The number of new infections in the U.S. has leveled off at about 30,000 per day in the last five weeks and appears to be showing a slight drop off.  This is very positive since more and more people are being tested all the time.

So much about the coronavirus is as yet poorly understood that it is hard to even know the best way to implement the social distancing strategy which most of the world (except for Sweden!) is taking very seriously.

As I discussed last week, many states, including Nebraska where I live, are beginning to reopen their economies.  Considering the uncertain timeline for the further spread of the coronavirus, it is critical to do this, even if the effort starts out slowly and hesitantly.

Many people, including myself, have speculated on how the pandemic is going to significantly change the way we conduct our personal lives, both at work and at home, such as, for example, by speeding up even more quickly the adoption of technology.

Another big change is going to occur in how we relate to the rest of the world in the future, especially China. Not only was the pandemic caused by poor public health measures in Wuhan, China, but it has now become obvious that the developed world has become too dependent on industrial supply chains centered in China.  This has enabled China to dictate the terms of access to its market in circumvention of established international trade rules.  The U.S. and its allies can’t protect their interests without confronting China.

Conclusion.  The coronavirus pandemic has presented a huge shock to the entire world.  Trying to limit the number of infections and deaths is an enormous public health issue.  But is will also have a big effect on everyday life in the future.  And world affairs will be greatly impacted.  It is worthwhile to try to anticipate what is coming down the pike and prepare for it, even if imperfectly!

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As the number of new cases of coronavirus infections in the U.S. continues to level off at about 30,000 per day, and should soon start beginning to drop, America is thinking more and more about how to return to normal.

For example, restaurants in many different states are reopening with seating restrictions.

It turns out that Middle America is leading the way in loosening restrictions so that the economy can begin to reopen. It is urgent to begin doing this.  We simply cannot stay locked down until an effective vaccine appears on the scene which may be many months, or even a year or more, from happening.

An at least temporary retreat of the regulatory state is helping this to happen.  For example, medical personnel have been freed to practice across state lines.  Obstacles to telemedicine are being dismantled by Medicare and Medicaid.  Private firms are being liberated to develop Covid-19 and antibody tests.  The FDA has authorized emergency use of the Gilead drug Remdesivir for Covid-19 patients.

Long term, the pandemic has exposed several weaknesses of overly strict central planning.  For example:

• Net neutrality price controls on internet service providers, now overturned, never anticipated that the entire country would be simultaneously stuck at home, requiring much more flexibility for internet traffic.
• The 2010 Dodd-Frank law piled a multitude of unnecessary restrictions on small banks which prevent them from serving desperate small-business applicants at the present time.
• Obamacare outlawed short-term health insurance plans lasting more than three months (now loosened), not anticipating that millions of people could be thrown out of work, with no guarantee of being back in less than three months.
• Our decentralized federal system of government is now showing its great strength in the coronavirus pandemic.

Conclusion.  Led by Middle America, the U.S. is now just starting to recover from the economic disruption caused by the coronavirus pandemic.  This forward movement has been greatly aided by a loosening of various regulatory restrictions.  Our decentralized federalist system is demonstrating its great strength and resilience.

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New coronavirus infections in the U.S. have levelled off to the rate of about 30,000 per day and several states are experimenting with loosening restrictions on “nonessential” economic activity.

                     There are reputable reports that the death rate from COVID-19 may be as low as .025% to .635% of the number of infected individuals, even lower than the mortality rate for seasonal flu.

Experts have already proposed some general guidelines for reopening the economy in a safe but also sensible manner.

Now a top expert in medical economics, Avik Roy, at the Foundation for Research on Equal Opportunity, has given more explicit reopening guidelines even assuming a more pessimistic scenario, in which accurate, near-ubiquitous testing is difficult to achieve; infected individual’s antibodies do not lead to immunity; anti-viral treatments take longer to develop; and vaccines never arrive.

