After Bloody Day, Coronavirus Meltdown Continues. Big Danger: Italian and Eurobanks Are Set To Blow

There are so many wheels coming off that analysts and the business press is on coronavirus crisis overload. And unlike 2008, the Fed can’t save anyone from the Grim Reaper.

Due to being time constrained, we’ll give only a broad brush treatment.

As bad as things look, the press is oddly underplaying the big economic risk that could move the world rapidly in the Great Depression direction: the collapse of the Italian banking system. Eurobanks would almost certainly be engulfed. They are generally undercapitalized. The EU dithered after the crisis. First. it implemented half-baked resolution schemes that if anything increase the risk of bank runs, then repeatedly rejected Italian pleas for help or rule waivers. The EU had a huge row merely trying to fill the upcoming Brexit-induced budget gap. It would take a massive bailout to rescue Italy’s banks, either in the form of large scale direct aid to Italians to keep the country solvent, or to its banking system.

The lockdown of Italy will kill just about all commerce. Hardly any business are allowed to remain open. Retail, restaurants, entertainment, non-essential businesses, all shuttered. Italy’s economy had already shrunk 10% post crisis. The country’s economic base is small and medium-sized businesses, many of which are barely getting by because Italy’s banks are letting them get away with zombified loans.

CNN politely calls the likely result of the shutdown a “deep recession“. No D words allowed!

Italy has imposed sweeping nationwide restrictions on travel and public life, a desperate attempt to contain the coronavirus outbreak that looks set to plunge the world’s eighth largest economy into a steep recession.

The measures announced late Monday include travel restrictions on 60 million residents, a ban on public events, the closure of schools, movie theaters, museums and gyms, and limits on opening hours for restaurants, bars and shops…The restrictions are in place until at least April 3.

Taken together, the unprecedented measures are likely to push an economy that contracted in the final three months of 2019 into a sharper downturn that will put Italian hotels, travel companies and restaurants under intense pressure.

How does the country function? Yes, the government is allowing mortgages to go unpaid. But what about business rents? Income for expenses like food and gas? This is a massive shock to an already distressed economy.

Some members of the press have taken note. For instance, from Euromoney:

Italy’s financial sector and public finances are uniquely vulnerable to the Covid-19 crisis. Business loans, above all, are under threat, as Italy’s economic structure is particularly reliant on small and medium-sized businesses, while its judicial system has routinely proved itself incapable of processing collateral claims sufficiently quickly.

Italian household debt is better-placed, as residential mortgages are less common and loan-to-value ratios lower than elsewhere in Europe, analysts say.

Davide Serra, Italian founder and chief executive of financial institutions specialist Algebris Investments, believes that there is little chance of a 2008-style liquidity crisis in Italy, or elsewhere in Europe’s banking sector…

The biggest question, everyone agrees, is how long the downturn in demand will be. If it is brief, will people start spending again after a month or two, making up for lost spending by using what they have saved while in isolation? “If not, we are talking about going back to the Middle Ages: no company will survive,” says Stefano Visalli, founder of Oxy Capital, an SME-focused private equity company in Milan.

The article admittedly has some ideas as to what might be done, but with a hole this big, the only real remedy is serious fiscal spending and the EU is allergic to that.

From the Guardian:

Italy is the eurozone’s weak link…The issue is not whether Italy will have a recession….

Nor is it really a question of how deep the downturn will be…Were the economy to remain effectively immobilised until the end of June, he says there could be a 4.5% drop in output in the second quarter….

That said, for the rest of Europe Italy is a country that is too big to fail. So what’s really at stake is not whether Italian GDP contracts by 1.5% or 4.5% in the second quarter but whether its financial crisis proves contagious. As it might.

Charles Dumas, of TS Lombard, says: “The banking system is unlikely to be able to remain solvent or liquid in the current conditions of nationwide lockdown. The tourist industry is effectively dead for 2020. Fiscal stimulus could be counterproductive if, as is possible, investors demand a much wider credit spread to accept fresh Italian paper. Italy will need massive support from eurozone partners to avoid going the way of Greece…

Instead, the onus is on individual governments and the European commission to show that they have learned lessons from the counterproductive obsession with the budgetary orthodoxy that delayed the eurozone’s recovery from the 2008-09 financial crisis.

In the meantime, let us quickly acknowledge the stomach-churning events so far:

Trump managed to make a bad situation worse with his speech last night. No serious detail on what to do to save lives, save the lame idea of a travel ban from Europe, which means efectively flights to Europe too. Even though the ban can be circumvented by flying through London or Dublin, that move still gave the already sick oil markets another kick in the teeth. For instance, from Bloomberg:

Sue Trinh, global macro strategist at Manulife Investment Management in Hong Kong:

“All the ‘solutions’ we are seeing from the powers that be are reminiscent of the great financial crisis. Bailing out the zombies while structural issues surrounding allocation of resources remain — liquidity does not control the spread of this virus. Where are the hospital beds, ICUs, doctors, medical equipment and vaccine R&D?”

US stock futures are already limit down, so expect another air pocket market open.

Congress is channeling the ghost of Andrew Mellon. From The Hill:

A push to cut the payroll tax as part of an effort to revive the economy is facing steep headwinds on Capitol Hill.

Trump has spent days making the pitch publicly, as well as privately, as Washington is under growing pressure to try to shore up the stock market, which has plummeted this week over growing concerns about the growing coronavirus outbreak.

House Democrats are set to unveil an economic response package that does not include a payroll tax cut. Meanwhile, Senate reactions range from deep skepticism to, in some cases, outright opposition, raising questions about whether a plan could ever reach Trump’s desk.

So the Republicans don’t like spending and the Democrats don’t want to give Trump a win, particularly this year.

Aside from that, Mrs. Lincoln, how was the play?


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  1. jackiebass

    Bob Dylan sang a song that I think is on the money. It’s called There’s a Hard Rain Gonna Fall. In the US the FED fumbled the ball. They should have been raising interest rates. Instead they were slow to raise them and then caved to Trumps badgering and lowered them. The result was an overheated economy based on credit. Now when they need to lower rates there isn’t much to lower. I think a recession will hit suddenly and be , if it is possible, far worse than the last recession.

