Archive for March 2020


Infrastructure spending will not create jobs

This caught my eye:

President Donald Trump called on Congress to provide $2 trillion for U.S. infrastructure, seizing on the coronavirus outbreak to try once again to advance one of his longest-standing priorities.

Sorry, but when did we switch from talking about spending bills in the billions to spending bills in the trillions? When did trillions become a “thing”?

Right now, we are losing lots of jobs because people are unable to work. Fiscal stimulus won’t change that. When the coronavirus crisis is over, monetary policy will determine the level of employment.

This is madness.

Then consider this Bloomberg headline:

Economists Are Losing Hope in a ‘V-Shaped’ Post-Virus Recovery

Notice how March came in like a lion, with most economists (including me) predicting boom times ahead, and it’s going out like a lamb that’s stricken with coronavirus, with many economists (including me) worried about a sluggish recovery.

This is the most bizarre thing I’ve ever seen. As of yet, we don’t have a single monthly data point indicating any sort of recession (although I am pretty sure we are in one, and a deep one) and we are already speculating on the recovery! How is that even possible?

Maybe market monetarism has won. Maybe economists no longer rely on computer models fed with macro data, and now look to financial market indicators to predict the future path of the economy. If not, what’s your explanation? How are people already able to predict a slow recovery from a recession that is only just beginning?

PS. A sliver of good news?

China’s official manufacturing index rebounded to record an unexpected expansion in March, government data showed on Tuesday, after falling sharply in February as the coronavirus epidemic brought work to a halt across most of the country.

The official manufacturing purchasing managers’ index rose to 52.0 during the month, according to the National Bureau of Statistics, from February’s record low figure of 35.7. The 50-point level separates contraction from expansion. The March reading came in well above economists’ forecasts of 45 compiled by Reuters.

At least good news for decent people; not sure how anti-Chinese bigots regard the news.

PPS. Ten days ago I predicted that Switzerland would have 5 times as many active cases as China by the end of March. It ended up being 6 times as many. Very soon it will be 10 times as many.

PPPS. In East Asia, bigotry against Westerners is on the rise.

PPPPS. For those interested in looking beyond burial urns, a scientific study looks at the extent of the undercount in Wuhan.

Those Chinese never seem to learn

This Bloomberg headline really makes me angry:

When will the Chinese learn? Censoring doctors who are trying to warn the public about failures in the response to coronavirus will always backfire, just making the problem worse. You’d think that after what happened in January in Wuhan the Chinese would have learned their lesson.

Oh wait . . .

More confirmation that the Fed is never out of ammo

Market monetarists knew this all along:

Should conditions on Wall Street deteriorate significantly, the central bank could go where it’s never gone before: to passively intervene in the stock market for the first time ever, according to market analysts and economists.

. . .  The Fed would need congressional permission to extend its operations, but it already has received wide latitude from the Treasury Department through emergency provisions in the Federal Reserve Act.

“If there were any major dislocations, it is clear that they will go into whatever nook and cranny in the market that starts to choke,” said Quincy Krosby, chief market strategist at Prudential Financial. . . . Indeed, the Fed already has shown a willingness to go beyond its financial crisis response, and it may have to do more if the crisis worsens.

As the economic fallout from the pandemic spread earlier this month, Boston Fed President Eric Rosengren already was saying the Fed may need to broaden the types of assets it can buy to support the economy.

It’s fine if people want to keep talking about fiscal stimulus.  But don’t pretend it’s justified by the Fed running out of ammo.

PS. As I’ve said repeatedly, I’m in favor of Congress giving the Fed permission to buy corporate stocks and bonds, and I oppose the actual purchase of those assets.  Instead, I’d pursue level targeting.

HT:  David Beckworth

Five stages of denial

[Before starting this silly post, let me say that I’m seeing some positive signs in data from many countries; the curves seem to be starting to bend. Yay!]

Five Stages of Denial:

Stage one:

I feel for those poor Chinese suffering from the terrible coronavirus. Glad we don’t have it.

Stage two:

You say the problem is becoming worse here than in East Asia? That can’t possibly be true. Those East Asian countries must be faking the data. The West is superior.

