Fed cuts half point in emergency move amid spreading virus(bloomberg.com) |
Fed cuts half point in emergency move amid spreading virus(bloomberg.com) |
No. People are reacting to this virus by actively choosing to avoid conferences, travel, restaurants, movies, shops, and sporting events. They aren’t doing it because they’ve run out of money or are trying to save. They’re doing it because they don’t want to get sick. The Fed can’t will people back out into normal life by cutting interest rates.
And that’s why the market is basically flat today after this announcement. The market has nearly universally reacted to this rate cut with ambivalence.
When is the last time the Fed's spastic behavior had a sure and long-term positive impact on the economy from the average person's perspective? I specify this perspective because the macro measures used by central banks are not always accurate indicators of the general welfare. Central banks are good for primarily one purpose, and that is ensuring the economic dominance of the groups controlling them. This has been their purpose throughout history(2), and I don't see that changing now. This most recent move is at best a platitude.
All that said, I agree with your sentiment that blanket statements, especially in the highly dynamic field of economics, tend not to be accurate or helpful.
(1) Danielle DiMartino Booth, Fed Up
(2) Look into the history of the Banque Royale of France 1716-1720 and the history of the Bank of England up into the 18th century. The long and short of it is these banks were used as mechanisms by the elite to retain control over currency systems which would otherwise have given too much power to the public for their liking.
How long should I wait for the rates to move?
Here's where they stand today based on a survey of lenders, down to about 3.13%: http://www.mortgagenewsdaily.com/mortgage_rates/
If stock prices are permanently lower as a result, though, it's certainly not good for you. And, believe it or not, this is probably the more accepted idea -- that price movements are memoryless, that we shouldn't subscribe to the gamblers fallacy (that down today means up tomorrow), and that being happy for a price drop is a form of timing the market, which is frowned upon.
I don't fully buy it, but it's worth thinking about.
All reserves are gone. Imagine trying to climb out of this ditch if something really bad happened (like say a million people die).
1 - The Q1 supply shock is going to be a temporary thing. They'll recover alright after causing some companies to miss their Q1 earnings. If this was the only effect, we would recover just fine here later this year, but...
2 - Coronavirus is just getting started in the US and Europe. If it spreads widely, and unabated, then the those countries will be forced to enact school closures, business closures, etc, which will cause a massive demand shock.
3 - Demand shock will tank airlines, cruises, restaurants, malls, etc. Basically anything that requires groups of people to make money.
4 - Eventually, demand shock will hit corporate balance sheets in a big way. Many corporations (especially in the energy industry) are overloaded with debt [1]. If this goes on long enough, then those companies will go bankrupt.
5 - If enough companies default on their debt simultaneously, then derivatives on corporate debt (defaults) will cause a systemic crisis again [2].
There's no guarantee that this will happen, but if it does it's going to make 2008 look like a joke by comparison.
If it does, we need to do the right thing this time: wind down the banks and let them fail.
For the downvoters:
[1] https://www.nytimes.com/2018/09/01/opinion/the-next-financia...
[2] https://www.wsj.com/articles/in-a-blast-from-a-financial-cri...
This addiction to debt has got to stop, and unfortunately it sometimes takes cold, hard pain for some to learn a lesson.
I suggest Iranian, Argentinian bonds if you really want to get that blood flowing.
More or less, this is a deal with an investment bank where they take your money and hold onto it for a fixed term, while watching the level of a stock market index. If the index ever gets above a pre-determined "trigger level", they give you your money back early, with interest calculated at a fixed rate. If it never gets above the trigger level, then at the end of the term, they give you back your money, without interest. Unless the index has fallen below a "barrier level", in which case you don't get all your money back - you lose it in proportion to the fall in the index.
So, it's a bit like investing in the stock market - if the market goes up, you make money, if it goes down, you lose money - but rounded to fixed levels.
Here's an example:
http://www.marianainvestments.com/adviser/contact/view-plan/...
The term is 10 years, the index is the FTSE 100, the barrier level is 70%; there are three options for interest rates and trigger levels, and the safest, option 1, pays 8.55%, and has trigger levels like this:
Year Level
2 102.5%
3 100.0%
4 97.5%
5 95.0%
6 92.5%
7 90.0%
8 87.5%
9 85.0%
10 82.5%
Or, if you think that it will make it to 105% of its current level, you could go for the full-blooded option 3, which pays out 14% per annum.
And bear in mind that a fall in the index only matters at the end of the term. If there's a crash, and the index has fallen to 50% of the current level by year 3, the product keeps running. If the index recovers to 87.5% of the current level five years after that, the product pays out! It literally cannot go tits up.
You’re going to have to qualify that. I’ve been doing this shit for thirty years, including writing logistics and other supply chain software. Do not prioritize my opinion just because I write software; prioritize the opinions of, oh I don’t know, maybe COOs? The buyer for electronic parts at my employer? Anyone, anyone but software engineers so arrogant that they think they have an opinion worthy of listening simply because... hell, I can’t even guess why a software engineer would think that.
Care to substantiate it? Why? At the very least businesspeople should be more qualified because that's what they deal with? Just because software engineers have to think for a living and do some math sometimes doesn't mean they are experts in every field where that is used...
The only way that can happen is if the economy is permanently less productive. There are things that can make that happen (climate change, for example) but the corona virus is not among them. Fear of the virus is causing vastly more damage than the virus itself. The virus itself is mainly killing old, unproductive people. I don't want to minimize the severity of the problem or the emotional pain of people who have lost loved ones, but in terms of long-term economic impact the corona virus is really not a problem.
> permanently less productive
A short-term reduction in profits reduces the discounted sum of future returns. Not as much as if interest rates were lower, though.
Also, the example of the virus could indicate that these infections are on average more common and more severe than we figured, and that could reduce expected long-term growth.
Finally, a "pause" on activity could delay productivity increases. Probably a small effect, but this could represent investment not happening in the short term.
I sent some lumpy buy orders yesterday, but I'm not sure I was right to.
On the margin, I'm still slightly bearish on the whole situation due to the combination of the virus' absurdly high infection rate[0] and its long incubation period (I'll let each one of you be the judge of how long that is...)
[0] https://duckduckgo.com/?q=infection+rate+sars+vs+coronavirus...
Fiscal policy (e.g. the government buying tanks) absolutely affects the real economy.
The central bank doesn't control fiscal policy. It controls monetary policy. Monetary policy also affects the real economy, just indirectly.
A temporary boost to the market gives more time for the true long term impact to the supply chain to play out. It may turn out that the boost only gave a short respite but it may also turn out that it saved the market unneeded turmoil.
A short term boost also gives people a chance to take a breath, step back and take a more rational approach.
There are reports of kidney damage and damage to fertility among men who have recovered. Are those true? We don’t know. We have no idea.
The rational response to a deadly virus with so many unknown factors is to hunker down, avoid mass gatherings, and exercise other precautionary measures. These precautionary measures mean fewer people traveling, going to the movies, going out to dinner, attending conferences, etc. There is nothing the Fed can do to blunt this reaction besides pour money into Coronavirus research and hope they find a vaccine or remedy before it drags the economy into a recession.
You're right to highlight those aspects of the virus and I find them noteworthy as well.
However, the statistics I am most interested in is mortality rate and rate of asymptomatic infections.
