped recovery is not possible.

Now, we need to figure out what actions to take next. How vigorously should we be fighting COVID-19? The story is more complex than most people understand. These are some of the issues I see:

[1] The share of COVID-19 cases that can be expected to end in death seems to be much lower than most people expect.

Most people assume that the ratios of deaths to cases by age group, computed using reported cases, such as those included in the Johns Hopkins Database, give a good indication of the chance of death a person faces if a person catches COVID-19. In fact, the cases reported to this database are far from representative of all cases; they tend to be the more severe cases. Cases with no symptoms, or only very slight symptoms, tend to be missed. The result is that ratios calculated directly from this database make people think their risk of death is far higher than it really is.

The US Center for Disease Control has published Planning Scenarios, based on information available on April 29, 2020.* Using this information, the CDC’s best estimate of the number of future deaths per 1000 cases with symptoms is as follows:

Ages 0 – 49    0.5 deaths per 1000 cases with symptoms

Ages 50-64    2.0 deaths per 1000 cases with symptoms

Ages 65+       13.0 deaths per 1000 cases with symptoms

The CDC’s best estimate is that 35% of cases have no symptoms at all. Thus, if we were to include these cases without symptoms in the chart above, the chart would become:

Ages 0-49   0.5 deaths per 1,538 cases (including those without symptoms), or 0.3 deaths per 1000 cases with or without symptoms

Ages 50-64  1.3 deaths per 1000 cases with or without symptoms

Ages 65+    8.5 deaths per 1000 cases with or without symptoms

A recent study of blood samples from 23 different parts of the world came to a similarly low estimate of the number of deaths per 1000 COVID-19 infections. It reported that among people who are less than 70 years old, the number of deaths per 1000 ranged from 0.0 to 2.3 per 1000, with a median of 0.4 deaths per 1000.

The same paper remarks,

COVID-19 seems to affect predominantly the frail, the disadvantaged, and the marginalized – as shown by high rates of infectious burden in nursing homes, homeless shelters, prisons, meat processing plants, and the strong racial/ethnic inequalities against minorities in terms of the cumulative death risk.

[2] There seem to be things we can do ourselves to reduce our personal chance of serious illness or death.

General good health is protective against getting a bad case of COVID-19. Thus, anything that we can do in terms of a good diet and exercise is likely helpful. Staying inside for weeks on end in the hope of preventing exposure to COVID-19 is probably not helpful.

Continued exposure to huge amounts of disinfectants and hand sanitizers is likely not to be helpful either. Our bodies depend on healthy microbiomes, and products such as these adversely affect our microbiomes. They kill good and bad bacteria alike and may leave harmful residues. It is easy to scale back our personal use of these products.

There are recent indications that vitamin D is likely to be protective in reducing both the incidence of COVID-19 and the disease’s severity. Web MD reports:

Several groups of researchers from different countries have found that the sickest patients often have the lowest levels of vitamin D, and that countries with higher death rates had larger numbers of people with vitamin D deficiency than countries with lower death rates.

Experts say healthy blood levels of vitamin D may give people with COVID-19 a survival advantage by helping them avoid cytokine storm, when the immune system overreacts and attacks your body’s own cells and tissues.

While we don’t know for certain that vitamin D is helpful, there is certainly enough circumstantial evidence to suggest that it would likely be worthwhile to raise vitamin D levels to the amount recommended by the National Institute of Health (30 nmol/L or higher). People with dark skin living in areas away from the equator might especially be helped by this strategy, since dark skin reduces vitamin D production.

Masks seem to be helpful in preventing the spread of infection. A person’s own immune system can handle some level of germs. If two people meeting together both wear masks, the combination of masks can perhaps reduce the level of germs to within the amount the immune system can handle. Our immune systems are built to handle a barrage of small attacks by viruses and bacteria. Continued “practice” with relatively low combinations of good and bad bacteria (as occur with masks) will tend to build up our bodies’ natural defenses.

