Category: zerohedge

Authored by Richard Hobday via Medium.com,

Fresh air, sunlight and improvised face masks seemed to work a century ago; and they might help us now.

When new, virulent diseases emerge, such SARS and Covid-19, the race begins to find new vaccines and treatments for those affected. As the current crisis unfolds, governments are enforcing quarantine and isolation, and public gatherings are being discouraged. Health officials took the same approach 100 years ago, when influenza was spreading around the world. The results were mixed. But records from the 1918 pandemic suggest one technique for dealing with influenza — little-known today — was effective. Some hard-won experience from the greatest pandemic in recorded history could help us in the weeks and months ahead.

Influenza patients getting sunlight at the Camp Brooks emergency open-air hospital in Boston. Medical staff were not supposed to remove their masks. (National Archives)

Put simply, medics found that severely ill flu patients nursed outdoors recovered better than those treated indoors. A combination of fresh air and sunlight seems to have prevented deaths among patients; and infections among medical staff. There is scientific support for this. Research shows that outdoor air is a natural disinfectant. Fresh air can kill the flu virus and other harmful germs. Equally, sunlight is germicidal and there is now evidence it can kill the flu virus.

`Open-Air’ Treatment in 1918

During the great pandemic, two of the worst places to be were military barracks and troop-ships. Overcrowding and bad ventilation put soldiers and sailors at high risk of catching influenza and the other infections that often followed it. As with the current Covid-19 outbreak, most of the victims of so-called `Spanish flu’ did not die from influenza: they died of pneumonia and other complications.

When the influenza pandemic reached the East coast of the United States in 1918, the city of Boston was particularly badly hit. So the State Guard set up an emergency hospital. They took in the worst cases among sailors on ships in Boston harbour. The hospital’s medical officer had noticed the most seriously ill sailors had been in badly-ventilated spaces. So he gave them as much fresh air as possible by putting them in tents. And in good weather they were taken out of their tents and put in the sun. At this time, it was common practice to put sick soldiers outdoors. Open-air therapy, as it was known, was widely used on casualties from the Western Front. And it became the treatment of choice for another common and often deadly respiratory infection of the time; tuberculosis. Patients were put outside in their beds to breathe fresh outdoor air. Or they were nursed in cross-ventilated wards with the windows open day and night. The open-air regimen remained popular until antibiotics replaced it in the 1950s.

Doctors who had first-hand experience of open-air therapy at the hospital in Boston were convinced the regimen was effective. It was adopted elsewhere. If one report is correct, it reduced deaths among hospital patients from 40 per cent to about 13 per cent. According to the Surgeon General of the Massachusetts State Guard:

`The efficacy of open air treatment has been absolutely proven, and one has only to try it to discover its value.’

Fresh Air is a Disinfectant

Patients treated outdoors were less likely to be exposed to the infectious germs that are often present in conventional hospital wards. They were breathing clean air in what must have been a largely sterile environment. We know this because, in the 1960s, Ministry of Defence scientists proved that fresh air is a natural disinfectant. Something in it, which they called the Open Air Factor, is far more harmful to airborne bacteria — and the influenza virus — than indoor air. They couldn’t identify exactly what the Open Air Factor is. But they found it was effective both at night and during the daytime.

Their research also revealed that the Open Air Factor’s disinfecting powers can be preserved in enclosures — if ventilation rates are kept high enough. Significantly, the rates they identified are the same ones that cross-ventilated hospital wards, with high ceilings and big windows, were designed for. But by the time the scientists made their discoveries, antibiotic therapy had replaced open-air treatment. Since then the germicidal effects of fresh air have not featured in infection control, or hospital design. Yet harmful bacteria have become increasingly resistant to antibiotics.

Sunlight and Influenza Infection

Putting infected patients out in the sun may have helped because it inactivates the influenza virus. It also kills bacteria that cause lung and other infections in hospitals. During the First World War, military surgeons routinely used sunlight to heal infected wounds. They knew it was a disinfectant. What they didn’t know is that one advantage of placing patients outside in the sun is they can synthesise vitamin D in their skin if sunlight is strong enough. This was not discovered until the 1920s. Low vitamin D levels are now linked to respiratory infections and may increase susceptibility to influenza. Also, our body’s biological rhythms appear to influence how we resist infections. New research suggests they can alter our inflammatory response to the flu virus. As with vitamin D, at the time of the 1918 pandemic, the important part played by sunlight in synchronizing these rhythms was not known.