The FREOPP strategy takes into account the heavy skew of poor health outcomes and deaths from COVID-19 towards the elderly and those with chronic disease, as well as new tools for contact tracing being developed by Apple and Google.

Here is are some of their major ideas:

• Reopen pre-K and K-12 schools right away.
• Lift stay-at-home orders for most non-elderly individuals.
• Reopen safe but “nonessential” businesses.
• Incentivize employers to deploy testing at work.
• Incentivize consumers to use contact tracing apps.
• Continue to prohibit large group gatherings.

Conclusion.  Even if, and perhaps especially if, the U.S., and the rest of the whole world, are in for a long slog to recover from the coronavirus pandemic, there are a number of fairly simple measures as above which can be taken to lessen the current economic pain.  Since we don’t know how long it will take to completely eliminate the pandemic, we need to figure out a way to return to a more normal and sustainable way of life in the meantime.

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New coronavirus infections in the U.S. have leveled off at about 30,000 per day and we are beginning to turn our focus to the reopening the American economy.

As China increasingly becomes the main challenger to U.S. world leadership, how has the coronavirus pandemic affected the relative standing of these two largest world powers?  (see here, here, and here)

Pertinent to this question, Ruchir Sharma, the Chief Global Strategist at Moran Stanley Investment, has a very informative article in the latest edition of Foreign Affairs, “The Comeback Nation.”

Mr. Sharma points out that:

• The U.S. share of world-wide nominal GDP was 25% in 1980 and remained at 25% in 2020. During the same time period, China’s share grew from 2% to 16% and the EU’s share dropped from 35% to 21%.
• 90% of global financial transactions use the dollar. The share of countries which use the dollar as their anchor currency (including China) has risen from 30% in 1950 to 60% today.  Because the U.S. Federal Reserve controls the supply of dollars, it is now, more than ever, the world’s central bank.  Whether or not global elites trust the current U.S. president, they do trust U.S. institutions, which is why the U.S. is now a financial empire without rivals.

  

• Signs are that the coronavirus pandemic will even further entrench the dollar at the center of the global financial system.
• Ever since Gallup started asking Americans, in 1979, whether they were satisfied with how their lives were going, the vast majority have said yes. In January 2020, that share hit a record 90%.
• The median household income in 2018, adjusted for inflation, was $63,000, an increase of $15,000 from the early 1970s, and of $7000 since 2013.
• For all the talk of decline and despair, the bigger risk for the future is complacency in the face of growing threats from debt, deficits and demographics.
• U.S. productivity has gotten a boost from investment in technology in recent years, but the most important U.S. advantage has been a relatively high population growth rate, babies and immigrants, not Stanford and Google.
• Unfortunately, major voices in both parties are now making the case that deficits no longer pose a threat to growth – Republicans to defend low taxes and Democrats to defend higher public spending.
• If, into the future, China and the U.S. each maintained their officially reported nominal GDP growth rates, 6% for China and 4% for the U.S., China would not catch up with the U.S. until 2050. If its growth rate slows by one percentage point, China will not catch up with the U.S. until 2090.
• The most important driver of any economy is the working-age population, which is still growing in the U.S. but started shrinking in China five years ago.

Conclusion.  Perhaps “the experts may be correct to argue that the United States should modernize its global strategy, restore ties to traditional allies and critical trade partners, rejoin international agreements, and help rebuild the international pillars of the postwar order.”  But such moves would be icing on the cake.  They are not needed to preserve U.S. leadership because the United States is not in decline.

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As the coronavirus continues to spread around the world and deaths from Covid-19 continue to grow, experts are debating how the pandemic will affect world leadership (see here and here) in the future.

The U.S. has had by far the largest number of infections compared to other countries.  Other countries with high numbers of infections (Spain, Italy, France Germany and the UK) are in Western Europe. Western Europe and the U.S. represent the most advanced countries of the world in terms of economic growth and personal freedom.  These countries have wide open societies and attract the greatest number of visitors.  This makes them more vulnerable to contagion from outside.

