Long term macro effect of ncovid

[JCD]

@JCD I think the quarantine is a one-time thing and then herd immunity will strengthen.

@ertyu "China Shuts Down All Cinemas, Again" - https://www.hollywoodreporter.com/news/ ... in-1287040

[ertyu]

Yes. A second wave was expected, it makes sense that they would reopen gradually and hold back on inessential businesses that are at the same time high risk. It's true that if the virus resurfaces somewhere else, too, they will probably quarantine that region as hard as they quarantined Hubei province. Good point.

[Ego]

PDF http://ssingh.ucdavis.edu/uploads/1/2/3 ... r2020_.pdf

Longer-run economic consequences of pandemics

How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes? Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In contrast, we find that wars have no such effect, indeed the opposite. This is consistent with the destruction of capital that happens in wars, but not in pandemics. Using more sparse data, we find real wages somewhat elevated following pandemics. The findings are consistent with pandemics inducing labor scarcity and/or a shift to greater precautionary savings.

Note: Pandemics tend to kill workers leaving fewer people to work so their wages increase. That may not happen in this case as this pandemic primarily kills the elderly.

[ertyu]

Plus automation. Automation has been a significant driver of the decreased demand for labor over the past 20 yrs - a trend likely to continue.

So L-shaped it is.

Posting Nordea's estimates for U, V, and L - shaped recovery scenarios here as well.
https://e-markets.nordea.com/api/resear ... ent/109171

I wish I knew enough to translate their quantitative predictions into an intuitive idea of what the world would look like and project likely implications, especially on the EU. Somehow the blogs and podcasts I tend to consume all focus on the US, and because the US has beef with China, on China. The EU and the Euro have been in a precarious state for a while + my personal blind spot is much larger when it comes to europe. I am much more likely to be taken by surprise by developments there. I was thinking today, I tend to downplay the relative risks of the situation there just because the risks are not immediately present in my field of vision the way risks concerning the US are.

Regardless, it seems like an L-shaped recovery is more likely. I also agree with @bostonimproper that this crisis might be the one where the US loses either reserve currency status or leading economic powerhouse status. The conclusion seems to be that there might be a structural break in stock market performance - which might put the 4% rule in question. While I love the 4% rule (I know it is BS, but it is comforting to calculate how based on the 4% rule I have enough money not to work), the 4% rule holds for the US, for the period in which it grew to the status of a world superpower. SWRs for other countries are lower (as per Dr. Wade Phau's research). If the US becomes one of the many, it's not inconceivable that the 4% rule might no longer hold.

[ertyu]

The article I needed: https://voxeu.org/article/future-imperf ... oronavirus

arguments here seem reasonable

[The Old Man]

@ertyu

The pandemic bailout will result in enormous debt. Once debt exceeds the carrying capacity of society then default looms - either outright default or default through very high inflation. The article posits default through very high inflation. Its a good argument; although, one should also consider the scenario of outright default.

[ertyu]

One does not preclude the other. It is possible to have inflation and default. I personally believe inflation is more likely.

[forest_turtle]

Deleted

[ertyu]

Variant Perceptions on previous shocks and pandemics:

https://vpresearch.app.box.com/s/mxfaud ... um8xu6bjm8

[bostonimproper]

I want to know what governments, private institutions, etc. will have the most public trust by the end of this. The USD is the world's reserve currency because it's relatively stable and is tied to a large institutional power (the USG) that people trust more than others to pay their debts and be transparent about their financials (also some general international good will generally). Trust here is a relative good. As long as you are the most trustworthy, even among not terribly reliable options, you kind of win the title. Assuming you're large enough.

The question is, then: Who will be most trusted in a post-covid world? The US? China? Europe? A collection of programmers and futurists running cryptocurrencies? Gold miners? Multinational corporations? Everyone is going to be extremely loaded up on debt after this.

And, further, will that trust be far-reaching and international or factionalized between regions and countries? If the latter, oof.

This is all to say: I think the only thing that can save neoliberal globalization now is Apple launching a stable crytocoin. #JokingButAlsoNot?

[ertyu]

imo neoliberal globalization would've been under pressure even without corona. it arose because developments in transportation made it feasible to exploit labor cost differentials. But if you're busy automating away, as the US has been since approx. 2000, shortening supply chains becomes cost-effective again. Bring automated production back home and export to the developing world, destroying their economies in the process (classical imperialist playbook, we've been here before. scour them for raw materials while you're at it). People were doing ted talks about this dynamic even before trump got elected.

You ask who would be most "trusted" - but after a pandemic, the nature of trust itself might change, from trust-because-transparent to trust-because-in-control. China in particular is positioning itself to take advantage of this on an ever-increasing scale. Russia has been working it within their sphere of influence as well. Right now, they (Russia) are sending doctor missions to Italy, approaching the most dissatisfied member of the EU (because abandoned in emergency). I am worried about the strain the EU is under. The EU is a Good.

As for the US, it gives me the strongest whiff of corporate feudalism. I see corporations gaining greater and greater power while keeping a shadow puppet show government - this dynamic is well under way. It is imo why anti-corona measures took so long to implement: rich people don't want to sacrifice profits and are more than happy with a (up to) 10% cull in the population - less taxes to pay if there's no poor and old people to support. Less people to start shit when they start automating. As long as you can blame it on China, all is good (and they will totally blame it on China. the troll farm is already all over reddit, for instance, participating on threads with comments like, "it's important to remember that this is all China's fault with their shitty hygiene practices". this particular gem from u/he_does_it_for_money -- which, dude, at least you're honest). People discuss "revolution" - but tbh i'm not sure how possible that is given the military AI and surveillance capabilities of the states - both the Chinese one and the US (whatever shit are boston dynamics up to??)

tl;dr: i'm not optimistic. we should all move to syberia, at least in 20 yrs or so it'll thaw