Medicines, Mitigation and Money

This is a “viral” post in three parts: Treatment, mitigation and the economic aftermath. First to treatments for the virus – not a vaccine, which will take too long (if it is ever produced).

Treatment: While other anti-viral treatments are being tested, there is increasing anecdotal evidence from epidemiologists and doctors treating patients that hydroxychloroquine (the safe anti-malaria drug) is effective both as a prophylactic and, combined with the antibiotic azithromycin, as a treatment for those with the disease. Many doctors in numbers of countries are apparently using it on themselves and for treating their patients. Among the states in America, I understand that only New York State has been restricting its use to tackle the virus to within hospitals.

Clinical trials are underway, but as Dr Fauci — one of the two principal public-health officials advising Trump — said, they would take months to complete. Months is too long if people are unnecessarily suffering and dying. In the meantime, the economy goes on tanking. As is commonly said, you have to go to war with what you have not with what you would like to have.

No, I am not a medical doctor. All I am saying is that if I were to catch a serious dose of the disease, I will be asking for the above treatment ahead of Dr Fauci’s clinical trials. And loudly, if I am able.



Mitigation has now gone much further than ever recommended in what now turns out to be an alarmist report from the Imperial College London; which I separately wrote about some time ago, when I took it at face value. But take any of the epidemiological models. They have one thing in common. They exaggerate. Why do they do this?

Epidemiological models are inevitably based on data from initial outbreaks when everyone is taken by surprise by a sudden death toll. Only when more data comes in showing the number of those who have recovered, or who got mild symptoms, or who were asymptomatic, or who were naturally immune, and when treatment adjusts to the new situation, does the data reflect reality.

The US Navy hospital ship, with one thousand beds, parked outside New York “hot-spot” to relieve the “overwhelmed” hospitals has so far (morning our time 3 April) taken in three patients, according to Fox News. Here is a question to Trump from a hack journalist. Can you guarantee that everyone who needs a ventilator will get one? He rightly ignored the moronic question. Can you guarantee, Mr President, that no surgeon will amputate the wrong limb?

Ford, GM and other companies have been commissioned to produce tens of thousands, perhaps hundreds of thousands, of ventilators. Prediction: mountains of unused ventilators – $5 each; $50 for a dozen.

A blunderbuss approach to mitigation has been taken when a rapier was needed. Panic has replaced reason. Pushed by a juvenile, cargo-cultist media and social media comprising those who know nothing about wealth creation, and aided by impressionable populations, governments have tried to outdo each other in imposing restrictions. Protecting the vulnerable, building more critical-care facilities, and allowing the economy to go about its business was and is still the way to go.

If essential services and so-called essential services can keep safe while keeping on running, why can’t every business. Sure, they would need to put in extra measures, cleaning, have hand sanitizers, wear masks and gloves maybe, distance a little more maybe, take temperatures of employees on arrival, make sure those who are sick don’t come in. It can be done.

For example, supermarket staff and shoppers congregate still; post offices are open. Precautions are taken. Replicate those as applicable across all businesses, including restaurants and coffee shops.  I’ve just bought a burger from across the street. Plenty of people milling around inside, lots of people behind the counter. What difference would it make if I were to eat it in there?

Of course, even with precautions, opening things up will probably result in more infections and more deaths and, in fact, more sickness and deaths from all manner of regular communicable diseases. But there is another side to avoiding risks of catching communicable diseases.

Those claiming unemployment relief jumped by almost 10 million in the US in the past two weeks, dwarfing anything recorded in such a short period since the figures were first compiled in 1967. It will get worse and worse. Businesses are being wrecked, and chain by chain, from one business to another, the banks will be drawn into the devastation. And there will be adverse mental and physical health effects, quite apart from increased suicides, crime, domestic abuse, drug and alcohol abuse, and general misery.

Let me say again as I have done before: It can’t be allowed to go on. It is untenable. Scott Morrison talked about six months. I fell of my chair! He should start talking about six weeks (and two have gone). This is not to say that things go back to how they were. The infection has to be fought but in a sustainable way.

There are two sides to the issue. Taking riding instructions from public health officials on how to combat the virus is taking only one side of the issue. We don’t elect and remunerate those in governments to slavishly follow the advice of such officials.

The same Dr Fauci who, unfortunately, at least for now, seems to be pulling Trump’s strings, was asked when the US could begin working again. When the infection rate had reached zero, he said. Surreal. Immune from reality. Cocooned in his own world. The very definition of a crazy/mad scientist. And we think people like him should be pulling the strings?

Governments need to balance benefits against costs. It’s hard these days with such a moronic media and large swathes of populations lacking the stoicism and common sense of previous generations. But that’s when leaders of stature are needed.