      1. Which is worse - bankers or terrorists

        They will go negative. It is a market based phenomenon.

        But that will crash the dollar.

      2. Yves Smith Post author

        The Fed won’t. Fed realizes it is counterproductive (even super low rates too but they were not willing to push for more fiscal spending so they could back out of their corner). Fed has complained about the ECB’s negative rates in a not-very-coded manner.

        1. Which is worse - bankers or terrorists

          Yves, I think you have the best blog on the internet and love you and your team’s work (although I honestly lack the time to read everything). But I’d kindly like to debate this notion that the Fed will not go negative with you.

          I’m looking at the charts on the S & P this morning. We’re at the December 2018 lows at this writing. The next resistance level is the December 2015 lows. That would be close to a 50% drop.

          Under these conditions, are we sure the Fed doesn’t go negative, with fiscal stimulus off the table? How do you stimulate if you are looking at a 50% drop? There would be wreckage all over the financial system, including in derivatives land. Sure, the Fed made these comments about European interest rates recently, but wasn’t one week ago a previous historical epoch?

            1. Which is worse - bankers or terrorists

              But, it is happening in the euro land and Japan. And why is the EUR rising right now?

              1. vlade

                And a fat lot of help it did them. In fact, there’s an excellent arguement to be made that banks hurt from negative rates, which is one of the reasons why EUR/Japanese banks are in the world of hurt they are.

                Fed cares about its banks way more than the EU (and ECB is not as powerful within the EU as Fed is within the US IMO) does. It’s not going to sink them wholesale.

          1. aj

            Banks can borrow all the money they want at negative interest rates. It’s no different than paying interest on reserves. But they still have to loan money at positive interest rates. The negative rates don’t actually get passed on to the end consumer. Some countries have tried imposing negative rates on deposits which is counter productive because its essentially a tax on keeping your money in the bank. Now if I can walk into a bank and borrow money at negative rates, whoo boy that would sure spur the economy! Sign me up for as much as I can get.

          2. Yves Smith Post author

            What about “negative rates are counterproductive and the Fed figured that out” don’t you understand?

            The bizarre theory is that negative rates lead people to spend more.

            In fact, it does the opposite. Savers save harder to make up for the lack of interest.

            It also signals deflation. The best place to be in deflation is in cash.

            1. Which is worse - bankers or terrorists

              In saying “what part don’t you understand”, I think you might be conflating whether I think negative rates with what the Fed actually would do. Being an institutional body, I’m not trying to suggest that they would at all act logically.

              1. Yves Smith Post author

                You are being argumentative with no evidence.

                The Fed has made increasingly clear, albeit in a coded manner, that it thinks negative interest rates don’t work. It’s even clear the Fed would rather have gotten short term rates higher but felt constrained by the not so hot recovery (which it actually recognized was what was happening even though it would never say so).

                The Fed’s views are very clear.

                The Fed can’t be bullied.

                And US banks don’t want t them either, and Congresscritters would go nuts on behalf of constituents. So pray tell why would the Fed go there? This is just your pet idea.

                I also did not address your comment re the S&P. The media may go nuts over that, but that is not the Fed’s job. The stock markets crashed in the dot-bomb era with little economic fallout (the bigger impact was the implosion of all of the real economy activity that the dot com frenzy produced, plus all the forward tech spend due to Y2K leading to diminished demand after that). After the crisis, the Fed focused on propping up banks and the housing market (via QE lowering mortgage rates). The impact on stocks was an unintended by product. The Fed knows (as in Fed papers on this!) that the wealth effect of higher stock prices is way way way way smaller than that of real estate.

                1. Which is worse - bankers or terrorists

                  I guess I am deliberately not trying to build an argument and instead strategically figure out what the Fed would do. Building an argument presumes that financial market participants act logically.

                  The Fed has injected liquidity into the market and that hasn’t worked. So what do they do? I know that I have about a million and a half dollars sitting in a premium savings accounts as just play money, but if that went negative, I would likely push it out the risk curve into an investment that had some likelihood of getting a positive return. I would think others would too.

                  I can’t believe that the Fed would care out smaller time savers that would be forced to save more because they are getting negative rates. Coming from a working class background, I care about them, but I doubt the Fed does, nor do the Congresscritters elected by them.

                  Since the Fed really does not have many options for stimulus at the zero bound, might they therefore bite the bullet and try to get people to push their money further out on the risk curve? I would think the Fed would go there if real rates get too far below the Fed funds rate at some point, and the Fed lacks other creative ideas?

                  What do I think the Fed would actually do? I bet they get into the buying stocks and alternative assets like real estate.

                  1. Yves Smith Post author

                    Where have you been since 2008? Investors have gone way out on the risk curve and all that’s done is produce unicorns that in significant numbers fell apart. That didn’t put money in the hands of businesses OR consumers. All it was was trading paper at even more inflated prices.

                    The Fed knows this doesn’t work. They’ve already know that is a big fail.

                    If they wanted to help the economy, they’d do better buying state and municipal debt to preserve those payrolls and emergency services as their tax receipts fall.

                    1. Which is worse - bankers or terrorists

                      That is interesting…the notion of the Fed buying state and municipal debt. Has the Fed discussed that anywhere? Very interesting.

                      My take on Central Banks is generally not to trust what they say. I was been working on a large deal in Egypt with the government during the 2017 Egyptian pound devaluation. They promised everyone: “we will not float the pound” right up until the moment that they did, resulting in a devaluation of about EGP/USD=7.83 to about 17, destroying the savings of tens of millions of people instantly. This devaluation was counterintuitive in many ways as Egypt is a net importer and an energy importer, but they still did it.

                      I’m therefore always looking for the ultimate motives governing what a Central Bank is going to do, not what they say.

  2. vlade

    I have to say, that I’m dissapointed, it not really surprised, by the lack of coherent and unified EU response. CV has now IMO a much larger chance to break the EU than the Brexit ever did, because once barriers are put in place, they will be much harder to lift, and the barriers and lack of help from your neighbor will be remembered. Merkel and Macron, if they wanted, have (quickly disappearing) chance of showing real Europeanism, but I’m not going to hold my breath for it.

