Monday, May 17, 2021

Financial Outcomes of Lockdowns

Our fifty states are interconnected through trade and travel and states that did not enforce lockdowns are still affected by states that chose to shut down completely. Blue states, poorly managed to begin with and tightly locked down, are clamoring for a piece of the huge financial rescue coming from Washington.

This welfare is enabled by the Treasury’s money printing without any backing of goods and services faster than paper can be supplied thus contributing to the rising inflation, inflation partially hidden by the elimination of fuel and food from the proverbial basket of goods that determines each month the rise and fall of prices.

In addition, the disastrous executive orders passed in the first 100 days of the new presidency have affected our economy quite negatively, coupled with the out-of-control spending, much of it totally unrelated to the pandemic effects. Temporary and permanent effects of the lockdown have disrupted the economy and bankrupted many small businesses and larger ones that were already struggling before the “pandemic” hit.

If data is compiled and reported correctly, it is obvious how GDP has been affected by lockdowns in terms of loss of consumption, investment, government spending, and trade with other countries.

We had a relatively large working population “pre-pandemic,” now Americans are being paid more to stay home while employers are struggling to find people willing to work in service sectors.

We had, at one time, the most productive workers in the world. The U.S. economy used to make at least $40,000 worth of goods and services for every living American and over $80,000 for every working American. (William J. Baumol and Alan S. Blinder, Economics, 2007)

To find out what the total output of the economy is, you must look at the gross domestic product (GDP) which is comprised of consumption (the largest component), investment (I), government spending (G) and next exports (X-IM, exports minus imports). Government buys goods and services from private businesses amounting to about 18 percent of GDP, it does not produce goods, but it provides services. Two-thirds of GDP is consumption.

When you look at the GDP number for 2020, you can measure the size of the economy, what it produced in final goods and services that year. The real GDP shows adjustment to the economy in the purchasing power of money by correcting for inflation (increase in prices of goods and services every American buys). As you can plainly see in grocery stores and at the gas pumps, these two important elements for every household have skyrocketed in prices. Yet they are no longer included in the basket of goods used to measures inflation.

Economic data hides the human factors that cause immense suffering in a terrible economy marked by a terrible GDP.

Take the world-wide Great Depression of the 1930s. The U.S. GDP dropped 30 percent, business investment was almost non-existent, and the unemployment rate grew from 3 percent in 1929 to 25 percent in 1933. In the labor force, one person in four was jobless. And the government was not handing out unemployment and stimulus checks. Soup lines, closed factories, people begging, and homeless were at an all-time high.

NPR reported that GDP shrank at the annual rate of 32.9% in the second quarter of 2020, “the sharpest economic contraction in modern American history,” as reported by the Commerce Department. GDP Drops At 32.9% Rate, The Worst U.S. Contraction Ever : Coronavirus Updates : NPR

The estimated real GDP for the first quarter in 2021 by the Bureau of Economic Analysis is an increase of 6.4 percent. This figure reflects some economic recovery, reopening “establishments,” and government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans, distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.

“The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2021 because the impacts are generally embedded in source data and cannot be separately identified.”  Gross Domestic Product, First Quarter 2021 (Advance Estimate) | U.S. Bureau of Economic Analysis (BEA)

But how does one correctly estimate and quantify the loss of economic welfare on a societal level which impacts the economy?

-          Suspended or permanently lost freedoms for almost 15 months now

-          Permanent or temporary effects on mental health

-          Loss of economic opportunities due to the lockdowns

-          Loss of investment in human capital due to closed schools (students learned precious little in public schools or in college for over a year now)

-          Personal and professional loss resulting from inability to travel for business or leisure

-          Educational, friendship, and family losses due to lockdowns

-          Children being out of school and not in contact with outside humans

-          Adults being out of the labor force and not in contact with colleagues

-          Mental and physical uncertainty

-          Loss from proper medical care when care was virtual and inadequate

-          Loss from ability to go to hospitals due to fear of contagion

-          Loss from death because of other neglected serious medical problems

-          Severe loss from lack of socialization of people of all ages

-          Loss of our humanity and identity due to masking everywhere

-          Social distancing caused more than just reduced economic activity, it profoundly affected many individuals

-          Loss of entrepreneurship (some was replaced by a robust mushrooming of production of personalized masks and shields)

-          Loss of innovation

-          Small business formation collapsed except those supporting the lockdowns and mask wearing (door delivery, curb delivery, contactless credit card use, fashionable masking accessories and gloves)

-          The disappearance of buffets; new and permanent sanitation rules in retail and food processing and serving

-          Losses from wedding venues, birthday, and other parties

-          Banned activities such as going to church and everything related to it are not counted in GDP as a loss

-          Playing sports and attending professional and amateur games damaged economic activity in concessions and booster club activities/fund raising

-          The huge cost resulting from the lost value of living due to lockdowns, of seeing and associating with family

-          The loss of leisure time, i.e., traveling abroad, going on a cruise, on vacation, to a wedding, to a graduation, birthday, etc.

