Friday May 29

Money Matters: On the Eve of a (Trumpian) Pandemic

This is a strange time to draft a column for a magazine that won’t be printed for at least a month. This week, the last important, pre-Super Tuesday debate for Dems devolved into what might have been mistaken for a Kindergarten finger-painting table with adjoining participants doing whatever they could to mar any effect another had attempted. We actually had to turn it off. Too painful. We tuned into Rachel Maddow’s non debate-oriented show for a deep dive into the emerging Covid-19 pandemic. Starting with a sane economist, she then moved on to a public health specialist who described in painful detail just how the current administration has defunded, and disempowered, all of the disease-crisis capacities of the federal government. According to her, and a growing number of others, by the time you read this we MAY be in some sort of public health “lock-down” to reduce the possibilities of inter-person transmission of the virus. Or maybe not. Or maybe it will just be a couple of cities. You’ll know when you read this surly contemplation of just how strange this world has become.

To most sane observers of the financial markets, we have been edging ever closer to a “correction” yet hoping the economic expansion to continue. Actually, this applies only to those with assets. For the half of America that gets by paycheck to paycheck, the idea of “economic expansion” is a pipe dream. Real wages expanded last year at the bargain basement rate of 1% while US stock market returned to the wealthy who own those assets, something like 20-30%. As they say, the rich get richer. This possible pandemic will challenge how leadership responds, how Trump responds, and how the most action averse of Senators, Mitch McConnell, responds. Some things are, at this point, predictable. Trump needs a booming stock market and an “other” to run against. Absent either of these, he’ll activate his base, though not those elusive suburban women. But what might happen if the “other” attacks are shifted from border crossers or Muslims to Covid-19 carriers. One wonders what all those gun toting MAGA hatted crowds might then do?

Trump returned from his love-fest with India’s authoritarian PM Modi (during which he failed to even mention the sectarian violence plaguing the country) to test his facile posturing on the virus, clearly an emerging “black swan event” in this presidential year. It didn’t go well, but did produce some wonderful soundbites that could well bite back. Claiming we only have 15 cases (there are 60), and no deaths, he seemed to be implying that we’re ahead of this thing and we should really be buying into the plummeting stock market. His vaunted economic advisor, Larry Kudlow, seemed to foreshadow this posture when he attempted to calm the markets with a rather fantastical statement that, “We have this thing contained.” But Trump took the prize as he counted backwards from his claimed 15 cases to “almost zero,” as the quarantine period runs. Meanwhile, the CDC director sharing the podium admonished the country to prepare for a pandemic, to “dust off” institutional plans for such, and to get supplies one might need if schools, workplaces, and churches and the like are closed down. Already, Nestle has halted all international travel of its employees globally, and, closer at hand here in the Bay Area, Vallejo’s Kaiser hospital is reporting its first case—another “novel” case meaning there is no clear connection to another source of exposure.

And if this all continues to turn for the worst, what will you readers a month from now be reading? Will air travel grind to a halt, at least internationally? Will conventions and sports events be canceled? Will certain towns and cities deemed hot spots be cordoned off? It is as if Knightian uncertainty, the economic term for a “lack of any quantifiable knowledge about some possible occurrence, as opposed to the presence of quantifiable risk….” (Wikipedia), has arrived uninvited to the party. It has taken the markets some weeks to decide that the threat is real, but this week they seem to have concluded that the worst is possible. Now in the realm of “correction” (down 10% from its high), we will flirt with a “bear market” (down 20% from a high). The difference is notable. Corrections take an average of four months to recover; bear markets average fourteen-and-one-half months to recover. At this moment in time, the numbers are clear: we are on a path toward a bear market having passed the “correction” point, and we still know almost nothing about the shape, effect, or plans to address this possible pandemic. One thing we all DO know is that half the population lives paycheck to paycheck, and if a downward trending crisis results in fewer of those paychecks coming, we are in serious trouble.

One recent dire speculation I came across suggested that a third of the US population could contract this virus if pandemic spreading conditions prevail. If this is the case, and mortality continues at the 2-3% level, this would mean the deaths of 3 million or more. It is hard to imagine just how dire the global impact would be if this, among the most technically advanced countries, lost 1% of its population. Lesser developed places might experience an even more abrupt economic disruption. And, as we saw in the 1930’s, recessions beget depressions if left unattended, and in a world enduring panic and disruption as people try to avoid the pathogen, economic “bounce-backs” will be far more difficult to construct.

So, as Trump slowly counts backward from 15, and Kudlow asserts containment, we lightly tread in the hopes that all this just goes away. Remember, Trump told us that when it warms up in April, it will just peter out. Somehow, I don’t think relying on this decidedly non-scientific assertion would lead to a terribly sensible approach. Speculation does run rampant in times like these, so how about wondering how we can have an election in a society terrified by inter-personal contact like one has in the simple act of going to the polls and voting?

And the economy, if we follow China’s lead in trying to contain and isolate the outbreak(s)? That is a huge, unquantifiable uncertainty. As an authoritarian state, China has tools America lacks, and the omnipresent weapons happy American population would be harder to restrain. And the internet? Will it be a friend or foe as we try to discern fact from fiction? We already know that Trump, in his never-ending campaign to undo anything Obama did, already dismantled planning efforts and personnel devoted to managing a pandemic. Can a last-minute effort to throw billions at this problem, led by an administration that regularly challenges science, succeed?

We are all, unfortunately, in the petri dish of this experiment.

DRUMMOND PIKE, a frequent Organizers’ Forum participant and contributor to these pages, was the founder and CEO of Tides in San Francisco, and continues to be involved in philanthropy and social change.

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