Covid Economic Update

As the event horizon of the 2020 election nears, I want to get in one last non-Trump post. I saw this headline a few days ago:

GDP soars by record 33.1% annual pace in third quarter, but coronavirus resurgence threatens U.S. economic recovery

The widely expected snapback in gross domestic product, the official scorecard of the U.S. economy, was given a big assist by trillions of dollars in government aid to families, the unemployed and businesses most harmed by the virus.

In terms of total GDP (not quarterly changes) the US economy has recovered 2/3 of its Covid losses even in spite of record number of daily cases and 1,000 deaths/day. This suggests that the people who died and got sick were mostly non-contributing to the economy in terms of economic activity even when they were healthy, and that the shutdowns were counterproductive, as they not only failed to prevent second and third waves, but temporality crippled the economy and caused great inconvenience to millions of people. Had there not been shutdowns, the US economy would have still suffered a bit due to people not shopping as much out of fear of getting sick, but the decline would not have been as severe. The left is not happy about this. The liberal narrative for the past 6 months is that the second wave would tank the economy, yet in spite of second and third waves, the US economy has reclaimed considerable ground.

However, it was not so much the shutdowns hurt the economy, but rather the fear caused a temporary paralysis, thanks in part to the liberal media, who perpetuated this false information that Covid had a 2% infection morality rate (which was the initial and erroneous estimate), which by April was revised down by 90% (and keeps falling as more testing is done) due to the unexpectedly large incidence of asymptomatic carriers, which coincides with the S&P 500 bottom in March/April even though the number of daily cases keeps rising. This 90-95% reduction of IFR is the so-called ‘Covid miracle’ that is completely ignored by the media. This means Covid may only be 2x as deadly as the flu instead of 50x as deadly as originally feared.

As I correctly predicted, the stock market and economy quickly recovered because the deaths and illnesses had little effect, as the people who died otherwise contributed little economic value, either being elderly, chronically ill, or poor (generally, low-IQ people in dense urban areas are dying at the highest rates even though initially, in January and February, it was the wealthy who seemed to be getting sick).

Covid may be a net-positive on the economy in terms of making it more efficient, by streamlining and concentrating economic activity through a handful of highly productive and efficient firms instead of thousands of unprofitable and struggling small and medium-sized businesses. This is another reason why GDP recovered so strongly in spite of so many businesses being permanently closed and millions people unemployed, because most of those business and people were redundant/deadweight. Consequently, big tech and big retail came out stronger than ever as a consequence of Covid. Stimulus checks pure top-line growth for Amazon, Nike, Apple, and Walmart. Similar to the 2008 bailouts, it is like a soft form of socialism or central planning but with privatized profits. Many of the same liberals’ who whined about bailouts and crony capitalism in 2008-2009 are now clamoring for more stimulus, without realizing it is the same thing (except the money going to big tech companies instead of big banks).