Stage three:

OK, maybe the East Asian data is accurate, but we are much freer than the East Asian countries.  That’s why we are getting hit harder.  Freedom has a price.

Stage four:

You say it’s now gotten so bad in the West that many of us now have tighter restrictions that some of the East Asian countries?  OK, but the Chinese are to blame for all of this.  They delayed reporting the severity of the epidemic for several weeks.

Stage five:

OK, you say that an extra few weeks would have made no difference, as the West spent nearly 2 months twiddling its thumbs once we found out? And you say that our governments also lied to us? Well then the Chinese are to blame because they are a barbaric race that eats wild animals, and that’s what created the disease in the first place, just as Africans created AIDS and Europeans explorers brought smallpox to the New World.

And BTW, you are an apologist for Communist China because you are forcing me to confront the fact that the West might not be as superior as I had assumed.

I guess it was inevitable that this crisis would push people toward “us vs. them” thinking, but it is still quite worrisome.  Even within the US, you have states trying to keep out residents of other states.  And that prejudice is directed against our fellow Americans; just imagine how Americans feel about foreigners right now.

Unfortunately, things are no better in China, where Westerners are now widely viewed as a disease-ridden menace that needs to be kept out of their country.  Let’s hope that sanity prevails in the long run.  Looking back at history, I think it’s fair to say that a global rise in hypernationalism generally doesn’t end well.

PS.  Here’s the pro-communist WSJ explaining how China successfully controlled the coronavirus.

PPS.  Here’s an excellent NYT article on how the Wuhan government covered up the problem.  It’s the best account I’ve seen.

And LOL:

Trump spent weeks downplaying the coronavirus — but now thinks keeping US deaths under 100,000 would be ‘a very good job’

To quote Former President Bush: “Brownie, you’re doing a heck of a job”.

Looking for scapegoats

For a stat head like me, it’s becoming increasing painful to follow the media. There’s an absolute orgy of misinformation, innumeracy and wild conspiracy theories, pouring forth in increasing volume.

One of the best examples is the claim that there are a vast number of hidden coronavirus cases. One argument is that many cases are asymptomatic. That’s true, but we have a pretty good idea as to how many asymptomatic cases exist, and its not enough to materially change the picture. It seems like somewhere in the ballpark of 50% of cases are asymptomatic.  Don’t be innumerate, there can’t be that many undetected cases.  Testing would have picked it up. Half the UK population did not catch the disease.  If it did, right now it would look far worse than Lombardy or Wuhan.

Now it’s reported that the UK government believes that China has vastly underreported the number of actual cases:

Boris Johnson’s government is reportedly furious with China’s handling of the coronavirus, with UK officials quoted on Sunday warning that Beijing faces a “reckoning” once the COVID-19 crisis is over.

UK government officials believe China is spreading disinformation about the severity of the coronavirus outbreak in its country, the Mail on Sunday reports.

The newspaper says scientists have warned Johnson that China could have downplayed its number of confirmed cases of the coronavirus “by a factor of 15 to 40 times.” China had reported just 81,439 at the time of writing.

Similar claims are being made about Japan, and other countries.

Here’s the problem with these wild conspiracy theories.  Everyone knows that the reported caseload totals are below the actual totals, because many people with coronavirus never get tested.  But that’s true almost everywhere.  Globally, there are 33,500 deaths and 700,000 cases.  Most evidence points to a mortality rate of roughly 1%, suggesting there are actually at least 3.3 million cases.  And even that’s a low estimate, as lots of people currently infected will eventually die.

China probably has less underreporting that average, as their caseload peaked much earlier and most of the deaths that will eventually occur have already occurred.  And yet despite that fact, even reported death rates in China are currently lower than the world average.  Adjusting for demographics, they are probably roughly equal.  Japan has very few deaths, so the caseload can’t be that wildly inaccurate.