    Trump’s speech (even if widely misunderstood by people who equate the EU with Schengen – like most journos these days) shown he considers the EU as a rival, not a partner.

    But even so, saying you’d create a firebreak between your and your neighbors house because he’s a rival won’t do you any good if you sold your firehose first and your house is already on flame.

    1. Lee

      CV has now IMO a much larger chance to break the EU than the Brexit ever did

      CV could break globalization too. Dreaming on, perhaps the U.S. will stumble its way into universal healthcare or even an MMT bailout of Main Street. Always the optimist, me.

      1. tegnost

        Some dreams are nightmares, and before any good thing happens there will be a lot of pain.

    2. PlutoniumKun

      The EU can sometimes appear like a duck – cruising placidly along while under the water there is furious paddling – usually by officials zipping around trying to prepare something that national leaders can agree to. Or it can be like the sitting duck variety, just haplessly floating around while everyone takes aim. I really don’t know right now which one it is, but I strongly suspect that national governments are so busy trying to address the virus on a national basis that they simply haven’t begun to grasp the consequences of what is happening in Italy.

      Its possible that Trump has done Europe a huge favour in banning flights. This might finally convince national leaders that Europe either gets its act together immediately, or it sinks one by one. This could be the start of something very, very big. And very nasty.

    3. Which is worse- bankers or terrorists

      Agree with vlade entirely. I think what is under appreciated right now is that the global response to this is making the global leadership look like a bunch of morons. In a crisis, people look to leaders for answers, and the leaders have none.

      And the best you can hope for is Biden, which is like drinking castor oil.

      The impact of Italian banking defaults will be much larger than the virus itself. As a start, one can imagine Italy having to nationalize most of its banking system and possibly several major industries. The potential for a default on the euro has the potential to blow up TARGET2 imbalances and trigger the nationalization of much of the European banking system. And then CTRL+P.

      The political price for this to pay will be massive. My personal hunch is that you will see more countries shift to autocratic systems of government, given the trauma the fallout of this will create for the world.

      1. Wyoming

        … look like a bunch of morons


        ..My personal hunch is that you will see more countries shift to autocratic systems of government

        I think ‘this’ point is when you finally see the ‘leadership’ show up. There are no leaders on the stage yet….

          1. Wyoming

            I don’t mean those kinds of leaders. I mean the type who show up and turn the world upside down…and they are always waiting in the wings.

    4. David

      Macron is due to speak on TV tonight- he has been chairing a Defence Council meeting today to decide what to do.
      The problem is that the present generation of European leaders are primarily technocrats who have grown up in the current system: Macron was at school when the Maastricht Treaty was negotiated. Europe is a type of secular religion, and their first priority will be to ensure that the virus does nothing to upset plans for further and deeper cooperation, and doesn’t damage the European acquis, which is to say everything that has been decided and implemented so far. In practice, this means hanging on to freedom of movement like grim death (as it were) and trying, at least, to force respect of competition rules which prevent governments subsidising the private sector. They’ll be worried that when the crisis is over, the acquis will have been rolled back and states will go back to the bad old ways. So I imagine that there are people in Brussels even now saying that states should not use the epidemic as “an excuse” to do things that otherwise Brussels would be trying to stop them doing. It’s worth pointing out also that the acquis is not only in terms of texts but also behaviour, so even things that might technically be possible will be politically frowned upon.
      I agree that this could be very bad for the EU, and certainly worse than Brexit. It’s a basic rule of history that you shouldn’t allow technocrats to manage and emergency. But the EU is a technocratic organisation, and cannot change, and there’s almost nothing it could reasonably be expected to do, based on its past history and current leaders, that wouldn’t make the situation worse rather than better.

      1. Ignacio

        So far the EC committee for coronavirus response has been focused in transparency on information and has been “confident that the expertise and professionalism of the european HC and civil protection systems will minimize the effects” and not forgetting coordination. What coordination?. But as an institution in denial, as most others, is acting reactively. The EC is following the situation in Italy and “is preparing measures that will ensure that help reaches the HC systems, SMEs, and other vulnerable parts” and the EC is ready to make “full use of the flexibility which exists in the [stupid] Stability and Growth Pact” which is another form of denial. I hope that some day, the sooner the better, they will wake up from their technocratic limbo and do something bold. I very much agree with your take on the cultural problems/limits that make this technocratic elites so unable to manage a serious situation, even to recognize it is that serious. They don’t seem to realise the danger applies also to themselves. The sooner some in Von der Leyen’s team get infected, the better.

  3. WobblyTelomeres

    If the Biden Democrats are true to form, you’ll see tucked within a healthcare/insurance rescue package 1) a removal of personal bankruptcy as a way to discharge healthcare debt and 2) allowing ERs to refuse to admit the uninfected (read uninsured) to free up stressed resources to deal with the pandemic. Neither will have sunset provisions, strangely.

    1. Arizona Slim

      Methinks that the Biden Democrats will lose the fall elections like McGovern did back in 1972.

  4. carl

    I think there may be some room for a unified response from the EU, at least when all the other countries are engulfed with the virus. Italy was pretty weak already, of course, but they are also the first country in Europe to go through this event.

    1. paul

      Italy was pretty weak already,

      While it has particular problems,as any country has, suppressing a country’s immune response (devaluation,countercyclical spending), which the ‘growth and stability’ approach has done, is what has made it even weaker

      A market/secular version of christian science.

  5. timbers

    Call my cynical, but if Trump could figure out a way to make stocks go up, all would be well in D.C. WORLD.


    Making stocks go up is all he and D.C. World and the Fed care about. Really. Everything else is ranked in importance in relation how much they make stocks go up (or down).

    If the media kept reporting on the virus – because it generates clicks and presumably revenue – then he’d just have to figure out away to muzzle the corporate media and get the to just stop reporting it and move on to something else.

    And like that famous clip from Animal House, “All is well!”

    1. Tvc15

      The link is an 8 minute clip from the Jimmy Dore shows that confirms your hypothesis timbers. CNBC’s genius Rick Santelli would rather people die quickly as long as the markets bounce back. Capitalism uber alles.

    2. .Tom

      The economy comprises real people doing real things. The stock market is something else entirely. You could get the impression from some in the PMC that so long as markets are ok, it doesn’t matter what happens to the economy.