-          Loss of mental health, disability, suicides from lockdowns, drug overdoses, increased drug use and dependency, child abuse, elder abuse, and spousal abuse.

In his book, Economics in One Virus, Ryan A. Bourne wrote that “a third to a half of even the near-term decline in early phases of the pandemic was purely due to the lockdowns, as opposed to panicked changes in behavior from risk-averse consumers and workers.” (Cato Institute, 2021, p. 79)

Bourne wrote that there was a decline in vaccines for other child diseases, cancellation of elective surgeries by hospitals that potentially made a person’s health worse and increase in nursing home deaths that were not related to Covid.

The Covid-19 lockdowns in various states have had and are still having an economic impact that may or may not be correctly and fully quantifiable.  Bourne wrote, “Mercatus Center economists James Broughel and Michael Kotrous conclude that the initial lockdown measures probably cost somewhere between $255 and $464 billion in lost output (1.2 to 2.2 percent of 2019 GDP).”

Economic activity is much easier to calculate but how do you quantify the loss from schooling alone, what economists call “human capital accumulation?” And how does one quantify all the other intangible losses? What kind of subjective yard stick can one possibly use?

A lot of money has been created and a small part was distributed to the population in the form of various payments, stimulus checks, unemployment, and extended unemployment checks, etc. The money created did not go to economic growth or investment as people either were not allowed to work, their employers went bankrupt, the jobs went away, few new jobs and businesses were created, and many chose to stay home as the government’s weekly welfare checks was more than they were making while working. So, the increase in the money supply then caused inflation.

Investments were made heavily in the real estate market and construction market as people were fleeing mismanaged and locked down blue states. Housing prices and construction materials, especially lumber, have skyrocketed.

Consumption goods prices increased as well as retailers were unable to get enough merchandise stock in the brick-and-mortar stores and consumers turned to Amazon online and to other giant retailers that could remain open to the detriment of mom-and-pop stores that were not allowed to stay open.

The excessive money creation means that we have too much money chasing too few goods, inflation is high, and people want to invest in tangible goods such as real estate and precious metals, hence their prices are going up.

The lockdowns were exaggerated responses to a mismanaged health crisis and a rush to vaccines, but it was mostly a money supply-created crisis in order to generate the precise outcome we are facing today – high unemployment, high inflation, more government dependency, huge government spending (on political pet projects domestically and internationally), high gas prices and less mobility, high energy, less access to proper medical care, forcing solar and wind generated energy to fully replace fossil fuels, some of the many items on the agenda of the Great Reset/Build Back Better. The long-term global effects of the “new normal,” caused by the flu virus and by the subsequent opportunistic response to it, are not going to be pretty.

 

 

 

 

4 comments:

  1. In one word, the BIOLOGICAL WAR against America started by the international communist organization has won! Comrade Putin, Dictator Xi, Mau-Mau Hussein Nobama and the DemocRAT party USA are the winners! God save us, the average citizens, as we feel mentally locked down and physically in the chains of Marxism!

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  2. Hello Dr. Ileana Johnson Paugh,

    It goes without saying that I thoroughly enjoyed your article in the Canada Free Press.

    If you could take a few minutes of your valuable time I would like you to answer two questions about your article.

    The first question is, is their a concerted effort to bring the United States down a notch so that it is no longer s a supper power calling the shots on a global scale?

    The United States time has come and gone and their will be another power player to replace the US.

    So instead of trying to wage a war against the US through the use of the military might we destroy it from within.

    And of course with the help of it’s own people.

    This effort to take down the US can’t be fought on the street and expect to win. Instead the same tragedy cancer uses, work from within slowly and stealthily. There will come a point the patient will be too weak to fight back.

    Second question : What’s to become of the land of the free? Nothing? Will it go the way other countries who were in our position. We sit an watch on the side lines. There are many among us who have traveled that road.

    All the guns and bullets that the GP has ammast is a mute subject because it won’t be a conventual war as people where lead to believe. The GP was able to be locked down using the scare tactic of a virus that is useless against guns. People willingly summitted then as they are submitting now.

    Be well and stay well Dr Dr. Ileana Johnson Paugh.

    Matt Matherne

    PS Many thanks for sharing your lovely smile with us all.

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  3. They (elite/ global cult) planned this a long time ago. So many people who don;t see the full picture and take the toxic vaccin. A lot of conditioned obedience and laziness.

    Lawyer Reiner Fuellmich (german/ american) and about 200 to 300 other lawyers go to court in two or three weeks to sue Christian Drosten, who designed the PCR test for corona, Lothar Wieler, the director of the German RIVM and others.

    Quote:

    "Then we'll see if the legal system still exists or if it has already been completely taken over by the other side, which I don't think is the case."


    "We have to do something because the people responsible for this have no empathy and are extremely dangerous. They only care about money and power.”

    ReplyDelete