Tuesday, March 31, 2020


From Torsten Slok's excellent email links:

Jonathan Dingel and Brent Neiman: The places hardest hit by the virus are also the places where most jobs can be done at home.
Also the highest wage occupations are easiest to do at home. Good for GDP, bad for people with low wages.

New York Fed Weekly Economic Index

But it's not just a fall, it's also a radical shift in demand. A list of lots and lots of job openings, in all the places you'd guess. The instinct to just pay people to sit at home has downsides.

LA times via Marginal Revolution
They were ready to roll whenever disaster struck California: three 200-bed mobile hospitals that could be deployed to the scene of a crisis on flatbed trucks and provide advanced medical care to the injured and sick within 72 hours.
Each hospital would be the size of a football field, with a surgery ward, intensive care unit and X-ray equipment. Medical response teams would also have access to a massive stockpile of emergency supplies: 50 million N95 respirators, 2,400 portable ventilators and kits to set up 21,000 additional patient beds wherever they were needed.
...in 2011, the administration of a fiscally minded Democratic governor, Jerry Brown, who came into office facing a $26-billion deficit. And so, that year, the state cut off the money to store and maintain the stockpile of supplies and the mobile hospitals. 
... The annual savings for eliminating both programs? No more than $5.8 million per year, according to state budget records, a tiny fraction of the 2011 budget, which totaled $129 billion.
My emphasis. 50 million is a lot. A lesson in what government can do, and I hope will do next time.

Not to rub it in, but Gov. Brown did want to spend $80,000 million on a high speed train, all to lower the average global temperature by about 0.0001 (?) degree in the year 2100. Which is not a personal observation so much as an observation about the probabilities of various events that all of our elite intelligentsia assumed.

Amit Seru and Luigi Zingales want to save capitalism from the cares act. Besides the prospect of direct bailouts to big business, the Fed's actions are truly gargantuan and under reported. Vastly oversimplifying,  the Fed is prepared to lend about $4 trillion dollars of newly printed money (really newly printed government debt) directly to businesses, and to backstop the entire non-bank financial system. Good or bad? Let us hope it doesn't come to that.


  1. Typical "budget cutting." Kill all the small cost, big benefits items before addressing any real problems.

  2. Once, just once in the history of finance, bail out the "common people" and let the financial engineers and rentiers go to hell where they belong and may they be consigned to the lowest level of hell.

    I have no sympathy for billionaires hiding out on $500,000 yachts.

    From my own perspective: I'm 66 years old and a physician. I planned to work until 70 or so. I have enough assets to retire. I have a procedure-based practice and Texas has banned all elective procedures. I'm trying to survive on telemedicine

    Bail me the hell out or I retire. I doubt that I'm alone in this. Older docs have been calling it quits way before this virus happened. Have fun with your underqualified nurse practitioner visits.

    Caveat: posted under the influence

  3. The stimulus package of $2 trillion is approximately 9% of GDP ($22 trillion). One would expect that the price level will increase by 9% once the epidemic has run its course.

  4. I hope Amit Seru and Luigi Zingales succeed.

    My imagination runs wild with fears about what a Biden Administration would do with such financial authority? The President appoints over 3,000 policy makers (most of whom probably supported Warren) and they hire and reorganize civil service positions.
    Here comes the Administrative State in full bloom, just as F.A. Hayek reported in "The Road to Serfdom."


  5. Will the $4 trillion purchased by the Fed generate inflation - or does it primarily offset contraction in the broader money supply due to declining leverage (or am I completely off base)?

  6. Bail-outs of public companies: where CEOs have borrowed cheap money, done stock buy-backs, improved their EPS, boosted their bonuses, and now found themselves cash-poor, shouldn't a bail-out (1) be treated as a public offering; (2) be conditional on the CEO resigning and waiving all rights to bonuses and golden parachutes?


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