We see dentists and dental hygienists wearing face shields. These shields are readily available over the internet and can be worn with a mask or by themselves. We don’t yet know precisely how much protection they provide, but early models suggest that they can be helpful in two directions: (a) preventing the wearer’s droplets from harming others and (b) reducing the droplet exposure from others. Thus, they may be a worthwhile way to reduce exposure to the virus causing COVID-19, even when others are not wearing masks.

[3] The medical community’s ability to treat COVID-19 cases keeps improving.

There seem to be many small changes that are improving treatment of COVID-19. If patients are having trouble getting enough oxygen, having them lie on their stomachs seems to increase their blood oxygen levels. The cost of this change is pretty much zero, but it keeps people out of the ICU longer.

Originally, planners thought that ventilators would be needed for patients with COVID-19, since ventilators are often used on pneumonia patients. Experience has shown, however, that oxygen plus something like a CPAP machine often works better and is less expensive.**

The simple change of not sending recuperating patients to nursing home-type facilities for the last stages of care has proven helpful, as well. Many of these patients can still infect others, leading to infections in long-term care facilities. Tests to tell whether patients are truly over the disease do not seem to be very accurate.

Last week, it was announced that treatment with an inexpensive common steroid could reduce deaths of people on ventilators by one-third. It could also reduce deaths of those requiring only oxygen treatment by 20%. Using this treatment should significantly reduce deaths, at little cost.

We can expect improvements in treatments to continue as doctors experiment with existing treatments, and as drug companies work on new solutions. Looking at cumulative historical mortality rates tends to overlook the huge learning curve that is taking place, allowing mortality rates to be lower.

[4] More doubts are being raised about quickly finding a vaccine that prevents COVID-19. 

The public would like to think that a vaccine solution is right around the corner. Vaccine promoters such as Anthony Fauci and Bill Gates would like to encourage this belief. Unfortunately, there are quite a few obstacles to getting a vaccine that actually works for any length of time:

(a) Antibodies for coronaviruses tend not to stay around for very long. A recent study suggests that even as soon as eight weeks, a significant share of COVID-19 patients (40% of those without symptoms; 12.9% of those with symptoms) had lost all immunity. A vaccine will likely face this same challenge.

(b) Vaccines may not work against mutations. Beijing is now fighting a new version of COVID-19 that seems to have been imported from Europe in food. Early indications are that people who caught the original Wuhan version of the COVID-19 virus will not be immune to the mutated version imported from Europe.

Vaccines that are currently under development use the Wuhan version of the virus. The catch is that the version of COVID-19 now circulating in the United States, Europe and perhaps elsewhere is mostly not the Wuhan type.

(c) There is a real concern that a vaccine against one version of COVID-19 will make a person’s response to a mutation of COVID-19 worse, rather than better. It has been known for many years that Dengue Fever has this characteristic; it is one of the reasons that there is no vaccine for Dengue Fever. The earlier SARS virus (which is closely related to the COVID-19 virus) has this same issue. Preliminary analysis suggests that the virus causing COVID-19 seems to have this characteristic, as well.

In sum, getting a vaccine that actually works against COVID-19 is likely to be a huge challenge. Instead of expecting a silver bullet in the form of a COVID-19 vaccine, we probably need to be looking for a lot of silver bee-bees that will hold down the impact of the illness. Hopefully, COVID-19 will someday disappear on its own, but we have no assurance of this outcome.

[5] The basic underlying issue that the world economy faces is overshoot, caused by too high a population relative to underlying resources.

When an economy is in overshoot, the big danger is collapse. The characteristics of overshoot leading to collapse include the following:

  • Very great wage disparity; too many people are very poor
  • Declining health, often due to poor nutrition, making people vulnerable to epidemics
  • Increasing use of debt, to make up for inadequate wages and profits
  • Falling commodity prices because too few people can afford these commodities and goods made from these commodities
  • Gluts of commodities, causing farmers to plow under crops and oil to be put into storage

Thus, pandemics are very much to be expected when an economy is in overshoot.

One example of collapse is that following the Black Death (1348-1350) epidemic in Europe. The collapse killed 60% of Europe’s population and dropped Britain’s population from close to 5 million to about 2 million.

