Category Archives: Economics

Mad dogs and Georgians going out in the midday sun …

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Apologies to Noel Coward, but it works on so many levels.  The tropics are quiet, and there haven’t been any major earthquakes.  It would be great to discuss the “La Nina Watch” that long range forecasters have put out as well as some other climate research. There is cat business to report as well. But the US is increasingly in crisis, and a rant about Georgia’s response to the pandemic is required.  Long time readers will realize this isn’t political: to be clear, both dominant parties in the US utterly disgust me.  Both are acting irresponsibly with respect to the COVID-19 response. Of course individual politicians on both sides care. They aren’t stupid.  Partisans on both sides using inflammatory language to describe the other aren’t helping the situation.  But Politicians are so focused on proving the other side wrong, and not being wrong themselves, they can’t see through to doing the right thing.  And as a long time student of how societies function in response to stress and disasters (or, more often, don’t function), I’m increasingly concerned they are setting up American society for a major catastrophe.

To try to boil it down to the essentials, the US financial system is on the verge of collapse.  Forget the casino (aka Stock Market) – that has been disconnected from the real economy for a long time.  Small businesses, especially service type businesses, are defaulting on leases and mortgages at historical rates.  Economic activity is crashing, and the underfunded, short term band-aids like PPP are running out.  And money flow through the economy is declining.  Take one small indicator: the rate of approval of small business loans.  Institutional lenders were approving 66.5% of loan applications in February.   By April that was down to 18.1% – and the number of applications was a fraction of the amount two months earlier.  Banks are setting up huge reserves to prepare for loan defaults.  It’s an insidious catch-22: banks are reluctant to loan money that can keep a business going and recover because they are afraid that existing loans are going to default.  This is part of the circular firing squad is in play in the property markets: businesses can’t pay rent to property “owners” who really don’t own those properties; they need the rental income to pay their mortgages to the banks.  Who used those assets and and income in further complex financial instruments within the capital markets.  This is called leveraging.  So that small business going under and defaulting on $1000 of rent has the potential to unravel millions of dollars of related financial activity.  Throw in the social unrest and move to address some long ignored social fault lines, it’s a toxic mix.  People are scared.  They should be.

On top of all that, there is no doubt the spread of the virus is out of control.

What does that have to do with Georgia?  Everything.  We have a politically inspired catch-22 in play.  Republicans are focused on getting the economy back in operation, and demonstrating they are properly running their states (and via Trump the country).  Democrats are focused on the public health aspects, and demonstrating the Republicans are incompetent and should be replaced.  Each are playing power games and trying undermining the other, and are so focused on their own agendas they are ignoring the correct (in context) concerns of the other.

Enter the Governor of Georgia.  Yesterday Kemp issued an executive order that is one of the more irrational pieces of stupidity to come out of this episode – and that’s saying a lot.  The key bit of insanity is on page 32 that overrides any requirement for face masks put in place by cities and counties.  We’ve learned a lot about how the SARS-COV-2 virus that causes COVID-19 spreads. The initial fears about surface spread,  airborne transmission,  and so forth, have proved overblown. It is fairly clear now that the vast majority of spread is by droplets expelled during breathing/talking/sneezing/coughing.  Masks – even simple cloth masks – work.  Period.  In this report (link) …

In May, two hairstylists at a Missouri salon who had COVID-19 but wore face masks cut the hair of 139 masked customers for roughly a week, and did not infect a single client. They also did not infect any of the clients’ contacts or any of the other stylists in the salon, researchers report.

Yes, the order “encourages” the use of masks, but elsewhere it does a lot to undercut that message.  If Kemp really wants to get Georgia back to work and school, it’s simple: require everyone leaving their home to wear a mask.  Undermining that concept is irresponsible.  

In the “equal time equal stupidity” department, some states such as California are putting “shelter in place” restrictions and shutting down businesses again.  This, too, is irresponsible.  In the first place lockdowns won’t work at this point. The California Republic doesn’t live in a vacuum.  As soon as the orders are lifted, the virus lurking in neighboring states will come back and they will be right back where they started.  In a viral outbreak, you use a lockdown to stop the immediate spread, and use the time to put in to place the public health measures to control it – things like contact tracing, testing, research to figure out how to deal with it when you reopen.  Shutdowns only work if a) everybody does it, and b) you use the time wisely.  In the US neither happened.  So doing it again just won’t work and, now we just can’t afford it.  Another wide shutdown risks collapsing the economy (and its going to be damn hard to prevent that anyway).

