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3.3 million - BostonCard - 03-26-2020

First time unemployment claims.

BC


RE: 3.3 million - OutsiderFan - 03-26-2020

(03-26-2020, 07:48 AM)BostonCard Wrote:  First time unemployment claims.

BC

Given what Congress is passing, I don't think these unemployment claims are a big deal in the near-term. They have all been baked into the recovery bills that have or will pass later. The real pain will be when the mortgage for our 10% of GDP debt comes home to roost.

As I said last week, the conditions for stagflation have been set in place. Sinking demand from economy that can no longer grow with credit,  combined with inflation. Ugh.


RE: 3.3 million - BostonCard - 03-26-2020

Japan has debt of 200% of GDP and does not have stagflation; if anything they have struggled with deflation.  US debt will hit 100% of GDP, which is manageable.  A single (non-recurring) big spending bill isn't a problem.

The concerns are around structural deficits of about 5% of GDP even before this recession, and entitlement programs that are not adequately funded, combined with anemic GDP growth during the boom.

As a first approximation, as long as:
structural deficit/GDP + interest * debt/GDP < GDP growth

You are fine indefinitely (debt as a percent of GDP goes down over time).  Interest rates have been at historic lows, so the second part of the equation is not a problem.  The issue is the structural deficit and lack of GDP growth.

BC


RE: 3.3 million - 2006alum - 03-26-2020

(03-26-2020, 09:27 AM)BostonCard Wrote:  As a first approximation, as long as:
structural deficit/GDP + interest * debt/GDP < GDP growth

You are fine indefinitely (debt as a percent of GDP goes down over time).  Interest rates have been at historic lows, so the second part of the equation is not a problem.  The issue is the structural deficit and lack of GDP growth.

BC

One thing that I have found useful to note with these kinds of models is that our intuitive understandings of economic production tend not to incorporate seemingly unrelated externalities like the costs of economic growth to the planet (and concomitant exacerbation of storms, droughts, etc.) as well as the increased likelihood in global pandemics that result from so much interconnectedness. The heightened costs of mitigating those externalities not only reduce growth (in terms of crop losses, folks out of work, etc.), but they also result in increased expenditures to offset it. 

These kinds of acts of god tend to be thought of as force majeure exigencies unrelated to the fundamentals of economic growth calculations, but of course both could be fairly incorporated as "negative externalities" associated with various growth strategies. For example, as this useful chart shows, our spending on cleanup related to weather and climate disasters has exploded over the past decade. And whereas prior pandemics took many months or years to make their way across the globe, our experience with COVID-19 shows how hard it is to contain a virus in an age of widespread interconnectedness.

Changing times can also make strange bedfellows - on this, I suspect many America Firsters and lefty environmentalists agree with some of the changes needed, even if their underlying motivations may be entirely unrelated to one another.


RE: 3.3 million - Farm93 - 03-26-2020

(03-26-2020, 08:18 AM)OutsiderFan Wrote:  
(03-26-2020, 07:48 AM)BostonCard Wrote:  First time unemployment claims.

BC

Given what Congress is passing, I don't think these unemployment claims are a big deal in the near-term. They have all been baked into the recovery bills that have or will pass later. The real pain will be when the mortgage for our 10% of GDP debt comes home to roost.

As I said last week, the conditions for stagflation have been set in place. Sinking demand from economy that can no longer grow with credit,  combined with inflation. Ugh.

All preventable with aggressive preparation and testing (see Korea & Japan).   We didn't opt for that plan.

Battling stagflation isn't the problem of the day.
We will have a large number of healthcare workers that will be impacted.   (Death, lung and heart issues, mental issues, etc.)
We will have people die that could have been saved.
The legal battles of those choices burdening health care workers and the legal system for years, especially if people die without access to treatment.

At some point in here, likely soon, someone on this board will lose a family member.   Posts worrying about stagflation, interest rates or 401(K) values will then seem so trivial.  

POTUS-45 says we are at war.   Love him or hate him.   Let's take that analogy literally for a moment.   When at war you don't squabble over the costs of the planes and tanks.   You build the things you need.   In the end even the winners of war will suffer in so many ways. 

"A strange game. The only winning move is not to play. How about a nice game of chess?"  Wargames

The winning move was to continue to remain ready for a pandemic and test aggressively to avoid playing the game of war with a virus.  

Now we are forced to play the game because our opponent is not interested in a nice game of chess.   It will cost a lot.   And will impact our national growth rate for several years.  Hopefully everyone on this board will live to experience that decade of weak fundamentals.

Hopefully next time the USA will learn the lesson from COVID-19 that Korea and Japan got from their battles with SARS and MERS.  The only winning move is not to play.   How about a nice series of tests?