According to the International Air Transportation Association providing a single vaccine dose to the world’s 7.8 billion people would require 8,000 fully filled 747 cargo planes, which…is a problem considering there are fewer than one thousand 747 freighters on the planet.
With oil demand and prices collapsing this year, U.S. oil and gas companies shed 107,000 jobs between March and August, the “fastest rate of layoffs in the industry’s history,” according to a Deloitte report released yesterday.
The World Bank said an additional 88 million to 115 million people will fall into extreme poverty this year due to the pandemic.
This marks the first uptick in extreme poverty in about 20 years. Powerful economic growth in countries like China and India allowed hundreds of millions of people to raise their living standards over the past couple of decades.
· Extreme poverty is defined as living on an income of $1.90 or less a day, or ~$700/year.
· A greater number of city residents are falling into extreme poverty, whereas before the pandemic it was mostly concentrated in rural areas.
· The World Bank also reported a larger share of extreme poverty in middle-income countries and among people with higher education levels.
Individuals Seeing Slower Recovery
Personal income fell 2.7% due to a drop in unemployment benefits, as consumer spending slows. Along with continued high rates of unemployment, many Americans are finding it difficult to spend their money on anything but the essentials. A lack of federal aid and extremely slow job growth are adding to signs of an economy that could weaken. Consumers without jobs are seeing little help and little chance of getting their jobs back as more layoffs appear to be becoming permanent.
Since June, the Fed has been buying $80 billion of U.S. Treasuries each month. That was initially under the guise of ensuring smooth “market functioning,” but minutes of the central bank’s September meeting revealed that officials now see purchases as “contributing to accommodative financial conditions in a way that supported economic recovery.” This is the central bank’s way of saying the stock market is up, credit spreads on investment-grade corporate bonds are tight and risky companies can easily find willing lenders. In other words, the Fed is supporting asset prices, which helps keep a recovery on track but also disproportionately benefits the wealthiest Americans who own the vast majority of stocks and bonds.
It appears that the impact of Covid-15 and the resulting economic recession is increasingly falling on those who have the least ability to cope with the financial hardships. These are the people needed to fuel a global recovery. If they can’t consume, how long can we sustain any kind of recovery?
There was an interesting concept floated in the Wall Street Journal this week. The Fed is buying $80 billion of Treasury securities each month in an effort to support the value of those securities in this low-rate environment, benefitting those that own treasury securities. If the Fed took the money that they are investing in bonds (and stocks) and invested that in additional direct fiscal and targeted stimulus, would it be able to support the economy in a more direct way to accelerate recovery.
We have taken on a huge amount of debt to try to stimulate the economy. Mohamed El-Erian, President of Queens College said “there are four ways to deal with debt. Only one way works – high inclusive economic growth. The others are austerity (and you can’t have austerity forever, financial repression (blow up the system) or default.” These last three are not very attractive.
That leaves us with high, inclusive growth. How can we marshal our resources target strategic investments that generate jobs, improve our ability to deal with future problems and support rapid economic growth?