I note with interest that among the 700+ infected on the cruise ship, there were 6 deaths as of yesterday - and this is among a relatively geriatric population. So, perhaps we see a mortality rate of <1% among a greater risk population.
I think the death rate will ultimately depend on whether everyone who needs hospital treatment can get it. And that's why I think the Diamond Princess may not be representative of what happens in the real world.
Your death count is incorrect. Several deaths occurred after cruise members returned to their home country, and are currently counted as deaths in their home country instead of the cruise ship.
Take for example: 78-year-old man in Perth - got infected on the cruise ship - but counted as a death in Australia.
The good news is assuming you trust China’s numbers new infections are down massively from a February 2nd peak. Deaths in China are also down significantly but less so, again assuming you trust their numbers.
[0] direct link: https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594...
[1] posted to HN: https://news.ycombinator.com/item?id=22475060
The statistic influencers currently are China, South Korea and Iran.
Then it seems to help that people are more aware and numbers seem to be dropping. I'm short-term bearish, although it could change with an extreme outlier within the EU.
It also helps that I can see what a big corporation ( where I work) is doing and I don't see any panic. Rather creating awareness.
I'm also aware of the most vulnerable companies ( travel + flight) where a friend works and it seems to be okay, as in: "not as bad as the news seems to suggest", but nonetheless carefull.
This is not going to be the end of the world as we know it but I think it will take quite some more time before it's behind us.
Cutting rates further isn’t going to protect businesses without footfall from going under - they need propped up on a wide scale until the virus peaks and passes.
Theoretically a cut to zero might help but only if you’re giving guaranteed credit lines to every small business to get them through the worst of it - but how would that even work?
that's what zerohedge calls "the dead cat bounce" right?
Is there any question? 80% of the Chinese workforce has been sitting on the sidelines since mid-January. Production is just barely ramping up and I don't think we'll see full capacity until well into April, provided that COVID19 is truly contained/managed.
Edit: not sure about the downvotes. Here's a source about Foxconn production: https://twitter.com/onlyyoontv/status/1234855310428430337
;P
I jest, but I wonder about the difference between "natural" complex-systems-behavior recessions, and those that come from acute stimulus like war and pandemic.
Something like: is there a difference between people wanting to produce and consume but being "artificially" held back, versus an average lack of confidence in the markets causing slow-down?
Source: Page 12, paragraph 2. https://www.who.int/docs/default-source/coronaviruse/who-chi...
> The median incubation period was 3.0 days (range, 0 to 24.0 days)
Edited my post to include that source
I don't see that supported by the CDC either though
There are several cases where the incubation period has been over 20 days. Maybe 90% of cases incubate for 14 days or less. Maybe 99% for less than 20.
14 days is not some magic limit.
There are case reports of it being far longer than 14 days:
https://www.reuters.com/article/us-china-health-incubation/c...
> A 70-year-old man in China’s Hubei Province was infected with coronavirus but did not show symptoms until 27 days later, the local government said on Saturday, meaning the virus’ incubation period could be much longer than the presumed 14 days.
if this was more like SARS with a 10% IFR, with equally high mortality rates among young people, then I would be very worried. But this virus seems to be the opposite. most factory workers fit in that cohort of people in that the virus effects the least so I don't see supply chains suffering.
I think supply chains are more affected by government attempts to contain the virus (quarantines/social distancing/restrictions on travel and trade) than by the virus itself, no?
It owns close to 80% of the Japanese ETF market currently, with no end to the expansion of balance sheet in sight.
After buying long treasuries, it's not unreasonable to imagine the Fed buying stocks, either individual issues or ETFs. The President would be for it, and it would be hard to drum up any opposition to it in congress.
Not only that, but rates on long treasuries have stayed negative for long periods of time in other countries. It's an open question how negative long treasuries can go, but the evidence suggests we're not even close to the limit.
Recessions are politically unacceptable in today's world. Buy stocks. Buy treasuries. Do so with wild abandon, because the Fed has your back. Just watch out for the moment when the whole thing jumps into reverse and no amount of market manipulation will stop the bleeding.
The Fed does not keep interest rates low in a vacuum. There is an auction system that determines real rates. If the Fed is not able to sell all their bonds at the target rate, they have to adjust.
In the long run, I think we will see:
1. (at risk of calling this bull market a "new normal") P/E ratios for stock will continue to climb in a secular fashion. Low returns from the alternative investment of bonds will dictate high P/E ratios.
2. Debt financing will remain cheap. Low interest rates signal cash that is desperate to find a place to park it.
3. Government debt will remain popular and affordable. This is a win for Keynesians.
4. Secular low interest rates are an indicator of a stable and mature economy, which is good. The bad part is that they signal a world where obvious available capital investment projects are missing- we seem to have picked the low hanging fruit.
5. Next recession the U.S. will hit the zero lower bound, and we will see lots of QE and/or nominal negative interest rates through some institutional mechanism.
6. Increasing government deficits look better when interest rates are low.
7. Speculative: Deficit spending can increase indefinitely if real interest rates are below 0 (aka nominal rates are below inflation). To put it in other terms: Any deficit spending is free money up until the point that it causes inflation to rise about the nominal interest rate.
What we need are lower interest rates! What we need is to limit immigration from Mexico (even though the US has a higher infection rate and there isn't any talk of limiting flights from, say, England). What we need to do is silence domain experts and have communications controlled by politicians at the White House.
Maybe this rate cut is actually the right thing to do, what do I know? But I have little reason to believe it was made for the right reasons.
Given that the administration choose exactly who leads the FED, they're not exactly independent either.
New gov, same as the old gov?
To use that quote to set up an equivalence between the two administrations is beyond the pale. I think neither Democrats nor Republicans would say the two administrations are alike.
cynical, but genuinely curious
I like the imagery of fire hydrants spraying water on an issue that is ongoing and unresolved while the vaults become hollow and worth nothing.
Why would this exact scenario regarding growth in the number of cases not play out in the US? The only difference is smaller population, but cities are dense here too.
However, unlike China, I don't think US and other countries will be able to quarantine entire cities.
They only hope IMHO is that the virus becomes less virulent with as summer approaches.
"New data on China that has trickled in over the last few days suggests the damage coronavirus has wrought on the world’s second-largest economy could be worse and more prolonged than previously expected, despite a decline this week in the number of new infections in the country."
[0] https://business.financialpost.com/news/economy/five-signs-t...
I presume the Fed knows this, and what worse is this seems to be due to political pressure.
Finally, when this does not work, it will reduce peoples' faith in the Fed.
People are being too rigid here: this isn't a perfect policy but it's not an inherently bad idea. You use monentary policy to buffer shocks to the economy, and in that regime it's best used early and with agility. I think the Fed is fine here, though I agree that this is a very minor side plot in a much larger story.
One thing that bothers me and I don't see discussed here is how much the market moved ahead of the announcement. It is very alarming that this sort of information leaked ahead of the announcement as much as it did. I would be interested to know how that reached the market.
What would be hilarious/terrible is if this attempt to juice the markets doesn't prevent a sea of red at EOD.
The first order effects weren't so large to stem the selloff (first order meaning the PV effect of lowering discount rate).