      1. Oh

        That’s why the phony Obama chose to bail out the banksters so that the 401(k)s would go up in value.. Grifter that he is he didn’t nationalize the banks.
        The new crook in the WH will bail out the insurance fraudsters and will not help the common folk

    3. Another Scott

      The stock market is the least of my concerns (actually some of my friends are excited about the prospect of lower prices for when they invest their annual bonuses). Rather I’m mostly concerned about how this will affect hourly workers and small businesses. Professionals like myself can work from home, but not hourly service industry workers. Restaurant and hotel workers for example won’t see as many hours and need the income. I know people who’ve had their shifts cut. I have enough saved that a few weeks or months of depressed income wouldn’t hurt me too much, but I will still get my normal paycheck; they won’t. These people need help, and it probably needs to come from the government. Increased unemployment insurance won’t help because the still have jobs at reduced hours, so they won’t qualify but still need to pay bills.

      And the small businesses that I frequent for lunch or walk by daily (like barbers) still need to pay their suppliers, including landlords. It’s unreasonable to expect them to shoulder the costs either. A few months of lost demand could drive some out of business. They might need government help as well.

      Congress needs to act now and help the people harmed economically, as well as those who get sick. But I’m not hopeful. It’s clear that Trump doesn’t know what he’s doing, and I think and fear that Democrats are more concerned with making him look bad than legislating to help the American people.

      1. Which is worse - bankers or terrorists

        I was visiting my friend’s kid at the University of Colorado and she is worried that when they close the school they will shut down her work study job and she won’t be able to pay the rent.

      2. allan

        Seattle chef Tom Douglas is closing his restaurants temporarily because of new coronavirus [Seattle Times]

        Tom Douglas, one of Seattle’s most well-known chefs, will temporarily close 12 of his restaurants, effective Sunday, his spokesperson said Wednesday evening.

        Sales at Douglas’ restaurants have declined up to 90% since the coronavirus outbreak, and spokesperson Madeline Dow Pennington said Wednesday night that executives have “spent hours over the last two days analyzing every single model to keep our team whole, and unfortunately this is the only outcome that made the most sense.”

        Effective after dinner service on March 15, 12 of Douglas’ 13 restaurants will close, but management hopes to reopen within “eight to 12 weeks” if the market conditions improve, Pennington said. …

        Hard to see how a payroll tax cut is going to help these workers.

        1. a different chris


          “People will have more money to spend! It will spread itself around! For instance, they will go out to eat….more….oh.”

          The way we think about things today is just like the deer that walks into shooting range. They only know how to do what they do. One day it doesn’t work.

        2. periol

          Hard to see how a payroll tax cut is going to help these workers.

          People get lazy, and every now and then need to be reminded to pick themselves up by their bootstraps. Since the payroll tax cut would be a pretty big blow to Social Security, they need all the bootstrap practicing they can get for a future without retirement.

          Big brains just looking out for the little guy here. /s

          1. Wukchumni

            People get lazy, and every now and then need to be reminded to pick themselves up by their bootstraps.

            Most of us unfortunately, can’t levitate to save ourselves.

      3. Endeavor

        I make this same argument on other blogs. Money Changers do not care a whit about the peasant class so it gets no traction.

        1. eg

          They forget the fact that all the real stuff that they rely upon in their lives is made by those very same peasants …

    4. Samuel Conner

      I suspect that the Fed can control the price of any asset it chooses to. We have seen (aftermath of GFC) that it could control, if it chose, the entire Treasury yield curve. Equities prices could be next. IIRC, Ben Bernanke is on record, long ago, as suggesting that BoJ could purchase Japanese equities as a way of responding to the then problems Japan was facing.

      At some point, someone may figure out that if the Fed can (and, at need, should) do all this to prop up the financial economy, then it could correspondingly stimulate the real economy through funding investments in needed infrastructure and capacity (or dare we contemplate, even — gasp! — consumption).

      It’s conceivable to me that this could even occur under DJT; perhaps more likely under him than under JB-puppeteered-by-a-strong-VP.

  6. The Rev Kev

    I would assume that all the countries in the EU will be heading into recession territory in the next few months which will include those fiscal conservatives like Germany and Denmark. Either they have a change of religion and completely overhaul the financial structure of the EU into something that is more stable and workable or they will decide that some countries will be more deserving of financial aid than others. Considering that as far as medical gear is concerned they are leaving Italy twisting in the wind, I would guess that they will try to go for the later option which will result in internal revolts in the EU. Because Italian finances are not good, they are just first in the firing line. It’s not gunna be pretty.

  7. Hank Linderman

    Last week an anesthesiologist friend texted me, “Overheard in surgery today – it’s not an epidemic, it’s a Dem panic.” That opinion was almost certainly voiced by a surgeon. On Monday I texted her to ask, “How’s that Dem panic narrative holding up?” She replied, “Feeling among health care people is overall, it’s been overdone a bit. But people are hesitant to make travel plans.” By Wednesday, she had become alarmed, after reading links I had sent and after speaking with an infectious disease doc.

    I had had dinner with her and a friend in January when news of the virus was making the rounds. She and our friend were not concerned, didn’t want to hear how alarmed I already was after reading reports on NC. That’s more than a month that could have been put to good use inside our medical system.

    My wife and I are in two different states, my trip to be with her is cancelled. She’s got an underlying respiratory infection that flares up when she gets a cold, ideally she skips the virus altogether but we all know that is unlikely.

    I’m stocked up on rice, beans, peanut butter and jelly, a few loaves of bread and yes – tp. Here we go…

  8. Ignim Brites

    The rationale for the draconian measures to contain the virus seems obvious. But it isn’t obvious if the consequence is increased morbidity and mortality from a failing economy. It seems doubtful that the virus can be contained although its spread can be slowed. But why bother? This just delays the day when the population has built up enough natural immunity that the disease can be managed. Maybe there is a hope that a vaccine will arrive in time to substantially alleviate the morbidity and mortality. But this is at best months off. Can the NYC subway system be shut down for months? Maybe there is a hope that the virus will mutate to a less lethal form. Again this is probably months off and no scientific evidence has been offered to suggest this possibility. The only real rationale for the draconian measures we see in Italy and China ( and Harvard and Seattle and the NBA ) is to spare the health care industry from collapse. So the sole focus of emergency measures should be to increase the capacity of the health care industry to deal with the pandemic. And, importantly, increase the public awareness that not every cough, sniffle, and fever needs to be tested.

