The Breakdown - Welcome to the Groundhog Day Economy (PS, It Sucks) - The Breakdown Weekly Recap

Episode Date: June 27, 2020

As states shutter economic activity because of preventable COVID-19 outbreaks, it’s deja vu all over again.  This is a movie we’ve seen before: Rise in what could have been preventable COVID-19 cases A call for shutdowns (plus voluntary closures) Rampant politicization of health and economic issues rather than common sense approaches Persistent jobless claims plus new layoffs  Wall Street nerves turning into new Federal Reserve and Treasury action Rinse, repeat, economy!

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, Crypto, and Beyond. This episode is sponsored by BitStamp and Cipher Trace. The Breakdown is produced and distributed by Coin Desk. And now, here's your host, NLW. Welcome back to The Breakdown. It is Saturday, June 27th, and this is the weekly recap. Groundhog Day is a 1993 film starring Bill Murray, written by Harold Rames of Ghostbusters fame, and it's about a man who is basically a curmudgeon. He goes through life not caring about anyone but himself and not really enjoying what's around him,

until he has a moment where he goes to Punksitani, Pennsylvania for the annual Groundhog Day Festival, and wakes up every single morning at the same time with the same things happening. He relives his life over and over again. He gets depressed. He tries to kill himself. He tries to escape this endless flywheel. And eventually he starts having these moments where he becomes close to the people around him. He starts to serve instead of just think about himself. He falls in love and eventually he wakes up together with his new true love, a changed man. It is a redemptive tale of the human spirit and the capacity for change that we have. That said, when most people think about Groundhog Day, what they think about is living the same thing

over and over and over again, and man, that is what we're living through right now. We are living through the Groundhog Day economy, and it sucks. And this weekly recap is all about the frustration that I feel looking out across an economy that is just caught in the same stupid cycles that we've been in for more than three or four months now. For this weekly recap, I'm going to talk about five examples of ground hogging. So ground hogging example number one, a rise in cases that could have been contained through simple measures. We are seeing a massive increase in coronavirus cases in 33 states around the country. 33 states have rising cases rather than falling cases. In many places, these numbers are going up extraordinarily. Florida has surged to more than 5,000 new cases daily

up from the less than 1,000 daily at the beginning of June. Texas is up near 6,000 daily from a little over 1,000 daily at the beginning of the month as well. The number of patients hospitalized has reached record highs 12 days in a row in Texas, and certain large hospital systems are already at 100% ICU capacity while others are only a week or two behind. This COVID-19 outbreak has had a strong streak of exceptionalism. First, an American exceptionalism that somehow thought that we wouldn't get it here, we'd be able to better handle it than anyone else had. And then second, a certain regional exceptionalism that said that this was just somehow a New York problem. It turns out viruses don't care about politics. All they care about

is their ability to spread. And the ways that we could have been stopping the spread and the ways that we could have been increasing our capacity in case it did spread, fell by the wayside in favor of turning this into yet another political battleground. Bit Stamp is the original global cryptocurrency exchange. Since 2011, BitStamp has been the preferred exchange for serious traders and investors,

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Groundhogging number two, a call for shutdowns. As cases surge, we are seeing people suggest that we may need to go into lockdown mode again. Former Treasury Secretary Larry Summers said that up to 30% of the economy may have to shut down to contain this thing. In Texas, you've seen paused reopening plans. Not to mention, they've started imposing rules like no elective surgeries on their hospitals. And importantly, even without shutdown's economic activity is flagging. Joe Wisenthal pointed out in Bloomberg this morning that Open Table has stalled out and returned to May numbers in many of the places that are now starting to see a surge. Now, I've said before and I've said again, I have a hard

