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Economic Recovery: We All Should Prepare for a Long Convalescence

By Shlomo Maital

How quickly will economies in the US, Canada, Japan and Europe bounce back? Will it be fast, like China, or very slow, like the US?

   Bloomberg has been tracking this key issue, using a wide variety of indicators; the visual track for 10 countries is shown in the diagram.

   It has been 5 months since these economies bottomed out, with 60% – 80% decline in the economy, owing to lockdown, in a very short period of a month or six weeks.

   So far, no matter what the national strategy (or lack of one, as in the US) —   herd immunity (Sweden), local lockdown (Italy), school-opening and back-to-normal prematurely (US) —   economies are plateau-ing, at 60% to 80% of their previous pre-pandemic level. And in most of the 10, COVID-19 is making a comeback, in a second or third wave — with the age of those infected declining sharply, as young people emerge, head to bars, and parties, and colleges – and become ill.

   And, if that isn’t bad enough, a new forecast from the leading pandemic prediction institution, at Univ. of Washington, reports this: A new long-term forecast predicts a significant acceleration in Covid-19 deaths in the U.S. as colder weather takes hold. Under the latest projections from the Institute for Health Metrics and Evaluation at the University of Washington’s School of Medicine, deaths could rise to 410,000 by the end of 2020. In a worst-case scenario, there could be 620,000 fatalities, more than three times the number of Americans who have died over the past eight months. The difference between the projected and worst-case scenarios comes down to how diligent authorities are in mandating masks and social distancing, according to the report.

   Readers, fasten your seat belts. Many of us yearn for the good old days, like, those we have 6 months ago. It does not seem likely any time soon. Prepare yourself and your family for a rocky road to recovery. It will be a marathon, not a sprint. Even optimistists believe an effective vaccine won’t be available for many months – and then, how many vaccine-deniers will turn it down, lacking trust in leaders who follow politics rather than science?


No, Larry Kudlow, The Recovery Is NOT V-Shaped

By Shlomo Maital

Economic Activity in the World’s Major Economies

     ImPOTUS (Trump) has surrounded himself with a battery of sycophants, including his chief economic advisor Larry Kudlow, who continues to insist the economic recovery will be V-shaped – sharp drop, and sharp recovery. The reason this is so destructive, is that much more stimulus is needed for the US economy – but the wrong-headed view that full recovery is imminent will prevent it. It is so painful to see crackpot economists running economic policy, when the US has stadiums full of truly brilliant economists, many of them Nobel Prize winners. The price for this folly will be heavy.

   According to Bloomberg, the economic recovery – after a disastrous 40-80% decline in economic activity — has stalled, and is plateau-ing at around 80% of pre-pandemic levels.

“The recovery has stalled in major advanced economies, with some countries hitting a ceiling on activity that is below their pre-crisis levels, according to Bloomberg Economics gauges that integrate high-frequency data such as credit-card use, travel and location information. Euro-area economies such as Germany, France and Italy, along with Norway and Japan, are closest to their pre-pandemic readings, with Spain falling behind slightly. The U.K., U.S. and Canada are still far below their levels of activity at the start of the year”.

   That is actually terrible — because it means we are in a deep recession and are remaining there. Historically, when the world economy fell into recession, the US economy was the locomotive that pulled it out of the mud, with large demand on the part of American consumers.   Today, the US is run by those who reject any idea that the US has a responsibility for other nations’ wellbeing – and even if they believed they did, they are impotent.

     What is the reason? There are two. First, governments, especially in the US, do not understand that in the absence of consumer demand, only government can fill the gap, and massive amounts of spending are required to rescue the economy.   Debt-phobia (fear of public debt) is still alive and well — but if we remain stuck at 80%, even the existing debt will be tough to service, and if we can get back to 100%, the higher debt will be repaid from new revenues generated. Second, people are scared, uncertain (justifiably so), and are not spending. 

     People are not stupid. They see the weak government policies, and the US political deadlock – and hang on to their money. Even when restaurants do open, people are simply not going to eat in them. They understand that 80% far better than many economists and leaders.  They fell it on their flesh.

     The message here is – if you are fortunate enough to have current income, and not everyone does, set aside a portion of it, because you will need it in future.   I have been telling people this for years, in good times, and now, in bad times, it is still valid, because the bad times can persist or get even worse.

COVID-19: Plasma DOES Help!

By Shlomo Maital

   Plasma is a component of our blood. Some 44% of our blood comprises red cells (that carry oxygen to and from the heart and the lungs and other organs), 1% are white blood cells that fight ‘invaders’, and 55% is plasma. It is the liquid part of the blood that carries cells and proteins throughout the body.

   There is a theory that plasma from patients who have had COVID-19 and recovered contain antibodies, that can be helpful for other patients in overcoming the illness – especially those who are very seriously ill.

     Research in Israel has provided serious confirmation. For those who are very seriously ill with COVID-19, many of them elderly with other serious preconditions, some 50% or so do not recover. When they are administered plasma, that contains antibodies generated by the body to fight the virus, drawn from recovered patients, he rate of recovery improves from about half to one-third, 33%.

     Many Israelis have volunteered to donate plasma, after recovering – especially among the ultra-Orthodox community, which has been heavily afflicted by COVID-19.

     Israel now has a special plasma bank, with many doses of such plasma, in the event that there is a second wave of the virus. Meanwhile, on May 18, there were only 16 new cases, and two deaths. In total Israel has suffered 278 deaths from COVID-19, a relatively low number, out of some 17,000 cases; of those, 13,435 have fully recovered. Only 50 persons remain in critical condition, on ventilators.


Rebuilding America – Literally!   It’s Really Simple

By Shlomo  Maital


Image  Singapore’s Changi Airport


Image  A Crowded American airport

     It has been six years since America’s recession began, at the end of 2007, and as New York Times columnist Floyd Norris notes, the U.S. still has fewer jobs than it did then.  


   The answer is simple.  The U.S. labor-intensive construction industry has not recovered.  In the spring of 2006 construction employment was 7,476,000;  today, it is 5,851,000.   Nearly 1.7 million jobs were lost in construction.   This has deeply hurt the U.S. economy’s recovery, because construction jobs pay quite well, and underpin a lot of consumer spending.   The housing bubble not only claimed financial victims, from sub-prime mortgages and related assets; it threw many workers out of a job and has not brought them back.  Construction is a major, perhaps the main, drag on the recovery.

   The solution is really simple.  America’s infrastructure is ragged.  The interstate highway system was built in the 1950’s, 60 years ago, under President Eisenhower. It needs investment.  American airports are old, incredibly crowded (see the photo), and need renewal.  Been to JFK lately?  Thousands of American bridges are rusting and crumbling and need replacement.  Many roads inside cities have huge potholes.  Schools need new modern buildings. 

   If government spending were increased and focused on infrastructure investment, the construction industry could recover and lead a general economic recovery. This in turn would help the rest of the world, too.  Such spending is not wasteful, nor harmful, even if it temporarily increased the budget deficit, because it has been proven that infrastructure investment pays a high rate of return.  Will it work?  China proves it does.  China massively invested in construction and investment, when its economic growth flagged during the global economic crisis,  building railroads and highways, and quickly restored its rapid growth.

    But alas, it is unlikely to happen.  There is a Republican-Democrat budget compromise on the table that may avert another U.S. government shutdown, but it includes very small restoration of cuts made under the previous ‘sequestration’ legislation.   And it won’t help construction one bit. 

    America needs rebuilding – its infrastructure, and its society and political system as well.  It has the resources to do it.  But does it have the will?  It seems not.


Blog entries written by Prof. Shlomo Maital

Shlomo Maital