    1. ambrit

      The problem with your last sentence, concerning testing protocols, is that so far, I have not seen an easy way to visually determine whether a cough or sniffle is a “normal” cold or flu, or the Dreaded Pathogen. Failing an easy way to make that determination, the only way presently available to collect useful data with which to design the programs with which to combat this epidemic is….testing. All else is pure Social Darwinism. In other words, let the weak die off so as to free up the talents and resources of the “Ubermenschen Davosii.”
      The present narrative that “not all suspicious cases” should be tested, much less addressing the issue of asymptomatic transmission of the pathogen, is merely a smoke screen to obscure the fact that the present neo-liberal form of healthcare in America is a massive failure.
      If South Korea can mobilize and actually perform tens of thousands of C-19 tests on short order, then so could the United States. This entire sorry debacle is a sign and seal signifying that America has already descended into Second World status. How low can we go? Just watch.

      1. Which is worse bankers or terrorists

        Regarding “testing protocols”, this is the exact problem. How is one supposed to have faith in leadership when testing protocols that have proven necessary for the ordinary function of the economy and society don’t exist?

        Why should one have faith in the political leadership then? And frankly, why should one have faith in health care officials, scientists and medical researchers?

      2. xkeyscored

        I think the Second World was basically China and the USSR. China is now manufacturing and exporting all sorts of WURS-related stuff, unlike the USA, which can’t make anything like enough for its own population (I hear the latest lot of CDC tests are having trouble with one of the reagents, unless that was the article getting confused with the first batch).

        Third World is more apt for the Benighted States, a banana republic with hardly any bananas.

    2. vlade

      “So the sole focus of emergency measures should be to increase the capacity of the health care industry to deal with the pandemic. ”
      Too late.

      The “But but Chinese built the hospitals.. “. No, they built shelters where to put beds, out of prefab. If the weather was warm(er), you’d build military tent hospitals with the same result.

      For this, you need ICU-equivalent beds, with respirators, artificial lungs and what have you. Those machines, even if you pay for them, are not lying just over there with a supply to double the output you have.

      Same goes for trained doctors and nurses. If you run them harsh as China did, they will have some of the highest mortality rate for their age cohorts/risk factors, because of the high-viral loads – the amount of 100% protective equipment is low, and with anything else, it’s just a question of time. So you need staff rotation, but where to take the staff to rotate?

      The delay is crucial, and the “why bother” is, TBH, pretty dumb answer. Because the delay buys us time, and time in crisis is the most valuable thing.

      1. Dirk77

        As this blog has mentioned it’s either saving the economy or people. And if the economy can survive on a total quarantine for just X weeks, then that is how long it will be before all restrictions are lifted. From the talk of relatives who went through the Great Depression, I never asked, but I infer that they’d rather take the 1918 flu over the former. Perhaps that is because dead people tell no tales, nor vote, but still.

        1. vlade

          My point is that “increase capacity of health care industry” is a whishful thinking, and not a solution right now. It’s like saying “increase the capacity of a dam and build more levees” when Katrina is pushing the tide 12 miles inland.

          It takes time – which we can only hope to get by the measures the original posters says “why bother”.

          We can’t create a (useful) ICU bed or a doctor by a decree, no matter how much we want to.

          1. Dirk77

            Yes. Running medical people into the ground is not a good idea. In my response I was guessing the delay one can get from one’s national healthcare system doesn’t depend upon what load it can carry if the economy can carry less. So I was thinking if you believe the economy can survive only X weeks of quarantine, the focus would be on what is X currently, what could be done from now till X, and what can be done to increase X? … My brain is starting to hurt.

          2. Ignim Brites

            The “Why bother?” is rhetorical. The point is that underlying the testing and quaranting protocol is s misunderstanding that this is the solution. It is only the solution if you believe large segments of the economy can be shut down indefinitely. This is an illusion. We are only playing for time until medical capacity ramps up ( or warm weather curtails the contagiousness of the virus ). All attention must be paid to ramping up medical capacity.

            1. vlade

              We cannot ramp up medical capacity in any reasonable time for the response. Even if you do get the medical equipment, you will not get the trained medical staff. You cannot train ICU nurses/doctors in months. It’s just not possible.

              I don’t think you get what the “flatten the curve” means. We have some medical capacity. We can extend it some, but not much. Quarantine, especially based on early testing, means driving the R0 down, which means fewer patients at any given point in time, which means the system more able to cope.

              “Ramp up medical capacity” is as deluded as UK govt’s “herd immunity”.

              I’d be glad to hear otherwise though, i.e. how are you going to ramp up the medical capacity (personel and materiel) while people refuse coming to work because no-one knows who is/isn’t sick, and the visibly sick are in the populace. Are we all going to work 24/7 while falling down sick to deliver a few more respirators that will use who exactly?

              The virus has 5% ICU demand (approx 5% of symptomatic infected need ICU care). Are you going to ramp up the ICU capacity to 5% of the population? Right now the US has 100k ICU beds. 5% of the US population (330m) is 17million.

              You’d have to increase the ICU capacity more than hundredfold. For ventilated patients, which I believe is Level of Care 3, the recommendation is 1:1 nurse/patient ratio, and a nurse can really work only about 8 hours/day, so you need at least three per patient/day, but the LOC3 recommendation is six FTE nurses per bed. So you’d need 51 million nurses minimum, or 102m recommended. Right.

              That’s going to turn your whole economy into one massive hospital.

              1. Ignim Brites

                Increasing test kits is ramping medical capacity. No one seems to doubt this can be done. Increasing hospital beds is no doubt more difficult and increasing ICUs still more. But this has to be done. We cannot flatten the curve indefinitely. Let me put it another way, do you seriously think Harvard will cancel the academic year beginning in the fall of 2020?

