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It Appears COVID-19 Has Killed the XFL

The XFL held a conference call today and laid off its entire staff. According to Neil Stratton of Inside The League, the XFL will not go forward in 2021 either, citing too much monetary loss due to the COVID-19 pandemic cancelling half of its inaugural season. Bad news, especially since it seemed like the XFL had maybe finally figured out how to make a spring minor league work. Hopefully the NFL will look at adopting its kickoff rules.

UPDATE: On Monday, the XFL filed for bankruptcy.

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Comments

91 comments, Last at 19 Apr 2020, 11:56am

1 Counterpoint

"Bad news"? Noted jackass Vince McMahon getting dunked on is a silver lining to these dreary times.

3 Vince McMahon was trying to…

In reply to by Venger

Vince McMahon was trying to create a business, one that has ripple effects beyond him making more money. If the XFL was successful, it meant a league with more professional athletes, coaches, trainers, stadium staffs, etc etc. It was about creating and growing a business much larger than McMahon and his family. That is now over for all of these people. 

9 Mixed feelings

I liked the new XFL more than I thought I would, and I’m sad to see it shut down, but on the other hand, I really really hate Vince McMahon. He’s a real scumbag. Eventually I hope someone reasonable is able to get one of these spring leagues going, though.

10 The failure of the XFL is…

The failure of the XFL is not the failure of spring football. Vince McMahon being out of the game will help ensure that the next league won't be dragged down by his special brand of incompetent maliciousness.

 

 

20 Opinion of Vince McMahon…

Opinion of Vince McMahon aside, the XFL seemed to be doing pretty well and I actually liked the games they put on. 

It wasn't bland and vanilla, but it had something watchable about it - unlike the UFL or AFF.

It looked like they had figured out a way to make these meaningless games interesting to watch with some new timing rules and changed kickoff rules and - what most people forget - punting rules. I even really liked the XP rules of going for 1, 2 or 3.

I really thought this league would have a chance - I didn't think that when the AFF kicked off.

62 I really think it is the…

I really think it is the death of spring football.

The only way spring football will survive is if it has a benefactor, someone with way more money than they need who's willing to just throw it at something until the league becomes useful enough to the NFL that they start supporting it as well. Or someone with wacko money who just keeps it going as a vanity project. McMahon was a good target. I know a lot of people didn't want to support the XFL because it supported McMahon, but really, the XFL was never going to make McMahon money. Instead, I supported the XFL (with eyeballs) because a lot of the *people* involved were good people who interacted a ton with sports fans.

The economics of spring football don't work. College football works because the teams *do* have a benefactor that keep it going as a vanity project - the university itself. Some of those benefactors have a large enough following of groupies (they call them 'alumni') that they can actually make money on advertising, too. Others lose money, but they don't care, since, again, vanity project.

But if you try to imagine the economics of "minor league football"... it can't work (on a national scale, like the XFL/AAF tried to do). Football plays too few games to survive off of "family outing" attendance, and the rosters involved are too big and player salaries are too high for the risks they're bearing.

The XFL was miles better in terms of quality of football than the AAF, but their attendance/ratings were similar (and still declining when they went off the air), they paid similar salaries, which means in the end they were likely losing similar amounts of money. Which means the only way they were going to survive was if some idiot with more money than sense kept throwing money at it.

15 I'm not sure he was on his…

I'm not sure he was on his way to success, but this effort was much better than the old XFL.

Frankly, I think this story along with the Gurley / Matthews tweets implies there are some really wealthy people in at least some trouble related to the pandemic. At the end of the day, my guess is McMahon just doesn't want to finance this vanity project again with the lay of the economic land. And while I don't know the details of Kroenke's situation, it seems odd that two former Rams players haven't been paid and are talking about it openly.

21 WWE is also making A LOT…

WWE is also making A LOT less money ( I presume, but I'll eat my shoe if I'm wrong) with their shows being held without a live audience.

I don't know how much money McMahon really has - as in liquidity, because that stock could lose it's value rather quickly. 

My guess is that a lot of 'entertainment' will not recover from this virus. You know what happened at the end of Truman Show. People changed the channel and found something else to be interested in.

27 A couple of short answers:…

A couple of short answers:

The financial hit of no ticket sales is minor for WWE. The vast, vast majority of their revenue comes from TV deals. 

