And Here It Comes: There’s an early January PDB on the Novel Coronavirus

From ABC News today:

“Analysts concluded [a novel coronavirus pandemic] could be a cataclysmic event,” one of the sources said of the NCMI’s report. “It was then briefed multiple times to” the Defense Intelligence Agency, the Pentagon’s Joint Staff and the White House.

From that warning in November, the sources described repeated briefings through December for policy-makers and decision-makers across the federal government as well as the National Security Council at the White House. All of that culminated with a detailed explanation of the problem that appeared in the President’s Daily Brief of intelligence matters in early January, the sources said. For something to have appeared in the PDB, it would have had to go through weeks of vetting and analysis…

We need the PDB declassified and released, to understand the full magnitude of the public policy disaster this administration has visited upon America, just like this PDB of August 6, 2001 “Bin Laden determined to strike in US” was released.

Reader Comment from March 9th

Bruce Hall, on Stephen Moore’s “roaring back” comment, about a month ago:

The situation is a prepper’s dream: market dropping with prices probably following as competition for any sales heats up, assets in gold and cash, a big stock of freeze-dried food, and a self-contained dwelling.

But realistically, once the real scope of the problem is understood and amelioration actions are effected, things will begin to normalize. That may be six weeks or six months, but Moore is probably right although “roaring” may be overstating the case. The economy did not “roar” back to life after the last major downturn. There may be significant re-thinking about supply chains and markets because of the vulnerabilities exposed by Covid 19. You know … eggs in one basket ….

Wow, oil below $30 around midnight, but recovered to $34. Well, that will make that summer road trip that won’t happen less expensive.

My personal opinion (yes, opinion) is that this crisis is somewhat overblown and will fall into the Ebola, SARS, MERS, sky-is-falling category once more facts and protocols are in place. But fear is a powerful de-motivator.

I think we can now safely say the the crisis was not “overblown”. Deutsche Bank’s March 30th forecast for the US, shows a persistent hit to the level of GDP.

Source: Deutsche Bank, 3/30/2020.

Source: Goldman Sachs, 3/31/2020.

Business Cycle Indicators, April 6, 2020

Five key indicators followed by the NBER BCDC, as of today:

Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2019M01=0.  Manufacturing and trade sales for February assumed to be at stochastic trend for 2018-2020M01. Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (3/26 release), and author’s calculations.

The Current Crisis: SitRep and Interpretation Lecture

I was lucky enough to get assigned to coteach a macro course (with Charles Engel) this semester. However, as time passed, it seemed strange to go through the models without referring to current events — in my half of the course, I got to teach one lecture in person, and then had to switch to remote teaching –, so here is my digression from the syllabus, talking about — among other things — why a “V” recovery is not likely, contra Larry Kudlow, Stephen Moore, et al.

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For These Times

If you despair of the administration bringing us safely through this test, then let this provide some hope, click here.

Elgar’s Nimrod Variation IX, from the Enigma Variations – musicians of the Calgary Philharmonic Orchestra and the Edmonton Symphony Orchestra.

Ma, Rogers, Zhou: “Global Economic and Financial Effects of 21st Century Pandemics and Epidemics”

Addendum, A new paper by Chang Ma, John H. Rogers and Sili Zhou:

We provide perspective on the possible global economic and financial effects from COVID-19 by examining the handful of similar major health crises in the 21st century. We estimate the effects of these disease shock episodes on GDP growth, fiscal policy, expectations, financial markets, and corporate activity. Simple time-series models of GDP growth indicate that real GDP is 2.57 % lower on average across 210 countries in the year of the official declaration of the outbreak and is still 2.96 % below its pre-shock level five years later. The negative effect on GDP is felt less in countries with more aggressive first-year responses in government spending. Consensus forecast data suggests a pessimistic view on real GDP initially that lasts for two months, an effect that is larger for emerging market economies. Stock market responses indicate an immediate negative reaction. Finally, using firm-level data, we find a fall in corporate profitability and employment, and an increase in debt, the last of which is further reflected in higher sovereign CDS spreads.

Addendum, 4/1:

Impact on GDP growth expectations are illustrated in Figure 3:

One interesting (among many) policy relevant findings:

In countries with large responses of government expenditures, real GDP initially falls by 2.68% but the effect dies out in the second year. For the low government expenditure response countries, real GDP initially falls by 2.84%, an effect that is very persistent. Meanwhile, responses in government tax revenues do not make much of a difference.

Wisconsin Senator Ron Johnson Looks on the Bright Side

And argues against excessive debt accumulation.

From a USA Today op-ed:

Every premature death is a tragedy, but death is an unavoidable part of life. More than 2.8 million die each year — nearly 7,700 a day. The 2017-18 flu season was exceptionally bad, with 61,000 deaths attributed to it. Can you imagine the panic if those mortality statistics were attributed to a new virus and reported nonstop?

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