Takeaway: Mortality data in major manufacturing countries is not to be believed; making it anyone's guess when supply chain function is restored

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The Grim Reaper, Inflation & Bad Policy  - AdobeStock 239802922

Those are people who died, died. They were all my friends and they died. ~ Jim Carroll Band, 1980


As the U.S. and the world faces a shortage of workers, the primary policy objective of the White House seems to be “make it worse.”

Leaving aside the merits of a refundable, advanceable child credit, or family and medical leave and the other priorities spelled out in the now delayed reconciliation package, most will have the effect of reducing participation in the workforce.

Under normal circumstances, that effect might be laudable. The U.S., like most developed countries, is experiencing a fertility crisis and policies that support family formation are one path to reversing that. Unfortunately, only in the fantasyland of Capitol Hill are these normal circumstances.

In Washington, you can ignore labor disruption caused by death, particularly of racial and ethnic minorities, that are disproportionately represented in critical industries such as agriculture, food processing, construction and transportation. In Washington you can also ignore the dependency this country and others around the world have on migratory labor; people who leave their homes in South and Central America or Eastern Europe for seasonal work in construction, transportation and agriculture. In Washington, workers who are compelled to return home to family after the death of a spouse or other breadwinner don’t exist.

Yet, all these effects of pandemic, well documented throughout human history, are now cast aside to deliver on the promise of historians like Jon Meacham that President Biden would complete the unfinished business of Lyndon Johnson and Franklin Roosevelt.

We are all for nostalgia but as LBJ and Richard Nixon discovered, tossing money at a problem that exists largely in the narrative of the time and ignores the circumstances on the ground delivers mostly heartache and a lot of inflation.

The proposal to spend anywhere from $150 to $400B for Home and Community-based Services in Medicaid certainly delivers a new constituency a la LBJ. It also will further aggravate the availability of workers and increase wage demands across an industry critical for replacing lost capacity in nursing homes. Similarly, extending the Medicare scope of benefits to include hearing, dental and vision services will inflate those items and services

Inflation is upon us and likely for a while until the labor parts of the puzzle fall into their new places; innovations address shortages; and the economy adapts. If reconciliation passes as written, the road back to stasis could be very long.

The Grim Reaper, Inflation & Bad Policy  - Vietnam


Self-delusion is a powerful force when served up as an alternative to acquainting oneself with new and often underappreciated realities.

In the 1920s, the governor of the New York Federal Reserve Bank, Benjamin Strong, pursued a low interest rate policy designed to satisfy Montagu Norman, Governor of the Bank of England and his goal of returning England to the gold standard. The narrative at the time was that it would be catastrophic for trade if the U.S. did not pursue an easy money policy.

Of course, you know the rest of the story.

The group think that has pervaded everything from media reports to dinner conversations from the start of the pandemic provides ample shelter for today’s central bankers to keep telling themselves stories. The often cited 700,000 U.S. deaths is offered as evidence of incompetence and decline. The low death rates in places along supply chains demonstrates the rewards for extended limitations on commercial and social activity. By fall of next year, 70% of the world will be vaccinated. And so on.

As we have pointed out above, prolonged labor disruption is the most consistent effect of pandemics throughout time; usually the result of death and/or migration. The evidence is all around us. Nike cannot make shoes; container ships cannot be loaded/unloaded; and cotton cannot be milled and may not have even been planted.

And yet, Vietnam reports but 19,000 COVID deaths or 19.5 people per 100,000k. That compares favorably or, rather fantastically, to the U.S. death toll of 200 per 100,000k. So unbelievable is that number that even if you accept that placing draconian limits on human activity works in limiting the spread of disease (and there is now ample evidence to suggest it does not) there are few realistic scenarios in which Vietnam’s health care system can produce a better result than America’s

What is most likely, probably the only, explanation is that a lot more people died in Vietnam than even the Vietnamese government knows. Worse, that invisible death toll will continue to rise. Vietnam’s vaccine rollout has been weak with only an estimated 8% of the population having completed the first course. A donation of 500k doses from Sinopharm, whose efficacy is demonstrably weaker, and produced by a centuries-old national enemy, won’t help.

Repeat that tale with variations on the theme across Asia, Sub-Sahara Africa and parts of south and central America and you have a recipe for structural inflation, geopolitical unrest, and any number of supply shortage.

The Grim Reaper, Inflation & Bad Policy  - US Immunization


At about half a dozen U.S. military bases across the country, over 50k Afghan refugees are housed as they work through the immigration requirements. Interestingly the process has been slowed by outbreaks of measles, forcing the U.S. government to launch an immunization campaign for measles, mumps and rubella as well as polio.

These are all disease for which inexpensive vaccines have been available for decades. World health organizations like UNICEF have run programs promoting the importance of childhood immunizations. After decades of work, 83% of children worldwide have been immunized with the basic series. It is an extraordinary achievement but, as the refugee outbreaks demonstrate, does not deliver disease eradication.

The WHO has set a goal of immunizing 70% of the world against COVID by September 2022 and the U.S. has echoed that. It seems hard to imagine. After 10 intense months, the U.S. has reached 65% of total and 75% of eligible population with growth slowing even in the face of federal and state mandates.

The urgency for the U.S. and particularly WHO is that the longer manufacturing nations, like Vietnam, suffer waves of disease, the more critical it becomes for U.S. based manufacturers to move their supply chains to more stable regions, creating a whole new set of problems.

For that reason, WHO is running a “Vaccine Inequity” campaign to encourage donations as well as the real end goal of transferring technology to less developed nations. For the U.S. it is all about maintaining the narrative that inflation is transitory, to be fixed in short order by massive vaccination programs, here and abroad.

Great story if true. Probably not true.