But McMahon did take a major hit when the stocks dropped. Two months ago he was willing to absorb a few hundred million dollars in losses to get his football league off the ground. When the value of his stock plummeted, those losses suddenly looked a lot bigger.

49 Those TV deals will be a lot…

Those TV deals will be a lot smaller next time, because I think the WWE will lose A LOT of fans. 

The shows are unwatchable and akward and once people stop watching the WWE, it will be very hard to get them back. Unlike football, where it's the teams and game that draws the audience, not the drama and the stories of the players.

43 McMahon also essentially…

McMahon also essentially became the first to break the no-sports streak with Wrestlemania 36, if you can count that, so he at least has that in his credit.

Regarding how other sports will go, let's see how the overseas baseball and basketball leagues go - Taiwan just played some baseball and basketball in empty stadiums and South Korea is about to.

Next. let's see how the MLB Arizona/Florida leagues go, and if UFC can reschedule 249 on an island as is rumored.

One thing I don't want to see, besides the disaster of no football in the fall, would be to see in the NBA, the Bucks' title hopes go up in smoke, with the specter of Giannis's unrestricted free agency being one year closer; I also still like LeBron, and wouldn't mind seeing him have some success, with his window rapidly closing - and Unibrow also technically approaching unrestricted free agency.

2 I think the NFL is being too…

I think the NFL is being too naive to assume everything will be just fine when the season starts. At a minimum, I don't see the same mass fan attendance happening so games might be played in empty stadiums.

 

But beyond that, how are they going to ensure that players don't infect one another? If you think what happened in the NBA can't happen in the NFL when the season begins as the weather starts to become cold again....you are being naive.

 

 

4 The infected players will…

The infected players will get quarantined and the rest of the team will play without them or something like that. Ensuring everyone doesn't get infected isn't viable for NFL, any other business, or society as a whole. The attendance or lack thereof is more likely to be a serious impediment.

6 Without ubiquitous testing,…

Without ubiquitous testing, it will be impossible to effectively quarantine. Lots of people are asymptomatic.

 

Furthermore, right now our country has decided to embrace an economic depression in the name of saving lives. It has torpedoed lots and lots of businesses to do so. If it wants to, it can do the same with the NFL. As a business, the NFL cannot operate via social distancing the way this website can.  By definition, it operates with large groups of people and where travel is a heavy part of the job description. In other words, a containment nightmare.

22 If the spread of the Corona…

If the spread of the Corona Virus contintues, there is no way the NFL can stay on schedule.

If you want NFL games, you should stay a few feet away from other people and don't touch anything they've touched,  and others should do the same.

It's really that simple.

5 Does anyone know what the NFL did...

Does anyone know what the NFL did for the 2009 H1N1 flu pandemic?  For comparison purposes, according to the CDC, between mid-April 2009 and mid-April 2010, there were 60.8 million cases, 274,000 hospitalizations, and about 12,500 deaths from it.  (https://www.cdc.gov/flu/pandemic-resources/2009-h1n1-pandemic.html)  Estimates for coronavirus are all over the place, but the CDC is currently estimating deaths somewhere in the 60,000s.

12 H1N1 was far less contagious…

H1N1 was far less contagious, and the epidemic was spread out over several months, rather than weeks, like local COVID-19 outbreaks have been.  It’s like the difference between drinking a bottle of Vodka over two weeks vs two hours.

A better comp might be the 1918 Spanish Flu, but even that wasn’t as contagious and time condensed as COVID-19.  And of course the world (and the sports world)was very different place back then.

84 The CDCs numbers are…

The CDCs numbers are ludicrous. 

 

We're at 30k documented deaths, the per day is still going up at a pretty steady rate, and we just broke 2500 a day. Well break 60k with time left in April.  

 

And that's not even accounting for New York saying they've got close to 10k bodies that don't count because they don't have enough tests to validate them.  

 

This thing is going to be way closer to 1918 that H1N1

85 Hot Take

"This thing is going to be way closer to 1918 that H1N1" - This is a a pretty intense hot take.

Adjusted to modern populations the 1918 pandemic killed 100 & 160 million globally, 2-3.4 million in the US. The modelling and serology testing that has been done it looks questionable whether it will be 1 or 2 orders of magnatude smaller than 1918. The right paralell seems to be the 1957 Hong Kong Flu which killed 175k-350k, adjusted by population - this looks somewhat less serious than that (but probably would have been worse were it not for vastly greater availability of oxygen theropy).