Face Masks Coronavirus and Flu

Surgical masks are currently in short supply in China and elsewhere. They were worn 100 years ago, during the great pandemic, to try and stop the influenza virus spreading. While surgical masks may offer some protection from infection they do not seal around the face. So they don’t filter out small airborne particles. In 1918, anyone at the emergency hospital in Boston who had contact with patients had to wear an improvised face mask. This comprised five layers of gauze fitted to a wire frame which covered the nose and mouth. The frame was shaped to fit the face of the wearer and prevent the gauze filter touching the mouth and nostrils. The masks were replaced every two hours; properly sterilized and with fresh gauze put on. They were a forerunner of the N95 respirators in use in hospitals today to protect medical staff against airborne infection.

Temporary Hospitals

Staff at the hospital kept up high standards of personal and environmental hygiene. No doubt this played a big part in the relatively low rates of infection and deaths reported there. The speed with which their hospital and other temporary open-air facilities were erected to cope with the surge in pneumonia patients was another factor. Today, many countries are not prepared for a severe influenza pandemic. Their health services will be overwhelmed if there is one. Vaccines and antiviral drugs might help. Antibiotics may be effective for pneumonia and other complications. But much of the world’s population will not have access to them. If another 1918 comes, or the Covid-19 crisis gets worse, history suggests it might be prudent to have tents and pre-fabricated wards ready to deal with large numbers of seriously ill cases. Plenty of fresh air and a little sunlight might help too.

With the Fed’s cutting rates three days ahead of the regular Wednesday FOMC announcement by 100bps to 0%-25bps, while also announcing a fresh $700BN QE as well as enhanced FX swaps, panic is in the air as reflected in the S&P futures which have been locked limit down since the open, and with equity traders frozen out and unable to do anything all the attention has shifted to rates where all hell is breaking loose.

As BMO’s Ian Lyngen wrote in his Fed post-mortem “it is not inconceivable that we see negative Treasury yields in the front end when Asia comes back on line”, and that’s precisely what has happened, when yields on several Treasury bonds expiring in the next three months are getting quoted at slightly negative levels during Asia hours following the Fed’s 100bps rate cut.

One such example is the US govt bond maturing April 23, or in five weeks, which briefly dipped below zero, touching -0.01% after trading at 1.50% just two weeks ago.

And while so far NIRP is confined to short-dated maturities, expect to see negative rates migrating further right on the yield curve with every passing day, and as IG Markets’ analyst Kyle Rodda notes “everywhere effectively could see their yields under pressure and turn negative – you’ve got the Fed coming in cutting rates to near zero, and the Reserve Bank of New Zealand slashing to ensure liquidity in markets.”

As Rodda correctly notes, “it’s all about keeping financial conditions and liquidity as supported as they can, and investors might take this as another reason to just pile into safety.”

“It’s a sign the Fed and other central banks are doing whatever it takes to keep liquidity ticking, especially when we saw Treasuries trading almost like equities last week when all people wanted to do was hoard cash.”

Then there is the question of the Fed’s ad hoc QE announcement which, as Powell’s press conference made clear, is being made up as we go along, with the Fed simply stating that “to support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities that are central to the flow of credit to households and businesses, over coming months the Committee will increase its holdings of Treasury securities by at least $500 billion and its holdings of agency mortgage-backed securities by at least $200 billion. The Committee will also reinvest all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”

Purchases will begin Monday on the below schedule, similar to Friday’s QE shocker:

• 10:15 – 10:30 am: Treasury Coupons 0 to 2.25 year sector, for around $10 billion
• 11:00 – 11:15 am: Treasury Coupons 2.25 to 4.5 year sector, for around $8 billion
• 11:45 am – 12:00 pm: Treasury Coupons 4.5 to 7 year sector, for around $9 billion
• 12:30 – 12:45 pm: Treasury Coupons 7 to 20 year sector, for around $5 billion
• 1:15 – 1:30 pm: Treasury Coupons 20 to 30 year sector, for around $5 billion
• 2:00 – 2:15 pm: TIPS 7.5 to 30 year sector, for around $3 billion

It is this likelihood that the Fed will monetize anything and everything at far higher prices than market, coupled with a non-trivial probability that the Fed’s next move will, in fact, be to cut below zero, that will keep yields depressed, pushing them ever lower, especially if equities are locked out, until most of the curve eventually drops below zero.

