Wednesday, April 1, 2020

A podcast and good fellows video

A new Grumpy Economist podcast, summarizing a lot of the last week and some newer thoughts.

A video discussion with Niall Ferguson and H.R. McMaster on the Covid-19  situation, focusing on longer-run implications.

I ran out of time on one important point. The US is now playing the 2008 playbook on a grand scale -- bailout, stimulus, Fed printing trillions of cash and lending it to avoid bankruptcy. Apparently "infrastructure stimulus" is next. We're sort of like a 2 year old with a hammer, to which everything looks like a nail.

The danger in what we are doing is likewise that this becomes enshrined as standard pandemic policy for the next time -- shut down the whole economy, print rivers of cash, wait for technology to save us.  This episode should be regarded as what not to do, so we have a robust and fast-moving public health response that avoids a shutdown.

Niall and H.R. are quite a bit more guns-ho for Cold War 2 with China than I am, and see the virus as confirmation of that need. I think we'll have more of that discussion in future episodes.


  1. Listening to the others on China, gotta be careful of these International Relations types!

  2. "Niall and H.R. are quite a bit more guns-ho for Cold War 2 with China than I am"

    We don't need to start a war cold or hot with China. We do have to recognize that China has not become what we were hoping it would be. We hoped that China would liberalize, open up, and become an ordinary member of the international community.

    It has not, it has become more repressive using the technology it acquired from us to repress Hong Kong and terrorize the Uighurs. China has become more agressive also. The building of fortified islands in the South China sea is just one aspect of their aggressive stance.

    What we need to recognize is that China has, of its own volition, become a competitor to the United States that is not interested in cooperation or peaceful development.

    We must assess our economic ties with China with a cold eye to figuring out what would happen if China did something really untoward like launching an attack on Taiwan.

    Allowing China to control our supply chains for medicines is handing them a weapon they could and would use against us in a crisis. We cannot let that happen.

    1. On cue, more evidence for my position:

      "Why you should care that China is attacking fishermen in Indonesian waters" by Tom Rogan on April 01, 2020

      How does the Chinese Communist Party, which revels in saying it seeks only respectful friendship with the world, explain this quote: "They come into our waters and kill everything."

      That's how an Indonesian fisherman described Chinese fishing expeditions in Indonesia's exclusive economic zone. ... Chinese coast guard warships are once again escorting Chinese fishing trawlers deep into Indonesian waters. There, they threaten Indonesian fishing crews who complain as [the Chinese] literally scrape the sea clean of life. It's another one of Xi Jinping's gifts to the world: stealing from an already impoverished people and desecrating already troubled oceans.

      * * *

      ... this is a critical example of where Beijing's "we just want to be friends" rhetoric meets reality. It's all a lie. China wants to seize and control without any regard for others. Just as we've learned with coronavirus, Xi's regime cannot be trusted. Yes, it might say the right things and bribe the right Western leaders with investment deals. But in the end, Communist China aims to make itself richer and stronger at our and everyone else's expense.

      * * *

      But just as it is seizing fishing stocks, China's military is trying to turn the Western Pacific Ocean into its private retreat — a place where guests must ask to enter, then accept Chinese economic and political hegemony in return for transit and trade. If Xi succeeds in this, he might enrich his nation but only by making the rest of us poorer.

  3. A big problem with this crisis (or any crisis) is that any policy change doesn't have an immediate effect. Social distancing helps slow the virus but given its week or more incubation period social distancing won't show results for about 2 weeks after being instituted. With cries to "do something" it's too easy to add new rules and restrictions before the previous set has had a chance to work.

    Stimulus is similar. The initial stimulus bills haven't had time to work but the economy is still slowing so there's a push to do something more. This is combined with a strong push to get permanent, non-pandemic policy changes through as part of the "do something" impetus.

    I'd guess much of any latest round of stimulus is fulfilling somebody's policy wish list under the guise of saving the economy. Of course, an infrastructure stimulus runs into the problem that we shouldn't be starting new infrastructure projects if we're all supposed to be staying at home.

  4. Niall is one of those people who benefit from the public's tendency to think that people who are articulate must be smart and well informed.

  5. The real lesson here would seem to be that we need to pay more attention to, and invest more money in, public health and preparing for epidemics.

  6. The whole discussion of China left me pretty disappointed. No one put forth what the ideal policy should be, other thaw into another cold war. Is that fruitful for everyone? I guess it depends on how pernicious we think China's intentions are. Is the communist party advocating world domination a la the Nazis?

    Even if China isn't going that route, I myself wish we could free the Chinese people of their government. I'm just not sure a cold war is the way to achieve that goal. It hasn't worked for North Korea.

  7. I have now had an opportunity to listen to the whole podcast. I still think that Ferguson and McMaster had the better part of the argument.

    My question to Mr. Cochrane is how much has the US profited from its trade with China in the last 10 years? And does that nearly cover the cost of this catastrophe.

    I suspect we are now way behind, especially when you include the damage that Chinese espionage has inflicted on the US.


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