As for second order effects (rate cuts to spur economic activity), I'm not even bullish about the mechanism to transmit rate cuts to the real economy normally, but I think in a quarantine situation, those mechanisms are even more diminished as there's less economic activity. Thinking out loud, demand will probably just hit a wall--there's no elasticity here when people are worried about their lives.
The only mechanism that sounds plausible to flow through to the real economy is fiscal. Government buys Pampers, burns them, buys them again. Or keep lowering rates to raise asset prices by a purely mechanical lowering of discount factor.
What short term behavior changes do emergency rate cuts cause to boost the economy? Are there capital projects that can get started in weeks, that were previously shelved because the rates were 0.5% too high, but are now viable? What sort of projects would these be?
Have we actually seen investment though? Or have we seen mostly stock buybacks?
I can't tell if they've just not yet updated that page.
[0] https://www.cmegroup.com/trading/interest-rates/countdown-to...
https://www.marketplace.org/2020/02/18/coronavirus-warnings-...
giant gains are not so important after giant losses, this is just celebrating volatility.
The stock market psychology works on "buy on rumor, sell on news" principle. This is the reason there was a significant rally yesterday, and stocks are in negative territory today.
What the Fed should have done is give signals that they are about to cut interest rates, then give stronger signals, then even stronger signals, then cut interest rate by 0.25% then repeat for the next 0.25%. Markets would have rallied multiple times for each good news signal.
Let me stop you right there - stock market is a multi-agent system with autonomous algorithms making micro decisions, cap managers doing strategic decisions, and everything in the middle. Add a bit of chaos theory. "Buy on rumor, sell on news" is an extremely simplified and naive rational for explaining how a stock market works.
Most theories of how a stock market works have a built-in fallacy. If someone figured out how the stock market fluctuates, it would be ironed out by massive hedges.
I think the Fed understands stock market psychology pretty well.
I think they just didn't have a choice here.
I suppose negative interest rates will let us know shortly!
The Fed funds rate doesn't really do much to near-term mortgage rates (at least it hasn't to me, as a consumer). The market dip in Treasuries (openly traded) depressed yields which drove mortgage rates much lower before the fed acted at all. Lower rates allows buyers to purchase a lot more home than they otherwise would have which has a good chance of being higher than any rise in the market price - especially for less frothy areas.
If you're talking about prices going up as institutional investors buy up property obviously disregard the above as it's a different dynamic.
It isn't going to help, because it doesn't address the actual cause at all -- but it will help heighten the panic
So why cut the rate? Doesn't make any sense.
Our inability to suffer short-term consequences for long-term prosperity is a real issue that we as a country need to figure out how to solve. (Can you solve for human nature?) The fed shouldn't have made cuts in 2019 at the height of the market, we should have let failing banks fail, we need to start spending responsibly if we want to remain a reserve currency, and we need to learn that forest fires clear out the undergrowth for new growth.
The Fed has been much more aggressive than the ECB, and it's why the US recovered faster than Europe.
Edit: ~ "Thomas Jefferson" changed to "~ Someone, supposedly Thomas Jefferson"
* No documentation ties it to its putative originator.
* Its earliest known reference did not appear until long after the death of its supposed originator.
* Multiple sources are claimed for its origins.
* Contextual information indicates the words are of more recent origin than claimed. (deflation/inflation)
1. https://www.monticello.org/site/research-and-collections/pri...
2. https://www.snopes.com/fact-check/bank-shot-2/
One of the “Rules of Misquotation” outlined by Ralph Keyes in his 1992 book on that subject is that axiom that “Famous dead people make excellent commentators on current events.” Given the fear and uncertainty engendered by the current economic situation, and the disgruntlement expressed by many Americans at the thought of providing taxpayer-funded government bailouts to financial institutions and other large corporate entities (such as the auto industry), it was only a matter of time until someone trotted out a quotation (apocryphal or otherwise) from a respected, long-dead figure demonstrating that this whole economic mess was both predictable and inevitable. And one could hardly find a more hallowed figure in U.S. history than Thomas Jefferson to deliver this message, warning us from across the centuries that predatory banks and corporations would eventually impoverish us all. [snopes]
The only way out of this is to get enough cash into the hands of regular people that they can use it to pay down their debts at the same time as interest rates increase to provide the incentive to do that. Either that means the money corporations are warehousing has to somehow get paid out as wages (which would require some kind of major e.g. tax policy change), or some other new money has to be created by the government and not banks (by fiat rather than as debt) and then transferred to regular people via a UBI or similar.
In the meantime we can pretty much keep kicking the can down the road by keeping interest rates low for an arbitrarily long period of time. We could even go further into it, because the lower interest rates are the more debt load people can carry. But that keeps increasing the amount of idle cash in the corporate coffers. Something something wealth inequality.
Oh you mean the economy that has been stagnate for 20 years?
Nobody wants to rip off the band-aid, even if it's infected underneath.
In other words, buy low sell high. Got it. ;)
Your initial paragraph seeks to address point raised by others that FED is running out of ammunition and you list of Japan as an example with other pointing out the price Japan paid for that pollicy.
I suppose FED could buy all US equities on national credit card ( and if you think about it, something similar to it happened only few months ago ), but do you think it is a prudent move?
Maybe a little like subprime leading up to 2008. The problem was written off by just about everyone who bothered to look, until something snapped and it was the only thing that mattered.
We may be seeing the start of this in the repo market, which once again had a convulsion today. I doubt many care about it or really understand it, and that goes double for policy makers.
- Signaling that the Fed is willing to get involved to stabilize market prices (by making capital cheaper) is meant to calm markets and give participants comfort about making decisions today that they could optionally wait to decide. If everyone goes into a holding pattern, liquidity is impacted, which can cause all sorts of unpredictable price movement.
- it is a wealth transfer from one group to another. The beneficiaries are existing debtors (mostly firms) and firms who benefit most from cheaper capital.
- it gives the Fed slightly more influence over the outcome of the 2020 election, since reversal of the Covid-19 rate decrease can be timed to create desirable optics as the election approaches. Much research has been done about the most critical time period prior to the election when "it's the economy, stupid" is most true.
This is devastating.
I actually think the Fed is kind of happy to have a virus as cover for this move.
Fiscal responses (having the government spend actual money, either on things like infrastructure it by just handing it out to the population, which will then largely spend that money as they see fit) rather than monetary policy responses (reduce rates and hope that people will borrow more) are known to work well in most cases.
The Corona virus situation is slightly different than the financial mess of 2008 because it involves actual potential supply constraints. This means that a higher rate of inflation may have to be accepted temporarily. But inflation has arguably been far too low for far too long anyway...
However, if we were to take aggressive action on Climate Change, there’s a lot of potential jobs there. A massive potential stimulus. Also, you know, public funding of basic research which could explore, I don’t know, pandemic response, new therapeutics, etc.
Like you said, ideological barriers are what’s keeping us stuck. But before we went all in on finance we had a pretty epic run last century of productivity fueled by public investment (think 1940-1970).
Do you not need a roof over your head, health insurance, a car, college education, etc? Inflation has been rampant, it's just not apparent in manufactured goods because the actual cost of production dropped rapidly with offshoring and technological progress. Without significant inflation, we would have seen a steady march down of consumer prices, as happened in computing.