While it may not be a surprise to too many people in the real world that Chinese macro-economic data for February was a disaster, it appears it was a massive shock to analysts and economists who forecast this data.

• Chinese Retail Sales crashed 20.5% YTD YoY – the first annual drop on record and four times worse than the -4.0% expectation

• Chinese Industrial Production collapsed 13.5% YTD YOY – the first annual drop on record and more than four times worse than the -3.0% expectation

• Fixed Asset Investment plunged 24.5% YTD YoY – the first annual drop and more than twelve times worse than the expected 2.% contraction.

And to go with those stunning numbers, Property Investment puked 16.3% YTD YoY and the Surveyed Jobless Rate exploded to a record 6.2%.

The retail collapse was across the board – restaurants and catering down 43.1%, clothing down 30.9%, jewelry down 41.1% are some of the bigger drops.

 

But… just wait for the recovery! Oh wait, you mean this recovery?

As HSBC’s Julien Zhu told Bloomberg Television, this is “unprecedented” adding that the recovery is pretty cautious so far, warning “it will be a Herculean task to completely reverse everything this month.”

Of course, with US futures already limit-down, we can’t really gauge any reaction yet though yuan is modestly weaker on the data.

Pan·dem·ic /panˈdemik/ (of a disease) prevalent over a whole country or the world.

As humans have spread across the world, so have infectious diseases. In fact, as Visual Cpitalist’s Nicholas LePan notes, even in this modern era, outbreaks are nearly constant, though not every outbreak reaches pandemic level as the Novel Coronavirus (COVID-19) has.

Today’s visualization outlines some of history’s most deadly pandemics, from the Antonine Plague to the current COVID-19 event.

A Timeline of Historical Pandemics

Disease and illnesses have plagued humanity since the earliest days, our mortal flaw. However, it was not until the marked shift to agrarian communities that the scale and spread of these diseases increased dramatically.

Widespread trade created new opportunities for human and animal interactions that sped up such epidemics. Malaria, tuberculosis, leprosy, influenza, smallpox, and others first appeared during these early years.

The more civilized humans became – with larger cities, more exotic trade routes, and increased contact with different populations of people, animals, and ecosystems – the more likely pandemics would occur.

Here are some of the major pandemics that have occurred over time:

Note: Many of the death toll numbers listed above are best estimates based on available research. Some, such as the Plague of Justinian, are subject to debate based on new evidence.

Despite the persistence of disease and pandemics throughout history, there’s one consistent trend over time – a gradual reduction in the death rate. Healthcare improvements and understanding the factors that incubate pandemics have been powerful tools in mitigating their impact.

Wrath of the Gods

In many ancient societies, people believed that spirits and gods inflicted disease and destruction upon those that deserved their wrath. This unscientific perception often led to disastrous responses that resulted in the deaths of thousands, if not millions.

In the case of Justinian’s plague, the Byzantine historian Procopius of Caesarea traced the origins of the plague (the Yersinia pestis bacteria) to China and northeast India, via land and sea trade routes to Egypt where it entered the Byzantine Empire through Mediterranean ports.

Despite his apparent knowledge of the role geography and trade played in this spread, Procopius laid blame for the outbreak on the Emperor Justinian, declaring him to be either a devil, or invoking God’s punishment for his evil ways. Some historians found that this event could have dashed Emperor Justinian’s efforts to reunite the Western and Eastern remnants of the Roman Empire, and marked the beginning of the Dark Ages.

Luckily, humanity’s understanding of the causes of disease has improved, and this is resulting in a drastic improvement in the response to modern pandemics, albeit slow and incomplete.

Importing Disease

The practice of quarantine began during the 14th century, in an effort to protect coastal cities from plague epidemics. Cautious port authorities required ships arriving in Venice from infected ports to sit at anchor for 40 days before landing — the origin of the word quarantine from the Italian “quaranta giorni”, or 40 days.

One of the first instances of relying on geography and statistical analysis was in mid-19th century London, during a cholera outbreak. In 1854, Dr. John Snow came to the conclusion that cholera was spreading via tainted water and decided to display neighborhood mortality data directly on a map. This method revealed a cluster of cases around a specific pump from which people were drawing their water from.