Economic aftermath

The economic costs of this crisis, brought on by the virus and by government overreactions are incalculable. I have no idea. I worry that no-one does. Yet onwards we press, into the abyss.

Of course, once started up again, economies, however crippled, will recover in time. This we know. And it will happen more quickly and more surely if private sector businesses (large and small) are given full rein to innovate, develop and grow. In other words, we need to keep the notions and nostrums of greenies and socialists quarantined way beyond the end of the crisis. Now, at least, that would be one good outcome.

Will governments be left with unmanageable debt; which leads economic journalists, like Adam Creighton at The Australian, to argue that superannuants will have to be soaked? He is not one to miss an opportunity to push this barrow. However, I am not sure that government debt will prove to be unmanageable.

You have to go back to basics. Governments can’t simply “print money” and spend. It would be inflationary. If it were not inflationary, there would be no impediment. But it is. Hence, even Modern Monetary Theorists, who have a cavalier approach to money printing, need to address inflation with unworkable, government run, employment-stabilisation schemes.

This is my thought and I am just spitballing – so I am open to being criticised and corrected. Take Australia. Suppose all of the debt generated by the federal government specifically to combat the lockdown (I will leave aside state governments to avoid complications) were taken up by the Reserve Bank. Moreover, as a force majeure measure, suppose the debt had a zero coupon and a perpetual time horizon. Effectively it would be cancelled.

The problem is that during the aftermath of the crisis, as things begin to return to something approaching normal, inflation might break out. Taking the current level of extra government spending. The money supply will have increased by around $300 billion or so; around 15% growth on the current stock of M3 money (notes and coin, plus deposits with banks, and other deposit-taking financial institutions). In addition, the $300 billion is base money which potentially fuels bank lending – the largest contributor to monetary growth in normal times.

It’s an assumption, but bank lending might well be subdued for an extended period as banks repair their balance sheets. This will prevent further strong growth in the money supply. At the same time, the community’s increased risk aversion and, in turn, increased demand for liquidity after the crisis, might reduce the rate at which money turns over (its velocity, so-called). This will work in the direction of keeping inflation in check.

It’s a matter of empiricism. If inflation were to break out to any marked extent, the government and Reserve Bank would be forced to increase interest rates by selling debt into the market. And the government might indeed end up with “unmanageable” debt. But, as the circumstances are so unique, it seems worth speculating, at least, on ways to approach the financing of government expenditure in the first instance; while worrying about inflation later, if it arises. These are not normal times.

17 thoughts on “Medicines, Mitigation and Money

  • lloveday says:

    “Prediction: mountains of unused ventilators”.
    The UK government was left with 60 million doses of Tamiflu vaccine in 2009, which are said to have cost taxpayers around £500 million because the UK government’s chief medical officer told the NHS to plan for 19,000 to 65,000 deaths from ‘swine flu’ during that winter – the actual number of deaths was 457, with even that low number likely inflated for similar reasons to the COVID-19 count.

  • DUANE WALKER says:

    I think a lot of business may not start up again, even if they are able. This unprecedented government intervention will make the risk of operating a business too high. The government could shut everything down again in two, six or twelve months. You can’t trust the government. The Australian government has been anti-business for a long time.

  • pgang says:

    40 or so dead in Australia. All of them with other medical problems, elderly, or off cruise ships that we are treating with a particular kind of cowardly inhumanity.
    We have descended utterly into madness. Who would have thought that humanity could so readily embrace tyranny?
    And this weekend is Easter and the churches are bowing their knee to their new god, the state. Pell might be better off staying where he is.

  • pgang says:

    Peter it still sounds like money printing to me. I think the main problems facing us are these (given that it is even possible to claw our way out of this with so many anti-capital forces arrayed against us).

    Government spending is predicted to be at least a year’s worth of taxation (in a normal economy). That will mean a massive reduction in genuine govt services in future – defence and infrastructure for example.
    Value destruction – think of the fall in value in real estate that may occur, and all of the debt associated with it.
    Bank bailouts might be required on top of everything else, as debt collapses.
    Genuine social disintegration.
    People will quickly learn to expect massive government handouts as the norm.
    Overloaded public services such as schools, as private businesses close.
    A vast shortage of capital and savings for private investment to get their hands on. A massively shrunken private sector.

  • Peter OBrien says:

    With regard to Fauci and chloroquine, this was reported in both the Australian and the Guardian:

    “But Dr Anthony Fauci, the nation’s top doctor on infectious diseases and a key member of the White House taskforce, was adamant there was nothing to suggest the medicine had any benefit against coronavirus.

    “In terms of science, I don’t think we can definitively say it works,” he told CBS’s Face the Nation.