time imagining how Americans, especially in these supremely independent states, would take another mandate for shutdown. And frankly, if there's any good news, I think it's that people are voluntarily shutting businesses and trying to make this work. It will surprise you none at all, given that this is a Bitcoin-oriented macro podcast that I think that individual responsibility and volunteerism is a huge part of the answer to this challenge. But whatever the case is, groundhogging number two is the fact that you're seeing a call for shutdown economic activity, and even when there's not a call for it, just actual rational shutdowns as people try to avoid this thing. Groundhogging number three is something I talked about before, the politicization of everything,

and focusing on smaller kind of point-winning issues instead of the larger question of how to design an economy that can stay open while COVID is happening. The single question has been and will continue to be how to design an economy. that can coexist with a new disease. And there are answers to that. There are answers that are complex and nuanced and have to do with public responsibility that have to do with masks, that have to do with social distancing, that have to do with voluntarily self-quarantining at-risk populations, that have to do with a real smart assessment of the threat of different types of businesses as we get more information. There is a complex but available set of answers around how to have the economy and

this disease coexist, but we don't talk about that when all we do is try to score political points and try to demonize people on the other side of the spectrum for thinking what they think about this disease or about the economy. And it's stupid, and it ruins us, and it is ruining us. Groundhogging number four, persistent jobless claims and new layoffs. If you guys are regular listeners, you will have heard me talk about this a lot over the last couple weeks, but in short, we have two things going on simultaneously. We have one, a really stubborn, ongoing unemployment situation based on the first wave of coronavirus that hit, that has kept continuing claims around 20 million, and new claims continue to be around 1.5 million per week. Those things have stalled out,

and they don't seem to be getting particularly better, at least not as fast as we'd like. Second and even more scary in some ways is that there are new layoffs happening. There are new layoffs, particularly farther up the chain in the professional and white collar sectors, as these businesses have to totally reimagine their budgets going forward, and lots and lots of people get axed because of that. Macy's laid off 3% of their workforce this week, just by one example. And we haven't even begun to deal with the fact that certain benefits are coming to an end right now, right? PPP benefits are coming to an end. The $600 per week extension is coming to an end.

These could create an entirely new set of trouble. Finally, ground hogging number five. Wall Street getting nervous into expanded Fed action. The Wall Street Journal today published a piece called COVID-19 is a puzzle that Wall Street can't solve. It's a really extensive piece, and I'm just going to read you the headlines and part of the last section by way of helping understand this. So their headline for January was markets shrug off a mysterious viral outbreak.

In February, it was the beginning of the end of the bull market. In March, it was the whatever it takes. moment as the Fed started to come in and get involved. April and May were the stock market and the economy disconnect. And then here's June, new problems. And I'm going to read this section just briefly because I think it dramatizes this rat race that we're on, this total groundhog day that we're living in. Optimistic investors found support for their case in a series of new statistics released this month that seemed to start showing what they had been saying. The worst of the economic downturn appeared to be behind us. On June 6th, data showed the labor market added 2.5 million jobs in May,

the most on record, according to data going back to 1948. Data released on June 16th showed retail sales surged a record 18 percent and that a gauge of industrial production ticked higher. But now investors are dealing with another problem. Reports are showing a surge in coronavirus cases in many places, including California, Arizona, and Texas, which all broke daily records in June for the number of new infections. Stocks have given away some of the gains that they racked up for the month. Heading into the second half of the year, investors and analysts are doubtful, stocks can maintain the fierce momentum of April and May. Market functioning appears to be safe for now thanks to the Fed, but few believe TrueCom will return to the markets anytime soon. The problem

that started the sell-off, the pandemic, isn't gone yet, and no one is sure when it will be either. So here we are, months later, having not really addressed our capacity to treat this disease and being surprised when it starts to interfere with our economics again. And instead of figuring out how to actually have the economy and COVID-19 coexist, we'll probably just do what we did before, which is reactive, one-size-fits-all shutdowns, followed by incredible injections of government money into the economy to try to keep it afloat. We're living in Groundhog Day and it sucks. All right, guys, thanks for listening. Until next time, be safe, take care of each other. Peace.