While the interactions created through trade and urban life play a pivotal role, it is also the virulent nature of particular diseases that indicate the trajectory of a pandemic.

Tracking Infectiousness

Scientists use a basic measure to track the infectiousness of a disease called the reproduction number — also known as R0 or “R naught.” This number tells us how many susceptible people, on average, each sick person will in turn infect.

Measles tops the list, being the most contagious with a R0 range of 12-18. This means a single person can infect, on average, 12 to 18 people in an unvaccinated population.

While measles may be the most virulent, vaccination efforts and herd immunity can curb its spread. The more people are immune to a disease, the less likely it is to proliferate, making vaccinations critical to prevent the resurgence of known and treatable diseases.

It’s hard to calculate and forecast the true impact of COVID-19, as the outbreak is still ongoing and researchers are still learning about this new form of coronavirus.

Urbanization and the Spread of Disease

We arrive at where we began, with rising global connections and interactions as a driving force behind pandemics. From small hunting and gathering tribes to the metropolis, humanity’s reliance on one another has also sparked opportunities for disease to spread.

Urbanization in the developing world is bringing more and more rural residents into denser neighborhoods, while population increases are putting greater pressure on the environment. At the same time, passenger air traffic nearly doubled in the past decade. These macro trends are having a profound impact on the spread of infectious disease.

As organizations and governments around the world ask for citizens to practice social distancing to help reduce the rate of infection, the digital world is allowing people to maintain connections and commerce like never before.

Editor’s Note: The COVID-19 pandemic is in its early stages and it is obviously impossible to predict its future impact. This post and infographic are meant to provide historical context, and we will continue to update it as time goes on to maintain its accuracy.

Authored by Jennie Taer via SaraACarter.com,

The source of the Covid-19 global pandemic being Wuhan, China has become a problem for the Chinese Communist Party, who’s now trying to do everything they can to shift the blame.

With the level of control the Party has over its people, there’s no doubt Chinese citizens are falling prey to conspiracy theories promoting the lie that the U.S. is covering up their essential role in the pandemic.

Here are five examples of that:

1. Chinese official Lijian Zhao condemns U.S. officials 

Lijian, Zhao, Foreign Ministry Spokesman & Deputy Director General of China’s Information Department, has criticized U.S. officials for making, what he says, are false accusations about the genesis of the virus.

问：可能是美军把病毒带到武汉的说法是中国政府立场吗?
答：最近有一些关于新冠病毒源头的讨论。个别美国政府高官和国会议员发表种种不实和不负责任的言论，抹黑攻击中国，我们坚决反对。国际社会包括美国国内，对病毒源头问题有不同看法。中方始终认为，这是一个科学问题，需要听取科学和专业意见。 pic.twitter.com/M3R5b7Kfjx

— Lijian Zhao 赵立坚 (@zlj517) March 13, 2020

When translated to English, Zhao’s recent Tweet reads,

“Q: Could it be that the US government’s position that the US military brought the virus to Wuhan?

A: There have been some recent discussions about the source of the new coronavirus.”

He continued, “We are firmly opposed to the various false and irresponsible remarks made by some senior US government officials and members of Congress. The international community, including the United States, has different views on the source of the virus. China always believes that this is a scientific issue and requires scientific and professional advice.”

#China‘s foreign ministry has, for all intents and purposes, accused the US of committing an act of war. #COVID19 #CoronavirusPandemic https://t.co/MTbh4qxNjN

— Gordon G. Chang (@GordonGChang) March 12, 2020

2. China Publishes multilingual book, A Battle Against Epidemic

Publisher “China Book International” released a book praising the Chinese government under President Xi Jinping for it’s handling of the coronavirus outbreak.

“The book is compiled to show the strength of the Communist Party of China (CPC) leadership and China’s socialist system, as well as China’s efforts in strengthening cooperation with the international community to jointly safeguard global and regional public health security,” a press release stated.

The book is also available in several languages including English, French, Spanish, Russian and Arabic. It’s currently available on Amazon, a global retailer.

3. U.S. Blame on China is ‘immoral and irresponsible’

A Chinese Foreign Ministry spokesperson Geng Shuang told CCTV Thursday that the U.S blame for the pandemic is ‘immoral and irresponsible.’

“We urge the U.S. official to respect facts and the common understanding of the international community,” Geng told a press briefing.