We’re told that Boris Johnson is “furious” with China for its lies and misinformation.  I’m also furious with China for its lies and misinformation.  I’m also furious with the US government for all its lies and misinformation.  I’m furious that as Americans were preparing to attend Mardi Gras, Trump was telling them that everything was under control.  I’m furious with the UK government for wasting time on a “herd immunity” strategy before backtracking.  I’m furious that Boris Johnson is relying on experts who are innumerate.  I’m furious that my fellow white people have screwed up this epidemic 100 times worse that Asian people.  Look at the list of the top 20 countries, in terms of active cases (right column).  At least 18 are white countries, 19 if you include Brazil as white.  And the 20th (Korea) will fall entirely off the list by the middle of this week.  And this was an Asian problem as recently as mid-February.  We had plenty of time to prepare, and twiddled our thumbs.

A global epidemic?  Bull****, it’s a white man’s disease.  But that won’t stop white people from looking for scapegoats.  We’re no more advanced that the medieval peasants who blamed diseases on Jews and witches.

I expect some commenters to tell me the China data is fake, and that the disease is running rampant in China.  In fact, it would be shocking if the Chinese did not have the disease under control.  They adopted far more draconian social distancing tactics than did the rest of East Asia, and in most of the rest of East Asia the level of community transmission is also quite low.  (Japan may be picking up, and some others are seeing a recent surge of imported cases—as is China.)

Believe it or not, it’s possible to have a general idea of what’s going on in China without relying on the Chinese media, which is full of propaganda.  We know that they have draconian social distancing.  We know that there is no surge in coronavirus deaths occurring all over China (as of today, it may occur later), and we know the hospitals are not currently being overrun with coronavirus patients.  There are likely several million phone calls a day between Chinese people outside China and those within, including medical personnel within China.  It’s not a black box.

The key to interpreting the news is:

1. Don’t be innumerate.

2.  Understand what sort of things governments lie about, and what sort of things they don’t lie about, because they fear being discredited.  The lies undertaken by the Wuhan government were incredibly costly to the central government of China.  The Chinese public was furious, the truth got out anyway, and it delayed by a week or two the national lockdown and quarantine of Hubei.  It was a PR and health care disaster for China.  So why did the Wuhan government lie?  They probably thought the epidemic would blow over quickly and they’d get away with it.  (This article provided a narrative of how the lies played out.)

Governments lie when there is little cost.  Thus there’s not much cost to the Chinese government in claiming the camps for Muslims in Xinjiang are re-education camps.  The costs would be somewhat higher if they insisted no such camps exist.  A top Chinese official recently claimed the virus was created in a US lab.  Then another top Chinese official said that’s “crazy” (as it is).  That’s an example of an issue where the Chinese government itself probably had a change of mind on the value of the lie, due to a backlash.

Trump is quite similar.  He lies frequently in his twitter feed, but tries to avoid the sort of obvious lies that his supporters would immediately spot, and be embarrassed by. (Instead, he does the sort of lies that I easily spot.)

Unless you understand how and why governments lie, you’ll never be able to interpret data properly.

PS.  Tyler Cowen recently linked to a bunch of claims about the coronavirus data, many of which are unpersuasive.  Iceland is treated as an outlier because it has a low death rate.  But death rates across countries are quite uneven; just a few weeks ago Germany had a similar low death rate, and since then it’s edged upward.  It’s likely that some of the Icelanders now infected will eventually die.  Another link suggests as many as 40,000 deaths in Wuhan, which seems highly implausible.  That’s more than the entire world has today.  Ah, but you say, “It started earlier in Wuhan.”  True, but it also ended much earlier in Wuhan.  It started in late 2019, but even in early January it was just picking up momentum.  By January 23 you had the hard lockdown that stopped it in its tracks.  Not enough time to produce a caseload that would lead to 40,000 deaths.  If it were, we’d be seeing 40,000 deaths in many other cities.  But we aren’t.

PPS.  LOL at the innumerate Alabama governor who said “we’re not California”.  Yeah, you’re worse.

PPPS.  Wuhan is now building a lovely riverfront park.  Wuhan is not a symbol; it’s an actual place with 11 million people, all getting on with their lives.  We should be trying to cooperate more with China, not less.  Stop saying China is evil, and start saying Xi Jinping is evil.