During the Revolutionary War, Ben Franklin famously said “We must, indeed, all hang together or, most assuredly, we shall all hang separately.”   To hang together in this crisis we all have to wear masks (to stop the virus), and we have to restart business and school (to save the economy).  Doing the first allows the second.  Doing one or the other in isolation won’t work – and will make things worse.

Economic implications of reopening: balancing the damage

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It didn’t have to be this way.  SARS appeared in 2003.  Since then there has been a lot of research, and some previous “warning shots” (MERS, 2012) that clearly said “get ready.”  But it’s worse than that: after 9/11, the potential for biological warfare based terrorism was a extensively studied and considered. Money was spent, plans were suggested, little action was taken. So at least three administrations have dropped the ball on pandemic planning (and those plans that did exist were largely ignored).  Even worse was what has happened this year.  We had  over two months of solid intel (and credible reports of more than three) that something bad was on the way.  The present administration did virtually nothing.  The Congress, who gets much of the same intel, did nothing.  Yes, Presidential leadership would have been optimal, and President Trump’s administration Failed, but I didn’t see reports of stacks of legislation being sent to his desk, and much of a response would have had to come from the legislative end of Pennsylvania Ave.  So in short, the Legislative and Executive branches of the US Government, both political parties, failed the American people.  Very little can be argued about that except by die hard partisans.

Next, after the gross under-reaction, there was an arguable overreaction in some ways.  Measured, targeted approaches of shutting down “high contact” activities while preserving other less risky commercial activities were not taken: a one size fits all “shut it all down” approach was the norm – cause in part by the lack of testing and/or plans.  States imposed their will on municipalities, when stronger or weaker measures may have been appropriate depending on the locale. But politics aside, those kinds of targeted actions require technical things that the US just doesn’t have:  a coherent and reliable testing, tracking, and isolation system.

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The looming political and economic crisis (editorial)

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I see a lot of people who are viewing the economic impacts of the SARS-COV-2 outbreak as an opportunity for change. Across the political spectrum activists for various causes are practically salivating over the opportunity to use the crisis to implement their favorite agendas.

  • Climate change? Great! The crashing oil markets are the perfect time to act!
  • Social Justice? Great! The economic and health system disparities made clear by the virus are the perfect time to act!
  • Iran? Great! Their weakened state, internal unrest, along with the insulation of a down oil market, make this the perfect time to act!
  • China? Great! Their weakened state, internal unrest, anger over their handling of the the crisis make this the perfect time to act!

The list seems endless. And all of those forces are interacting in the political process, slowing down economic interventions in the real economy (the Fed and other reserve banks are propping up the markets, but I hope most people realize that the stock and bond markets are no longer much related to the real economy). There’s just one problem: all of the potential for change is potentially delusional.

It seems pretty obvious that the global political and economic system is on the verge of a cascading collapse, probably merely weeks or at best months away. I have discussed this with several colleagues, and while we are coming at it from different directions (some from economics, some from geopolitics) we end up in the same place. And that should give everyone some pause. What will be the trigger? There so many to choose from it’s hard to say. In the US, tens of thousands of small businesses are on the verge of failure. Those businesses all have mortgages, pay rents, pay taxes, buy stuff from other businesses – as do their employees. Once those go, the domino effect (zipper effect, whatever you want to call it) will rapidly lock up or even collapse the entire financial system, especially state and local governments dependent on tax revenues. Consider one small, often overlooked aspect: that welfare benefits are distributed using the Electronic Benefit Transfer (EBT) system. That uses debit cards to provide benefits to recipients. What happens if banks stop extending credit and the electronic money system becomes restrictive or locks up? What happens if grocery stores can’t accept EBTdue to their own credit issues or delays in state payments? Millions of people in the US would suddenly be cut off. In areas where the EBT has been disrupted for even 24-48 hours, social unrest (rioting, looting, etc) has rapidly ensued. That these happened in isolated, urban high crime areas means they didn’t capture the public attention, but if that happens nationally … well, it will be ugly. I could terrify you with various geopolitical scenarios as well. Most of these are of “low” probability (some 1 in 5, some 1 in 10), but when you have a bunch of “low” probability events, the chances of one of them happening start to approach 1.0. And they all end up in the same place: something happens that causes the fragile, overly interconnected and over leveraged credit and financial system to go into a death spiral. Once it happens, it will be hard or impossible to stop, given that if any one “trigger” happens, like a string of firecrackers it will set the others off. So that brings us to this:

There isn’t time to use this crisis to craft some wonderful transition to a brave new (Marxist, Progressive, Green, NeoCapitalist, ‘Murican!, Libertarian, whatever) world. We have to stop the collapse at all costs and buy time. Or none of those things will mean anything.  The Congress is set to pass a boost in funding to the Paycheck Protection Program and some other tweaks today.  It is woefully inadequate by an order of magnitude (trillions are needed, not hundreds of billions).  Even re-opening is not likely to help at this stage (even assuming there are not repercussions or fall “second wave”).

If the system collapses, no matter what the trigger, there won’t be any opportunities for change. Yes, we need to move to something more sustainable.  If we get past this crisis that will take on even more urgency because it is doubtful we will get another chance. To use a medical analogy, the patient is in about to go into cardiac arrest; we can worry about diet and exercise when we get the heart beating again.  But for now, we need to stop pushing for the next thing until we can have some confidence there will even be a next thing …

Time to be blunt: the data sucks.

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Good information is vital for decision making.  With respect to the ongoing pandemic, leaders and internet experts alike in the US are analyzing the numbers, doing projections, making plans, not to mention news outlets scaring the poop out of people with “death counters” and “breaking news” of new numbers.  There is just one problem: all of this is based on numbers that are so noisy they are almost useless. And there are powerful political forces in both “tribes” driving the data in to places it doesn’t want to go – something much easier to do with bad data.

Yes, often you have to work with data that is noisy. Experts do it all the time. But I can’t recall seeing so much analysis, decisions, and opinions rendered on vital subjects on data that is so crappy – often by people with little to no experience in dealing with noisy data.

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What do you say when nothing has changed?

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One of the problems with a 24 hour infotainment (aka news) cycle is that there is constant pressure to come up with “new content.”  If I don’t post something for a day or so I get messages from the usual social media suspects that “your thousands of followers haven’t heard from you in a while, write something!”  Honestly, given my research subjects, I think  most of my followers are perfectly happy NOT hearing from me.   But if you’re in the professional content business you have your kleptocaptialist corporate masters to serve, so you have to come up with something.  So you do.  Even if it’s more trivia than information or news – the more inflammatory the better.  So, if deaths are down in one area, play them up in another.  The political shenanigans are always great for hits, and politicians are always looking for a camera to love.  “Things are moving along as predicted, hang in there, nothing new to report” just doesn’t sell the latest prescription drugs (insert rant here).

So where do things stand?  There is water under the ocean (same as it ever was).  The numbers and forecasts haven’t really changed a lot, so as frustrating, boring, and economically harmful as it is, keep on keeping on with the CDC guidelines. 

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Spirit, Speak Comfort To Me!

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OK, before someone gets upset I’m not taking the current crisis seriously, don’t misunderstand: this is a serious situation. But there is no cause to lose our sense of humor or be grim. Yes, we must take action, but no, it’s not the end of the world (unless you’re a nurse or doctor, then it might feel like it for a couple of weeks).  I’ll crunch the numbers downthread and it’s not as bad as you might think if you keep perspective.  But do not doubt the sad fact that the US health care system can’t really keep up with a normal flu season; there is no way it can handle a rapid influx of respiratory patients. That is why COVID19 is so dangerous, and why everyone needs to take it seriously, following the CDC guidelines, limit interactions outside your immediate household (aka social distancing), keep strict hygiene protocols, and otherwise doing everything you can to try to slow down the rate of spread. It’s more than likely not about you. It’s about that 1% of so of the population who will get very sick, and may not get enough care because the system will be overloaded.