89 H1N1 killed 12k people in…

In reply to by sbond101

H1N1 killed 12k people in the US, in 60 million infections. 

Covid 19 has killed 40k people in 700k infections (and there are another 150k in critical care. )

We're talking about a 2-3% mortality rate with the best medical care, and will go significantly higher if we run out of beds - vs a mortality rate in the thousandths of a percent. 

 

 

The Spanish Flu had a 2.5% mortality rate. With much poorer medical care. 

 

This is absofuckinglutely more like the Spanish flue than swine flu. And the CDCs 60k number is absofuckinglutely propoganda. We're going to blow right past that next week. 

90 Not Correct

"We're talking about a 2-3% mortality rate with the best medical care, and will go significantly higher if we run out of beds - vs a mortality rate in the thousandths of a percent." - There is extremely strong evidence to suggest this is not close to correct. There have no been serology tests in Germany, the Netherlands, New York (pregnant women only), and Santa Clara (CA) that show the case load is understated between 10 & 20 times (a wide envelope of uncertainty because the largest sample so far is 2k). All this is to say it looks like the actual mortality is likely 0.3%-0.01%. This is consistent with the actual death tolls observed in Italy, Spain, etc... These numbers also suggest that what were seeing in New York is not primarily the effect of lockdowns working, but of the infection reaching it's natural zenith as it begins to be blocked from spread by previously exposed population.

https://spectator.us/covid-antibody-test-german-town-shows-15-percent-infection-rate/

https://www.nbcnewyork.com/news/local/nyc-hospital-finds-high-covid-19-infection-rate-but-few-symptoms-in-pregnant-women/2372863/

 

91 The number of infections is…

The number of infections is completely unknown at this time so it is impossible to estimate mortality from the reported infections. The Diamond Princess cruise ship is one case where infections and deaths are well determined and it had about a 1% fatality rate. 538 had a good article about pandemic models https://fivethirtyeight.com/features/a-comic-strip-tour-of-the-wild-world-of-pandemic-modeling/

53 We have several months until…

We have several months until training camp. It is at least theoretically possible that testing could become ubiquitous (at least for people with money, like football teams) by then and players and coaches could be tested daily with a 15 minute rapid test before entering facilities. If we can't get to that point it will be hard for it to go on, and if it does it will no doubt be marred by whole sections of teams going down at once for a month.

58 In the NBA, in early March…

In the NBA, in early March before anyone really knew what was going on, Rudy Gobert and Donovan Mitchell were the only ones among ~60 total Utah team members and training/coaching staff who tested positive...and this was with Gobert haphazardly palming microphones and spots all over the locker room.  So I wouldn't be sure about large parts of teams going down due to in-house spread.

It was a different story with Gobert spreading outside the organization - he infected a young fan, and the Jazz/Pistons game on 3/7 ended up being an enormous disease vector with DET's Christian Wood and some crew getting infected.

7 A recent (albeit small) poll…

A recent (albeit small) poll found that 61% of fans said that they would not attend a football game without a vaccine. That's likely not going to be available until the 2021 season.

This fall, us TV fans are going to be seeing some (at least) half empty stadiums.

edit:  And that's the NFL...what about the NCAA!

37 It was reported by ESPN. …

It was reported by ESPN.  https://www.espn.com/espn/story/_/id/29018209/poll-fans-attend-games-vaccine

I miss-stated that it was for football.  It was for all sports.  If it's OK to copy/paste, here's the relevant part.

Some 72% of Americans polled said they would not attend if sporting events resumed without a vaccine for the coronavirus. The poll, which had a fairly small sample size of 762 respondents, was released Thursday by Seton Hall University's Stillman School of Business.

When polling respondents who identified as sports fans, 61% said they would not go to a game without a vaccine. The margin of error is plus-or-minus 3.6%.

8 Our ignorance of the…

Our ignorance of the function of this virus remains so profound that making predictions is pretty ridiculous. What is kind of interesting, in a very morbid way, for readers of this ste, is what metrics are being used to understand it. Unfortunately, my impression is that the data is very unreliable. 

