Basic Math

Pre-virus, call US GDP a $22T set of annual flows through our economy. And of course this is not the way the flows work, but let's straight-line assume $5.5T of flows per quarter. Or $60B per day.

Now, let's overlay "social distancing." What happens to the $60B per day in flows? In certain sectors, it drops to nearly $0B. China's recent Q1'20 numbers project a -25% drop in aggregate GDP (and China's numbers should always be taken lightly, as the true impact may be larger). So what has "social distancing" done to the daily flow of activity in the US? Well, -25% seems to be a decent aggregate starting point, realizing of course that for certain sub-sectors the number is -100%.

So we as a people (though "social distancing") have made our choice. We have slowed GDP from $60B per day to $45B per day (or $0B per day). However, we've only slowed the income side of GDP. Not the cost side. Bills still have to be paid. Debt still accrues. Same way every day, regardless. And markets are still open and function on normal hours every day. Which means an increasing gap between "normal human economic world" and "financial world." Does this make sense?

It does make sense - if we are attempting to destroy our US economy and our way of life.

There are some bottoms-up and top-down attempts, at the margins, to mitigate the wedge driven between "normal human economic world" and "financial world." Some free services, some pro athletes paying arena salaries, some interest-free periods, some foreclosure forbearance, some marginal unemployment relief. But nothing systematic. And nothing nearly large enough. How much "lost" GDP in the past 3 weeks? $315B?

So what can we do?

Some ideas (with slightly more details in the last "Four Factors of Belief" article):

• "GDP Production Board": similar to the War Production Board
• "New Brady Commission": create a facility for debtors and creditors
• Shut the Markets: there's no need for full-time Wall Street-CNBC right now

This is really simple. Movement on the fronts above do NOT have to be comprehensive permanent $1,000B+ exercises. We just need temporary facilities in place so the the markets do not devour their host body.

Every single day, in fact every hour that we do not take action on the 3 points above, the problem becomes bigger. Compounds. And weakens our ability to fight the virus.

It's human nature. Wait until the point of maximum pain to move. Maybe we're not there yet. But during the era of the virus, MAX PAIN may be too high to bear.

So why are we waiting?