Here’s the latest analysis.  First, please, please, please, stop obsessing on every blip in the numbers!  They are not “skyrocketing” or whatever inflammatory phrase the media is using at the moment. Second, the absolute numbers don’t matter.  Yes, each and every one is a life, and a tragedy.  But what matters in terms of risk is the denominator: how many people are getting sick and passing away in terms of what size group?  Losing 100 people in Chatham County (pop about 290,000) is very different from losing 100 people in New York City (pop 8.6 million).  Don’t compare them.  It’s mortality per unit population that matters – and how fast that mortality happens.  Please stop feeding the beast by quoting and hyping how many deaths per day without context.  It’s not helpful, and causing people far more stress than is appropriate.

Time for some math: deaths from the virus are progressing along what is known as a logistic function.  This type of function was originally developed for use in population growth, but has found it’s way in to many other fields.  In biology, this is sometimes called a carrying capacity curve.  We are entering the scary part of that curve.  Here’s what the curve looks like with data for several areas as of 24 March 2020.  The black line is a theoretical curve that represents an estimate of how things might progress.  The grey line is for comparison, the 2017 H3N2 flu progression speeded up by a factor of 5.  The dots represent actual data as of the totals for yesterday as reported this morning.  Click to embiggen …

 

Of these, China (grey +) and Iran (blue o)  look weird.  I suspect those numbers are “munged.”  But Spain (red dots) and Italy (green dots), which are the farthest along of societies that might resemble the US, seem ok.  (South Korea is even further down the curve, but they took very early intervention, and have more hospital surge capacity than the US, so may not be a good analog).  New York is the cyan triangles that are hard to see because  it’s just starting to creep along the curve – about day 25 or so.  The next 20 days will be very scary – you can see that is the steepest part of the curve, and people will talk about doubling times, and extrapolation the daily rates far beyond the point where they will start to  settle down.

Where will it end?  The latest projections are that the US will see between 50 and 90 thousand deaths.  (2017 saw 61 thousand H3N2 influenza deaths – but over 6 months, not 6 weeks!).  New York will likely see upwards of 5 thousand (currently 200 or so).  Smaller communities will also see a rapid rise in deaths that, without context, will seem terrifying. Expect the health care system to be in crisis, and please do what you can to support the medical community.  This will be horrific for them.  Chatham County, Georgia hospitals, which serve about 400,000 people, will likely see nearly 1,000 respiratory cases, of which 100 may die, all in the next three weeks.  But again, by the end of April, most parts of the country should be at the upper end of the curve, with the deaths per day decreasing.

How soon will we know if that is our future, or something worse?  Italy should be at near their peak.  I expect that by early next week we will see a downward trend in their numbers, followed by Spain 4-5 days later.  If by the 1st of April Italy is still recording 700 or more per day, that will be a source of concern.  Will update the graph this weekend … meanwhile, don’t hoard TP like this guy.

How bad is Italy (ok, one more COVID post this week).

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As of the final totals from yesterday, 22 March 2020, there have been 5476 deaths from SARS-COV-2 in Italy. To put that in perspective, in the 2013/14 influenza season, there were 7027 excess deaths due to influenza recorded. In 2014/15, a  20,259 deaths were attributed to that outbreak, while in the worse recent year, 2016/17, 24,981 died from influenza. (from Rosano et al, Int. J. Infections Diseases, Vol 88, Nov 2019, pp 127-134).

Yes, COVID19 is different in how fast cases are coming, but not in whole population mortality. The speed of progression seems to be about 4 and 6 times that of influenza, and that is producing a HUGE strain on the system. But the outcomes have yet to approach a bad influenza outbreak. The present rate of the last three days of 690/day will have to continue for another 28 days to reach the 2016/17 flu season toll. I’d be very surprised if the rates don’t start to drop soon. If they haven’t dropped in Italy in two weeks, maybe then it’s time to worry, but for now, things seem on track for this to be a “flu season in 6 weeks” virus. Catastrophic for the health care system, but not a big deal in whole population terms. In economic terms, that’s a whole different question …