Not in Hong-Kong. [1]
[1] https://edition.cnn.com/2020/02/26/economy/hong-kong-budget-...
Not really. This was extensively explored following the Great Depression, in part by Ben Bernanke, which is how we got QE. In summary, the Fed can buy more than just short-dated government bonds.
Moreover, "liquidity trap" doesn't refer to the central bank running out of tools per se. It refers to investors calling a central bank's bluff.
A classic example is a stagflation-facing central bank cutting rates. The cut spurs inflation. Investors figure that will force the central bank's hand into a rate hike shortly. As a result, they hold.
The cut thus fails to have an impact because the bank is perceived to be constrained. That doesn't apply here.
So long as the appearance of inflation never occurs.
As long as other countries do business in USD and keep buying US debt, the party keeps going.
With fiat, you can spend as much as the combined purchasing power of all your citizens through money printing.
When you’re the reserve currency, that pool is extended to the purchasing power of many many countries.
That’s probably why, from a strategic POV, the US must remain the largest military force and continue to police the world.
With dollar hegemony, the US might even introduce new ways (like MMT) of sipping purchasing power of participants.
If a company temporarily can't manufacture something due to supply chain disruption, they could lose a lot of money and might need to borrow some. Getting by until things recover just got cheaper.
I'd guess there are probably similar issues for restaurants, the tourist industry, maybe construction?
But that assumes they're credit-worthy. It wouldn't help a company that can't borrow.
- sick pay for hourly employees for next year
- backstop airlines, event planning and travel businesses in some capacity
- offer Netflix rewards for vaccines, testing methods or other applicable things
- cover cost of insurance for massive testing
He's just trying to stimulus himself a re-election.
After that, yeah then it gets tough, but then again, maybe we get some actual fiscal stimulus which maybe buys the US some China style infrastructure!
To my understanding, there is a real public market, however the Fed essentially manipulates by participating to the degree necessary to achieve the target interest rate. When the overnight repo rate went up, the Fed hopped in to 'fix' the rate. You will never have enough assets to compete with the Fed's goals. They have limitless capacity to participate in the market.
A secular trend is a variable that evidences a consistent pattern within a given period of time. It is a statistical tendency that can be easily identified and it is not subject to seasonal or cyclical effects. (https://www.myaccountingcourse.com/accounting-dictionary/sec...)
When our economy was doing well, the rates supposed to be increased, now we have very little room to use that to help with recovery.
If the market tanks, all the talking heads will just blame the upcoming election, and claim that markets and market makers are scared of a Democrat being elected. It doesn't change the talking points for the President at all, I imagine. He still claims the moral victory, if only he hadn't been undercut by those thieves on the other side.
That sort of thing is standard now. Claim success until you can't, then deny any involvement and blame someone else. That's politics, baby.
It's fair to say, that the FED has no clue.
Edit: Trump has loudly and consistently attacked the Federal Reserve for scheming against him and trying to sabotage the economy, something completely unprecedented considering the Fed is famously intended to be independent. He ratcheted up these complaints even further since the outbreak of Convid-19. Then, the Fed takes the unusual step of cutting rates between sessions (for the first time since the start of the Great recession) despite a strong economy.
Edit #2: Now Trump has lashed out again, calling the Fed's move insufficient.
Be well, friends.
For example: who is going to outcompete American Airlines/United/Delta if all international flights are grounded or flight restrictions get worse?
Why would we care how robust our businesses are to such a rare event if we can mitigate it in other ways? You think it would be better to lose those businesses just for the chance at something better replacing them, just to avoid resorting to those mitigations?
But this is still a good point: if the market really is overheated then short-term monetary policy won't change that, and we can expect a lasting hit regardless of how disease issues play out. And it's not necessarily going to be obvious what's market movement and what's disease-related; I wouldn't be surprised if some over-hyped companies seize this as a chance to lower guidance faster than they normally could without spooking investors.
> The objectives as mandated by the Congress in the Federal Reserve Act are promoting (1) maximum employment, which means all Americans that want to work are gainfully employed, and (2) stable prices for the goods and services we all purchase.
> Following its meeting in January 2012, the FOMC issued a statement regarding its longer-run goals and monetary policy strategy. The FOMC noted in its statement that the Committee judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve's statutory mandate.
I have no doubt this administration will hesitate for even a second if they are able to implement a feature that results in short term (through November) gains at the cost of long term ruin.
The only real effect it has on first time buyers is coming up with a percentage based down payment. But 20% isn't a real requirement nowadays, but you will incur a PMI payment until you get to 20% equity.
But housing isn't more expensive, unless you want to pay cash for the home. Then yes, low interest rates aren't nice. But when interest rates are low, what's the point in paying cash? Someone offering you money below what you could make on that money in the open market is something you should take. Put enough down to give you a comfortable monthly payment (or get to 20% to avoid PMI) and diversify the rest of your money.
Moderator: solve black poverty Candidate: we’ve got to get them into houses so they can build wealth.
Perhaps the people who drafted the US Constitution would have had a chance to read Smith by 1787, but I can't imagine they would have really had a chance to fully digest and internalize the ideas being presented. They were almost certainly working from a firmly mercantilist mindset.
"Hutcheson had abandoned the psychological view of moral philosophy, claiming that motives were too fickle to be used as a basis for a philosophical system. Instead, he hypothesised a dedicated "sixth sense" to explain morality. This idea, to be taken up by David Hume (see Hume's A Treatise of Human Nature), claimed that man is pleased by utility. "
I think this is one of the first places to move away from a labor theory of value to a utility theory of value. I'm a dummy though so who knows.
Edit: Publication on or before 12 April 1759 should have had plenty of time to be read and discussed before the Contract Clause?*
^https://en.wikipedia.org/wiki/The_Theory_of_Moral_Sentiments
Put your money into the USA.
0.67 Sharpe Ratio from government bonds in local currency from 1990 to 2000.
To quote this Forbes article[1] : "the way that inflation is measured over the decades has changed numerous times. If it was still measured the same way as it was in 1990, it would be closer to 6%. Which seems a lot more accurate. If inflation was calculated as it was in 1980, it would be closer to 10%."
[1] https://forbeswealthblog.ca/2018/06/are-the-posted-inflation...
What evidence is there that companies who previously bought stock and issued debt are low on cash?
how about just massive testing. no insurance necessary
[1] Shennongjia, Hubei. Looks like it's a "county" with about 75k people: https://en.wikipedia.org/wiki/Shennongjia
[2] For instance: he visited Wuhan, self-quarantined immediately after returning which limited his contact with others, then 27 days later developed infection. Every contact he did have was tracked and confirmed negative. That's total speculation, though.
No, even if the acheivable aggregate real expansionary impact of monetary policy were unbounded (which no one argues it is) we wouldn't all be rich because monetary policy also has a distributional impact. But, more to the point, having bounded real impact isn't the same as zero real impact.
Increasing the money supply is effectively a transfer of wealth from people who own/lend currency to people who owe/borrow it. It doesn't come without cost. It's effectively taxing one group and giving the money to another.
As for stimulating the economy, it works as long as the borrowers are making better use of the money than the lenders would have. In a time when you may need to e.g. build new factories somewhere else because existing ones are unavailable, that becomes more true than it was the day before, because the people who want to build new factories need money to do it and now that money is cheaper to get.
