Chris,
The difficulty with your concern is you seem to ignore the time which is bought by the lockdown, flattening the curve, whatever; and what can be accomplished in that time.
If the medical community wasn't doing anything, if we really only had the shoddy testing capabilities we have now, the nearly complete lack of any drugs to address the virus, and physical separation being our only defense, then I'd agree with you.
But in the coming weeks/months we will have:
- Massively better testing, it's starting to roll out now from Abbot Labs and unlike the others, they know what they're doing.
- We will actually have data on the drugs we currently have that are safe or semi-safe because early controlled trials will be complete. There are many many more than just malaria drugs and a z-pac
- We may have a vaccine before a second wave, or not, but we'll be a hell of a lot closer.
- We will have some idea if the early survivors retain their immunity or not, something we don't yet know.
- We will actually know, as opposed to guesses we're using now, how this is actually spread by what we think are asymptomatic people.
Taking the "burn itself out fast" strategy only makes sense if one believes we won't learn anything new which matters during the time we buy by delaying the disease. The flaw in the arguments that support that approach is this often unstated assumption.
For example, my UCSF buddies have told me that there are more than 15 separate vaccine trials going on simultaneously in mice, seven of them are showing great results. Will they take 18 months to reach mass use? Maybe, but once again, it would be a mistake to assume that the only solution is inject a bunch of eggs and grow some vaccine. There is a gigantic risk of rolling out a vaccine without proper testing, but again this is a crazy time and shortening testing or accepting a worse set of bad side effects may be fine. Let's not assume, without back up data, that the technological limitation of the 1950s still exists as another unstated assumption in the argument.
If we put a comparatively tiny amount of money into accelerating Abbot Labs' test boxes, we could test everyone; and do so repeatedly. That alone would alter our actions substantially.
Will there be financial consequences for this? Sure. Will they be sustained for decades? NO, not even close. We just got done spending $2.4 Trillion on the war in Iraq and Afganistan (
SOURCE CBO) and we didn't destroy the economy. Will the economy be different after this? Sure. What will it look like? I don't think anyone knows.
It's clear that large corporations can tap the US Gov for help much more effectively than small businesses, but the damage being done to small businesses in an election year is NOT lost on the US Congress. How often have you seen the House and Senate move a bill this big this fast? It's been years, maybe even decades.
As a retired investor here's my view of the economic impact of this informed by a 30-day crash course on the medical side and over 40 years working on businesses large and small.
- The disease will be freaking terrible for the next two-three months and then fade. We don't know if there will be a second and third wave, as there was in the 1918 flu. We do know about the 1918 flu and we should assume the medical industry is a bit more effective than it was in 1918.
- In the short term, the various governments will not be able to do much about the economy other than "look" like they are doing things. Some folks aren't going to get their checks until September. Those checks aren't big enough. The small business forgivable loans aren't moving yet because the rules aren't written. etc... So the true economic stimulus really can't arrive until about July. During that time, everything will be getting worse. There will be massive demands for an economic stimulus that is two or three times the size of the one already approved. It'll pass and that second wave of stimulus won't arrive until the fall. This is partially human nature and partially the folks in Washington wanting to get re-elected because by then the voters will be REALLY PISSED OFF.
- There is a very good chance that the combination of better medical skills than we had in 1918 and a lot of people developing immunity prior to October will result in the "second wave" being smaller than the first wave by a lot. So things won't be as bad as everyone thinks they will be as we go through the summer and are clamoring for more stimulus.
- The second big stimulus will arrive in time for the elections in November and the economy will take off like it has been shot out of a cannon.
- In the summer of 2021, we'll be worried about the economy overheating and we will have reports of massive fraud within the system that is trying to spray a firehose of money into the economy just when we have controlled or corraled the disease.
- We will increase the national debt by four or five trillion dollars. Put another way, by the cost of two or three more middle east wars. It won't break the economy.
The shorter summary is: This disease will spike in the next 60 days and then fade. It takes the Gov a long time to act, so the stimulus will arrive after the disease has mostly passed. The stimulus will be much bigger than it should be for political reasons, so the economy will go bonkers and we will be booming by late 2021 and through 2022 as we try to ween everyone off of free money.
Fortunes will be made during 2022 by those who didn't blink in 2020. This will be one of the largest buying opportunities of our lifetime, perhaps ever. I'll even go out on a limb to say that the smart money will start to buy as the terrible news arrives towards the end of June and into July.
If you would like to ponder what the "smart money" thinks about all this, you can use the Options Market and simply plot the cost of an option on the Dow Industrials for October, as one example. The cost of that option is already MUCH higher than it usually is, indicating that the smart money thinks the economy will be rolling by then. If the option price continues to rise, it'll confirm what I'm proposing. Research has shown that in catastrophic times the outrageous premiums which options receive are worth it. Said another way, even the "smart money" underestimates how rapidly the market and economy will turn upward. You can also lose your ass playing the options market. Be warned. But, it is a great indicator that most folks don't consider.
Here's a simple thing to do about all this. Refinance your house. While interest rates are effectively well below the inflation rate, lever up. At the very least don't be shy about hauling in as much free money as the government will give you in forgivable debt and stupid low interest rates.