“Every minute wasted on smearing and complaining would be better spent on enhancing domestic response and international cooperation.”

4. China’s State-run media calls for U.S. apology

China’s state-run media outlet, Xinhua is one of the government’s strongest allies in pushing propaganda for public consumption. A recent piece published by the site calls on the U.S. to apologize to China.

“We should say righteously that the U.S. owes China an apology, the world owes China a thank you,” an editorial in the outlet read.

5. China’s manipulation of U.S. media

On Twitter, a user reported seeing an altered CNN chyron, they say was changed by Chinese officials, that read “CDC confirms first Coronavirus case of ‘unknown’ origin in U.S.”

Seen on Wechat (the Chinese caption says ‘CDC confirms the first case of the Coronavirus originated in the US’) pic.twitter.com/K1VGAV8xTm

— USAGM China (@usagmchina) March 2, 2020

The people of China on the receiving end of this information are spreading it like wildfire in WeChat groups. Further, they are warning others to a conspiracy that the U.S. government is orchestrating a coverup of a virus that they say, started in the U.S.

With the Fed telegraphing an all out capital markets panic as the Fed could not wait a mere three days until the scheduled FOMC meeting to rush out the biggest monetary bazooka in history which proved to not be enough, the rest of the developed world’s central banks had no choice but to fall in line – after all if, one panics, all must panic. And sure enough, early on Sunday, the Bank of Japan announced it will hold an emergency meeting at noon local time, raising investor sentiment about global policy coordination amid the spread of the new coronavirus, and helping spike the Nikkei 225 up 1.6% on Monday morning, although the index has since given up much of the gains.

The Bank of Japan announced on Monday morning that like the Fed, it too will move its policy meeting up to Monday afternoon rather than on Thursday as initially planned, as part of concerted efforts worldwide to shore up the global economy.

Tokyo’s Nikkei Stock Average jumped nearly 300 points to 17,726, its first rise in four days after a turbulent week that sent global stock markets crashing over fears of a global economic slowdown, as the coronavirus pandemic hits global supply chains while cases continue to surge in Europe and the U.S. However it then quickly pared all gains before dipping modestly in the green.

After the BOJ’s announcement, the yen declined 0.92 yen to 106.92 after surging as highas 105.80 per U.S. dollar as investors pinned hopes on monetary easing, driving demand for the dollar. However, in light of the $12 trillion dollar global margin call, we expect to see the yen, a global risk-off proxy, surge much, much higher before the day is done.

While it is unclear just what additional credible steps the BOJ can offer, Takahide Kiuchi, a former BOJ policy board member writes that Kuroda will likely raise its annual purchase of ETFs funds to 9 trln yen from the current 6 trln yen, which however means that the central bank will simply end up nationalizing the market much faster than previously scheduled. The central bank could also theoretically lower its short-term interest rate target to minus 0.2% from minus 0.1% according to Kiuchi, now executive economist at Nomura Research Institute, although with Japan’s banks already screaming at the torture of years of NIRP, all this action will do is bring forward the demise of Japan’s banking sector.

Which is precisely why Japan’s Kuroda is now completely trapped.

 

 

 

With income inequality the political hot potato du-jour and wealth concentration at its most extreme since the roaring twenties, is it any wonder that even Americans’ view of what used to be called ‘success’ is now tainted with the ugly taste of partisan ‘not-fair’-ism.

Income inequality is roaring…

Wealth concentration is extreme to say the least…

But still, according to Pew Research’s latest survey, when asked about the impact of billionaires on the country, nearly four-in-ten adults under age 30 (39%) say the fact that some have fortunes of a billion dollars or more is a bad thing…

…with 50% of young Democrats.

“The recent reigning conventional wisdom over the last several decades of what I call the ‘Age of Capital’ is that [billionaires] are ‘up there’ because they are smarter than us,” said Anand Giridharadas, author of “Winners Take All: The Elite Charade of Changing the World.”

But the Pew data, he says, suggest that young Americans are concluding that billionaires have amassed their wealth “through their rigging of the tax code, through legal political bribery, through their tax avoidance in shelters like the Cayman Islands, and through lobbying for public policy that benefits them privately.“

“Bernie Sanders taught a lot of people [about wealth inequality], including people who did not vote for him,” Giridharadas said.

“The billionaire class is ‘up there’ because they are standing on our backs pinning us down.”