13 That’s exactly right.  This…

That’s exactly right.  This is going to be nearly impossible to project with any accuracy.  I’m an ICU doc, and this virus is nothing like I’ve ever seen.  It does completely different things from one patient to another.  It also seems to keep coming up with new ways to fuck people up.  The good news is that the overall mortality rate is low, but the bad news is sheer volume of cases almost makes that almost a moot point.  At the risk of sounding flippant, it has a low DVOA, but very high DYAR.

17 Ur dvoa dyar analogy is a…

Ur dvoa dyar analogy is a good one. This isn't really a football question but one that the inner economist in me is struggling with.

 

We are trading an economic depression to save lives. This is something we refuse to do with the flu, HIV, and other illnesses. Obviously, this is a different animal we are dealing with, but the tradeoffs are real. Without a vaccine and rampant testing, I wonder how long the economy and it's citizens have the stomach for this. 

 

I have a pretty pessimistic outlook myself.

24 Are we trading an economic…

Are we trading an economic depression to save lives?  Or are we trading one economic depression (caused by social distancing) for another type of economic depression (caused by a significant number of deaths, which reduces both the workforce and the overall consumer base)?

It's truly a question, not a conclusion, but I think it needs to be part of the equation when evaluating "how long the economy and it's citizen have the stomach for this"?

If we really knew the mortality rate and transmission rate of this virus, we'd have a better handle on the economic impact of "let's do nothing and let this thing play out".  If the true mortality rate is low, then the economic impact of letting it play itself out through business-as-normal would be small.  If it's large - and the events in northern Italy in early March validly led to concerns that the mortality rate could be very large - then letting it play out might have led to long-term economic impacts that are greater than the impacts from social distancing.

We just don't know right now - might never really know - and that makes public policy choices even more difficult.

 

25 Economic Realities

"Are we trading an economic depression to save lives?  Or are we trading one economic depression (caused by social distancing) for another type of economic depression" - I think we can pretty safely conclude the former. In the worst models presented a totally uncontrolled pandemic where the healthcare system totally collapsed the virus would kill ~2,000,000 Americans hevily skewed to older Americans that are a significant net economic drain on the system. From a pure dollars & cents point of view - this would have a pretty minor impact on the economy. In reality, the data from places like Sweeden where more moderate measures are being taken shows that the 2,000,000 estimate is wildly high, and that people will volintarily take many mitigation efforts regardless of what the government says that have economic costs. In view of this the real choice seems to run the spectrum from total economic collapse and utter deprevation of civil liberities (like China) to a recession and closed boarders - it's unclear at this point from the data where on this spectrum the minimum loss of life actually lies; but it's worth laying out the choices as they can currently be understood.

The key piece of data is the serology testing currently beginning so we can get a good handle on the actual epidemiology. The first of these tests done this week in Germany (only 1,000 respondents) showed 15% of respondents had antibodies suggesting this is much closer to over than is generally believed. One way or the other we should know in the next 2 weeks. The long term political & economic consequences and attendant loss of life are much more difficult to predict. Either way, I think there's actually a fair chance we're playing NFL football again in the fall, albeit potentially with limited attendance. NFL players risk a lot worse than a COVID-19 (when factoring how young/healthy the players are) infection every time they get on the field - I can't imagine the NFLPA making it difficult to get it done.

30 One issue I have seen in…

One issue I have seen in this discussion is this: Epidemiologically speaking, the risks and potential horrors are more easily understood by most people. The economics one's are more subtle. 

Let's take the extreme view that we want to permanently expunge this virus, economy be damned. Without a vaccine or effective enough mass testing, a lockdown is the only sledgehammer catchall policy. And the estimates I have read suggest that a lockdown needs to take at least 6 months to a year for it work. 

Consider:

1) Due to our profoundly screwed up healthcare system, almost everyone gets their healthcare coverage through their employer. The virus has effectively thrown a bunch of people into the land of the uninsured. The workers who are furloughed happily still receive health insurance, but businesses pay that and with no money coming in, that reality will fade as well. Have you seen the insurance costs on the private exchanges? It's horrendous. 

 

2) Stimulus payments cover the rent, but not indefinitely. Nor mortgages indefinitely. Its fun to say, "screw the banks and the greedy landlords" but banks are funded by liquidity that comes from pensions and IRA accounts. That liquidity also backs loans to small and medium sized businesses that employ lots of people. Screw banks on one major flow of income and they pass that pain to someone else along the way. One person's deferred mortgage might mean another's reduced pension or someone else's job being cut. Landlord's who cannot collect rent also default on the mortgage. 