Figure 1. Britain’s population, 1200 to 1700. Chart by Bloomberg using Federal Reserve of St. Louis data.

We might say that there was a U-shaped population recovery, which took about 300 years.

A later example that almost led to collapse was the period between 1914 and 1945. This was a period of shrinking international trade, indicating that something was truly wrong. On Figure 2 below, the WSJ calls its measure of international trade the “Trade Openness Index.” The period 1914-1945 is highlighted as being somewhat like today.

Figure 2. The Trade Openness Index is an index based on the average of world imports and exports, divided by world GDP. Chart by Wall Street Journal.

Many of the issues in the 1914-1945 timeframe were coal related. World War I took place when coal depletion became a problem in Britain. The issue at that time was wages that were too low for coal miners because the price of coal would not rise very high. Higher coal prices were needed to offset the impact of depletion, but high coal prices were not affordable by citizens.

The Pandemic of 1918-1919 killed far more people than either World War I or COVID-19.

World War II came about at the time coal depletion became a problem in Germany.

Figure 3. Figure by author describing peak coal timing compared to World War I and World War II.

The problem of inadequate energy resources finally ended when World War II ramped up demand through more debt and through more women entering the labor force for the first time. In response, the US began pumping oil out of the ground at a faster rate. Instead of depending on coal alone, the world began depending on a combination of oil and coal as energy resources. The ratio of population to energy resources was suddenly brought back into balance again, and collapse was averted!

[6] We are now in another period of overshoot of population relative to resources. The critical resource this time is oil. The alternatives we have aren’t suited to fulfilling our most basic need: the growing and transportation of food. They act as add-ons that are lost if oil is lost.

If we look back at Figure 2 above, it shows that since 2008, the world has again fallen into a period of shrinking imports and exports, which is a sign of “not enough energy resources to go around.” We are also experiencing many of the other characteristics of an overshoot economy that I mentioned in Section 5 above.

Figure 4 shows world energy consumption by type of energy through 2019, using recently published data by BP. The “Other” combination in Figure 4 includes nuclear, hydroelectric, wind, solar, and other smaller categories such as geothermal energy, wood pellets, and sawdust burned for fuel.

Figure 4. World energy consumption by fuel, based on BP’s 2020 Statistical Review of World Energy.

Oil has been rising at a steady pace; coal consumption has been close to level since about 2012. Natural gas and “Other” seem to be rising a little faster in the most recent few years.

If we divide by world population, the trend in world energy consumption per capita by type is as follows:

Figure 5. World Per Capita Energy Consumption based on BP’s 2020 Statistical Review of World Energy

Many people would like to think that the various energy sources are substitutable, but this is not really the case, as we approach limits of a finite world.

One catch is that there are very few stand-alone energy resources. Most energy resources only work within a framework provided by other energy sources. Wood that is picked up from the forest floor can work as a stand-alone energy source. Wind can almost be used as a stand-alone energy source, if it is used to power a simple sail boat or a wooden windmill. Water can almost be used as a stand-alone energy source, if it can be made to turn a wooden water wheel.

Coal, when its use was ramped up, enabled the production of both concrete and steel. It allowed modern hydroelectric dams to be built. It allowed steam engines to operate. It truly could be used as a stand-alone energy source. The main obstacle to the extraction of coal was keeping the cost of extraction low enough, so that, even with transportation, buyers could afford to purchase the coal.

Oil, similarly, can be a stand-alone energy solution because it is very flexible, dense, and easily transported. Or it can be paired with other types of less-expensive energy, to make it go further. We can see our dependence on oil by how level energy consumption per capita is in Figure 5 since the early 1980s. Growth in population seems to depend upon the amount of oil available.

As I have mentioned in previous posts, the economy is a self-organizing system. If there isn’t enough of the energy products upon which the economy primarily depends, the system tends to change in very strange ways. Countries become more quarrelsome. People decide to have fewer children or they become more susceptible to pandemics, bringing population more in line with energy resources.

