These two individuals have written an extraordinary document entitled “When and Where Will the Recovery Occur? A National and State by State Analysis of the Economic Response to the Coronavirus”. It is the pinnacle of economic hackery.
Guest Contribution: “How Severe Is the “Great Lockdown” Expected to Be?”
Today, we are pleased to present a guest contribution written by Enrique Martínez-García (Senior Reserach Economist and Policy Advisor, Federal Reserve Bank of Dallas). The views expressed here are those solely of the author and do not reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.
Guest Contribution: “History Warns Us How to Avoid a W”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate May 1st.
Guest Contribution: “Market volatility and the length of the Covid-19 recession”
Today, we are pleased to present a guest contribution written by Valerio Ercolani and Filippo Natoli, both of the Directorate General for Economics, Statistics and Research of the Bank of Italy. The views presented in this note represent those of the authors and not necessarily reflect those of the Bank of Italy.
After the economic downturn that followed the outbreak of the Covid-19 crisis, private forecasters see a rebound in the third quarter of 2020 both in the US and worldwide. While this appears as the most plausible scenario assuming lockdown and social distancing measures are soon relaxed, a recessive dynamics through the end of the year cannot be ruled out. A simple probit model augmented with market volatility, which reached its maximum last March, forecasts a more prolonged recession in the United States. Historically, turmoil in financial markets informed us that the associated recessions were not close to the end.
Economy in a nose dive
The Bureau of Economic Analysis announced today that U.S. real GDP fell at a 4.8% annual rate in the first quarter of 2020. That’s a rate of decline that we only see historically during the worst quarter of a recession.
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The Course of the (Ongoing) Trade War: Soybean Prices
As measured by near month futures:
Worried about Surging Inflation?
Periodically, I get emails from some guy named Tim Congdon of the Institute of International Monetary Research, bewailing the tendency “to shrug off the inflation risks that have in the past arisen from too much monetary financing of large budget deficits.” So…big increases in the Fed’s balance sheet: will they collide with reduced supply over the medium run to produce inflation? TIPS say no…
What Could’ve Been: Population Adjusted Covid-19 Fatality Rate
Question: Shouldn’t we be doing a lot better than Italy and Spain? Could we have implemented a system of social-distancing combined with testing and tracking that would not have entailed an economic shutdown of the current magnitude (i.e., could we have implemented something closer to what S. Korea did, had we had a competent administration and leader not-in-denial?).
When Non-Specialists Predict Outside of Their Expertise
A reader, Ed Hanson, critiques the flagging of the fact that there were three waves of the 1918-20 flu:
You may not be a fortune teller, but you do tend toward being a panic monger.
Case in point, never knew that the Spanish flu was coronavirus. Maybe, that is because it is not.
While not being a doctor, a little research shows that there have been 7 identified coronaviruses causing human disease. 4 associated with the common cold, and 3 known for acute respiratory syndrome. These being MERS, SARS, and the covid-19.
OF the first 6, none shows the the wax and wane you write of in the topic.
That leaves covid-19. certainly the most deadly of the 7. I would rate a Spanish flu like wax and wane, far down as a possibility but still possible. More likely it won’t because the other coronoviruses have not shown that tendency.
Now Mr. Hanson is merely a random commenter; I quote him because he is representative of a group of individuals who are happy to predict with apparently no expertise, and without any apparent reference to mainstream scientific analysis. So, from The Hill:
A potential second wave of the novel coronavirus late in the year would likely be more deadly, as it would overlap with flu season, Centers for Disease Control and Prevention (CDC) head Robert Redfield told The Washington Post on Tuesday.
“There’s a possibility that the assault of the virus on our nation next winter will actually be even more difficult than the one we just went through,” Redfield told the Post. “And when I’ve said this to others, they kind of put their head back, they don’t understand what I mean.”
Mr. Trump has tried to whitewash the statement; from WaPo today:
In a tweet Wednesday, Trump alleged Redfield had been misquoted. But he accused CNN of having done so, even though CNN merely relayed the comments published by The Post.
“CDC Director was totally misquoted by Fake News @CNN on Covid 19,” Trump said. “He will be putting out a statement.”
In yesterday’s press conference, he indicated he’d been correctly quoted by WaPo.
Negative oil prices
First negative interest rates, and now negative oil prices. Is the world coming to an end?
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