        2. c_heale

          It’s both. If you save the people (both healthwise and financially) then you will save the economy. You can’t save the economy alone. What is required is giving money to the poorer members of society so they can stay home but continue some economic activity. If this isn’t done the world economy will completely break down.

      2. clarky90

        Thanks Vlade.

        The mantra must be; “Flatten the curve, flatten the curve, flatten the curve….”

        This virus is novel. It has only just arrived amongst the Earth’s human population. There are no groups of people (some bats and pangolins perhaps?) who have any immunity from prior contact, because there has been no prior contact (Novel!). Think, 1492.

        So, by flattening the curve via non medical practices (old wives practices), we preserve our healthcare system, the lives of our healthcare workers, the continuity of our material society;

        We need food to be grown and delivered; garbage collected; communication systems up; power and water intact; social order preserved (no riots or looting)…..

        For instance, say, if 100,000,000 patients become critically ill with covid 19, it is paramount that, that group arrive, progressively over three years to the hospitals, and NOT in a bulge, over three months…God forbid!

        1. VietnamVet

          The Establishment has exploited little people for so long they have ceased to consider them as necessary. Amazon said their workers who get COVID-19 will get paid sick leave. Mail, food, medicine and package delivery are critical to keep social distancing intact; along with keeping electricity and water utilities running. If hospitals aren’t overwhelmed around 500,000 Americans will die but not millions.

          If infected young drivers aren’t paid to take time off, they will spread the virus to the public. The 20% who need hospitalization may die without care, unable to recover and return to their jobs when healthy. Families deeper in debt. Dampening and extending the pandemic will be impossible. Greed really does kill common sense. Let them die. Assure a Depression.

          If the Federal Government does not provide universal unemployment pay, paid sick leave, plus pay all the costs for testing and hospital care for COVID-19, the United States is done for.

        2. Synoia

          (1) Actually flatten the curve is one mechanism, which, one hopes, leads to the least number of deaths.

          (2) But, there is another curve, which is “do notihng” (except for those who can afford it). The duration of the plague is shorter, good for the wealthy, but kills more people quickly.

          I’d bet on the US talking a good game about (1), and executing (literally) (2).

          1. ambrit

            I can’t fault the logic of your surmise, but I do find fault with the implied ‘cost benefit’ calculation being used by the elites.
            Choice Two not only “allows” a lot more people to die, but it also guarantees the “death” of the extant social order. Contrary to popular opinion, there is no guaranteed ‘next step’ in social evolution, or devolution. Literally anything can happen when there is a social dislocation. Remember, a collapse does not have to be total. Any ‘decent sized’ social dislocation will do. At the least, this Dreaded Pathogen is good for a social disruption. As to whether the disruption will be innovative or non…. If only I had a scrying orb.

    3. Which is worse - bankers or terrorists

      I think this post is excellent in highlighting the notion that measures are being taken because of an absence of a lack of good ideas rather than sound science.

      We’re all aware on this blog’s excellent coverage of Brexit as to how political decisions are made in the absence of any clear rationally based logic. However, I’m just not sure of the logic operating here…scientific or otherwise.

      And the mockery that the medical and pharma industry makes of itself over things like vaccinations is displaying itself at a grand scale. Don’t invest in basic research on the prevention of a pandemic when you can pay administrative officials and lobbyists to push the big pharma and pro-vax agenda.

      Where is the outrage? And why can’t there be some kind of large scale class action activity against the leadership of hospitals and insurance companies to misappropriate their resources to their own self-enrichment rather than clearly deal with an obvious public health crisis. Compare today’s times to World War II or the Pecora Commissions…why is such an abuse of power being allowed to stand then but not now, when information is now so more widely disseminated?

  9. Wyoming

    It will be ‘interesting’ from my perspective if CV shows up in my community.

    Prescott AZ has a median age of 58. There are a host of similar communities in AZ which have similar demographics. It is like the entire community is an old folks home (with actual old folks homes mixed in). Hospital ICU bed capacity in the US is low but for something like CV and the old population of these cities it is almost non-existent. It would literally take almost nothing to overwhelm the capacity and end up with a death rate through the roof.

    This above situation seems likely to be quite probable. My wife has been messaging all the other older women in her guild and it is like they are living in a bubble. Almost no knowledge of the situation and most of what they think they know is wrong. They are not restricting going out to restaurants (this is a huge activity in the older community) nor to the gym (more of a social club really). Still gathering in large groups all over the place and think this whole thing is made up. We don’t plan on going anywhere where we have to get near other people for a month or so.

    Once CV hits here is will be like a scythe.

    1. Arizona Slim

      And, here in Tucson, the annual Festival of Books was cancelled. This town is in mourning.

      1. Wyoming

        The big one hanging in the wind is the Tempe Arts festival. This is huge with 750 vendors and 10’s of thousands of visitors. We usually go every year…but not this one.

        My bet is it is cancelled within days.

    2. Ping

      Concerned about caregivers that come and go from other facilities and patients, I spoke with the director of my mother’s care home (a prominent national brand) about testing for asymptomatic caregivers who could be carriers. She said there is no access to meaningful testing (but deploying strict sanitation and monitoring, cancelled all family events and non staff facilitated activities).

      She said if anyone develops symptoms, they will be immediately hospitalized and can’t stay there. So, previously if a resident developed a cough or mild fever they were kept in their room and monitored, perhaps examined by visiting nurse practitioner with appropriate prescription or OTC meds .

      Now evidently they will be immediately shipped to hospital without testing when it could be just a mild condition and where hospital beds are often in short supply under normal circumstances.

      I have decided not to visit my mother for now because I am in close contact with an immune compromised family member and can’t risk becoming an unknown carrier contracted from an asymptomatic health care carrier at the care home because no precautionary testing is available.

      I’m sad and furious. I emailed several friends with repub leanings with parents in care homes, that we’ve lost valuable response time with testing and shoring up hospitals and care centers because the clown in the white house was more focused on his ego, wallet and extended golf weekends at Mar-a-Lago.

  10. Pelham

    Theoretically, couldn’t governments just print money and hand it out to businesses and households for a while until the virus blows over? It would be a temporary measure (no so-called moral hazard!), and all the governments would have to do is not count the payouts on their budgets.