What it does is increase borrowing. All borrowing is really borrowing from the future, because at some point the money has to paid back. (Or have interest paid on it forever, which is effectively the same thing.) So what you get now you have to give back later, but that may be a beneficial transaction if you need it more now when some disruption is occurring than you would years from now after things have calmed down.
But only in the short term, since lenders will catch on and increase their interest rates to offset the inflation. As you said, you're transferring wealth from lenders to borrowers, which means a larger incentive will be needed to induce anyone (other than the Fed) to lend money. To maintain the effect you would not only need to maintain the inflation but also continually increase the rate of inflation to exceed expectations. That's a quick route to hyperinflation and worthless currency.
The Fed can keep lending at arbitrarily low rates long after every other lender has been driven from the market because they're "lending" newly minted currency at essentially zero cost, and moreover don't particularly care whether they make a profit. However, even they can't sustain ever-increasing rates of inflation without destroying all confidence in their own currency, and it's pretty hard on the other lenders. ("Lenders" including anyone with a savings account, or with a significant fraction of their net worth in currency rather than inflation-proof assets and other investments; the poor are thus hit harder than the rich.)
> ... the people who want to build new factories need money to do it ...
That's an over-simplification. The people who want to build new factories need materials and labor to do it, not money. Giving them more money doesn't increase the amount of material or labor available, though it may allow them to claim a larger share of the available goods provided they do so before the inflation becomes generally known and devaluation takes effect. Naturally, if they're getting a larger share then others are making do with less. It only works out to a net benefit under the assumption that you know how those goods should be put to work better than the people directly involved—despite apparently being unable to persuade people that your plan is better rather than resorting to underhanded tricks.
No, because the reason you lower interest rate targets are exactly the conditions which provide lower returns on alternative investments besides lending. You can only afford to raise rates for lending if you've got something better to do with the money.
No, because lowering interest rates by 0.5% generally doesn't cause inflation to increase by 0.5%.
Moreover, most of the inflation from lower interest rates happens immediately. If you lower interest rates people borrow more money which causes some inflation, but to cause even more inflation people would need to borrow even more money, which they wouldn't do unless you lowered interest rates even further.
The level of outstanding debt (i.e. the money supply) goes up and then stays there until interest rates go back down and give people incentive to pay it back.
> As you said, you're transferring wealth from lenders to borrowers, which means a larger incentive will be needed to induce anyone (other than the Fed) to lend money.
Banks can borrow money from the Fed and lend it to other people. Also, when you lower interest rates it lowers the returns on everything else because people borrow money and use it to bid up securities, and then the now-smaller returns from issuing loans remain relatively attractive.
Notice that the US has had near-zero interest rates for over a decade and there isn't anything even resembling hyperinflation. But there is a whole lot more outstanding debt than there was when interest rates were higher.
> Giving them more money doesn't increase the amount of material or labor available
Sure it does, in the sense that available means in productive use rather than merely having physical existence.
If you pay people more they'll spend more time working and less time watching TV. They'll dig minerals out of the ground to make stuff with instead of leaving them in the ground. There is a difference between having something and doing something with it.
> It only works out to a net benefit under the assumption that you know how those goods should be put to work better than the people directly involved—despite apparently being unable to persuade people that your plan is better rather than resorting to underhanded tricks.
The entire premise of lending money is based on this being true. It's the assumption that some people have good ideas but not capital to fund them.
There are plenty of ideas that you can expect to turn $100,000 this year into $105,000 next year. If interest rates are at 4% they're viable, if they're at 6% they're not. Lowering interest rates makes more of those things viable.
It's not a matter of persuasiveness, it's a matter of transaction costs. Alice wants to start a company. She could borrow money and use it to pay salaries -- which is only possible if she can borrow at a sufficiently low interest rate. Or she could pursuade the workers to work all this year and not get paid until next year (when they'll get paid with interest). But then the workers would have to convince their landlords to let them live in their apartments without paying rent for a year, and the landlords would have to convince the government to let them defer paying property tax for a year, and the government would have to persuade the teachers to teach without pay for a year and so on.
Obviously borrowing the money from a bank is a lot more realistic.
100 Trillion Dollar bill anyone?
There is no argument that cannot or does not have long-term effects, and no we would not all be incredibly rich, as it absolutely costs something to increase to money supply.
When you increase the money supply you devalue each and every current piece of money in existence. Money (fiat) can be infinite but what you buy with it is not.
>Every underdeveloped nation would simply increase their money supply and poverty would end for ever.
No, it wouldn't. Have you heard of hyperinflation? A gallong of milk would simply cost $1000 dollars. Kind of like how milk used to cost 5 cents a gallon 50 years ago. The countries that do try what you are talking about, and there are plenty of examples, amazingly, all end up incredibly poor and economically devastated.
The argument that monetary policy cannot affect the real world economy is more about its limitations, where it cannot really make up for something like a months long interruption to international trade because the world's leading manufacturing nation has quarantined half its population.
The best it could to benefit the long term, I would think, is to make credit more available and cheaper to make it easier for companies and governments to weather the storm with minimal damage.
Second, since this is an ongoing outbreak the CFR is a moving target. Your calculation assumes the ratio of deaths to recoveries remains what it is now for the ~40k active cases. However, the CFR by that calculation has been steadily falling. Additionally, since CFR is only based on diagnosed cases the struggles with testing capacity, particularly in the US, will distort it by biasing diagnoses towards more severe cases.
We need more density in low-density areas of cities. Allow people to have multi-family homes if they choose it.
To use an analogy from botany, its like how certain types of plants need periods of dormancy, but its actually possible to create or install a given plant into specific environmental conditions where the inducement of dormancy is prevented, for a time... But overtime, without the time to rest and regenerate, the plant will become incredibly weak. It will stop flowering or producing delicious fruit. It will grow frail and live to only a fraction of its potential age limit. Similar to this are how efforts to reduce the spread of wildfires only ends up with a far more dangerous and uncontrollable situation down the road and the 'debt' of uncleared deadwood piles up.
Just a thought.
[0] Admittedly this is more of a problem in places without a national health service like the US.
Over that time, the population has also shrunk from 128 million to 126.3 million [1], so the per capita isn't as relevant. Japan's total GDP has pretty stagnant since 1995 [2].
[1] https://tradingeconomics.com/japan/population [2] https://tradingeconomics.com/japan/gdp
Please don't post partisan political comments without a source.
Edit: I appreciate the downvotes for kindly asking people to follow HackerNews' guidelines
More realistically, even if enough of them have antibodies to create herd immunity. (Via making it impractical for the virus to transmit to a vulnerable host)
I think a likely outcome is that the current outbreak dies down, then it either flares up again from some undetected cases or is reintroduced from another country. But then, with the initial media attention elsewhere and COVID-19 symptoms basically looking like the flu, they'll just let the sick die rather than re-introduce draconian quarantine measures.
As an RNA virus, it would be extremely difficult for SARS-COV-2 to establish persistence. I'm not aware of any known mechanism by which that could happen. It's been proposed that some COV's may have neurotropic capability [1] that might allow them to achieve latency, but it's just that -- a proposal.
This isn't happening in the rest of the world. ( Except some dictatorships)
Some minor outliers like you mentioned, eg. Italy. But these are getting handled. It will not spread anymore like it did in China.
