THE FOCUS (2/14/2021)
COVID Policies Kill Hope
The Unending, Restricted Government Policies on COVID Have Killed People's Hope. They Are More Dangerous Than Virus Itself
Empty Disneyland in Anaheim, Southern California due to lockdown. Almost a year into pandemic, Disneyland is still closed.
The University of Chicago Booth School of Business is convening panels of leading experts for the school’s 2021 Economic Outlook, held virtually in Chicago, Hong Kong and London to examine the economic factors that will shape the coming year.
The Fed: How much influence will the virus have on its decisions this year?
The fallout from the COVID-19 pandemic has been the major driving force in the Fed’s decisions for the last year and will likely continue to be so for the foreseeable future, said Kroszner, a former governor of the Federal Reserve System.
“The Fed and Central Bank can provide the foundation for recovery and liquidity support,” said Kroszner, deputy dean for executive programs and Norman R. Bobins Professor of Economics at Booth. “They can make sure that markets are functioning appropriately, but it’s really hard for them to do the next step of creating jobs or moving people from one sector to another. The economy is not just going to snap back to the way it was, and so the Fed will need to continue to provide that support.”
Change: Things won’t all go back to the way they were a year ago. What major changes do you see emerging from this pandemic?
The hope we may have briefly had, that the economic impact of the pandemic would be short-lived, has passed. Now that it’s clear that certain sectors of the economy will be changed forever, it will be important for governments and industries to recognize that and adapt accordingly, Kroszner said.
“You’ve got a boom in tech, and you’ve got a very strong contraction in the hospitality and transport sectors,” Kroszner said. “It’s going to be hard to move those people from one to another. Some of those companies will have to shut down. That doesn’t mean that you don’t provide support for the affected households, but you need to facilitate their ability to move on. That’s one of the most difficult things for politicians to do, to accept that you need to move on. That gets people back into productive work more quickly, which is good for them and good for the economy.”
Debt: The measures enacted to stimulate the economy and provide relief to citizens have cost significant amounts of money. How worried should we be about paying that back?
Concerns about the United States becoming like Greece during the global economic collapse of 2008–09 are unfounded, said Goolsbee (former chairman of the Council of Economic Advisers and a member of President Obama’s cabinet). "The US’s debt capacity is massively higher than where we are now and the debt service costs have actually fallen as the debt has risen. If we were to have a problem, there are many other countries that will have a problem first and will set off warnings for us."
“To me the issue isn’t that deficits will drive up interest rates here. The more relevant issue is about generational equity—should kids born in 2021 have to pay more of their lifetime income in taxes than people born in 1951?’” Goolsbee asked.
We don't disagree with Professor Goolsbee about the burden on the generational equity. However, the interest rates also affect the generational equity issue. At some point in the future, the interest rates would have to increase due to the rapid increase in money supply as well as the increase in government deficit to finance the COVID stimulus. The future generation would have to pay their mortgage and other type of loans at higher rates while also paying higher tax rates. This is a serious intergenerational effect of COVID that not many people giving attention yet.
One of the profound tragedies of the COVID or rather the COVID policies is the sudden disruption in some industries. One of them is tourism. Let's see how the COVID policies affect tourism industry in Europe ('Everybody is scared of 2021.' Europeans are losing jobs, businesses and hope):
The economy of the European Union is back in recession after GDP contracted again in the fourth quarter of last year, and major EU countries, including Germany and France, continue to struggle in early 2021. At the same time, severe vaccine shortages threaten to extend restrictions into the summer and postpone the recovery. UK GDP also likely shrank in the final three months of last year, and is being hurt by lockdowns and Brexit this quarter.
As the pandemic drags on, state-funded support packages that have kept businesses afloat are reaching their limits. Despite unprecedented government support for wages, the EU unemployment rate reached 7.5% in December. That means that 16 million men and women were unemployed — an increase of nearly 2 million compared to the same month the previous year, according to Eurostat.
In the United Kingdom, the number of people claiming unemployment benefits, including those working on a low income, more than doubled to 2.6 million between March and December, according to the Office for National Statistics.
Tourism faces an even gloomier outlook. The sector is crucial to the economies of European countries including France, Italy, Portugal, Spain and Greece, supporting countless businesses and livelihoods. As many as 11.7 million jobs in businesses that rely directly or indirectly on the sector are at risk, according to the European Commission.
Ian Smulders, formerly a ship captain who has been working as a tour guide in Crete since leaving Ireland in 2004, said he received the last of three €299 ($362) checks from the Greek government in January. "This is supposed to keep me going until May when the new tourist season is said to start. But like my colleagues, I know that this is simply fantasy," he told CNN Business.
Many colleagues have left the island or like him are struggling to keep a roof over their head and put food on the table, having had their income all but evaporate last year.
Apart from the ongoing uncertainty around the virus Smulders, who speaks six languages, said that many of his regular clients are simply too afraid to travel. "2021 will, if anything, be far worse than anything 2020 gave us."
According to the UN World Tourism Organization, Europe recorded a 70% decrease in arrivals in 2020, or more than 500 million fewer international tourists — the largest drop globally in absolute terms. "The overall prospects for a rebound in 2021 seem to have worsened," it said in a statement last week. "It could take two-and-a-half to four years for international tourism to return to 2019 levels."
In the mean time, how will the 12 million people employed in the tourism industry survive for the next three years? We are talking only one sector out of several economic sectors that are greatly affected by the COVID policies. After all is said and done, the COVID policies will be proven to be more disastrous to human beings than the virus itself.
How will governments in major economies tackle this serious economic issue? Well, let's see the statements from the finance chiefs of G7 (G7 Finance Chiefs Discuss How To Steer Economies Out Of Crisis)
British finance minister Rishi Sunak stressed “the moral, health and economic case” for global vaccine distribution and said international financial institutions had to help vulnerable countries respond to the pandemic.
Sunak called on private creditors to give debt help to the poorest countries and said climate change and nature preservation would be priorities for Britain’s G7 presidency.
World Bank President David Malpass said the G7 had a “good discussion” of inequality, COVID-19 vaccinations, climate change, economic vulnerabilities and debt reduction for poor countries.
At the time when millions of people in their economies found themselves without jobs and would likely rely on government supports to barely survive for the next three years, their finance chiefs are busy talking about climate change. About a year ago we wrote that the pandemic would be used to advance the climate change agenda of the left and the globalists. Sadly, we are proven to be right. The left and their globalist cabal never let crisis go to waste.
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