To repeat from yesterday: The US health care system can’t really keep up with a normal flu season; there is no way it can handle a rapid influx. That is why COVID19 is so dangerous, and why everyone needs to take it seriously, following the CDC guidelines, exercising social distancing and hygiene protocols, and otherwise doing everything you can to try to slow down the rate of spread. It’s more than likely not about you. It’s about that 1% of so of the population who will get very sick, and may not get enough care because the system will be overloaded.  Fixating on every up or down tick in the numbers, and chasing down every wild number or wild theory making the rounds is just not sensible or conducive to sanity.  My advice is to be careful, keep watch over those around you, take advantage of the time off as you can, check the news maybe once a day to see if anything has really changed as to what you should do, but don’t drive yourself crazy hitting refresh; this is a slow motion disaster. April will be the cruelest month – but by the last week things should be looking up.

What a fashionable Italian Cat might look like.

COVID19 vs Influenza: why it’s worse, why it’s not.

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OOPS: these are per 10,000, not 1000.  

You’re seeing lots of graphs and tables on COVID 19.  In a disgusting display of fear mongering, networks are now keeping running counts of the cases and deaths on screen as if tracking stocks or something.  But all of that lacks context.  How does COVID19 compare with a bad influenza outbreak? We’re starting to get enough data to seriously answer that question. I’m using the 2017 H3N2 outbreak for reference, which was a bit worse than an average season, and the data from three areas that are relatively farther along in the process: Hubei, China, Daegu, ROK, and Lobmardy, Italy.  Influenza is in blue; Hubei is orange, Daegu yellow, and Italy in green.  We start the clock on our graphs at the first known case and plot cases per 10,000 population by week:

Oh.  That’s not very interesting.  The COVID19 cases barely show up!  What is going on?  Well, to start with, we are probably only detecting/reporting a fraction of cases.  Lets scale H3N2 flu to assume we are only detecting 5% of COVID-19 cases (which seems to be the range in the literature at the moment):

That’s a lot more interesting – and really illustrates how COVID19 is both different from and more stressful for the health care system, and not as bad for the general population, as influenza.  Notice how rapidly the cases explode for COVID19.  This is why the outbreak is so stressful for hospitals: the cases flood in over 3-4 weeks, as opposed to 20 weeks for a flu outbreak.

There is a lot to learn from these numbers and graphs.  Notice the sharp break in the Hubei China curve.  There are likely two reasons for that. First, they instituted rather draconian travel restrictions.  Second, they are likely not being entirely honest about their reporting, either internally or externally.  From the Korea curve. which is probably pretty reliable, it looks like COVID19 cases will level off between 1.5 and 2 cases per 10000.  H3N2 leveled off at over 60 per thousand, but if we scale it to the same detection rate we suspect we are seeing for COVID19, then 3 to 3.5 is the range, and therefore COVID will have maybe 2/3 the impact of a bad flu season in terms of total number of cases, and mortality.  Italy is in the steep part of the curve.  We should see their case rate slow over the next week and level off, probably in the 2.0 to 3.0 /10,000 range (a bit higher than Korea due to the older population and later implementation of control measures).

What about the US?  We are just entering the steep part of the curve.  It will be very scary as cases explode – but keep it all in context.  If these trends hold, the US can expect about 30 to 35 million people to be “symptomatic” (most mild), 400,000 to 500,000 need hospitalization, and 30-40 thousand deaths.  Compare to the 2017 influenza season: 45 million symptomatic, 810,000 hospitalized, 61,000 died.  HOWEVER, rather than coming over 20 weeks or so, those cases will come over maybe 4 weeks -five times faster.  The US health care system can’t really keep up with a normal flu season; there is no way it can handle this flood.  That is why COVID19 is so dangerous, and why everyone needs to take this seriously, following the CDC guidelines, exercising social distancing and hygiene protocols, and otherwise doing everything you can to try to slow down the spread.  It’s more than likely not about you.  It’s about that 1% of so of the population who will get very sick, and may not get enough care because the system will be overloaded.  The state of the US system is a disgrace, and its inability to handle this outbreak is the result of health care policy decisions going back decades.  That will likely be the subject of an upcoming vehement rant …