As the number of daily new infections in the U.S. begins to stabilize, at about 30,000, and should soon start to decrease, the most urgent question facing U.S. leadership is when to reopen the economy.  Too soon could lead to a relapse and too slowly will simply prolong the economic misery. General guidelines for reopening the economy have been proposed by experts. 

The U.S. has far and away the world’s strongest economy and very strong political institutions as well.  Although there certainly are pessimists about U.S. leadership going forward, I think that such pessimism is unfounded.

But we are now faced with a critical new test for U.S. leadership.  The most valuable contribution the U.S. can make to the well being of the entire world right now is to revive its own economy as quickly as possible without suffering a Covid-19 relapse.  In other words, the best thing we can do not only for ourselves, but also for the rest of the world, is to return our own economy back to the high level (with only 3.5% unemployment) at which it was performing as recently as February of this year.  Just by focusing primarily on our own recovery, the U.S. has the economic and financial clout to pull the whole world out of a prolonged coronavirus recession.

Conclusion.  The U.S. is hardly in a state of decline.  But it does now have an urgent new challenge, to get past the pandemic crisis as soon as possible, by reviving the economy to its previous high level.

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The coronavirus pandemic is a major human tragedy which will kill many thousands around the world and cause huge economic disruption. Big mistakes were made in China, the U.S. and other countries which delayed the world-wide response.

Nevertheless, the U.S. has now adopted an effective social distancing strategy which is slowing down the spread of the virus in most parts of the country except for a number of unfortunate hot spots such as New York City.

A sensible plan of action for national recovery has been proposed by Scott Gottlieb and colleagues at the American Enterprise Institute.  They have a four part plan:

• Slow the Spread in Phase I. This is the social distancing phase we are already in.  Now the emphasis should be on increasing testing capacity to accommodate the ability to test everyone with symptoms and their close contacts.  Also issuing stay-at-home advisories in hot spots where transmission is particularly intense, as when case counts are doubling every three to five days.
• State-by-State Reopening in Phase II. This begins when there is a sustained reduction in new cases for at least 14 days, hospitals are able to treat all patients without resorting to crisis standards of care and the state is able to conduct active monitoring of confirmed cases and their contacts.  When these conditions are met, the vast majority of businesses and schools can reopen.
• Establish Immune Protection and Lift Social Distancing in Phase III. This means that infections can be prevented either with a vaccine or therapeutics which can mitigate the risk of spread or reduce serious outcomes in those with infections.  When these conditions are met, then all social distancing measures can be lifted.
• Prepare for the Next Pandemic in Phase IV. This can be achieved by expansion of public-health and health care infrastructure and workforce as well as government structures to execute strong preparedness plans.

Conclusion.  The coronavirus pandemic has caught the world off guard and done much damage.  But there are sensible means, as suggested above, for responding forcefully but in a measured way.  We want to be very sure that neither the U.S. nor any other country need go through such a traumatic pandemic again in the future.

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The incidence of new coronavirus infections in the U.S. appears to be slowing down to about 20,000 new cases per day (see chart).  This number should start to drop soon.

I have long considered myself fortunate to live in Omaha NE, and all the more so in the midst of the coronavirus crisis.  In Douglas County we have now had just 57 reported cases of infections and one death.  We are isolated from the country’s hot spots but still taking social distancing very seriously.

So I have the luxury to begin speculating about what will be coming down the pike when we get beyond the pandemic.  Here are some of the major changes which are likely to occur in the way we conduct our lives:

• The coronavirus will permanently change how we work.  Many companies and employees will decide that working remotely from the office has its advantages.  More and more people will discover that Zoom is a great way to convene groups electronically.

  

• Online education will expand dramatically, at least beyond high school. College faculties are now all learning how to teach online, many will like it, and it has the advantage of greatly increasing access to post-secondary education.
• Biotechnology will have a growth spurt.  Editing our genes could eventually make us immune to viruses.  Need more be said?