 

3) Mass lending and stimulus also ignores another sad fact. We were not running a bunch of budget surpluses prior to this virus. We were in massive debt already with huge unfunded liabilities down the pike that we have no idea how we were going to pay. The stimulus and business bailouts have only exacerbated those realities. Italy would have loved to run a stimulus program. They could not do it because no one would lend to them. That hasn't happened here because faith the US is still there. But those debts have to be paid and that gets passed on our future generations. By the way, paid debts means budget cuts and raised taxes. That hurts innovation, including in areas like cancer research, diabetes, infant mortality, roads and highways, education, etc etc. We are trading lives saved today for someone else's life tomorrow. 

 

4) Some businesses may never come back. Cruise liners, bars, restaurants - there will be a big shift for a large portion of the populace away from big gatherings. That has ripple effects too.

 

5) All these unemployed individuals and closed business were previously buying and investing in the economy. Shut them off and thats a big loss of income to other businesses. Those businesses have less to invest and consume and pretty soon every business gets affected. Layoffs happen in those industries as well. And remember, this is a global recession/depression - overseas funding and consumption dries up too. You may work in a business that is unaffected right now, but that almost certainly won't be the case in 6 months. 

 

Conclusion - the economic costs are severe and real and we need to be up front about that. As politically unpalatable as it is, we don't trade infinite resources to save one life. So one way or the other, budget constraints show up. Its the sad reality.

 

Its why I don't think we as a country will go through 1 year of a lockdown. We probably won't go 6 months with a lockdown. In that grim reality, we may be having to deal with Covid19 for a while. Maybe the best solution is to just lift the lockdown and accept the results

 

32 The desire for save…

The desire for safe investments mean we really don't need to 'pay the debt back' in the way you describe.

The UK had massive debt by US standards (between 100% and 200% of GDP) for over a century, from 1752 to 1862, without resulting in impoverishment. In fact, the income tax instituted in the early 19th century boosted economic activity and resulted in increased economic growth.

34 I am unclear as to what you…

I am unclear as to what you mean. I assume, since the desire for safe investments will drive down the interest rate on bonds, we can pay our debt by borrowing. Leave aside the crowding out effects, the real problem is the massive unfunded liabilities. That cannot be paid indefinitely through this kind of roll over strategy. And the stimulus spending is not a pro growth kind of policy, its on net a wash that has to be paid back as well. 

 

There is a huge body of literature on government debt. There's no real theory on what level of debt to gdp is. We have seen rich countries fall apart in the face of intractable government debt. This has already played out in Europe.

 

I am also unclear about the income tax argument. Income taxes are an inefficient way to tax. The only way they are pro growth is if they replace even more inefficient taxes(say from tariffs). 

36 Government Debt

This argument is really about faith in the ability to repay loans. There are a number of examples where governments have taken on much larger debt loads than the US currently has (for example - Japan, right now has close to 200% debt to GDP, more than twice the US figure and manages without catastrophe). The issue is that if there is a market signal that the US won't reopen quickly you will have the following cascade very quickly. Demand for debt falls, the federal reserve buys US bonds, inflations ensues, and the purchasing power makes the new money shoveled to US consumers irrelevant. As long as people believe the US wants to reopen ASAP it will be fine - the minute they signal a long-term lockdown the attendant collapse in confidence will be catastrophic.

38 This is spot on. I…

In reply to by sbond101

This is spot on.

I constantly have to remind people, government debt is mostly like personal debt, except instead of pay it back or default, you get option 3 which is inflate. Except option 3 is probably the worst option of all.

As long as faith exists, the US can survive. But things can move against you very quickly. Like the LA Rams. Toast of the league at one time, within a year, severe questions abound. 

76 Well... kindof. I mean, the…

Well... kindof. I mean, the most common thing people say about government borrowing is "they can't keep borrowing forever" which, well, isn't true. You can't keep *personally* borrowing forever because your total earnings are finite. Governments *can* keep borrowing forever because their total earnings aren't (at least, they're on a much longer timescale).

