By John Mauldin
March 19, 2020
This is a short midweek note, something I haven’t done for years. But as we all know, these are very special and difficult times.
Below, I’ll give you two links. They describe the nature of the new coronavirus pandemic and its potential consequences. I have run this past the best medical professionals I know, and they agree.
I was critical of the Federal Reserve for its emergency moves last Sunday. I now assume they had the same information that I’m giving you today. They weren’t panicking, they were trying to get ahead of the situation, going where we know we need to go and doing it now. Good on them. I apologize for my criticism.
Without radical action (some of which is already happening, some places, but not enough), this pandemic could cost many lives and potentially launch an economic depression. I am not exaggerating when I say this. I really mean it.
That doesn’t have to happen. We can solve this. That is what we as Americans or British or Italian or Chinese do. That is what we as humans do. We come together in a crisis.
But it will mean that we have to treat this situation not as an emergency, but as a battle that could turn into a war. World War C. It will be costly and require extraordinary measures, even if we act quickly. This weekend, I will explain why we should forget about balancing the budget, not unlike we did in World War II. I will say things I never thought John Mauldin would ever think or say, let alone write.
In the meantime, I urge you to read the following links and understand the urgent need for extraordinary actions in terms of social distancing. It will come at a terrible cost for much of the country, but if we do it now, we can get through this crisis quickly.
Consider how South Korea, Singapore, and Hong Kong have fared. Swift, comprehensive actions work. And as in a war, we must bear this financial and lifestyle burden together, understanding it will have consequences. The longer we delay, the higher the costs will be.
It is not that I think my ideas are any better than others being proposed, but I will offer some philosophical underpinnings and ideas that can guide us. And I will argue that proposals I have read so far, which may change by this weekend, are inadequate to deal with the nature of the crisis. They merely seem radical in terms of what we have done in the past of those alive. It is not radical if we are to avoid a World War II type of situation.
I am proposing that we do not think outside of the box. We must get rid of the box.
The data below clearly indicates we must take action. That action is going to cost a great deal of people and businesses a great deal of money, time, and blood. The sooner we take action, the lower the cost will be.
This first link talks about the consequences of delaying serious social distancing and quarantine policies, even for one more day. I believe the math and science are overwhelming. And that means you, gentle reader, must take action today for your own family. If you are in a position of power, you must take action for your community or your business. Focus on the actions that will make a difference today and be ready to adapt further as we see how the battle is unfolding.
Let me call out my own home state. As of this morning, Dallas has basically shut everything down. Fort Worth, on the other hand, is letting bars and restaurants open with six foot distancing. Fort Worth is putting Dallas and everyone else in the region at risk. Maybe in hindsight, we will find out that Fort Worth was right. However, given the data, can we risk it? Governor Abbott, I know you read my letter. Take charge and kick some Texas ass.
This second link describes a study by the Imperial College in Britain. A link to more detailed data is in the article. Basically, without drastic action now, it is possible a million Americans will die, and potentially even more. Again, the actions we take today can drastically impact what we can and cannot do a few weeks from now. It is very sobering.
Bluntly, this is going to cost more than a few trillion dollars. It will have unpleasant financial consequences for a very long time. So did World War II. But acting quickly will cut that cost in terms of life and spending. The consequence of not dealing with it financially, let alone medically, will be a depression and an unacceptable loss of life and economic support for millions of people.
Longtime readers know I am the “Muddle Through” economist. But this is not a Muddle Through scenario.
Again, I urge you to read the links, think about your own personal situation, and this weekend we’ll talk about what we must do as a nation.
It is time for our own Greatest Generation to step up. Only this time, it needs to be all of us.
For those of you who are Tolkien and Lord of the Rings fans, it is time to light the signal fires and muster the Rohirrim. I can never watch that 30-second scene with a dry eye.
It is time for us to light our own signal fires and muster our own courage. God knows we will need to support the front lines who go into harm’s way to keep the country running.
I’ll be back this weekend, and look forward to your feedback as always.
Your ready to get through this together analyst,
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