It's possible that some parts will need extra handling, but sharing information is the key for handling this.
Yes, China did some weird stuff with information in the beginning, but it seems there is not really much reason to suspect they're hiding information anymore [1,2]. The responses by free-er nations have been much milder with more reliance on self-quarantine. Let's hope that that works. And let's hope there will be sufficient testing to stay on top of things.
[1] https://www.vox.com/2020/1/27/21082354/coronavirus-outbreak-...
[2] https://www.vox.com/2020/3/2/21161067/coronavirus-covid19-ch...
We will see what the best strategy will be, the hardest work is now for China, South Korea, Iran and Italy.
The rest will learn from them.
https://www.medrxiv.org/content/10.1101/2020.02.28.20028068v...
"The mean incubation was 8.42(95% confidence interval [CI], 6.55-10.29) days... COVID-19 course was approximately 2 weeks."
Fairly small sample size of 55 patients, which means the reliability may be debatable, and giving figures to two decimal places is meaningless. (In fact any decimal places are meaningless, unless someone times the exact moment of exposure.)
That aside - it seems very unlikely that 24 day incubations will be common.
Broadly it seems most people who become symptomatic will show symptoms within 10 days and will recover within two weeks after the symptoms appear. A small percentage - mostly older and unwell - will become seriously ill, and an even smaller percentage will die.
Meanwhile the presence of untraceable infections strongly suggests that a significant number of people - possibly a majority - either don't develop symptoms at all, or don't consider them serious enough to require medical attention.
But are we close to full capacity?
There is also a question of short term vs. long term. In the short term if some things are made only in China they may become temporarily scarce. In the longer term either China will come back online or capacity will be created somewhere else (or both).
https://www.msn.com/en-us/news/us/coronavirus-may-have-sprea...
But the vast majority are less recent than February 20th. Almost all of them have been showing symptoms for longer than the average time to hospitalization.
And that's without considering that inflation is very low, so we can print our way out of some of it.
There are two possibilities: If in 25 years there wil be enough real resources (machines, infrastructure, knowledge..) for covering all the needs of the people, the accumulate debt is not going to be a problem. If in 25 years there will not be enough real resources, the government finances are going to be irrelevant.
So, what is the best way to make sure there are going to be enough resources? investing in infrastructure and education or "saving" money?
A borrower can only afford to pay higher rates if they have something better to do with the money. Lenders can always afford to raise rates, as doing so increases their profit margin. The limiting factor there is competition from other lenders, but a factor like inflation affects all lenders equally. What they can't afford is lower profits in real, fixed-dollar terms due to inflation. Lower profits on lending => less money available for lending => higher prices (interest rates) for the remaining supply.
Would it not be better to face some of that pain now?
The US could just cut interest rates whenever the stock market goes down. There's no real limit to how low they can go, and as long as the investors understand that the Fed is backstopping them they'll contribute in pumping it up.
But even mr. Draghi might agree that right now the ECB is pretty powerless, given that it's rates are already below zero.
If you insist in fixing your home with your car jack, don't complain about the results.
https://www.business-standard.com/article/finance/can-banks-...
No enforcement authority = no authority. It's really that simple. Strongly worded letters are pointless in a world where someone can hold them up, shout "Complete Exoneration!", and have their media apparatus repeat it until their followers believe it.
Just to play devil's advocate, the world also rarely has an epidemic of this magnitude...
This is my opinion, not backed by hard data or numbers or anything else - just my opinion. I think that the world (or at least the west) became dependent on China's capacity. We outsourced and off-shored, and a bunch of factories closed and companies shut down. China didn't add capacity, it replaced capacity. So in the short term, if China shuts down, there's an actual shortage of capacity, because much of the other capacity is gone.
In the long term, as you say, sure, we can start back up here. It will take a while, but we can get there. The buildings didn't die, and the people who knew how to do it didn't all get lobotomies. In the medium to long term, we'll be fine, whether China comes back or not.
Note again: This is my guess. Anyone with real data, feel free to supply it.
Please refrain from fearmongering. Yes, COVID-19 is serious, but dishonestly inducing a public panic only makes matters worse.
[1]: https://www.who.int/news-room/q-a-detail/q-a-coronaviruses
[2]: https://www.health.harvard.edu/blog/as-coronavirus-spreads-m...
[3]: https://www.worldometers.info/coronavirus/coronavirus-age-se...
Case in point the incubation period from your own link. "Most estimates of the incubation period range from 1-14 days, most commonly around five days. These estimates are updated as more information becomes available."
How long does it remain on the surface. "It is not certain how long the virus survices on surfaces."
Can asymptomatic people spread coronavirus? "How often asymptomatic transmission is occurring is unclear."
How deadly is the coronavirus? "We don’t yet know."
Can I catch the virus by eating food prepared by others? "It's not clear if this is possible."
TLDR: We have decent guesses in some categories and in others we don't know at all. People acting like they know for sure the details of this virus are lying at worst and merely uninformed at best.
> Case in point the incubation period from your own link. "Most estimates of the incubation period range from 1-14 days, most commonly around five days. These estimates are updated as more information becomes available."
Yes, it continues to become more accurate. Initial reports thought the incubation period could be up to 20-30 days. Continued study of the virus has refined the numbers and will continue to do so.
> How long does it remain on the surface. "It is not certain how long the virus survices on surfaces."
Interesting that you purposefully leave out the rest of the quote:
"It is not certain how long the virus that causes COVID-19 survives on surfaces, but it seems to behave like other coronaviruses. Studies suggest that coronaviruses (including preliminary information on the COVID-19 virus) may persist on surfaces for a few hours or up to several days. This may vary under different conditions (e.g. type of surface, temperature or humidity of the environment).
If you think a surface may be infected, clean it with simple disinfectant to kill the virus and protect yourself and others. Clean your hands with an alcohol-based hand rub or wash them with soap and water. Avoid touching your eyes, mouth, or nose."
> How deadly is the coronavirus? "We don’t yet know."
Again, you leave out the rest of the quote and this one has hard numbers behind it as the infection, recovery, and mortality rates are being tracked internationally.
"As of February 25, 2020, the reported confirmed cases and deaths in China suggest the mortality rate is roughly 3%. It is important to remember that early on in an epidemic there is a “tip of the iceberg” phenomenon where we overestimate more severe cases and mild or asymptomatic cases go unrecognized, so the mortality seems higher than the reality. That may be happening when we speak of up to 3% mortality. By contrast, SARS had a mortality rate of around 10%; the MERS mortality rate is closer to 30% to 40%. There appear to be many more COVID-19 cases confirmed than there were with SARS and MERS."
> Can I catch the virus by eating food prepared by others? "It's not clear if this is possible."
Yet another misleading partial quote.
"It’s not clear if this is possible, but if so it would be more likely to be the exception than the rule. That said, COVID-19 and other coronaviruses have been detected in the stool of certain patients, so we currently cannot rule out the possibility of occasional transmission from infected food handlers. The virus would likely be killed by cooking the food."
None of these are "guesses". They are scientific observations backed by evidence. Stop spreading misinformation. You claimed that we "know next to nothing about this virus" which is simply not true.
People need the truth, and they need time to be able to react to it before we're already in the midst of a bad situation.
