Former U.S. Senator Warns Against “Economic Meltdown”
The battle against the coronavirus is being fought on two fronts, the health one and the economic one. Former Senator Jim DeMint is one of the few seriously looking at both.
In the frenzy that has developed over our trying to limit the number of deaths that COVID-19, the points of view out there have been decidedly one-sided, believing that the only good choice is to go all in with the response and pay any price to do it.
We always need to consider the price of something, even to pretend to be rational, as all of our actions need to be weighed in terms of their costs and benefits to even have a conception of whether we are doing the right thing or not.
When we turn away from any sort of analysis, and especially when we consider the comparisons that we need to make as sacrilege, refusing to make them and holding anyone who would dare do so in disdain, being widely spit on by the media, this is where we really put ourselves at risk, this is when we really need to start worrying.
We can never refuse to look, and we cannot refuse to want to compare, for any reason. Perhaps there are scenarios where we do have to go all in on the health protective side, if we are all going to die anyway if we do not do this and when this represents the only real hope we have.
If half of us are expected to die from a health threat, as horrible as that may be, we still don’t want to be choosing strategies that will end up adding to the amount of suffering overall, because this makes the situation worse, not better.
The economic side of this equation is not just a matter of money, as this in itself causes suffering, and if we have the welfare of our country or our species in mind, we have to make that our focus, not just looking to manage statistics, the infection rate or even the death rate.
Human welfare encompasses far more than how many of us die in a given year from infectious diseases, and if that is the priority, we could lock people up in their homes continually because that will always mitigate whatever risks that are out there, and there are always significant ones. We do need to ensure that whatever measures that we take to limit these things are worth it overall, whether they serve to increase or decrease overall human welfare, and we can easily mess this up with severe consequences if we are unwise.
Whatever the right balance between fighting the virus and harming our economic welfare may be, this has to start with being open to trying to figure out what that balance may be, and not just come down on one side of the issue wholeheartedly and convince ourselves that no comparison is needed nor appropriate.
Few have had the courage to even speak up about the need to think more practically about this issue. President Trump did at one time, although he has really backed off and his rhetoric about how we need to get back to work has been set aside, at least for now.
Former U.S. Senator Jim DeMint has now stepped up to the mic, and we do need someone to at least have us considering the consequences of what we are doing to at least make sure that we are not overdoing it. This is not about seeing the wealthy pay a big price here like the leftist politicians demand, as these actions affect everyone, and the less well-off you are with this one, the bigger price you will pay.
It is the human cost that matters, and human welfare and economics are very closely linked, and economics itself seeks out to maximize human welfare overall, both at the level of the individual and at the level of society. We cannot insist on ignoring how what we will doing will affect this, as this is hitting us at our most basic levels, including how people are going to feed and shelter themselves.
The coming of a new month has brought us a shocking amount of people who have not been able to meet their housing costs, of which their continuing to be sheltered and not cast out into the cold homeless depends upon. While mortgage payments can be easily deferred, rent payments cannot. While governments may temporarily prevent evictions, once the crisis is over and tenants owe several months’ rent, this is going to create a real crisis in itself.
This is just the tip of the iceberg as we create a bigger and bigger hole every day from this lockdown. We can’t just assume blindly or without any real evaluation that locking things down to the extent we have is worth it, even so worth it that we do not even want to think about it, even chastising those who dare, because the price will need to be paid and we need to make sure that we do not cause massive net harm to everyone as our solution.
We’re far from the point of making any recommendations at this point, as all we are seeking to do here is to gain a sense of proportion. If we wildly exaggerate the risk, this is going to make our analysis very inaccurate, but we aren’t even willing to take an honest look at whether the cost of our response is worth saving a million lives or however many the soothsayers are telling us are on the line with this still needs to be measured in terms of a cost benefit analysis.
The Ultimate Measure Needs to be Our Overall Welfare
A lot of people will insist that there is no cost so great to prevent human lives, but how many people die from a given viral outbreak is just one component of the calculation of human welfare overall. The most effective response would be to just lock everyone away and let them all starve to death, and anyone can understand why that would be overdoing it because this would take a lot more lives than would be saved, everyone’s in this case.
In between doing this and doing nothing, there are various degrees of restriction that we can choose, but whatever we do choose needs to make sense, and we can’t be in a position to figure this out if we just refuse to look.
To do this, we do need to have better quality information than our just cooking up numbers such as millions of people dying from this, similar to what happened during the Spanish flu over 100 years ago, without even the need to justify these fantastic numbers.
The Spanish flu did not even happen in Spain, and the outbreak got its name from the fact that, for much of the outbreak, the Spanish media were the only ones that were speaking on it, as in other countries, they didn’t want to alarm the public by telling the truth.
We’ve turned 180 degrees from there now, where we now see the media going all out to be as alarmist as possible. We are also seeing this issue being very polarized politically, especially in the left-wing media, who already unabashedly promote their political agenda at the expense of the truth anyway, and have gotten even worse now as the stakes rise.
We don’t need any science or data to know that this has not shown to be an outbreak that could cause the deaths of this many Americans, in the millions. We now have over 50,000 deaths worldwide, but we are well into the outbreak with the situation resolved already in some places and starting to resolve in others. This includes in Europe, whose outbreak has been serious for longer than in the U.S. and has already started to settle down.