The problem with natural gas and with the electricity products that I have lumped together as “Other” is that they are not really stand-alone products. They cannot grow food or build roads. They cannot power international jets. They cannot build wind turbines or solar panels. They cannot put natural gas pipelines in place. They can only exist in a complex environment which includes oil and perhaps coal (or other cheaper energy products).

We are kidding ourselves if we think we can transition to modern fuels that are low in carbon emissions. Without high prices, oil and coal that are in the ground will tend to stay in the ground permanently. This is the serious obstacle that we are up against. Without oil and coal, natural gas and electricity products will quickly become unusable.

[7] A major problem with COVID-19 related shutdowns is the fact that they lead to very low commodity prices, including oil prices. 

Figure 6. Inflation-adjusted monthly average oil prices through May 2020. Amounts are Brent Spot Oil Prices, as published by the EIA. Inflation adjustment is made using the CPI-Urban Index.

Oil is the primary type of energy used in growing and transporting food. It is used in many essential processes, including in the production of electricity. If its production is to continue, its price must be both high enough for oil producers and low enough for consumers.

The problem that we have been encountering since 2008 (the start of the latest cutback in trade in Figure 2) is that oil prices have been falling too low for producers. Now, in 2020, oil production is beginning to fall. This is happening because producing companies cannot afford to extract oil at current prices; governments of oil exporting countries cannot collect enough taxes at current prices. They hope that by reducing oil supply, prices will rise again.

If extraordinarily low oil prices persist, a calamity similar to the one that “Peak Oilers” have worried about will certainly occur: Oil supply will begin dropping. In fact, the drop will likely be much more rapid than most Peak Oilers have imagined, because the drop will be caused by low prices, rather than the high prices that they imagined would occur.

Amounts which are today shown as “proven reserves” can be expected to disappear because they will not be economic to extract. Governments of oil exporting countries seem likely to be overthrown because tax revenue from oil is their major source of revenue for programs such as food subsidies and jobs programs. When this disappears, governments of oil exporters are forced to cut back, lowering the standard of living of their citizens.

[8] What our strategy should be from now on is not entirely clear.

Of course, one path is straight into collapse, as happened after the Black Death of 1348-1352 (Figure 1). In fact, the carrying capacity of Britain might still be about 2 million. Its current population is about 68 million, so this would represent a population reduction of about 97%.

Other countries would experience substantial population reductions as well. The population decline would reflect many causes of death besides direct deaths from COVID-19; they would reflect the impacts of collapsing governments, inadequate food supply, polluted water supplies, and untreated diseases of many kinds.

If a large share of the population stays hidden in their homes trying to avoid COVID, it seems to me that we are most certainly heading straight into collapse. Supply lines for many kinds of goods and services will be broken. Oil prices and food prices will stay very low. Farmers will plow under crops, trying to raise prices. Gluts of oil will continue to be a problem.

If we try to transition to renewables, this leads directly to collapse as well, as far as I can see. They are not robust enough to stand on their own. Prices of oil and other commodities will fall too low and gluts will occur. Renewables will only last as long as (a) the overall systems can be kept in good repair and (b) governments can support continued subsidies.

The only approach that seems to keep the system going a little longer would seem to be to try to muddle along, despite COVID-19. Open up economies, even if the number of COVID-19 cases is higher and keeps rising. Tell people about the approaches they can use to limit their exposure to the virus, and how they can make their immune systems stronger. Get people started raising their vitamin D levels, so that they perhaps have a better chance of fighting the disease if they get COVID-19.

With this approach, we keep as many people working for as long as possible. Life will go on as close to normal, for as long as it can. We can perhaps put off collapse for a bit longer. We don’t have a lot of options open to us, but this one seems to be the best of a lot of poor options.


*The CDC estimates are estimates of future deaths per 1000 cases. Thus, they probably reflect the learning curve that has already taken place. It is unlikely that they reflect the benefit of the new steroid treatment mentioned in Section 3, because this finding occurred after April 29.