A Harvard scientist predicted that 40-70% of the world could get this, and the death rate could be 1%. That rate is much higher among the elderly and the unwell.
A lot of people are going to die amidst the backdrop of a completely overloaded and mostly unprepared healthcare system. We need to acknowledge that.
I do not believe anything I've written is exaggerated or written from a place of fear.
But, the demographics skewed older than the general population, and there were 3200 people on board in basically a worst case scenario for spread.
So 42/3200 is ~1% of a much older population.
Edit: link to China study summary below, but including it top-level here as well.
http://www.cidrap.umn.edu/news-perspective/2020/02/study-720...
>Also, the cruise ship cases aren’t all resolved outcomes yet.
No they aren't, but the vast majority have been symptomatic longer than the average time till hospitalization and the number in critical condition hasn't increased in days. It's very unlikely they'll get to anywhere near 20%. And this is in a more geriatric population.
Yes, but the reason why the Diamond Princess is interesting is that we know exactly how many of them got infected. We don't know that about any other population.
If 42 were critical, that doesn't necessarily mean they were the only ones who needed hospital treatment.
>If 42 were critical, that doesn't necessarily mean they were the only ones who needed hospital treatment.
Percent hospitalized isn't the thing to look at. It's percentage of people who need intensive care or a ventilator that matters.
Many people were hospitalized for observation. Some people received IV fluids. How many of those people were saved by IV fluids vs. just being a nice to have is unknown. But that kind of care can be done in mass tent hospitals or even at home.
Unless, you know, there are enough goods to support a lifestyle similar to that of the current generation but our kids can't buy them because all their productivity is going to pay the interest on our generation's (foreign-owned) debt. Or there would have been enough goods but we took that money we borrowed and used it to shift production toward things we want now, compromising the capital investment and maintenance which were needed to stay productive so that everyone's needs could be covered in the future.
Profitable investment is good, and it isn't necessarily wrong to go in debt to fund a good investment, but there is such a thing as malinvestment—investing in the wrong things, resulting in a net loss—and the more debt you take on the more your productivity is continually drained away and unavailable for either investment or consumption. Profitable investments will take place without subsidies, and if it isn't clear which kinds of investment will end up being profitable then it's better to save the funds until the situation becomes clearer rather than waste scarce goods and labor on a bad investment.
Let's go over Housing, healthcare, and education in turn:
- Housing, overpriced because the jobs are concentrated, stupid zoning, etc. We deserve dense cities but UBI means no job, no stave, which in the short term takes away the demand to move. Let's not rest on that and continue to stupid-suburb, but do take some refuge in that short term benefit of decreasing the necessity of people moving.
- Education, overpriced because of a shortage of work and a credentialist rat race. I'm all for people being educated---say a liberal arts that includes engineering not because it pays well but because one has to understand the machines that surround us to understand the modern human and social condition. But it's stupid to expect people to stuggle to acquire credentials that won't get them hired and won't actually help with the stupid jobs that get if they are hired.
UBI helps eliminate unproductive by removing the desperation that forces people to take them. The decreased demand for employment hopefully will end the credentialism rat race, lowering the cost of education. And the decreased drudgery of the education that remains should make the education better, and push employers to shoulder more of the remaining cost.
- Healthcare. Unlike the others this probably is less overvalued; avoiding being sick or getting well when sick is incredibly valuable to the individual, and thus I view the price gouging as inevitable. I don't think there is a market based solution to this one, but that's OK. Just do the universal thing and remove this from the market, and now its not subject to inflation in the same way. [The power of the state commands the supply to exist.]
I think much of healthcare could be solved if providers had to publish uniform prices and couldn't post-facto bill, you know, like every other business. Imagine going to the grocery store, paying at the register, and then two months later receiving a bill in the mail for the cashier's time!
Still, I am not opposed to single payer as a way forward - assuming it doesn't get transmuted into mandatory patronage of the same corrupt system. It's not like Medicare currently solves the underlying issues, it just absorbs the cost disease.
Basic income is a natural extension of quantitative easing. It will help people in rural areas, but do nothing for in-demand areas (being swallowed up by housing). I do agree it's much better than just giving the money to the banks though!
Direct infrastructure improvement - party on! Government "public works" is currently focused on the military, producing a surplus of chaos and misery abroad, while our infrastructure crumbles. I don't know that subsidizing suburban infrastructure fully makes sense, but I do know it's better than squandering the resources elsewhere.
The appraised value is just a signal how much collateral a bank can rely on for the loan, which is why most loans with good interest rates have a maximum loan to value ratio. Banks don't want to own houses, they want to own a piece of the borrower's future productivity, manifested as interest payments.
The limited housing/transit supply (due to zoning restrictions) coupled with concentrated job growth are what drives up housing costs.
The inflation has been offshored. China's rural population has been lifted out of poverty. What happens to the world economy when china runs out of cheap labor?
So what you're really seeing is that physical infrastructure cannot keep up with the massive change in the US from a manufacturing and agricultural economy to a service and information economy.
But you're right that it doesn't give them much monetary room--I guess if/when the downturn comes resorting to fiscal stimulus be the only answer. Not that the GOP deficit chickenhawks have given any room there: remember when GOP was against deficits? US$ 1T later Pepperidge Farms remembers.
potentially, negative interest rates, that’s what [1]
[1] https://www.investopedia.com/articles/investing/070915/how-n...
I assume you meant “raise” instead of “cut” here.
If so, you are correct, and the question about what the fed does when the market corrects/crashes is why a lot of folks are wringing their hands right now.
Though inflation had remained low, so it's not clear that it was necessary to raise rates.
If you doubt the official numbers, the Billion Prices Project goes out scrapes price data, and it matched pretty well with the CPI:
Now, they have recently done basically what Trump asks. Are they succumbing to Trump's pressure, or is Trump asking them to do what actually is the right thing?
Are these numbers still updated now that many (or all?) have left the ship? Where can I see those numbers?
>Many people were hospitalized for observation
Yes, but if fewer people had been under close observation in a hospital more might have died. Admitting only precisely those who turn critical is not realistic in my (lay person's) opinion.
I agree with you about the age distribution on the cruise ship though. This is very important to note.
Still, I have to wonder what share of the population can get hospital/ICU treatment at any given time.
I don't know about other places, but here in the UK hospital bed occupancy rates are dangerously high at the best of times. I don't know how many beds/ICUs can be freed up in an emergency. But I doubt it's anywhere near enough if everyone gets sick at the same time.
I hope someone is doing some modelling to find out how aggressively we have to slow down the rate of infection so that hospitals are not overwhelmed.
> Please don't use Hacker News for political or ideological battle. That destroys the curiosity this site exists for.
https://ourworldindata.org/fertility-rate
I plugged in Denmark and Portugal, and both show lower fertility rates than the US.
The USA fertility rate in 1990 was 1.98; in 2020 it is projected to be 1.84 (a delta of -.14).
The fertility rate in Denmark in 1990 was 1.65; in 2020 it is projected to be 1.78 (a delta of +.13).
The fertility rate in Portugal in 1990 was 1.52; in 2020 it is projected to be 1.41 (a delta of -.11).
The fertility rate in Germany in 1990 was 1.36; in 2020 it is projected to be 1.47 (a delta of +.11).
