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Saturday 18th April 2020
Hi Friend,
Lockdown set to continue ...
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| But what happens next ...
The government announced this week, the lock down will continue for another three weeks. The household siege, held over Easter. The continuation will run until the May Bank Holiday. It may be difficult to continue much into May, without some concessions to "Banged Up Britons".
Police in the parks urging people to "return to your homes, this is not a holiday" are not ideal You tube Clips for a laissez-faire Tory party. Matt Hancock was urged to present some "forward guidance" on when the lock up would be lifted. The Health Secretary could not resist. There would be five tests. Just like the five pillars of the Covid-19 tests. The results, not necessarily in order of importance ...
"When the NHS had capacity to cope, when the fatality rate could clearly be seen to be falling, when the same would apply to the infection rate, when we were testing over a gazillion people each week and when the Prime Minister was back in Downing Street, to take the blame if anything went wrong."
There is light at the end of the tunnel, the health secretary explained. The shortfall in PPE could be resolved, by urging front line staff to use essential equipment every other day of the week. More ventilators are on the way, soon to be redundant if latest medical advice is to be accepted. Just let patients lie on their stomachs, at least they won't be able to see what's going on around them.
In the economy more widely, the Office For Budget Responsibility added to the economic gloom, predicting GDP could fall by 35% in the second quarter. No mystery to the mechanics, construction output is assumed to fall by 70%, manufacturing by 50% and the leisure sector by almost 90%. Unemployment could rise to over 2 million according to the OBR model.
This week the ONS revealed that one in four businesses had closed in recent weeks as a result of the lock down policy. A further 38% had experienced a substantial reduction in activity. The OBR assumes a rapid rebound in the economy, once the second quarter has passed. The Adam Smith Institute warned on the other hand, that "without a plan to reopen the economy, there won't be one to do so."
As we warned earlier in the month, applying mediaeval measures of containment to a contemporary economy, will risk driving us all back to the Dark Ages. There is a debate emerging between the cost of life and the cost of livelihood. It will be a tough call for a young cabinet.
The data will not make this any easier. The case load of infections may have peaked in the UK but the outbreak is now following a "European path" rather than the Asian model precedent. The cabinet has another three weeks to assess the evidence. The health case, may yet pass the test, just in time to rescue the economy from significant permanent set back ...
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| | | China : Economy shrinks by over 6% in the first quarter ...
This
week, China revealed the domestic economy fell by 6.8% in the first quarter.This was the first fall since records began in 1992. Industrial output fell by 8%. Investment fell by 16% and retail sales fell by almost 20%. The recovery will be hampered by the slow down in world trade and consumer caution in terms of spending plans and leisure habits. For the year as a whole, growth is expected to be around 2.5% compared to 6.1% last year. In the U.S. ...
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| Mutiny on the Bounty ...
It has been a tough week for the President. Trump experienced his worst melt down, ever according to reports from the White House Press Corp.
New chief of staff, Mark Meadows is said to be overwhelmed in the role and has been reduced to tears on occasions. Meadows is the fourth in the office under Trump. The odds are, he will be the shortest tenured yet.
This week Trump retweeted a call to sack Dr Anthtony Fauci, his own public health adviser. Funding for the World Health Organisation was suspended. The President blamed the WHO for assisting China, in a cover up of the initial outbreak and for criticism of his decision to suspend flights to China in January.
The North East state governors were accused of plotting to sabotage his exit policy. The President was set to order the states to open on the 1st May, until it was explained this was a state decision and not one for the White House. Then came the tweet ...
"Tell the Democrat Governors that “Mutiny On The Bounty” was one of my all time favorite movies. A good old fashioned mutiny every now and then is an exciting and invigorating thing to watch, especially when the mutineers need so much from the Captain. Too easy!"
On Friday, Trump urged the Democratic States of Michigan, Minnesota and Virginia to "LIBERATE" the people and to start loosening the strict social distancing guidelines. "Set my people FREE" the president's exhortation. The announcement came the day after the White House issued new federal guidelines on reopening the economy. The plan is to ease restrictions on businesses, residents, visitors to Trump hotels and Mar-a Lago specifically.
Goldman Sachs this week claimed the U.S. is past the worst. The number of infections does appeared to have peaked. The government and Federal Reserve have thrown some $6 trillion dollars at the economy. The President's name has been printed on the hand out checks. Still the unemployment number has surged by 22 million.
The call for a return to normality is understandable. A sense of panic is sweeping through the White House. Election looms within months. The State Governors, Democrat and Republican alike, will be more cautious in the return to work strategy ...
That's all for this week. Have a great, safe, week-end, wash your hands and don't talk to strangers,
John
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| © 2020 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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