**I have been told that disease spread can be a problem when using CPAP machines, however. Using ventilators at very low pressure settings seems also to be a solution.




This entry was posted in Financial Implications and tagged , , , , , by Gail Tverberg. Bookmark the permalink.

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.

2,824 thoughts on “COVID-19 and the economy: Where do we go from here?

  1. This is newsworthy because he is the one who tipped over. On the flip side, how many have attended these. Is this mentioned? More diversion from the news.

    As someone so eloquently stated a few days ago the ‘Political Truth’ is that this is a deadly pandemic (incentives in place to hype the death by Convid cases, and try to embarass the ‘Orange-man) ; the reality is the cure will cause/ is causing the greatest havoc.
    Convid collapse is an ‘iatrogenic economic’ cure.

    • On Sunday July 12th, Florida clocked a single day US record of 15,300 new confirmed cases. Based on the case fatality rate to date in the US, about 500-600 of those folks will likely die. Again, that’s a single day, and for Florida alone.

      • based on the CDC who state that the IFR is 0.26%:

        15,300 x 0.26% = 40 people will die (39.78).

        Again, that’s a single day, and for Florida alone.

        • big difference 500 to 600 whereas you say 40 can we trust any figures,or for that matter can we trust any information about the virus coming from any sources . This whole thing has become like “chinese whispers” we will never know what really happened .

        • That is not a very high figure. It is especially not a very high figure when compared to the destruction being done to the economy.

          Edited from Wikipedia:
          In the USA in 2016 (to take a year) 37,461 people were killed in 34,436 motor vehicle crashes, an average of 102 per day. In 2010, there were an estimated 5,419,000 crashes, 30,296 deadly, killing 32,999, and injuring 2,239,000. About 2,000 children under 16 die every year in traffic collisions.

          This is all so tragic and avoidable. More that 2.2 million injured each year. Those poor people will probably carry the scars, pain and impediments of those injuries for the rest of their lives.

          If only we restricted traffic to speeds below 20 mph, all of this could be avoided.

          Do you support this approach? A national 20 mph speed limit? If not, why not?

            • all motor vehicles will be required to keep a social distance of 6 feet from any object.

              all motor vehicles will be required to have a mask over their front hood, and must be vaccinated once per year when they get their inspection sticker, as well as have a swab test of the motor oil to check for the presence of a virus, if the motor is above normal temperature.

            • And be tested in Idaho…..did it again sorry
              Nothing gets past you in a million years

            • Only on Saturday nights….does that date me?

              No use being a gloomy doomy, may as well try this stoicism angle. Its all the rage with them smart-ar.. umm folks up in silly-con gully

            • Only way to jump in:

              I like it, nice going, a bit of humor.

              All the best,

              Dennis L.

        • You are conflating IFR and CFR. 15,300 are confirmed cases. Supposedly there are at least that many that are not confirmed.

        • Imagine, if you will, Florida:

          15,000 daily cases and most of them aren’t very sick.

          • It generally takes 21 days to die so given the case rate in Florida 21 days ago was 3000/d and deaths recorded yesterday was 72 the death rate is 2.4%. In 21 days those that will have died from todays 15000 cases will be 360.

            • thanks.

              there are lots of moving pieces here.

              if three weeks ago, the 3,000 were people seeking tests because they were actually sick, then the death rate of 2.4% would be artificially high, which it is since the actual IFR is 0.26%.

              similar with age groups, if the 3,000 were older people seeking tests.

              now, if anyone and everyone who thinks they might have been exposed to the virus are seeking tests, then the 15,000 would probably mean that many/most of them aren’t even sick, even though the test result is “positive”.

              since there seems to be much more testing resulting in many more positive results on people who are not even getting sick, then the 72 deaths yesterday could be in the beginning stage of a (perhaps bumpy) downward trend, and I think 40 deaths 3 weeks from now sounds reasonable.

              I could be quite wrong.

              especially if the virus is now disproportionately infecting older people.

              we will know in like maybe you know perhaps possibly in about 3 weeks.

