Confirming what economists expected in the first quarter of 2020, U.S. Gross Domestic Product [GDP] turned negative -4.8%, largely attributed to the coronvirus AKA SARS CoV-2 or Covid-19, but the real culprit was not the virus but the government’s response to the virus. President Donald Trump, 73, acquiesced against his best instincts to allow medical experts to shut down the U.S. economy, issuing nationwide “shelter in place” orders, followed by even more stringent requirements by individual states. California Gov. Gavin Newsom, who takes his orders from Billionaire Bill Gates-funded University of Washington Institute for Health Care Evaluation [IHCE] which told Newsom March 19 that 60% or 25.5 million California residents would be infected with Coronavirus by May 19. What’s most ironic is that the forecast might be right but for very different reasons.
More cases of SARS CoV-2 cases have become asymptomatic over the last two months, prompting the Centers for Disease Control and Prevention [CDC] to estimate that at least 50% of Covid-19 cases are asymptomatic. If the trend continues, as much as 80% would be asymptomatic, meaning the infection means nothing, because the vast majority of infected people have no symptoms. Given that government shutdowns have caused the current recession, the longer they go, the worse it gets for the economy. When you see the Dow Jones Industrial Average rocketing up today 532.31 points to 24.633.86, only 17% off the record high of 29,551 hit Feb. 12, you know there’s a disconnect. Wall Street learned today, with everyone else, the economy shrank by -4.8% in Q1, likely to get far worse in Q2. It’s as if Wall Street had to up stocks 30% to begin the next sell-off that’s inevitable in a serious recession.
Before the Labor Depart issues its report Friday, May 1, the U.S. Bureau of Economic Analysis [BEA] reported that GDP dropped -4.8% with personal consumption, a measure of consumer spending, dropped -7.6%, meaning that GDP is only going to get worse as the numbers pile up. Back in the dot-com bubble in 2000 or 2008 Financial Crisis, there’s never been a protracted period in which businesses were closed. When 67-year-old Federal Reserve Board Chairman Jerome Powell slashed the Federal Funds Rate to zero March 19, he realized how bad it was going to get. Rates hadn’t been slashed that much since former Fed Chairman Ben S. Bernanke dropped rates to zero Dec. 15, 2008 dealing with the Lehman Bros. bankruptcy filing Sept. 15, 2008.. Bernanke didn’t deal with the government shutting down businesses around the country, only a small fraction that went under in the Financial Crash.
Today’s worry for the White House and Federal Reserve is that cities, counties and states are about to run out of money. “The decline in first quarter GDP, was due to the response to the spread of Covid-19, as governments issues ‘stay-at-home’ orders in March,” BEA said in a statement. When the dust settles from the government’s shutdowns, economists will question whether or not the “shelter in place” orders were really needed to save lives. All indications point now that businesses could have remained open with the government issuing warnings to vulnerable populations, like the elderly and infirmed. But Trump capitulated to his medical experts led by 80-year-old National Institutes of Health infectious disease Chief Anthony Fauci who urged the president to shut down businesses as a mitigation measure to slow the spread of the coronavirus epidemic.
Infectious disease experts use computer models like the University of Washington Institute for Health Metrics and Evaluation [IHME]. Most projections from forecasters have exaggerated the amount of deaths from the U.S. coronavirus epidemic, when recent reports show, for whatever reason, the virus has gone asymtomatic in growing number of cases. It people don’t even know they’re sick, what’s the justification for shutting down the economy? Statements like “if you don’t ‘shelter in place’ you’ll die, completely exaggerates the risk to average U.S. citizens. Over 50% of the 227,290 U.S. deaths have occurred in nursing homes with severely infirmed patients. When you consider that the other half, like nursing home patients, have co-morbidities, it makes the mortality risk of Covdi-19 far lower, raising real question about why the government shut down the economy, creating far greater consequences to human welfare.
When you consider that preliminary drops in GDP [-4.8%], Personal Consumption [-7.6%] and Services Consumption [-10.2%], is the worst contraction on record, it’s bad news. That doesn’t bode well for Q2, where things look to get far worse, raining on Wall Street’s recent feeding frenzy, boosting the Dow within 17% of its Feb. 12 record high. Business fixed investments dropped 8.6%, the most since 2009 when Wall Street cratered, the stock market looks like its in for a bumpy ride. With 26.5 million already filing for unemployment and millions more this week, Wall Street’s euphoria is going to evaporate. Retail sales plunged 8.7% in March, with April reports looking worse when reported. Only Amazon shoppers buying toilet paper and other basic commodities took an upswing. Manufacturing data shows the worst drop since 1946, spelling real trouble for Q2.