The good news – for the rest of America’s “capitalists” – is that a majority (58%) say the impact of billionaires on America is neither bad nor good.

Finally, one quick question – where were all these under-30s when Bernie needed them the most in the Primaries? Was it all just virtue-signaling pro-socialist bullshit after all?

Via AlmasdarNews.com,

The Islamic State (ISIS/ISIL/IS/Daesh) has issued a travel warning to its fighters this past week, urging them to avoid countries that have coronavirus outbreaks.

According to scholar Aymenn Al-Tamimi, the Islamic State’s Al-Naba newsletter published a list of directives on how to handle this latest epidemic.

The terrorist group has advised supporters to stay away from “the land of the epidemic”, and instead has offered tips for them to follow like washing their hands frequently and “cover the mouth when yawning and sneezing”.

In the group’s latest al-Naba newsletter, instead of urging members to attack European cities, ISIS advises the healthy to not enter coronavirus-stricken areas in case they become infected, and “the afflicted should not exit from it”…

The newsletter refers to a “plague” described as a “torment sent by God on whomsoever He wills”. — Yahoo News

The newsletter included various Hadiths on how to deal with illness: “On the authority of Abu Huraira… the messenger said: “And flee from the one afflicted with leprosy as you flee from the lion.”

Some of the Hadiths mentioned ways to deal with the illness like placing your hand on your mouth when sneezing: “On the authority of Abu Huraira… he said: the Messenger of God would place his hand or clothing on his mouth when he sneezed, and in this way reduced or diminished his voice.”

Furthermore, Al-Arabiya reported that ISIS called on its fighters to avoid these countries where the coronavirus has broken out: “healthy people should refrain from entering virus-hit states, and infected people should not exit them.”

While ISIS does not control large areas in Iraq, Syria, and Libya, they do maintain several sleeper cells in these countries that they occasionally activate to carry out sporadic attacks throughout these nations.

Authored by Daniel Lacalle,

In February, the general consensus between large investment banks and supranational entities was that there would be a one-time hit on GDP in the first quarter from the coronavirus impact, followed by a stronger, V-shaped recovery. IMF expected a modest correction of global GDP of 0.1%, and the largest cut on estimates for 2020 growth was 0.4%.

Those days are gone.

The latest round of global growth revisions includes a slash of growth estimates for the first and second quarters and a very modest recovery in the third and fourth.

Average GDP estimates are now down 0.7%, and JP Morgan expects the eurozone to enter into a deep recession in the next two quarters (-1.8% and -3.3% in the first and second quarters) followed by a very poor recovery that would still leave the full-year 2020 estimate in contraction. The investment bank also assumes a slump in the United States of 2% and 3% respectively, but a full-year modest growth. Capital Economics estimates a hit on the U.S. economy for the full-year that would cut 0.8% off previous estimates, with the U.S. still growing, but a larger impact on the eurozone, with full-year 2020 growth at -1.2%, led by a -2% in Italy. This, unfortunately, looks like just the beginning of a downgrade cycle that adds to an already slowing economy in 2019.

The decision to shut down air travel and close all non-essential businesses is now a reality in major global economies. The United States has banned all European flights at the same time as Italy enters into a complete lockdown, Spain declares state of emergency and France closes all non-essential activity. These decisions are key to contain the spread of the virus and try to prevent the collapse of healthcare systems, and our thoughts are with all of those infected and the victims. Shutting down travel and businesses generates a negative ripple effect on the economy. It is an important measure to avoid rapid spread and there will be more cancellations of events and activity.

By now, we can at least get a clearer picture of the severity of the pandemic and in this blog we discuss economic consequences, so I believe it is important to remind of a few important factors:

1. We cannot assume that the above-mentioned estimates are too pessimistic. If we have learned anything from the history of global growth estimates is that most of us tend to be more optimistic than realistic even in crisis periods. Most analysts did not see a crisis in 2008 and, even more importantly, a majority still did not see it in 2009, when it was evident. It is true that 80% of estimates at the beginning of any given year have to be revised, but not because they are too pessimistic, rather the opposite.

2. Calls for large fiscal packages to offset the pandemic may be useless Allen-Reynolds at Capital Economics warned that “even if governments agreed on a larger tax and spending package, the economic impact would be much smaller than it would have been in the past, particularly if the fiscal stimulus was concentrated in Germany”, because output gaps are almost inexistent. This is not a demand problem, it is a supply shock, and you don’t address supply shocks with bricks, mortar and deficit spending.