  2. Would a similar wave pattern be evident for previous flu seasons I wonder?
    If we could incentivise the medical establishment to trawl their records and report any historical deaths, from whatever primary cause, but asociated with the flu virus, would a similar hysterical pattern emerge.
    Most seasonal flu viruses are pandemics aren’t they? You know, prevalent over large areas/many countries.

    My contention remains that ‘never let a crisis go to waste’ is the dominant factor this (US election) year.

    • I agree with your contention.

      now that daily deaths have plunged from 2,700 to 700:

      OMG! look at all the daily “cases” in Florida!

  3. You know what I think; everything is going to run out of puff by election time.
    Mueller et al
    …and the economy.
    Is this the singularity I hear about?

    • seriously, that’s a good point.

      the Badd Mann in the oval office says that the virus might just go away by itself.

      it would be hillary-ous if it actually was gone by October.

      MSM heads would be explloding.

  4. From comments above; “We knew in the middle of February this virus spread in scat. Why? Because in multiple incidents, including one in Hong Kong……. ”

    I met a man yesterday who works for the Office of National Statistics in the UK, the body responsible now for tracking the viral spread. He said that they have implemented a sewer monitoring scheme because it may give them information on where outbreaks are occurring.

    • Very nice, thank you. Corroborated with various sources from around the world. Correlation, not causation, nice information on this site.

      Dennis L.

    • So, if this is correct it comes back to washing your hands after you poop.

      Looking at packing houses for example, it would be interesting to see if this is the issue rather than packing people close together.

      In dentistry hand washing was an issue with assistants, sensitive skin. In the clinic we provided whatever hand lotion the assistants desired so hand washing was not an issue due to delicate hands. In a bureaucracy, there is always someone whose job is getting an item cheaper, the girls got what they wanted, it gave them control, bugged the heck out of purchasing. I was very insistent on hand washing even when not going between patients. If the assistant moved from her chair, she washed her hands – they were mostly in their chair, imagine that. We had many patients with viruses and other infections issues, not one transmission from patients to staff in 8 years at one facility and I think 3-4 at the other, when in doubt the staff were tested, again administration balked at the expense, we got the tests.

      There was no tolerance in this area, sensitivity to the staffs’ concern for their hands probably helped. If I saw cold water, short hand washings, I spoke up. Grumpy old man, infection control is serious stuff, it is not about being agreeable, pick your fights carefully, this was one of them. I cared about my staff.

      If the fecal idea is correct, same game as dentistry.

      Dennis L.

    • My expectation is that the problem has to do with toilet flushing without the cover down (or with no cover at all). Particles from the feces become airborne. The problem is a combined airborne-feces problem.

  5. There was a spokesman from the Office of National Statistics on BBC Radio 4 this morning, who said the UK economy was still down just under 25% (his actual words were ‘a quarter’) from a year ago.

    There is a related article just published on the BBC website, “UK economy shrinks by one-fifth under lockdown”. The one-fifth is for March-May.

    “The UK’s economy shrank by 19.1% in the three months to May, as the full impact of lockdown was felt, the Office for National Statistics has said.
    The economy actually grew by 1.8% in May, but this was not enough to make up for the fall of 6.9% in March and the record 20.4% decline in April.
    Manufacturing and house building showed signs of recovery in May as some businesses saw staff return to work.
    … ‘The economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS.’ ”

    Where does the 19.1% come from? 20.4 + 6.9 – 1.8 = 25.5?

    • The air here is certainly alive once more with the charming sound of angle-grinders and drills – but will it all pay off for the property speculators in the new environment?

    • Come now, MOO, you don’t seriously expect a statistician to be able to do basic mental arithmetic? If it’s not in a spreadsheet, it doesn’t exist.

  6. “Modern central banks jealously guard their independence—unless it comes to the environment. Witness monetary maestros’ growing enthusiasm for using central-bank balance sheets to pursue green-policy goals…

    “This could become a commitment to devote a certain proportion of QE purchases to green tech, perhaps accompanied by a relaxation of criteria to make more green bonds eligible.”