And, in fact, *some* inflation is better than deflation, which naturally occurs during recessions (since people buy less - see gas prices now) - deflation causes people to hang on to money rather than invest it (why invest it when it'll be worth less later if you do that), which can blow up the whole system. So, from a 'basic macroeconomics' standpoint, at least on long timescales, governments *should* tend to run a slight overall deficit and therefore a constantly growing debt (in real money, not inflation-adjusted money).

Note that none of the *concepts* that I'm talking about are particularly controversial, it's just the *scale* that's the big question- that is, what is "slight," what level of inflation is okay, etc.

77 Oh boy. Ok, as someone who…

Oh boy. Ok, as someone who has spent a ton of time studying this and keeping up with the literature as best as I can(I don't work as an economist anymore), yes the views you have outlined are conventionally held. 

Yes, on basic accounting terms, government earnings are infinite. And yet, I don't think lenders buy 100 year treasuries, so I don't really think that argument is a first order or even a second order consideration.

 

The views about inflation and deflation are indeed commonly held, but a deep examination into the theory leaves us all wanting. The idea that governments want a slight inflation is because it gives the Fed "headroom" , such that in bad times, it can lower interest rates(raise inflation expectations) and this can offset output loss in a recession. That's the logic, but the mechanisms when you explore them don't hold. Bank lending is pretty insensitive to interest rate changes. Household consumption even less so. In fact, the bank raises or lowers interest rates by exchanging cash for assets. But remember, banks can also just sit on the cash and it never gets into the real economy. That's essentially what happened in the great recession. 

Yes, unexpected deflation is especially bad because of debt contracts. Its even worse when debt contracts are written with expected inflation in mind. But remember, deflation is also not necessarily a bad thing. When people see the economy contract, they save. Yes they might over save and deepen the recession, but no amount of inflation fiddling will stop this basic fact of human nature. A government's job needs to be to stop bank failure panics, not stop the dreaded coupon clippers. 

By the way, there has been a long history where the US did not run an inflation tolerant regime. It got along just fine in all those years so I am not a believer in this theory that we need to be running slight inflations. 

 

In any case, I maintain, government debt levels highly depend on future expected earnings of the government. As long as they are good, the US can maintain its debt levels and expenditures. But there is no one out there who can say for certain what number we could reach for it to suddenly turn. No one foresaw what happened to Italy and Greece. 

79 Government Debt

I largely agree with theslothook here; The proposition that mild inflation is the appropriate state for economies is widely held but largely without evidence. Indeed the effects and measurement of inflation have been highly controversial within the economics community for a long time. 

All that said we have lots of examples of what happens when confidence in government debt repayment disappears. One particularly close to me is the Canadian debt crisis in the late 80's/early 90's where the government of Canada was no longer able to sell debt to investors in it's own currency. As a result, CAD devalued by ~40%, price inflation occurred at the same time as asset deflation, and most of the most talented Canadians went to seek employment in other countries. The crisis resolved by a combination of austerity, NAFTA, and the eventual recovery of the resource markets. Anyone who thinks the US is immune from this kind of crisis of confidence and the inability to raise new funds to finance government enterprise is kidding themselves. I reiterate the US can borrow a LOT more money - but if the market sees signals the economy is staying shut for the medium term that ability will vanish into thin air just like running lanes for a team with Nathan Peterman at QB.

 

 

81 It's really just an issue of…

It's really just an issue of degree, which is what I was trying to stress. Deflation is a more difficult problem to deal with than inflation and since you've always got future earnings, running a slight deficit on the long-term average is not a big deal. But what the 'ideal' target is, who knows. It could be 1%, it could be 0.1%. But basically if deficits are managed as some ratio of GDP, it is something that can be managed long-term.

Now if you ask me "yeah, but is that what the US is actually doing?" my answer is absolutely no. But unfortunately, when you get people who go around saying "government just keeps spending, they can't keep borrowing forever!" - that just confuses the issue, in my opinion, because, well, they *can*.

82 Now if you ask me "yeah, but…

Now if you ask me "yeah, but is that what the US is actually doing?" my answer is absolutely no. But unfortunately, when you get people who go around saying "government just keeps spending, they can't keep borrowing forever!" - that just confuses the issue, in my opinion, because, well, they *can*"

 

The only way this statement is true is if the government "borrows" money from the Fed, so perhaps in a literal sense this is correct. However, once you step into that world, people really struggle with the mechanics of inflation and central bank arcana. 