3. A third-quarter rapid recovery is now virtually impossible. The shutdown of developed economies is now granted and will likely take us more than a couple of weeks. The shutdown of emerging economies is likely to start in May, and impact 2020 and 2021 estimates. Every analysis we have seen so far only factors a 2020 recession, not a crisis and even less a 2021 large hit to the economy, but the financial implications in an already over-leveraged world add a strong of credit events to an economic shutdown.

4. The latest wave of downgrades already assumes a large-scale stimulus, rate cuts, and quantitative easing. The diminishing returns of monetary easing were already evident in 2018 and especially in 2019, with global manufacturing PMIs in contraction and growth estimates that came down significantly throughout the year. Average growth downward revisions by country averaged 20% between January and December in the middle of a massive coordinated central bank injection operation that injected up to 170 billion USD a month in the economy (considering PBOC, BOJ, ECB, and Fed) and saw widespread rate cuts.

5. The economic implications of a pandemic are not solved with massive spending increases. Governments will implement large demand-side policies that are the wrong answer to a shutdown of the economy. Most businesses will suffer from the collapse in sales and subsequent working capital build and none of that will be solved with deficit spending. You cannot mitigate a supply shock with demand policies, which increase debt and overcapacity in the already indebted and bloated sectors and do not help the sectors that suffer an abrupt collapse in activity.

6. A forced temporary shutdown must also include a shutdown of the tax collection system. Governments already finance themselves at negative rates. They must eliminate (not defer) tax payments for companies in the period of crisis to avoid a massive unemployment increase and a domino of bankruptcies, and facilitate working capital lines at zero rates to allow businesses and self-employed workers to navigate a shutdown. Governments that make the mistake of maintaining the current tax structure or just prolong the payment period for six months will see the massive negative consequences of a shutdown in the next nine months.

If, as expected, the shutdown is extended to more countries every week, the negative effects on the economy will be longer and exponential, and the mirage of a third-quarter recovery even more difficult.

It is very likely that the shutdown of the major developed economies will be followed by a shutdown of emerging markets, creating a supply shock as we have not seen in decades. Taking massive inflationary and demand-driven measures in a supply shock is not only a mistake, it is the recipe for stagflation and guarantee of a multi-year negative impact generated by rising debt, weakening productivity, rising inflation in non-replicable goods while deflation creeps in official headlines, and economic stagnation.

Sunday evening The Hill reports that a second Congressional aide has tested positive for Covid-19. 

“A staff member in Rep. David Schweikert’s (R-Ariz.) D.C. office has tested positive for COVID-19, the congressman said Sunday,” according to the report.

The individual is resting “comfortably at home and following guidance from local health officials,” Schweikert said in a statement. 

This follows the first known instance of a congressional aide getting the virus after on Thursday Washington state Democratic Senator Maria Cantwell announced the immediate closure of her office due to a confirmed case on her staff.

The Capitol building also closed to all external visitors and the public at that time, amid more and more Congress members announcing they would be working from home.

As Vox describes: 

Capitol hallways, usually bustling with visitors at this time of year, are mostly empty as public tours have been canceled. Some members of Congress, including Sens. Lindsey Graham and Ted Cruz, are self-quarantining after coming into contact with individuals diagnosed with Covid-19, the disease caused by the coronavirus, and they’re now waiting for the results of their own tests. A handful of House and Senate offices are also making the decision to close down their DC offices and directing staff to work remotely.

At least 16 cases of Covid-19 were confirmed in DC as of Saturday after days before the mayor declared a state of emergency in the city, also with newly announced restrictions on bars and restaurants starting Sunday.

My statement on COVID-19 and office closures: https://t.co/zXJZBtintV pic.twitter.com/icH2YLWgeQ

— Rep. David Schweikert (@RepDavid) March 15, 2020

Rep. Schweikert announced his office will be closing until further notice as staff members work remotely. His office in Scottsdale, Arizona is also preparing to work from home out “an abundance of caution.” 

Many more such announcements for Capitol Hill staffers to “go remote” are expected this week as the crisis continues, and as more confirmed positive cases emerge. 

However, House Speaker Nancy Pelosi previously pledged to lawmakers that as “captains of the ship” they would be “the last to leave.”