    Remember the trillion-dollar coin idea that even Paul Krugman backed a few years ago as a way to get around the GOP’s refusal to raise the national debt ceiling? So that was a trillion dollars for no good reason. Now we could use a trillion dollars for a good reason.

    1. Endeavor

      Remember Bush’s $300 per dependent cash rebate years ago. I was working in the automotive industry and it gave us a good boost. But the Money Changers don’t want to work for revenue or income, they want bailouts and tax subsidies. Money drops to the public not on list.

    2. Mel

      I seem to be an outlier here, but what good will money do if there’s nothing to buy and nowhere to buy it. We have to close down everything to keep people from passing the disease directly to each other, remember.
      The kind of response that will accomplish anything will involve something like military logistics chains, distributing the actual, material, goods. In normal life, money calls for that to happen, but life is not normal now, and the ad hoc supply chains that money had been evoking before, look like they can distribute infection just as well as they distribute goods — hence the response of closing the stores, etc.

      1. a different chris

        Not an outlier, I agree with you. Go long Netflix, Disney I would say but beyond that….

        Otherwise what does having money actually help with? I would suggest using it to pay off loans (car especially), not sure if that would help the broader economy or not.

        Because that would be for cars already bought, and they still wouldn’t be used to drive to Target.

        1. BillC

          … what does having money actually help with? Well, even folks on hourly or gig-economy jobs still have to pay rent, mortgage payments, car payments, utilities, student loan payments, overdue hospital bills… Not to mention groceries (safeguarding food distribution and retailing is a major focus in Italy’s lockdown regulations) and, if you’re locked down and not a reader or have kids, I’d bet the cable TV bill is important, too.

    3. .Tom

      It depends which government. It is, imo, the responsibility of government to make up for shortfalls of demand in the economy by spending. In the USA the federal government can easily do that. But it’s not the same for Italy because they use a foreign currency: the Euro. Italy has to borrow Euros from somewhere before they can spend them.

  11. Kevin

    RE; Italy

    In 2018, people aged between 45 and 54 years represented the largest part of population in Italy, counting in total 9.7 million individuals.

    1. vlade

      A vast majority of reported cases in Italy – almost 76% are >50 cohort. In fact >70 cohort is almost 40% of the cases (March 9 data, so fairly fresh,

      Basically, both in China and Korea, the mortality spikes from 50 ( Wuhan had the highest % of >50 infected, 65% (, but only 16% of those were in the >70 cohort (even though this cohort across China had >22% of all deaths), compared to Italy where it’s more than twice that. 

      So, if we go with cold statistics, my rough estimate is that Italian death rate will run in high teens at the very least, as it seems to have hit the most vulnerable part of the population.

          1. mtnwoman

            Totally agree (and I’m medical)

            These overly strict testing criteria of fever, cough, shortness of breath are going to miss all the asymptomatic or barely symptomatic who will be out and about and spreading the virus potentially.

          2. rd

            Any testing in the US would be welcome right now. The US public health system has a massive fail on this right now. It is likely to cost many, many lives as well as crushing the economy because the public officials, leagues, business, are closing things blindly because they have no idea how bad it is or where it is.

  12. lou strong

    As it’s correctly reported,in Italy yesterday’s evening last gov measures locked down every commerce except food shops/markets , pharmacies and some few other essential typologies, while leaving the industry/manifacture open.Now I read that a lot of big industries are closing spontaneously, while many others are currently reported to be on strike because workers don’t feel protected against Covid at workplace.

    Jumping to the European side, as the basic question for every mentally healthy person in Italy is how devastating will be the crisis for us , AFAIK Feb 16 my Economy Minister is expected to sign the ESM reform treaty, and I’m waiting to see what he’s gonna do.
    Until now my ruling class religion, regardless some purely cosmetic grumbling of the so-called euroskepticals, has been that right or wrong we have to accept whatever comes from Europe.

    It’s been correctly reported as well the issue of half-baked resolution scheme, etc, so, for a more complete overview, I bring to everybody’s attention the mechanisms and philosophy of the ESM reform , compared with the situation that is progressively taking shape and the incoming challenges .

  13. a different chris

    Doesn’t Switzerland have some self-defense thing where everybody has a military-spec rifle at home and they are well-trained on it and military drills in general?

    This is way too late, but in hindsight we should have done the same thing with medical training. We should have gotten and kept all capable adults up to say 50% of the capability of an LPN. Then we could redeploy as needed and print money to pay for it. We should have not been so cost conscious about “empty beds” in hospitals. Keep them ready to go. We for sure shouldn’t have closed entire hospitals and then torn them down to keep out competition for gods sake (cough, UPMC Braddock, cough – read about it if you don’t know should still be something on the internets).

    I dunno if coronavirus will really be that bad or it’s just our neoliberal systems that are now freaking everybody out, including and maybe most of all the committed neoliberals. But someday something is certainly going to come along and this (familyblog) show is pretty informative.

    1. Curt

      This is a great idea. (Practical nurse training for everyone.) I will try to remember it in the future. It might not address the problems specific to this crisis. i.e. lack of intensive care unit level nurses, lack of stockpiles of masks, lack of testing kits, lack of respiratory machines. But I think you have something there.

      1. ambrit

        I remember the Scouts having basic trauma training as part of the “drill.” Boy or Girl Scouts, self reliance, and cooperation to overcome adversity were prime directives.
        Basic medical emergency training should really be a part of the standard public school curriculum.
        Stop teaching to the tests and start teaching to reality. The two are a whole world apart.

  14. CarlH

    Trump’s address last night staggered me. I knew he was a hopeless, greed-head clown who is in over his head, but the totality of the depravity of our elites and Trump himself still hit me like a meteor last night. I am afraid we are in this together, with absolutely no help coming from the authorities. Everyone, please take care of yourselves and your loved ones in the days and weeks ahead and may we emerge from this a better people and a better society.

  15. rd

    Recession is a modern word coined by economists after the Great Depression. Recessions and stock market plunges used to be “depressions” or “panics” through the 1800s and early 1900s and then 1932 hit…..

    So once you had The Great Depression using the “d” word brought back memories of the 30s and so recession becoming the officially approved term, because “panic” was not really a neutral term either.

