WILL THE LOCKDOWN CREATE A SIMILAR UNINTENDED CONSEQUENCE AS PROHIBITION?

Yesterday I commented about the politicization of re-opening. Several days ago, I referenced a story on Bloomberg that indicated 82% of small businesses wish to reopen. Conversely 90% of tech and government workers wish to remain closed. This story also referenced a poll that indicated 92% of Democrats are in favor of maintaining the lockdown. Republican support declines to forty five percent.

I have read several Winston Churchill biographies. Perhaps one of the most lasting impressions was his view about “experts,” people who traditionally think in only one dimension and generally have the attitude of to hell with the commoner. Churchill held such “experts” in great contempt given their arrogance and narrow thinking.

In my view the vast majority of our politicians are paralyzed to challenge the experts fearing vilification in the blogosphere even as the initial estimates predicated by the experts have missed the mark by 99%. The experts are myopically focused on one or two data points, not the global landscape and the larger effects of this expert induced failed government policy.

It is suicide for the economy/society to remain shut. The Federal Reserve can not print enough money to make up the difference. The pain of the shutdown is rapidly spreading and the pressure to reopen will greatly intensify.

Some believe there is a possibility states/region that have not yet eased restrictions may suffer political hell as its residents compare their lot to other states/regions that have begun to reopen as their communities accept and learn to live with and challenge the disease in a more prudent manner. The data today is suggesting to who is most at risk.

For example, according to the Kaiser Family Foundation, almost 50% of Covid deaths have occurred in nursing homes. Fifty two percent of NJ deaths were in nursing homes. Minnesota, New Hampshire and Pennsylvania nursing home deaths were 81%, 77% and 71%, respectively. This is consistent to the European experience as roughly half of deaths in France, Italy and Spain were in nursing homes. It is this sector of the population that must be protected. For example, live in doctor, nurses and clinicians.

I am ardent believer that it is the commoner, the small businessperson, the true capitalists that will drive this reopening. There may be several rogue titans who will also act to help the cause. It is our national culture, in our DNA to take risk, to overcome not to sit back as beg for government handouts. We are a “can do” society where nothing is insurmountable.

Yesterday a WSJ editorial compared the current lockdown to Prohibition. As in that era, policy makers see the environment as a balance between economic damage and public health. The editorial stated Prohibition was widely flouted, failed and gave rise to a host of other public health ailments such as greater violence, alcohol poisoning and general increase in lawlessness.

Today whether a community see lockdown restrictions as legitimate or as gross overreach may depend whether the restrictions are designed for a city or sparse rural county. Imposing severe lockdown conditions appropriate for the former may ignite public noncompliance in the latter, perhaps ultimately legitimizing noncompliance everywhere…aka the Speakeasy effect. The editorial concludes asking will this again occur?

Wow! Talk about an unintended consequence.

Commenting about the markets, equities advanced on signs the economy will continue to reopen. The equity advance accelerated following the release of oil inventories which fell by an amount greater than expected. Oil is the industrial commodity utilized in almost all aspects of production. Oil closed up another 6% to the highest level since March 11.

Last night the foreign markets were down. London was down 0.67%, Paris down 0.98% and Frankfurt down 1.38%. China was down 0.5%, Japan down 0.21% and Hang Sang down 0.49%.

The Dow should open nominally lower following deteriorating Sino-American ties. The 10-year is up 2/32 to yield 0.68%.

 

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