Data sources:
Influenza Hospitalization Surveillance Network (FluSurv-NET), US Centers for Disease Control.
2019 Novel Coronavirus COVID-19 (2019-nCoV) Data Repository by Johns Hopkins CSSE

The difference between data and information (19 March COVID Notes)

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When looking at articles about any subject, but especially science topics, you have to appreciate the difference between data and information.  For example, people are freaking out about articles like this one that are saying the SARS-COV-2 virus (the beast that causes COVID19) can survive “for hours or days” in the air or on surfaces.  That is “data”.  But what does in mean to you, practically?  How is this different from other virus like influenza? That would be information. So let’s convert that data point into information …

To start with, let’s be clear it doesn’t mean anything different from the standpoint of guidelines:  your best bet as to what to do is  the CDC COVID-19 web site. For other preparation tips, try the DHS/FEMA site. By now you should know the drill: wash your hands, don’t touch your face, social distancing, just stay home and isolate if you don’t feel good. Help those around you as needed.

OK, so SARS-COV-2 can survive in airborne droplets for a few hours, and on surfaces for a few days in a controlled environment.  How is that different from the cold or flu?  Well … it isn’t.  The influenza virus can remain infectious for several days on things like doorknobs. The viruses that cause the common cold (and recall 20% of them are in the coronavirus family) can be viable for over a week, even longer.  To quote from NIH (who funded the study):

The findings affirm the guidance from public health professionals to use precautions similar to those for influenza and other respiratory viruses to prevent the spread of SARS-CoV-2 …

These kinds of studies are important for practitioners to assess the guidelines and see if anything needs to be changed. However, reporters have a responsibility to put that data into context so it becomes information.  Sadly, they often don’t, or do it “below the fold” so they grab the attention of readers (ZOMG! Its Lives!) but people don’t see the context (oh, it’s just like other viruses).

In summary, for cold and flu and, now, COVID19 season, just follow Sgt Apone’s advice and you’ll be ok …

Not enough crayons …

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Between the sheer magnitude of the misreporting going on in the major news media, and the monumental incompetence and feckless positioning to take advantage or avoid blame for the COVID19 crisis among US political leaders, it’s hard to know where to start.  The second biggest thing that bugs me is the assumption that people are stupid and have to be manipulated.  The biggest thing that bugs me is that the people doing the manipulating (media, leaders) think they are knowledgeable and smart enough to know what is best and that manipulation is required.  So for today a “short” post pointing out one small element of the madness.

Imperial College, London, released a report on modeling the potential impact of the virus.  It’s an interesting study, properly interpreted it’s good, valuable work.  But that’s certainly not what is happening.  One example is the New York Times article on the study.  They plucked out a graphic showing 2.2 Million US deaths, labeling it in the fine print as showing the number of deaths “in the absence of actions.”  What they don’t say is what the report itself said: that this scenario was unlikely.  That upper bound assumes that people would do nothing even as others around them fell sick.  Worse, this scenario is now in fact impossible: actions already taken will have a profound reduction on this total, even if the assumptions in the model (which are very bad case assumptions) are correct.  There are also reasons to believe that many of the assumptions in the paper are extreme, based on data that has become available later – this is a rapidly moving situation, and it is hard for peer reviewed research to keep up.  But it is valuable document showing the potential impact of various mitigation actions.

 

As I have ranted previously, there are always a huge range and variation of scenarios for any disaster.  Which scenario you use for a given purpose varies depending on the application.  There is no “right” number.  But there are a lot of wrong numbers, especially for what is most likely to happen.  I think most people understand that you sometimes have to plan and take action based on what could happen, even if though what is likely to happen is something more benign.  The problem is, by always emphasizing what might happen (much less the most extreme version of that) just causes a lot of fear, anxiety, and panic.  I just don’t buy it you have to scare people: most people, most of the time, will do the right thing if you just take the time to explain it to them.

As I have been saying all along, your best bet as to what to do is still the CDC COVID-19 web site.  For other preparation tips, try the DHS/FEMA site.  By now you should know the drill: wash your hands, don’t touch your face, social distancing as needed, stay home if you don’t feel good.  Help those around you as needed.  And try not to stress too much over the numbers, the drama, and the politics.  Most of the numbers (and the rhetorical extremes) are bogus anyway.