"Deflation is a more difficult problem to deal with than inflation and since you've always got future earnings, running a slight deficit on the long-term average is not a big deal. "

 

I might be engaging in economic pedantry, but inflation is not necessarily easier to deal with than deflation. Combatting inflation involves expectations and a good central bank reputation. A central bank can promise not to print money, but as long as inflation expectations are there, the relative price level will continue to rise. 

 

Not to be belabor this point beyond necessary, my general statement was that governments face budget constraints. Fighting Covid19 means trading GDP for lives saved. Its when people introduce the central bank into the equation that the corresponding complexity starts to make it seem like its all mana from heaven. In reality, the central bank can only augment the term structure of the debt. It can(provided its reputation is good) shift the debt burden across time intervals so that(in theory), no one generation bears the entire burden. But it cannot make that burden disappear.(btw, even this view isn't an any and always. There are lots and lots of microeconomic frictions and assumptions that belie this mechanism, but that's beyond the point).

Bottom line - debts are real and must eventually be paid in one form or another. 

 

 

 

 

 

 

83 "The only way this statement…

"The only way this statement is true is if the government "borrows" money from the Fed, so perhaps in a literal sense this is correct."

Yes, that's entirely the point. Because the government and the Fed will always be there, government can always borrow forward so long as there's some positive inflation, which means you absolutely can have a constantly growing debt in actual dollars.

Again, though, the only point I'm trying to make is the danger that you run into when discussing this where people think the *existence* of debt is a problem, instead of the deficit and its trend with GDP. There are a lot of ways where government spending is *backwards* from personal spending.

"I might be engaging in economic pedantry, but inflation is not necessarily easier to deal with than deflation. Combatting inflation involves expectations and a good central bank reputation. A central bank can promise not to print money, but as long as inflation expectations are there, the relative price level will continue to rise."

If the banks aren't lending, inflation's going to fall just because consumer spending and business investment's going to stop. It might take a while, sure, but it'll happen. Deflation's different. What can banks do?

At that point the problem is structural, and *governments* need to step in and fix things. Really, this is just fundamental: if a country is in a deflationary regime, the sane choice is to liquify everything and poof goes any control a bank has. Japan's the good example of that - the fundamental problem in the country is demographic, there's nothing the bank can do about that.

"Bottom line - debts are real and must eventually be paid in one form or another. "

I think the only real point I was trying to make was that for governments, it's probably better to just look at deficits and the overall trend, rather than debt. It's not a big deal for the government to borrow heavily to avoid a massive recession. That's when it *should* be borrowing, assuming it's a healthy economy. During the last recession there were periods at which inflation-adjusted borrowing rates were negative.

Deficit spending at that point isn't even borrowing if it's sane (obviously borrowing like, a billion dollars to build a statue or something would be stupid), it's like a very weird form of corporate tax. The problem is that this is all coming during a period where the US has been getting people to believe in growth that's clearly artificial, and so now that *that* fiction's been popped, *that* debt is effectively going to come due.

33 I think one year of lockdown…

I think one year of lockdown is an absolute impossibility, thankfully. We would have mass disobedience and eventually rioting long before that year went by if the politicians were so foolish as to try and keep the populace locked in their homes for that long. But politicians won't be tempted to try that because they will understand that that would be political suicide. There has already been an absurd amount of economic destruction and matters will only get worse the longer the lockdown continues. Expecting people to stay locked in their homes indefinitely while their lives are destroyed is absurd. I think we will be opening back up again sometime next month. Death rates will likely rise, but we probably already passed the point where the deaths are the worst outcome of the pandemic.

35 Long Term Lockdown

This is largely correct - those who think long-term lockdown is viable are deeply naive. In Italy it was ~one month between lockdown and food riots, the US is thankful substantially richer but it has limits. All over America there is areal photography of massive lineups at food banks (3+ miles of cars in Pittsburg for example). Those citing the ability of the United States to borrow are kidding themselves if they think it's based on anything besides the expectation of the US opening it's economy more quickly and robustly than most other nations and emerging with a robust ability to repay loans - something that efforts at medium-term UBI to staunch the consequences to average Americans will quickly undermine. The short version of this argument is that the western world better find a way to get back to with acceptable casualties in the next 6 weeks or so (e.g. no mass events, mandatory masks, or some combination); the attendant risks of not doing so make the predicted casualty counts look cheap.