    “The data are really just at best suggestive. There have been cases that show there may be an effect and there are others to show there’s no effect.”

    On one hand he says there is nothing to suggest it had any benefit and in the next breath he says there is. The evidence comes from at least two in vitro studies and one in vivo study. What is he playing at? Presumably trying to inject a note of caution that this won’t be a silver bullet but contradicting Trump, who has never claimed it would be a silver bullet, does not seem like a long term job security strategy.

  • Peter Smith says:

    It is “money printing” pgang. You are right about that. And you are right to be concerned about how destructive this shutdown is being and will be, and about the aftermath. My point is a narrow one – for discussion – about whether government debt generated to get us through the shutdown need be a burden on government budgets into the future.

  • Citizen Kane says:

    And Peter, you have not even begun to address the impact of the welfare largesse, such as doubled jobseeker and jobkeeper payments (universal wage by stealth) which will see the forces of the left mass to keep and prevent any wind back when the time comes. They will steamroll the government at the next election as mean spirited if they attempt a wind back and with millions benefitting they will have the numbers on their side given how close Australian elections usually are.

  • pgang says:

    Peter I get your point, but I just can’t get my head around it. Surely a rose, by any other name, is still a rose. It seems to me that you are talking about the creation of something from nothing, which is best left to God. If I am reading this correctly, you are saying that the government has dug a hole in the economy, and all they’re doing is filling it back in again. And that the replacement dirt won’t come at any real cost or dilute the value of the surrounding dirt.
    But it seems to me that if you’re pumping cash (the standard for trade value) into an economy then you can only be deflating the value of the currency, especially if the economy’s productive capability, or ‘energy’, is contracting. Will that be a burden on government budgets in future? Well, possibly not because hyper-inflation is the great cure for all debt. But regardless of that, it might be ok for the government to say, ‘hey look at us – the RBA has forgiven us our debt’, but I doubt that it’s going to be worth the trade-off in real economic effects from pretending to give people something that they don’t have and haven’t produced for themselves.
    All forms of social security are damaging to an economy given enough time. We have been watching that happen for years in a slow motion train wreck. Could this be the train hitting the wall?

  • pgang says:

    Pell free, marvellous.

  • lloveday says:

    pgang, I’m having a drink, or several well before” the sun is over the yardarm”.

  • pgang says:

    lloveday, it is a rare, bright ray of sanity in an otherwise decrepit civilisation. 7 to nil. That is going to echo through the world’s courts, and what does it say about Victoria?

  • ianl says:

    Economists spitballing, showing no scientific curiosity or awareness whatsoever.
    Oh well …
    This articles supplies information to support my suggestion that the Wuhan virus lab is located near a “wet” market for easy access to wild bat coronaviruses because the various bat species host corona viruses that their immune system can cope with. The Wuhan lab concentrates on trying to sort out this viral RNA biochemistry in hopeful expectation of controlling crossovers more effectively.
    SARS has now disappeared from the human population on current epidemiological evidence. Why ? Because it mutated (that is, *evolved*) into a strain less lethal to homo sapiens. No vaccine was ever successfully developed but nonetheless SARS has gone.
    This will happen to C19 as well. The timescale is not predictable of course.
    [I expect the HC Pell decision to have any number of its’ own threads, so any comment will be placed there].


    Most of us who travelled overseas in the old days were prescribed Chloroquine or similar as a prophylactic against malaria. It was usually well tolerated. It was safer than Quinnine. We took Chloroquine because the prospect of getting malaria was not a risk worth taking. It is also used to treat Lupus and Arthritis.

    The US FDA has approved its use against COVID-19. Hopefully our government is going to follow this example. I’d take it now if I could get some. Hopefully PM Boris Johnson is being treated with Chloroquine.

    The latest possible anti-KungFlu treatment is Ivermectin. I’m starting to think my horses are better protected against nasty viruses than me with their regular worm pasting and anti- Hendra bat virus treatments.

  • pgang says:

    Premier Gladys is going to lock us all up until there is a vaccine. See you all in a thousand years.

    My God, is there any end to the demonic stupidity of these people?

  • pgang says:

    “On Sunday, police in the Solomon Islands said five of the 27 bodies lost in the ferry disaster had been recovered.

    The MV Taimareho set sail in strong winds with more than 700 people on board, reportedly as part of a virus evacuation programme.”

    From BBC news. So there you have it. Fear is killing more people than the virus itself.

  • pgang says:

    I just got phone spammed by something called AusGov, lecturing me about how to live. It’s getting worse.

  • David Stewart says:

    A possible solution to the deaths caused by COVID 19 complications which may start the economy again.
    Why not use high doses of intravenous or liposomal vitamin C as a first resort for all those who are in intensive care because of COVID 19.

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