Difficult Trade Offs, Unprecedented QE, Accelerating Infection

Americans who in even greater numbers are staying at home Monday were suddenly being asked to choose between two virus scenarios; one espoused by medical experts, the other by people newly afraid the economy is being irreversibly crippled, President Trump among them.

Which view leads to the most prudent outcome, either an early relaxation of mitigation or its continuance, likely will be revealed, not by policymakers, but by the rate of acceleration of coronavirus spread in the next 10 days or so. Since observable infection lags initial infection by five days to two weeks, those Americans who caught the virus before mass testing began will show up at testing stations in the next few days and some at hospitals soon after. Their potential numbers still can’t be estimated.

The seeds of the debate were planted by a Wall Street Journal editorial last week, as predicted at the time in a previous White House Watch. The editorial suggested the shutdown of the economy underway is not sustainable. Talking heads picked up the theme and White House economic coordinator Larry Kudlow crystalised the debate on the Fox Business Network Monday morning. He said Trump is correct in tweeting Sunday night and retweeting Monday morning, “We cannot let the cure be worse than the problem itself,” apparently using capital letters for extra emphasis. So, said Kudlow,  “We’re going to have to make some difficult trade offs.”

Almost instantly a new Twitter meme was born, and posters to the “Death Panels” and similar channels drew the conclusion that what is being suggested is nothing less than letting more old people die. A number of medical experts said that if the mitigation “stay at home” guidelines are relaxed prematurely it would be the most direct path to becoming another Italy, with hospitals overrun, beds and equipment rationed, medical personnel sick. For old people, an unsettling prospect. In the evening’s Corona Virus Task Force Dr. Deborah Birx said 99% of Italy’s fatalities were at least 80 years old.

The briefing, incidentally, had only five participants, only two of whom were on the Task Force. Not there was the NIH’s acknowledged top infectious disease expert, Tony Fauci. One of the most-read news aggregator websites, The Drudge Report, all day had as its top headline, “Fauci and Trump Clash.” Asked at the briefing about Fauci’s whereabouts, Trump answered, “He’s not here because we weren’t discussing what he’s best at.”

If there was some hint the president was relishing the implication he had bested another foe, that was misdirected, White House officials said. Fauci is still appearing on TV and had attended an earlier Task Force meeting. Both CNN and MSNBC indicated they as not as much relishing the briefings, lasting nearly two hours this time, cutting away early for the first time.

Seven days remain of the 15-day White House guidelines, after which Trump said, he’ll be “making a decision” on whether to terminate them. Asked if he would follow the advice of his physician advisors, he said he listens to everybody, but did not directly answer the question.

Is the debate all that important on a day with so much else happening? After all, it will be the individual governors who will be deciding whether to relax their “stay at home” orders when the time comes, not the president. Is the issue really that black and white, the economy or the lives of the vulnerable?

Trump said he can save the economy and fight the virus at the same time. Where there are virus hotspots, like New York City and New Rochelle, Seattle, maybe New Jersey, maybe Illinois, people will be encouraged to stay home. Elsewhere, he suggested, in places like Nebraska, Iowa, Idaho, people can return to work, their employers can resume business. Or in the words Fox News used in the evening as a programme banner, “Starve the Virus, Not the Economy.”

Starving the economy for a long time, Trump said, can cause deaths just like the virus. “I’m talking about where people suffer massive depression, where people commit suicide, where tremendous death happens,” he said. In addition, you can “really hurt a country. You could take years and years to recover and the longer you stay out the harder it is to recover. Our country wasn’t built to be shut down. This is going away.”

By the time Asian markets opened, some of the market fear had gone away. Japan’s Nikkei was up more than 6%. US stock futures were positive, as they were in the Sunday overnight only to fade into negative territory by Monday’s close. After all, apart from the path of the virus, the Federal Reserve went beyond anything ever done before in the way of market and income support. It removed any cap on the renewal of quantitative easing, accelerated buying Treasury securities and mortgage backed securities, put together or reinstituted mechanisms to accept almost anything of high quality it couldn’t buy as collateral, promised a Main Street support program and on and on.

It made the president so happy he called Federal Reserve Chair Jay Powell to congratulate and compliment the target of his innumerable sharp jabs via Twitter over many months. “I am happy with him, yes,” Trump told the briefing. “I really think he’s caught up and he’s done the right thing. I called him today and I said, Jerome, good job. He’s not finished. I mean, he’s got other arrows in the quiver or whatever they say. I will tell you he’s got plenty of arrows.”

Fed watchers well aware of relations between the White House and the central bank could imagine the silent groans at the other end of the line. Fed policymakers always insist political pressure is never considered and certainly policy is not made in anticipation of a pat on the back. The day’s conference-call Federal Open Market Committee meeting lifted stocks – for about an hour and a half.

On Capitol Hill, Treasury Secretary Steven Mnuchin made many trips to the office of Senate Democratic Leader Chuck Schumer and in between, did interviews in which he said the Phase 3 nearly $2 trillion package would pass by nightfall. The necessary votes weren’t there in a second try in the morning for that preliminary vote and they weren’t there by the time senators left in the early evening. Another try will be attempted Wednesday. Schumer and his Republican counterpart, Majority Leader Mitch McConnell, traded pretty direct insults about each other’s alleged efforts to stuff the legislation with wish-list goodies, couched in oblique senatorial speech directed to “Mr. President”.

For anyone worried about the trillions being added to this year’s deficit, the total still unknown, the Council on Foreign Relations’ Sebastian Mallaby, on a conference call, said in the end, the Fed can simply “buy the debt”.

Meanwhile, the virus did its work, topping 100 American fatalities in one day for the first time. Since testing so far has only touched the edge of the pool of those possibly infected, who include the many without symptoms who were mingling with neighbours and work colleagues before being told to stay at home, it will be a few more days before the trajectory of the community spread can be estimated.

Among those who should have been adhering to the 15-day guidelines to separate themselves from others was Sen. Rand Paul, said the Task Force’s Dr. Birx. Paul, a physician, instead circulated among his Senate colleagues and staff for days before getting the results of his test showing he had contracted the virus.

New York Gov. Andrew Cuomo, touring some of the new 1,000 hospital bed units being installed at the Javits Center, Monday said the country is in “the quiet period before the storm”. He said without additional shipments, New York City hospitals had about a week’s worth of supplies.

No longer remarkable, virus stay-at-home precautions spread to several more states during the day. Florida singled out travellers from New York and New Jersey for two-week quarantines upon entry.

No one, not even Trump, disputed the estimate of Surgeon General Jerome Adams on NBC’s “Today” show when he said, “This week it’s going to be bad.” Echoed Trump, later, “Yeah, it’s bad…obviously the numbers are going to increase with time.” After that, though, “They’re going to start to decrease. And we’re going to be opening our country up for business because our country is meant to be open,” he said.

Three Nigerians were reported victims of chloroquine overdoses, following Trump’s advice to try it. Lagos newspapers reported a flood of emergency room cases.

Italy reported 623 more deaths in 24 hours, greeted as somewhat welcome news since it was the lowest total in three days.



Colin Lambert

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