    1. Left in Wisconsin

      Yes, “depression” was the euphemism of the day to persuade people that it wasn’t really a “panic.” It’s all Orwellian. Panic -> depression -> recession -> sad (HT Yves).

    2. sierra7

      There can be no comparison of the “recessions” post the GD……none compare with that disaster.
      I lived thru that era….was born in 1930 to immigrant Americans. I remember the “life” my (extended also) family lived.
      I will go no further.
      It seems currently that to stem any biological conflagration from spreading will require martial law or “modified” law. Severe travel restrictions. Possibly town to town; city to city; county to county; etc……
      Italy, South Korea are still small areas to quarantine. The US is hugely different. And we base our health care system on profit, where the other two have modified systems. So, we are probably totally unprepared for any large scale hospitalizations or massive out of home care.
      Some mentioned food stores remaining open. Remember, most retail establishments rely on a chain of supply which includes large warehouses where multi-thousands toil. Any one or multiples can be infected and shut down; same with the delivery truckers.
      We are/were unprepared for this. If we survive maybe we can come up with some better humanitarian progressive ideas on how to deal with life a bit differently. Not all profit is good; sometimes “community” is much better than outright, “individualism”.
      Stay healthy and safe.

  16. lyman alpha blob

    So maybe having massive multinational conglomerates, leveraged to the hilt, dependent on just-in-time supply chains with no inventory backlog, and that can brook no slow down due to razor thin margins, wasn’t such a good idea after all?

  17. ewmayer

    I think the alleged worst-case 4-5% drop in 2nd-quarter GDP estimate from the Guardian article may prove rather optimistic, given that the huge tourism industry is completely shut down, and many domestic-focused companies are also in virtual shutdown mode. Do we really think a tourism-dependent country in nationwide lockdown will continue at economic activity levels of 95% or more or normal? I don’t.

  18. freedomny

    “Trump managed to make a bad situation worse with his speech last night. No serious detail on what to do to save lives”

    This is what has absolutely enraged me. My parents, 85 & 90, live alone and are complete Trump worshipers. When I spoke with my Mom last week, she didn’t seem concerned about the virus at all – thought it was a hoax, a joke, etc….she thought of it in the same disparaging way that Trump did. Meanwhile, in the past 5 years she’s had a heart attack and pneumonia twice! I have family members that support Trump – family members that I love – and I am truly worried. Can’t we just prepare a “little” bit instead of being afraid to spook “markets”. Trump so fucked up.

    1. Ian Ollmannn

      See if you can convince them to stop watching Fox. That is where this nonsense is coming from, and it is going to get them killed.

      1. thoughtful person

        Have a doctor friend who insists this is like a bad flu year (20,000 aleady died this year). I disagree, fatality rates of this far higher, but it’s not just Trump.

  19. mtnwoman

    I’m in the functional medicine world.

    Listserves are coming up with possible treatments for COVID19, some that the Chinese have used. Off the top of my head: Vit C IV, indomethacin (a NSAID), chloroquine, Alinia. Then there are the HIV antiviral combos that are being used too.

  20. Cuibono

    FOLKS: with all the END DAYS talk here: it pays to look at Singapore and Hong King Mortality Stats!!!

    Figure that out and you have your answer

  21. Sound of the Suburbs

    In 2020, the global economy was a ponzi scheme of over-inflated asset prices (“the everything bubble”).
    The use of neoclassical economics and the belief in free markets, made them think that over-inflated asset prices represented real wealth accumulation.
    The central banks are trying to maintain the illusion over-inflated asset prices represent real wealth accumulation and it’s not easy.
    They are doing the best they can.

    At the end of the 1920s, the US was a ponzi scheme of over-inflated asset prices.
    The use of neoclassical economics and the belief in free markets, made them think that over-inflated asset prices represented real wealth accumulation.
    1929 – Wakey, wakey time
    This is what they are trying to avoid.

    The world could be in for a rude awakening with the coronavirus.

    1. Sound of the Suburbs

      1929 – Wakey, wakey time
      The Americans worked it out in the 1930s, but had forgotten again by the 1980s.

      Where had all that wealth gone to?
      In the 1930s, they pondered over where all that wealth had gone to in 1929 and realised inflating asset prices doesn’t create real wealth, they came up with the GDP measure to track real wealth creation in the economy.
      The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP. The real wealth creation in the economy is measured by GDP.
      Inflated asset prices aren’t real wealth, and this can disappear almost over-night, as it did in 1929 and 2008.
      Real wealth creation involves real work, producing new goods and services in the economy.

      That’s why we are getting all the real estate busts.
      1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
      2000s – Iceland, Dubai, US (2008), Vietnam
      2010s – Ireland, Spain, Greece, India
      Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
      Inflated asset prices are just inflated asset price, nothing more.

      Henry Simons was a founder member of the Chicago School of Economics and he had worked out what was wrong with his beliefs in free markets in the 1930s.
      Banks can inflate asset prices with the money they create from bank loans.
      Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
      “Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of “bank-financed inflation of securities and real estate” through the leveraged creation of secondary forms of money.”
      Real estate lending was actually the biggest problem lending category leading to 1929.

      Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
      “Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.
      This 1920’s neoclassical economist that believed in free markets knew this was a stable equilibrium. He became a laughing stock, but worked out where he had gone wrong.
      Banks can inflate asset prices with the money they create from bank loans, and he knew his belief in free markets was dependent on the Chicago Plan, as he had worked out the cause of his earlier mistake.
      Margin lending had inflated the US stock market to ridiculous levels.

      The IMF re-visited the Chicago plan after 2008.

      Why did it cause the US financial system to collapse?
      Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.
      What could possibly go wrong?
      Bankers do need to ensure the vast majority of that money gets paid back, and this is where they keep falling flat on their faces. Banking requires prudent lending.
      If someone can’t repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.
      As the real estate and stock market collapsed the banks became insolvent as their assets didn’t cover their liabilities.
      They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.
      The banks become insolvent and collapsed, along with the US economy.

      When these toxic assets collapsed in price, the Western banking system became insolvent in 2008.
      “It’s nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world” All the Presidents Bankers, Nomi Prins.
      Taxpayers had to shore up bank balance sheets and cover the losses.

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