      • “The Black Lives Matter movement is reinvigorating a yearslong campaign to push some of London’s oldest financial institutions to pay reparations to the descendants of slaves…

        “The Bank of England, Barclays and Lloyd’s of London insurance market are among those to apologize for or acknowledge links to slavery since the May killing of George Floyd by a police officer in Minneapolis prompted protests world-wide.”

        • If BLM really cared about slavery, then rather than worrying about slaves dead a century and a half ago, they would worry about the estimated 100,000 slaves held in captivity in the UK today. But of course, those victims are not enslaved by the totally evil white man, but by our totally virtuous imported third world barbarians, so they don’t count.

    • Feeding frenzy for Green pseudo-renewable technology parasites and vampires? Grab the cash and run…..

    • “Interestingly enough… Chevron said that it would write down as much as $10-11 billion in assets last December…

      “At the time, some analysts saw Chevron’s announcement as a harbinger for bad news for the whole industry. It made perfect sense: if Chevron could not turn in a profit from deepwater oil and shale gas at those oil prices, how likely would its peers be profitable in that environment?

      “That question never got an answer because just three months later, the Saudi-Russian price war led to an implosion in oil prices, and then the coronavirus pandemic added its own rather hefty weight to push them further down.”

  7. I know many of us on OFW have long wondered what would happen if a poor or emerging market nation attempted some manner of MMT. Looks like Indonesia will be a test-case:

    “Indonesia’s experiment to borrow money for free from the central bank has excited proponents of modern monetary theory and raised concerns about its effects on inflation and the rupiah…

    “…the lack of clarity on the tenor of bonds the Bank of Indonesia will buy and how it will subsequently get rid of these bond holdings have analysts worried.”

      • Cephlon, it looks like MMT or at least MMT-related policies (and I must confess I have no special expertise here and the distinction is somewhat lost on me) have been tried in a number of Latin American nations:

        “Almost every one of the Latin American experiments with major central bank–financed fiscal expansions took place under populist regimes, and all of them ended up badly, with runaway inflation, huge currency devaluations, and precipitous real wage declines.

        “In most of these episodes — Argentina, Bolivia, Brazil, Chile, Ecuador, Nicaragua, Peru, and Venezuela — policymakers used arguments similar to those made by MMTers to justify extensive use of money creation to finance very large increases in public expenditures.”

  8. “To date, the economic damage wrought by the pandemic has been mostly hidden by massive government subsidy. That’s about to change. And so the next few months will reveal the underlying economic impact of Covid-19 across the globe more clearly than we’ve seen so far.

    “My bet: As governments withdraw fiscal support, the economic picture is going to look worse than commonly appreciated.”

    “Getting a sense of what’s about to happen requires that we first be clear about how and why the pandemic has affected the economy: Is it because governments have required people to stay home, or is it because of the virus itself?

    “New research shows that economic losses have come mainly from fear, not government mandate. So eliminating the mandates without ending the fear does very little.”

    • Investors must prepare for Covid debt crunch:

      “There are already plenty of worrying signs: a record-breaking pace for corporate bankruptcies; job losses moving from small and medium-sized firms to larger ones; lengthening delays in commercial real estate payments; more households falling behind on rents and continuing to defer credit card payments; and a handful of developing countries delaying debt payments.”

          • “Singapore’s trade-reliant economy plunged into recession in the second quarter with a record contraction… the grim numbers for the wealthy city-state – a bellwether for the global economy – underscore the sweeping worldwide impact of the COVID-19 pandemic and point to an arduous road ahead.”

          • “No one recovers until everyone does.”

            This is a major issue. Winning the battle locally does not fix the world problem. It mostly damps down the local economy.

        • “global IT spending is projected to slump by 7.3%” At last, a piece of good news. Let’s hope it slumps by 90%. Now you know why almost all traditional Chinese shopkeepers in Singapore used an abacus. (Hint: its computations are exact)

    • No matter what governments mandate, if news stories are full of concern about rising cases and deaths, people will tend to stay at home.

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