Slate Money Podcast host and chief financial correspondent of Axios has written a book about the recovery of the economy after the pandemic.
Slate Money talks about Felix’s new book, The Phoenix Economy: Work, Life, and Money in the New Not Normal.
slate.com
So one of the first lessons he draws is that Steve Mnuchin helped save the economy. Salmon is no fan of Trump or the Republicans.
His contention is that the world barely recovered from 2008 Great Recession by the time covid hit. Despite all the complaints from Republicans, zero interest rates and QE by Bernanke didn't bring the economy back fully from 2008.
Monetary policy wasn't enough and what Obama and Democrats were able to pass as stimulus wasn't enough of a fiscal boost to complement the monetary policies.
So this was a conclusion that wasn't widely disseminated by many economists believed this and Mnuchin apparently believed it as well.
When covid hit, Mnuchin got Trump and the Republicans to pass the covid relief act, the first of which was $1 trillion. There was a lot of waste and fraud in disbursement but if they didn't pass it, we'd have been in a deeper hole.
Mnuchin had credibility with Trump because among other things, he was loyal. So when Charlottesville happened -- Jews will not replace us! -- Mnuchin, a Jew, backed Trump publicly unlike Gary Cohn, who resigned shortly after.
Also Trump wanted the economy to be as strong as possible in his re-election bid so he was inclined to do fiscal stimulus as Mnuchin advised.
Of course the money they put in the pockets of Americans, along with more money that Biden signed into law shortly after he was inaugurated, had all kinds of distorting effects on real estate and many other markets, which when combined with supply chain disruptions led to the highest inflation in 40 years.
Salmon cites some interesting facts and stats.
For instance, deaths of 18-25 year old males spiked during the pandemic, not because of covid but because of the side effects of covid. A lot of these deaths reflected people not caring or throwing caution to the wind so people auto accidents increased and people died from not wearing seat belts. Smoking and use of drugs also increased. The increase in smoking is unheard of because it's had a long history of declining for decades.
So it reflected a kind of YOLO mentality, which we've seen as lot of people stopped masking or avoiding crowded indoor places. Or they had to go to church choir and bars or concerts.
Another interesting data point, the prices of lobster rolls spiked. Why? Not because of labor costs. Salmon talked to an owner of a factory which made the lobster fillings which went into lobster rolls. His labor costs didn't increase at all but what he saw was spiking demand, so he was forced to raise prices so that his customers wouldn't sour on his inability to produce enough supply.
Again, reflects greater YOLO behavior.
But now, to combat high inflation, Fed is trying to slow down the economy and soft landing is far from guaranteed.
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Longer term, there will be continuing economic impact. I posted an article about how health care workers are among those hardest hit by Long Covid, unable to work. And we know a lot of nurses and even some doctors have left or plan to leave their profession from burnout, even if they didn't get sick themselves.
Health care was already a drag on the economy. Now costs are likely to continue a fast growth trajectory, since health care costs have been outpacing general inflation for decades.
Besides likely shortages of doctors and nurses, there will be more care and management required for greater incidence of chronic diseases -- diabetes, heart disease, strokes -- from patients even if they didn't become afflicted with long covid and had acute, debilitating symptoms.
Most of this is going to be invisible or not seen by most people, who've become inured to the high number of people lost the last 3 years and counting. Most were old people so they're not going to have direct impact on the economy, since they likely weren't working.
But even those who are still of working age and have escaped so far relatively unscathed are going to behave differently, impacting employers and those effects are going to reverberate throughout the economy.
Many white collar workers who've accumulated some wealth are now being selective in which jobs they choose to do, where they do it, under which terms. So a much greater number who will insist on WFH, not coming into the office -- maybe another form of YOLO.
This loss of workers coming into the offices regularly will have devastating economic impact on local economies, at least for the short term. Commercial real estate could be decimated, not to mention all the businesses which have developed around serving these workers daily -- restaurants which specialized on serving breakfast and lunch to these workers, stores, etc.
Several major cities will face budgetary collapses, leading to thousands of workers being dislocated. Level of basic services like police and firefighting, as well as public housing and social services could be cut back drastically.