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.
