21 April 2020 – Tuesday – #37

Nicole spotted a sign that the Spanish government is preparing to relax its lockdown. It’s an actual sign. If you’re having trouble reading it, so am I. It’s in Catalan. It gives directions on when children can go outside and what they can do.

The rumors are that relaxation measures will begin going into effect next week or the week after in Spain. Nothing has been approved at this time. The advisory above indicates the Spanish government is devloping its messaging. As in the US, it seems that, as excited as my friends are to get outside, what they really want to know is how to stay safe.

Relaxing the lockdown comes with risks of a resurgence of Covid-19. As I noted on 17 April, after Singapore’s Covid-19 cases plateaued, it saw a resurgence of Covid-19 cases in worker dormitories last week. Last night there were new reports that China is having a Covid-19 resurgence in the north.

Two billion people in lockdowns around the world want to go back to normal, but no one knows for sure what will happen when we start going outside. We don’t even have testing good enough to tell us what’s happening now.

Everyone wants to go back to normal because the world economy sucks. Federal Reserve Bank of Philadelphia President Patrick Harker expects the US economy to contract 5% in 2020. What to do?

Here’s a quick explainer from Steve Davis at University of Chicago Booth School of Business on market volatility this year.

Professor Steve Davis on unprecedented market volatility during Covid outbreak. Chicago Booth School of Business.

Davis attributes volatility not to media reporting of the pandemic, but rather to both the international interconnectedness of the economy and the extent of Covid-19 policy responses (social distancing of two billion people).

I will add that, unlike 1929 and 2008, the markets themselves are not the problem this time around. As McKinsey noted (see my 5 April entry), this market event looks like the end of WWII when there were enormous labor discontinuities as troops returned and industry transformed from supporting a worldwide military effort to creating consumer goods.

This suggests that fiscal policy support for displaced labor is the key to recovery rather than monetary response to market problems. The liquidity crunches in this downturn should be easier to manage than 1929 and 2008. In other words, putting money in the hands of workers will work better than putting it in the hands of financiers a la 2008. What will be difficult is maintaining supply chains while protecting worker health. One silver lining: Covid-19 may be a fast-motion trial for how economies change as Artificial Intelligence and Machine Learning displace large segments of the workforce.

As you might expect, the reduction in travel and office use has upended the energy segment. This Twitter thread records Texas crude dropping from US$8 to less than $US2 per barrel.

West Texas crud oil drops below $2 per barrel

So much for ending the oil war between Saudi Arabia and Russia that started last month. Even Vladmir Putin might be having second thoughts about having helped Trump win in 2016. And, as Brad notes, who would have guessed oil would hit US$0 before bitcoins? It’s a great opportunity for clean energy businesses to buy their carbon-based competitors and shut them down.

West Texas crude trades for negative values on 21 April 2020. We’ll pay you to take it!

In my 18 April entry, I mentioned a Stanford study of Covid-19 infections that claimed 50x-85x more infections than previously thought in Santa Clara county. The methodology of the Stanford team set off a bit of a firestorm in the epidemiology community, with some saying that 30x more infections that previously thought would be a higher bound. A recent Southern California test seems to confirm the initial Stanford findings.

I take away two points from the bruhaha. First, wait for the peer review process to play out before developing policy based on these kinds of studies. This is no different from hydroxychloroquine where people jumped to a conclusion based on anecdotal evidence rather than waiting for a proper study (which showed that hydroxychloroquine was ineffective at treating Covid-19).

Second, do more testing with better tests and better methodologies. A lot of the controversy about the Stanford study stems from how the Stanford team adjusted their raw numbers. For understandable reasons, it appears researchers are trading off reliable results with timely results right now.

The reason people are willing to trade off some accuracy to get these numbers as quickly as possible is that they are the raw inputs to the epidemilogical models that help us manage Covid-19. In the absence of these numbers, we can’t use models and we’re left with social distancing and hand washing.

If and when we have accurate infection rates and mortality rates for Covid-19 in Santa Clara county and Southern California, those numbers won’t necessariy apply to other places. For instance, BCG vaccine seems to reduce mortality by 10x (there is a trial in Australia underway to test this hypothesis). That would suggest that mortality rates for Santa Clara, which has never had a BCG vaccination program, will be different from, say, Germany, where BCG vaccinations were given to populations in parts of the country controlled by the USSR.

Bottom line: we need more testing to understand what to do next.

Sorry I missed 4/20 day. It’s 20/4 day here in Barcelona, so it didn’t register. But not to disappoint. My friend Matt resurfaced a classic AIDS-era pot brownie recipe to help you stay calm at home this week. All I can say is, if it worked during AIDS, it will work during Covid-19.

Also, sorry to report Pamplona has cancelled this year’s Running of the Bulls festival and San Francisco Pride has cancelled the Pride Parade on its 50th anniversary.

Hey, listen. I don’t want to sound like everyone else, but I’ve been writing Covid Diary BCN for seventy five years, always trying to help friends and family, even people in my community I don’t know. Today, more than ever, in these times of uncertainty, when we’re spending time apart, there are still ways we can stay together without leaving the comfort and safety of home. I’m here to help. You can count on me. We’ll get through this together.

Every Covid-19 Commerical is Exactly the Same

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