Part 2 of my take on the COVID-19 crisis.

1. Time for a Common Sense Plan: When the Cure is Exponentially
Worse Than the Disease
It’s been three weeks since I shared my views on COVID-19, and the world has
changed dramatically since then. The global workforce, save for essential
services, has largely come to a halt, and Americans’ eyes are glued to the
major news outlets as we collectively watch the “ticker” count off thousands
of additional cases each day.
The U.S. stock market has lost a third of its value beginning in mid-February
and continuing its free fall as I write this. In a record six weeks, global markets
slashed $23 Trillion of value, and the losses appear to be continuing.
Inevitably the federal government, which was late to this party for sure, has
begun a twofold exercise: 1. An expensive and all out game of “catchup” to
lower the rate of increase of the virus’s spread (important words here - we
missed the opportunity to stop it, for a number of reasons) in order to reduce
the impact to our healthcare system. 2. Transacting our way toward the
mother of all bailouts.
With respect to #1, I think the country has clearly fallen into the observation
some have attributed to Winston Churchill that “America always does the right
thing after exhausting all other possibilities.” We’re seeing the power of a
Federalist system as local, state and federal governments come together to
reduce the pace of the spread and hopefully keep the numbers of seriously ill
people from overwhelming our healthcare systems.
The state of New York is the leading “hot spot” and seems to be handling
things well, despite the density of New York City. The two other hot spot

2. states, California and Washington, have done well and I suspect will keep
things under control. Watch out for the great state of Florida - where I grew up
- the large population, demographics and beaches native to that state will
likely make it the next hot spot. West Virginia is another state likely to have
challenges given its substantial older, lower income and uninsured population.
#2 is the one I’m really concerned about though. As I watch leaders of major
industries go on television and share the size of the bailout that their industry
will need, I’ve been keeping track of the figures on a legal pad. The Airline
industry, the Hotel industry, the Restaurant industry, the Cruise Ship industry,
Hospitals, etc. are all calling for hundreds of billions of dollars to save
themselves. It’s adding up, and fast. The latest reports suggest that the first
major piece of bailout legislation will cost around $2 Trillion, or 10% of GDP.
All of this is deficit spending, and will immediately drop to the national debt,
which eclipsed 100% of GDP a couple years ago.
This won’t be enough, of course. World War II had us in the 20-25% of GDP
range with respect to money printing for the war effort, and if we start down
this path, that’s likely where we’ll be very shortly, and there’s no indication that
it will be sufficient to bring confidence back to the markets and the nation.
Andrew Ross Sorkin, the NBC correspondent and New York Times columnist
(who famously wrote “Too Big to Fail” about the 2008 financial crisis, and
knows a few things about bailouts) recently published an article suggesting
that the one way to fix this is to immediately offer every business in America a
0% five year bridge loan, the only requirement of which will be that the
business must maintain employment of 90% of its pre-COVID workforce. And
the program would be administered by the nation’s banks free of charge, a
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3. little gift back to the country following the TARP bank bailouts of a decade
ago.
This would likely work - it would immediately bring confidence back to the
nation, the markets, and our people, it would be employment-focused, and it
would not pick and choose which industries get bailed out. And how much fun
would it be to get endless millions of dollars for free! The price tag - holy shit -
likely in the tens of trillions. Hell I have several LLCs I use for my investments
and I’d definitely be filling out loan applications for each of them. It would be
my patriotic duty.
Let me propose an alternative. As I shared in my last piece on the topic,
COVID-19 is not Ebola or the zombie apocalypse. Lots of people who become
infected indeed die, but not so many that the world’s population will be
substantially impacted. On the other hand, a financial crisis greater than the
The Great Depression will no doubt kill many millions more if we don’t get the
economy going, and quickly. The U.S. economy, the largest on the planet,
churns out about $400 Billion per week. It cannot afford to go to zero for more
than a few weeks. Do runs on our banks seem that far off? How long before a
health crisis becomes a financial crisis?
My suggestion is simple - either we do the Sorkin loan program ASAP and
accept enormously new deficits and debt; or we accept that we didn’t stop
this virus, that most of us are going to get it, that some of us will die from it
(just like happens every year with Influenza), and we go on living our lives.
Open the bars and restaurants, get on planes, and get back to work, or risk
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4. losing everything. It’s the greatest example of “fish or cut bait” the world has
ever seen, and our leaders need to decide quickly which they want to do. DV
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