That v-shaped recovery isn’t happening

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No Health, No Recovery

For almost as long as Covid-19 has been terrorizing the planet, people have expected a quick, V-shaped end to it. This newsletter first discussed the concept in February, back when Elves still held dominion over Middle Earth. We suspected it wouldn't be so simple. Now we know for sure.

Even in the best of circumstances, with everybody in America doing all the right things to stop the spread of coronavirus, economic recovery might have been halting. These are not, it may shock you to learn, the best of circumstances. The U.S. didn't lock down enough, then it reopened too quickly, and now the virus is surging again. Maybe it's not as bad as it was in March in New York, writes Justin Fox. We're testing more and missing fewer cases than we were then. People are somewhat smarter about the virus.

But then "March in New York" is a bar for success so low it might as well be buried in concrete. The simple fact is that the virus has roared back, and many people are scared and avoiding whatever businesses have reopened. Mohamed El-Erian, who has been V-skeptical throughout this crisis, reminds us the idea of a trade-off between growth and safety has always been false. Until we get the virus under control, the economy will continue to need lots of help.

Although peopled by V-shape enthusiasts, Wall Street seems to get this. Stocks briefly jumped today on some promising vaccine news. You can't spell "V-shaped economic recovery" without "vaccine." But the FDA yesterday made clear it won't foist any vaccine on the public until it's sure it's safe and effective, writes Max Nisen. This means anybody hoping for a V to materialize in 2020 will be disappointed.

European Approaches V-Ness

If you need further proof shutting down the virus is the best way to boost the economy, look at this chart from Marcus Ashworth:

Germany and France shut their economies down harder but also fought the coronavirus better, and now they're being rewarded with recovery shapes that are almost V-like. Little wonder the euro is surging against the dollar, Marcus writes. Investors are more confident in the eurozone's recovery, and a stronger currency will help the domestic consumption it needs.

Europe also has a de facto leader, Angela Merkel, who has found renewed purpose in the crisis. Until recently Merkel's track record was mixed at best, writes Andreas Kluth. But coronavirus apparently woke her up to the need for a stronger financial and political union. She's still got a little time left in office, and it could be momentous for European history.

Not all is well in Europe, though. The places where Covid-19 outbreaks are still happening are predominantly enclaves of poor and immigrant workers, notes Ferdinando Giugliano. This exposes nagging inequalities that could yet fray Europe's social fabric.

Hong Kong Will Never Be the Same

We're all familiar with parables about being too greedy with precious assets such as golden-egg-laying geese, and yet we never seem to learn from them. China, for example, has stripped away Hong Kong's autonomy because it wants the city all to itself. In the process, it's destroying what made Hong Kong such an economic powerhouse. Under stricter Beijing control, it will no longer be a global financial capital, write David Fickling and Nisha Gopalan. It will be more like a bank vault for Chinese wealth. Foreign money will flee, diminishing the city — and its value to China. And we'll have a new cautionary tale of reckless avarice.

Trump-Putin 2020

Vladimir Putin just easily won the right to keep running Russia until 2036. His next electoral coup will be tougher: getting President Donald Trump re-elected. From Trump's first days in office to today, when he called reports of Russia ordering hits on U.S. troops a "HOAX!", Trump has been one of Putin's most valuable assets, writes Francis Wilkinson. We're about to find out just how far Putin is willing to go to protect him.

Trump's rival for the presidency, Joe Biden, should make clear

he won't let Putin get away with putting bounties on soldiers, writes Eli Lake. Promising to label Russia's intelligence agency a terrorist organization would be a good start. Putin already wants Biden to lose; might as well make it interesting.

Further Political Reading: Yesterday's elections brought big wins for moderate Democrats, Medicaid expansion and, uh, conspiracy theorists. — Jonathan Bernstein

Telltale Charts

The pandemic has given packaged-food companies such as General Mills a new foothold in consumer pantries, writes Sarah Halzack, and they shouldn't blow it.

Further Reading

Mexican President Andres Manuel Lopez Obrador isn't the only world leader bungling his pandemic response. Where he really stands out is in bungling the economic response, too. — Bloomberg's editorial board

The pandemic promises upheaval throughout Latin America, for better or worse. — Mac Margolis

The Fed has too many bankers, who may feel more empathy for banks than for real people. — Narayana Kocherlakota

A more-diverse police force is a more effective one. — Jennifer Doleac

Capitalizing "Black" doesn't solve anything, but at least shows people are waking up to racism. — Stephen Carter


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