Fire all of the guns at once*

The Federal Reserve took the quite extraordinary step of announcing a huge program of monetary stimulus, including near-zero interest rates and as bond buyback, on Sunday afternoon.  Donald Trump was very happy, and joined the daily White House coronavirus presser to say so: "people in the market should be very thrilled".

People in the market, alas, demurred rather strongly. Global stock futures began to skid right after the Fed move and Trump's endorsement of it. When Wall Street reopened for trading on Monday it was pure carnage, with the so-called circuit breaker, designed to curb excessive moves in the indices, hit within moments of the open.

This morning on Twitter a sagacious commentator (OK, it was me) opined that: Right now, recession is regrettable but unavoidable. Mass deaths are tragic but avoidable. Policy decisions need to be made accordingly. Donald Trump, always transactional in his approach, simply doesn't get that. He still appears to be in denial about the real state of the epidemic, and still appears to believe that what's needed most is to stop the selloff in equity markets and prevent the economy from slipping into recession.

That approach is going to fail on both counts, and "people in the market" know it. In fact, the experience of China should make it blindingly obvious that focusing on the actual epidemic at the expense of all else is exactly the correct approach. Shutting down Wuhan and the rest of Hubei Province created a big short-term hit to the Chinese economy, but less than three months later things there are rapidly getting back to normal.  The US approach -- basically, use up all of your stimulus tools at once while virtually ignoring the advice of the WHO ("test, test, test") -- looks all but certain to result in a much more widespread and long lasting epidemic.  That's very bad for the economy, and that's what the markets are pricing in right now.

In the absence of anything like real leadership from Washington, state and local authorities are stepping into the breach. New York City, to take one important example, is rapidly heading into lockdown, with schools, theatres and restaurants all closed.  As that sort of thing is replicated right across the country, the path of the epidemic will gradually change, though even at best that will take  a few more weeks. And when that happens, of course, we all know who will step up to try and take all the credit. 

* Steppenwolf, Born to be Wild. Perhaps ominously, the next line is "and explode into space"!

UPDATE, March 17: Watching the latest coronavirus press briefing from the White House, and it's clear that Donald Trump finally gets it. Basically saying, let's not worry about a recession right now. Combat the virus, keep people alive, work to make the outbreak as short as possible, and then the economy will come back strong. Yes, sir!