Five days ago I wrote a post called Peak Panic. I think I called it about right. There was and still is panic around Convid-19 but there is also the sense that the curve can be flattened by people self isolating (even if they don’t have the bug), practicing social distance and by limiting social interaction and group events.
Now comes word that Trump is sending Hydroxychloroquine and Z-Paks to NYC for Drug Trials. There is strong, if anecdotal evidence that hydroxychloroquine has a rapid effect on the virus. Six days and the virus is gone. We’ll see. But we will see quickly as the treatment will be given to hundreds of sick patients and, prophylactically, to front line medical personnel. It will either work perfectly or, more likely, imperfectly but effectively in many cases.
Having a treatment option – and there will be more than one – changes the entire picture. Yes, social distance and self-isolation will still be important for some time but the idea that the medical system will be overwhelmed fades very quickly if an effective treatment can be administered.
The entire world is in the process of shutting down as economic activity is judged too risky. The markets have crashed. Helicopter money is being loaded. (Although I note that the Trudeau government missed a chance when the Child Tax Benefit arrived in the same amount as last month.) Tax deadlines – both for filing and for payment – are being deferred. Employment insurance, pensions, payments to the self-employed, to companies and to institutions hit with the virus and its disruptions are all in the pipeline.
The fact that the virus may be first contained and then controlled is unlikely to have much impact on these programs. Nor should it. The economic disruption of the last couple of weeks is not going to vanish overnight even if the medicos sound the all clear. It will cost trillions.
[My minor suggestion is that governments add a virtual year to all the “monthly” entitlements they currently pay and pay that all at once. In the case, for example, of my pension the government would add one year to my life and send along the full benefits payable for that year. This would give me cash in pocket and would be as taxable as any other pension payment.]
Putting money into the hands of consumers and corporations immediately is likely a good idea. But a better idea is to begin to plan for an economic restart complete with the resumption of air travel, open pubs, non-essential businesses and so on. The exact date of this restart is unknowable at this point because we don’t know when the curve will start dropping like the Dow. However, that should not stop political and business leaders from outlining a 30-60 day restart plan which would kick in when the virus was effectively beaten.
Economies are perfectly happy to crash on their own. But there has never been a genuine economic restart. It is claimed that the Great Depression was ended by the production demands of World War II. That may well be true but, obviously, that is not an ideal outcome.
So what is?
There will be a lot of pent up demand but it will take a lot of work and a lot of money to meet that demand. There will also be a good deal of purely psychological damage which will have to be overcome. A part of the population, perhaps a large part, will be suffering from the after effects of sheer panic.
Focusing the restart on a specific day or week may be the most effective way to marshal the supply chains, employees, and businesses. We’ve seen the success of “Black Friday” in releasing the animal spirits of North American consumers.
Combining massive sales, big discounts on air fares, hotels, restaurants and a day of celebration might well be the best way of kicking the economy back into gear. Parades, Services of Thanksgiving, a truncated knock out tournament for the Stanley Cup, a reboot of Opening Day for a short MLB season, the list of potential events is endless.
Start the planning now, even before we have solved the virus issue, because if the economy continues in “shut down” the effect of that “shut down” could be much more severe than the virus itself.