“August” Shocks, Now the Wait

White House Watch provides the latest on the ongoing crisis, the response of the US government, and the reaction of the markets.

With mass testing finally getting under way in the United States, health officials are holding their breath, waiting to see if the virus spread points to an “Italy” outcome or a wave of infection that won’t overwhelm the nation’s hospitals.

All the dire realism recounted in recent days from private medical experts, the offices of governors and mayors as chronicled in last week’s White House Watches seemed Monday to land on the White House and President Trump. In his latest briefing Trump seemed mollified and somewhat grim as he zapped already plunging markets with a couple of words, “July” and “August.”

How long will this last? “We’ll see what happens but they think August – could be July, could be longer than that. But I’ve asked that question, many times,” Trump said, and Saturday when he said “it” was “under control,” the “it,” he was referring to was not the virus. “If you’re talking about the virus, no, that’s not under control for any place in the world,” he said.

Is the country heading for a recession? “Well, it may be,” he said, adding, “We’re not thinking in terms of recession, we’re thinking in terms of the virus” which needs to be stopped.

What about a nationwide lockdown? “We may look at certain areas … certain hotspots as they call them. We’ll be looking at that. But at this moment, no, we’re not.”

With Trump at the podium was the government’s top expert in the field, the NIH’s Tony Fauci. “I’ll say it over and over again,” he said, “When you’re dealing with an emerging infectious disease outbreak, you are always behind where you think you are.”

The Task Force response coordinator, noted AIDS specialist Deborah Birx, told reporters she is asking everyone “to hold their gatherings to under 10 people, not just in bars and restaurants, but in homes.”

The Dow industrials closed shortly after Trump uttered those words down just short of 3,000 points, a 12.93% free fall. Having dropped 9,362 points from its peak, it won’t take much to take the Dow below 20,000, when just 34 days ago it was within 449 points of 30,000.

As concerning for many market participants were the persisting problems evident in the market for commercial paper and in other corners of the money market despite massive attempts of the Federal Reserve, including Sunday’s surprise full-point rate cut, to restore ample liquidity. Another more than a dozen central banks, including the Bank of Japan, had also made important moves.

Federal banking regulators, including the Fed, have issued a directive for banks to resist the stigma attached to discount window borrowing. “The discount window supports the smooth flow of credit to households and businesses,” the joint statement said.

Trump said the Corona Virus Task Force had settled on “15 day” guidelines for now “based on the fast evolving situation,” with the unspoken understanding they are likely to be stiffened in two weeks rather than relaxed. The new Federal guidelines still have not caught up with the much more rigorous measures imposed in several states and the District of Columbia.

Trump’s language was not as stern as that, for instance, of Maryland’s Republican Governor Larry Hogan. “We’re no longer asking for people’s cooperation,” Hogan said Monday. City police, state troopers and, if necessary, the National Guard will make sure restaurants and bars are closed, he declared, ensuring a very sober St. Patrick’s Day Tuesday.

There were hints during the day that there is some consideration for the Army Corps of Engineers to be called to duty building emergency field hospitals and helping transform gyms and auditoriums into health care facilities as called for by New York Governor Andrew Cuomo. Relatively few drive-through virus testing centres are in operation with many more in line to be operating in the next few days. Initial testing, officials stress, is just for those showing symptoms.

Drive-time traffic thinned some more in major cities. In the District of Columbia there were traffic jams, but only afternoon on routes jammed with cars that were leaving. Signs taped to windows at pizza parlours, tailor shops and small retailers of all sorts apologised for “temporary” closings. Construction projects in downtown Washington, however, appeared to keep humming with activity. Major League Baseball pushed the season opening into mid-May at the earliest. Graduation ceremonies at high schools across the country were put on hold. McDonald’s ended inside seating.

On Capitol Hill, an agonising wait for the legislative sausage machine, with the Senate still waiting for the House to send over that virus response bill that guarantees sick-leave pay for small business staff forced to stay home, but not for employees of any firm with more than 500 on the payroll.

White House economic policy coordinator Larry Kudlow, who stopped to talk to reporters at the White House, many of whom had been forced to leave the press room by new anti-virus restrictions, and President Trump in the afternoon briefing talked about expanding sick-leave coverage despite Republican opposition. Both Kudlow and Treasury Secretary Steven Mnuchin traipsed over to the Hill late in the day to try to help pry the legislation out of the House.

Trump, in person and in a tweet, pledged to save the airlines which say they need more than $50 billion in government money to survive past mid-summer, not using the word forbidden in the Executive Mansion, “bailout.” He also disputed reports that, in a conference call, he told governors they’re on their own as they look for supplies of masks and other medical supplies. He said he told governors that if they can find the supplies through their normal supply lines, don’t wait for the Federal government.

The presidential trade advisor who hasn’t been too visible lately, Peter Navarro, popped up to do interviews Monday, saying he is arranging for emergency shipments of medical supplies using volunteered commercial planes. He emphasised one of his favourite themes from long before the virus broke, that the US needs to cut its supply lines to China and other countries. An economist, he refused on CNN to discuss the falling stock market.

As Asia markets opened Tuesday sessions, there were some early indications losses would not be nearly as severe as those earlier in the US and Australia registered some gains.

denny@macenews.com

www.macenews.com

 

Colin Lambert

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