  

• China’s influence in the world will shrink.  Not only did China’s backward public health procedures let the coronavirus pandemic break out in Wuhan, all businesses can now see how dangerous it is to let supply chains become concentrated in one country.

Conclusion.  That’s it for now.  I (and my sources!) are certainly not clairvoyant.  But already these changes alone will have a major impact on American society.  As technology becomes more important, so does the technical knowledge which supports it, and the consequent demand for more knowledge workers.  Our entire educational system will have to be upgraded.  More on this later.

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The economy has been doing very well lately and I would prefer to be talking about this.  But, of course, we now have a more immediate problem to deal with.

The atmosphere in the U.S. about the coronavirus threat is almost panicky but consider:

• There are currently 3115 confirmed cases of the virus in the U.S. and 60 deaths.
• There have been 81,000 cases in China (with four times our population) so far and 3199 deaths.
• China now reports that there are fewer and fewer new cases reported every day.
• Since China, with a late start, has been able to get the virus under control in a ten week period, the U.S. with a sensible strategy, should be able to do the same.
• Just in the last few days a very sensible strategy has sprung up spontaneously around the country: social distancing. Isolate yourself from other people to minimize your infection risk.
• Also, the federal government has declared a national emergency and has set up a flu testing strategy with major businesses such as Walmart, CVS and Walgreens.

  

• Our economy is being hurt by the coronavirus outbreak, especially for transportation and entertainment. Cruise ships, airplanes and restaurants will all be badly affected.  In Omaha NE, where I live, both  the College World Series (each June) and the Berkshire Hathaway annual convention (each May) have been cancelled for 2020.  Omaha will thus take a big financial hit.
• Performance theaters and art galleries in Omaha are suspending operations but not yet movie theaters and restaurants. This will also hurt the economy.
• Economists are mixed on whether or not the U.S. is likely to go into recession  which requires two successive quarters of negative growth. We won’t know officially until October of this year, after the third quarter ends.
• In the meantime, watch the monthly unemployment rate which activates the Sahm Signal indicator of recession. I will be watching this carefully and reporting on it.

  

Summary.  The coronavirus is very serious.  The federal government is now responding forcefully even if it did delay initially.  Practice social distancing but without overreacting.  My wife and I (both retired) will continue most of our normal daily and weekly activities such as working out, meeting with others in small groups, going to movies and eating out at our favorite restaurants.

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The U.S. economy has been doing very well lately.  The unemployment rate, under 4% for the last two years, has just been reported to be a continued low of 3.5% for February 2020 and, moreover, 273,000 jobs were added last month.

There’s other good news to report about the economy as well (coming soon!) but, of course, we also have the coronavirus to contend with at the present time.  How should we evaluate the coronavirus threat?  Consider:

• During the 2019-2020 flu season so far there have already been about 14,000 deaths in the U.S. Typically there are from 12,000 – 61,000 flu deaths in the U.S. each year.
• So far there have been 17 coronavirus deaths in the U.S., including 14 in Washington State 1 in California and 2 in Florida.

The most likely course of a coronavirus recession is steep but very short:

• The DJIA has plunged 3500 points since February 19 or 12% of its value. This represents good buying opportunities for savvy investors like Warren Buffett.
• The price of oil has dropped 33% in the past two months, from $63 per barrel to $42. This is great for consumers even though it is not so good for producers.
• Ten year Treasury bonds are now yielding less than 1% annual interest, a very low rate. Investors are unlikely to continue to tie up money for 10 years at such a low rate.
• 30 year home mortgages are now available for 3.29%, again very low but good for home buyers.

Conclusion: Most reactions to the coronavirus threat have been quick and dramatic.  Very soon, within a few months or less, the long term threat is likely to fade and the U.S. economy will bounce back to its previous growth mode, by continuing to exhibit strong consumer spending.

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