Now that we are all amateur virologists and epidemiologists we need to turn our collective attention to becoming amateur economists and statisticians. Statistics from Google shows that the number of searches for COVID19 have fallen and with that we believe the media will now begin to focus its attention away from the disease and towards the general economy. They will still look to grip us with fear around COVID19 but we humans adapt pretty quickly. The economy and possible food shortages are likely to replace coronavirus headlines.
In a recent piece we noted how policy choices were made in the absence of evidence. We literally allowed our fears based on government models and predictions to pave the way for large scale policy decisions to push their without being challenged. These models have not been accurate to date. Based on the lack of accurate data and case counts we would guesstimate that any models predictive abilities were (and continue to be) limited at best. Due to the ongoing fear, the government has justified evidence free policy decisions and mass shutdowns. We also wonder if the government had actually been prepared for a pandemic how many billions of dollars and jobs could have been saved. An ounce of prevention is worth a pound of cure. What happened to all the lessons we learned from SARS? Also, we continue to wonder what happens to the virus when we open up the economy again.
Keeping with the theme of models showing large numbers of deaths the government pushing through massive expenditures and subsidies. These transfer payments will never (ever) be repaid. The Bank of England in a statement announced the extension of the little known “Ways and Means Facility”. The ways and means facility essentially allows the Bank of England to print money to repay debt. In a press release the Bank of England called the measure “temporary” but two things are evident to us. This is likely to be in place much longer than the word “temporary” would connote and that every major industrialized nation save for maybe a few will have to follow suit and print money and monetize debt. Rest assured all levels governments will also look for ways to increase tax revenue.
Politicians, it seems to us, haven’t thought out the repercussions of their decisions. From the knock-on effects of the shutdowns to who pays the bill. These second and third order extensions of their decisions are now what we now have to fear. The CERB has come into effect and may at some point become the Universal Basic Income (UBI) that has been tossed around replacing both welfare and unemployment insurance payments. One problem with such a high basic income amount is that it removes the incentive for many people to return to work. Even if it is temporary we could easily envisage a politician running on the platform of keeping the CERB or UBI. Of course, by that time a UBI may be necessary due to economic contraction.
Perhaps we humans have gotten a little too complacent as of late but the good news is that this isn’t our first barbeque. The world has seen its fair share of war and disease over the past two plus million years…yet here we stand (or sit). This is not the apocalypse. The short term outcome is random for sure but the longer term picture is about as bright as it’s ever been.
This information has been prepared by Linda J. Levesque & Daniel Fearon who are Investment Advisors for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisors can open accounts only in the provinces in which they are registered. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
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