The Virus at a Milestone: So Much Has Changed
Author: Greg Valliere
May 27, 2020
IN LESS THAN SIX MONTHS, the coronavirus has killed hundreds of thousands of people, transformed geopolitics, altered fiscal and monetary policy, and scrambled the U.S. election outlook. As the 100,000th death approaches in the U.S., we offer this first draft on the pandemic’s impact . . .
THE TOOLKIT: Once awakened, policymakers assembled an extraordinary policy toolkit — lockdowns, social distancing, massive stimulus, etc. This pandemic could have been much worse — but the scientists and the Federal Reserve ruled in March and April.
THE CHINA DEEP FREEZE: It’s impossible to overstate the intensity of global antipathy toward the government in Beijing. The virus has made China a pariah. This is not just a bad public relations problem for its Communist Party; many countries, including the U.S., simply don’t want to deal with China any more.
THE DEBT EXPLOSION: U.S. government debt will increase by $4 trillion this year and surely will pass $30 trillion within a couple of years. President Trump and most politicians knew the stimulus was triage; they had to save the patient. But a staggering bill will arrive by mid-decade, as debt servicing costs climb, entitlement spending surges, taxes rise and inflation lurks.
THE FEDERAL RESERVE’S FINEST HOUR: America’s heroes have been medical personnel, many of whom gave their lives in the dark days of March and April. The heroes in this city were Jerome Powell and the Federal Reserve; they acted quickly and boldly, and as a result there were no panics over bank or market liquidity, as in past crises. Powell gets an A-plus.
THE ELECTION IMPACT: Donald Trump was acquitted on Feb. 5 — and with the economy strong, he seemed like a safe bet to win re-election. But the virus may change that scenario; a majority of Americans disapprove of his performance, and now he trails shaky challenger Joe Biden. Trump was dismissive of the virus threat for most of February and March, and the Democrats will never let him forget it.
HOW WE LIVE: Ballparks won’t be full, some people won’t shake hands, restaurants will be at half capacity. Teenagers at beaches may act like they’re invulnerable, but the rest of us will resume our old habits with caution. There’s no guarantee that there won’t be persistent hot spots in Brazil or Alabama, and a second wave could arrive before the vaccine.
THOSE WE HAVE LOST: Many of the old and weak have been culled from the herd, a harsh Darwinian fact of life. The human toll has been staggering — but if there’s a next time, the world will be better prepared. The toolkit, from emergency rooms to medical labs to fiscal policy, will be full this winter. The markets get it; the worst is over.
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