Don’t celebrate yet: Virus recovery is far from over

Coming out of the pandemic will be a slow process. We have to take on the myriad consequences of the pandemic.

It will take all of 2021 and much of 2022. It will be far more challenging to restore the economy than it was to shut it down.

... We will not be returning to the old normal.

Annapolis has begun planning for a post-COVID-19 reopening on July 4. On that day, President Joe Biden also hopes to celebrate the beginnings of our return to health and beginnings of an economic recovery.

Vaccinations are occurring at a remarkably fast pace. Successful passage of the $1.9 trillion American Rescue Plan almost certainly assures a robust economy this year and well into 2022. Some experts estimate a 4 to 6% growth rate – compare this to the pre-pandemic growth rate of 2.2%.

It’s understandable that Americans want their pre-pandemic lives back. But a catastrophe of the depth and breadth of the COVID-19 crisis will not go away with the flip of a switch.

We can’t rush to eliminate all pandemic protections. In the U.S. we will shortly reach over 30 million coronavirus cases and more than 540,000 deaths. Some of the new variants of the virus – e.g., U.K. strain – spread fast and are more destructive than the strain we originally fought.

We may think we’re done with the virus. It is far from done with us. And our physical health is just a part of it. Federal Reserve Chair Jerome Powell stated that wearing masks and getting vaccinated is the single most important policy to move us toward a growth economy.

Coming out of the pandemic will be a slow process. We have to take on the myriad consequences of the pandemic. It will take all of 2021 and much of 2022. It will be far more challenging to restore the economy than it was to shut it down. In addition to the wreckage of lost jobs and shuttered businesses, we now confront massive deficit and debt. We will not be returning to the old normal.

The economic growth in 2020 was the lowest since 1946. It fell by 9.5%, the worst in history. By last April 20 million Americans had lost their jobs and the U.S. unemployment rate jumped to 14.7%. By March 23, 2020 the Dow Jones had dropped 36%. These are Great Depression levels.

A study in the Journal of the American Medical Association predicts that the virus will end up costing Americans $16 trillion. This study calls it the greatest threat to prosperity and wellbeing the U.S. has encountered since the Great Depression.

U.S. non-farm payrolls dropped from 152.5 million in February 2020 to 130.3 million in April of that year – a loss of over 22 million jobs.

It will take another two or three years to reduce our current unemployment of 6.2% and get back to the February 2020 level.

Recovery for the 30%-40% of low-income workers and those who can’t work from home will be much slower and much more difficult. Almost 60% of jobs in America paying over $100,000 can be done from home, compared with 10% of the jobs paying under $40,000.

This economic situation is further complicated by growing national division. Political and cultural divisions now affect even vaccination decisions and other protections for our general health and mutual wellbeing. Populist discontent and the threat of civic disorder overhang our lives. Americans in all quarters feel unsure.

If current the high prices of stocks, real estate and other assets are not confirmed by a solid economic recovery, the future of the nation’s markets and its overall economy are in serious danger. Government alone cannot restore prosperity and confidence in the economy.

The Federal Reserve relies on increasing inflation because of the need to reduce U.S. government debt and reduce the debt-to-GDP ratio.

This process is simply devaluation of the dollar. What is irresponsible in normal times is nevertheless utilized when a pandemic is crushing economies around the world. Governments have made the choice to borrow more than they can ever repay and to devalue their currencies accordingly.

Adam Baratta, in his recent book “The Great Devaluation,” thoroughly analyzes the situation we’re now in. Ultimately what is at stake here is an out-of-control global financial system.