We are already seeing these overblown models fail in real time, when we look at where they had us at the present time and see how much direr our situation should be right now if they were accurate. We don’t seem to care though, even though we need to. The way we continue to approach this gives new meaning to the term propaganda, a propaganda of terror, one that is way beyond the dreams of any professed terrorist.
It will continue to be a fight in Europe, in the United States, and in many other places around the world. It is imperative that we ensure that our projections are as realistic as we can make them, and we especially need to guard against exaggerating the threat so massively that we cause a lot more harm and suffering than we ever should have contemplated if we had a much better grasp on the truth.
No one knows where these projections of millions of deaths have come from, although we’re told that the model is based upon Europe. We have not seen anything happen over there that would even approach such extreme numbers though, and the U.S. has had this virus longer than those countries in the first place. The U.S. will surpass these other countries in terms of total deaths due to their larger population, but even just a million people dying in the entire world, which includes many countries who are doing far less than we are, is outrageous enough, let alone several million somehow dying in the United States alone from this.
The only real way to decide what courses of actions lead to what is to compare areas that have locked down to those who have not. We’re not going to be able to do all that great of a job with this, but when we do dare to look at this, we see that states and countries who have not done this are getting along just fine and the Grim Reaper who is alleged to be ready to take these millions of lives is even further from their doors if anything.
We would think that anyone with a working brain would understand that there is a balance that needs to be sought here, lest we all get thrown into the mire, but the fear of this virus as rendered our brains quite dysfunctional. This is not play money that we are throwing around here, but we do not have anywhere near enough of this play money to correct the damage that these quarantines are causing, damage that continues to increase.
This is not even so much about trying to fight off a monster that has been magnified in size by a clearly ridiculous amount, as even if we were faced with the Spanish flu type of epidemic again, where millions of Americans did die from, there are still going to be limitations to what we can do to fight this and not make the situation a lot worse.
These are not pleasant events, even though they are common, but the nature of our existence has us dying from various factors, and among those is infectious diseases. A lot of people die every year from these in the best of years, and going from ignoring all these deaths completely to making them into the biggest threat to our survival in history is beyond stupid.
We Can Do Far Greater Damage than Any Virus Can if We Are Not Careful Enough
We may indeed be heading toward the biggest threat to our survival ever, but it won’t be from this virus, even if it did kill as many people as the Spanish flu did, which remains a ridiculous comparison. We survived that one fine, and when people look at the biggest challenges of the 20th century, the Great Depression is at the top of the list. Depressions do hurt, and can hurt a lot.
In truth, the biggest economic risk from this mess isn’t a depression, it is hyperinflation, which is an even scarier beast. Hardly anyone is talking very much about this, and DeMint deserves praise for his bringing up this issue.
We don’t want to just think that this is a matter of the government footing a large part of the bill for this, and this just resulting in some short-term pain for people along with adding to debt levels hardly anyone cares about.
The supply side won’t really be that much of a concern as we can catch up pretty fast, and will in fact with all this stimulus still in play. However, this will certainly dilute our money, and the risk of doing that is that this causes a lot of inflation, just like the idea of printing more money does. This is akin to printing a lot more money, and that money remains in circulation, and this can dangerously over-stimulate our economy.
If you have a certain percentage of the money supply in our hand, this will buy a certain amount of goods and services, prices set in relation to the money supply. When you dilute the money supply by a big amount, this is a lot like diluting stock by the company issuing a lot more shares, with each share now representing a smaller percentage of ownership.
This happens with money too, where your money represents a smaller portion of the money out there and you will need more to buy the same things now. People now demand higher wages, which causes more inflation, and the only way to fix this is to slow the economy down by forcing a lot of people out of work, or to be thrown into the financial abyss like Venezuela has. Both choices have devastating consequences.
We see these happen without our intentionally looking to do it, but when we are so hell-bent on printing all this money, creating it from thin air, this makes all the money that was in circulation before worth less. The more we overdo this, the greater the loss. This is in itself a huge deal and a monster we do not want to meet.
It is not that we don’t want to take cautionary measures to look to curtail the number of deaths from this outbreak, but we do need to be particularly careful that the solution is not worse than the problem. Not caring at all won’t get us there.
Neither the authorities, who have been duped by these overblown numbers, nor the public who continues to be kept in a state of panic by the media will pay attention to any of DeMint’s words or be willing to open their eyes even a bit to see what sort of pain that we are creating with our current approaches.
This is not an all-or-nothing thing, it is not about choosing to do nothing and choosing to completely fly off of the handle with extreme measures. This is not a discussion that we can afford not to have, even though so very few of us are willing to even have it right now.
This situation has gotten so bad that it is not reasonable at all to hope that we will look to measure the costs and benefits of what we are doing as long as the situation continues to escalate in this country, and our survival now rides on our peaking at numbers far lower than predicted. Hopefully then, we’ll start see the fever of panic that we are now under break, because something has to do it, or we are in a lot more trouble than we think.
Editor, MarketReview.com
Andrew is passionate about anything related to finance, and provides readers with his keen insights into how the numbers add up and what they mean.
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