The fertility rate in Canada in 1990 was 1.66; in 2020 it is projected to be 1.57 (a delta of -.09).
The fertility rate in France in 1990 was 1.75; in 2020 it is projected to be 2.06 (a delta of +.31).
The fertility rate in Norway in 1990 was 1.85; in 2020 it is projected to be 1.84 (a delta of -.01).
The fertility rate for Europe in total in 1990 was 1.70; in 2020 it is projected to be 1.62 (a delta of -.08).
This is obviously not a thorough (or even statistical) analysis of the situation, but a cursory look at the data from the perspective of multi-decade trends does not lend credence to the notion that the availability of social safety nets has no impact on demographic rate of change in a developed country.
[1] https://www.cia.gov/library/publications/the-world-factbook/...
[2] https://ourworldindata.org/fertility-rate#the-global-decline...
http://www.cidrap.umn.edu/news-perspective/2020/02/study-720...
About 40% of the patients in that study weren't even tested. They were included based on symptoms that include severe pneumonia. The ones who were tested, sought testing because they displayed symptoms severe enough to seek treatment.
This is the very definition of selection bias, and there is absolutely no reason to pretend that a 20% hospitalization rate is a realistic outcome.
Researchers saying "we are not completely certain but the evidence appears to indicate X" is not logically equivalent to "we have no idea why X happens"
(The answer is you have to increase immigration, and hire those people)
(Real) investment, in the sense of building up new productive capacity, is an important part of growing the economy. However, investment at least by the private sector cannot thrive in a vacuum. It needs a context of either existing or plausible demand. If the demand is missing, you'd be a fool to spend money on increasing productive capacity, i.e. you'd be a fool to invest.
Note the important emphasis on what kind of investment we're talking about. Unfortunately, the act of buying existing productive capacity (e.g. by buying stocks) is also called investing, and you have to be careful not to confuse the different meanings of the word.
Saving goes hand in hand with investment since by putting money in the bank it can be borrowed by entrepreneurs and they can hopefully do something productive with it. Merely spending it doesn't have that effect.
Also consider my point that many, many of these cases are unresolved. Whereas the China study, which most health experts are relying on currently as our best guess - not the cruise ship — looks at resolved cases.
The number of undiagnosed cases is the great unknown that experts disagree on. It's also the basis for all the wild speculation out there.
Under normal circumstances I would say let's test a random sample of the population in some affected area. But as test kits are scarce doing that would probably be ill advised.
I also agree that there’s a wide range of possibility. But I’m responding to the claim there’s no data with a study from China’s CDC that most experts are citing as the best info we have right now. Is it perfect? No. But the Diamond Princess isn’t a scientific study — it’s a mess.
Edit: for a range of possible outcomes, this article is helpful:
https://www.forbes.com/sites/kenrapoza/2020/02/25/coronaviru...
At the low end are South Korea’s (mortality) numbers, at the extreme high Iran, and Italy aligning roughly with China’s study.
The tl;dr is we have a fairly wide range of possible outcomes, but Italy is lining up with China’s findings.
But with the flu we have large population studies, so we can estimate the number of likely infected based on the number seeking treatment. They study you are citing can't be generalized, and no one but you is claiming it should be used to estimate hospitalization rate.
Public health officials who are trying to produce estimates are using that study along with models of how many un-diagnosed cases might be out there to try to predict hospitalization rates. But they aren't naively throwing out your 20% number.
>But I’m responding to the claim there’s no data with a study
There is no data to support your claim of a possible 20% hospitalization rate. None, it doesn't exist. There is data to support a 20% hospitalization rate among people sick enough to seek treatment, and people sick enough to be clinically diagnosed.
>at the extreme high Iran, and Italy aligning roughly with China’s study.
Italy and Iran also likely have far more actual cases than confirmed.
>No. But the Diamond Princess isn’t a scientific study — it’s a mess.
The study you are presenting makes no attempt to predict the actual hospitalization rate among the general population. And the samples aren't random. It's more a mess than the numbers from the Diamond Princess.
Everyone on board the ship was tested, no sampling bias there. But even then, there is selection bias because the ship's population is older than the general population.
Printing your way out of debt is not a solution, ask Argentina. Eventually your investors will lose faith in the value of the money they're getting back in return and the currency will collapse.
1. I never said fiscal stimulus was guaranteed to return more than the interest to service the debt needed to pay for it. I said if it does that. My point is deficit spending == bad is not always true.
2. You didn't provide any facts or resources to prove that there exists no possible fiscal stimulus that could generate a greater return than the interest on the debt needed to pay for it.
If you want resources, Google it. You'll find plenty of information backing up the claim that it is possible for deficit spending to pay for fiscal stimulus to be a net benefit.
>You don't address the fact that the debt has gone up 300% over the last 20 years while the GDP is up only an average of 2.5% a year.
Why are you quoting a 20 year value for the debt, but a yearly value for GDP?
>Printing your way out of debt is not a solution, ask Argentina.
Instead of looking at Argentina, why don't you look to the US? We've been effectively printing money since 2008 and inflation hasn't come close to going out of control.
The US isn't Argentina, and saying look to Argentina is no better than people saying look to Somalia for an example of why small hands off government doesn't work.
In the real world, though, Congress decides where to spend the money - not based on any kind of return on investment calculation, but based on political calculations. So in reality, a positive return, if it happens at all, will only happen by coincidence.
Boomers are the ones who tell you to be scared of the debt. Same boomers tell me that gold is the best investment
I also argue it is a net positive, regardless of the underlying mechanism(s), that the fertility rate is declining across the world considering the unsustainable consumption rate per capita of the first world.
[1] https://ourworldindata.org/fertility-rate#empowerment-of-wom...
Spending is crucial because that's what signals where investment is needed / desirable. Furthermore, spending is what gives companies profits that can then be reinvested for sustained development. If there is no spending, then investment is simply pointless.
If investment happens in a vacuum, without regard for where the demand (which is nearly a synonym for spending) is, the investment will likely go to inefficient or useless projects.
Furthermore, the stated causality from saving to investment doesn't exist in our modern financial system. Banks create money out of nothing whenever they find a suitable borrower. Of course, a borrower is more likely to be suitable if they can demonstrate demand for their product - again, the importance of spending.
Sidenote: There is an equality of savings and investment in the national accounts (if you ignore the external sector), but that's just an after-the-fact accounting identity without any causal content. There's good reason to believe that, if anything, the causality goes from investment to savings. Either way, it's not an interesting causality. The real economic decisions, certainly the ones that lead to good allocation of capital, follow where the demand is.
Sidenote #2: Your stab at the government misses the point as well. Nobody is asking for the government to start investing in productive capacity for things that the private sector usually provides.
However, government could ensure that people have more disposable income. This leads to more spending, which encourages (and finances, via reinvested profits!) investment in order to satisfy the added demand. At the same time, it improves the quality of the demand signal, which helps achieve a better overall allocation of capital.
There are other useful things that governments could do, but this is an important and useful thing. The economy generally works well when people can just vote with their wallets. But one precondition is that there is money in those wallets.
There would be no growth because the money the people would be spending is the same the government took from the companies in the first place. It's like taking the fat out of a man and feeding it back to him.
The discussion was about fiscal stimulus.