40 Although my initial impulse…

In reply to by sbond101

Although my initial impulse is to say blood is more valuable than treasure, I do understand that if you run out of treasure, that will ultimately lead to more bloodshed.  The lockdown is meant to be short term, flatten the curve, and allow the healthcare system to stay afloat by spreading out the cases.  I agree that a long-term lockdown is simply not viable.  If the short term lockdown fails to flatten the curve, then maybe the only viable option is lift it and either pour more resources into the healthcare system, or start rationing healthcare (offer only palliative treatment the elderly or chronically ill, even over the objections of the family).  The latter is distasteful to me, but I understand we may come to that point (they already went through some of that in Italy.

66 Not sure where the one year…

Not sure where the one year forecast came from?  I've seen that suggested as a reasonable timeframe for a vaccine, but not for a lifting of the physical distancing rules.

The main value of the physical distancing rules right now seems to be to give the medical system time to get ready.  

My wife's an RN who does in home care in the community.  Like so many other healthcare professionals right now, she's having to ration critical supplies in a way that's less than ideal for her health and the health of her patents. 

But that's a short-term issue, not a long-term one.  Industry has geared up to produce the masks, respirators, etc. that are currently under-available.   We're about to see a flood of these supplies become available over the next few weeks.  That's also the time frame to start getting broader testing data.

Bottom line is that from my perspective, lifting physical distancing rules right now could be a disaster, as we're not ready to treat so many potential patients all of whom need almost exactly the same time of health care all at the same time.  But two weeks or a month from now could be a whole different story, as the factory lines that started re-tooling last week begin delivering the equipment that'd be needed for a Milan-like wave of patients.

Not to mention that the work of people like Joey-Harringtons-Piano is also developing the practical know-how that will put doctors in a better position to successfully treat patients who present in May compared to those who presented in March.

The idea that we should stop physical distancing now because it'd be too costly to maintain it for a year is a red herring, to my mind.  Personally, I think we should put up with it now until the medical system is prepared to deal with covid-19, and trust that the combined efforts of industry and the healthcare profession will keep that time to a minimum.

There'll be football this fall.

68 I think it was a bbc report…

I think it was a bbc report. They said 6 months was the minimum guess and it could last a whole year IIRC.  

In any case, I wasn't suggesting ending the lockdown now. But there is a question of how long can you go with a lockdown. As I said in my post above, the immediate costs are very visible. A severely taxed health care system and lots of deaths. But the unobserved damages are real as well as I listed above.

 

I don't know the answer(maybe no one does), but there will come a moment where its June or July or August and the virus is still not gone. Do we continue the lockdown so more, like throwing good money after bad? The damages to the economy are real

 

70 Yes, the economic impact and…

Yes, the economic impact and other side effects (lost school days, domestic violence, etc) are very real.  I'm personally confident that they're very much on the minds of our politicians.

I can't imagine that any serious policy-maker is planning on the virus going away or being eliminated.  I mean, I suppose a silver-bullet inexpensive easily administered vaccine is possible, but it'd be irresponsible to plan for that scenario or to keep physical distancing restrictions in place waiting for it to happen.

The flattening-the-curve projections don't reduce the number of people who get infected, they simply spread out the timeframe over which infections occur.  My understanding of the discussions taking place here is that as the hospital supplies come in and the rate of increase of hospitalization slows down, then we shift into the process of gradually reducing the physical distancing restrictions.

B.C.'s the only province in Canada that seems to be entering that flattening stage (which may yet prove to be a mirage), and their hospitals aren't any better supplied that the rest of ours, yet.  So we're not seriously into the "how do we unwind?" phase, but we're getting closer.

The post-crisis analysis of this thing is going to be fascinating.  When we have true mortality figures and can add up the economic cost per life saved, we're still going to get wildly divergent estimates, I'd bet.  For purposes of future analysis, countries really should have divvied up a bunch of varying responses and pulled them from a hat.  "Okay, you're the control group, you do nothing.  You're on lock down for 4 weeks.  You take 6 months.  You try total isolation for a year."  We'd have so much better post-crisis data to work with! 

74 "B.C.'s the only province in…

"B.C.'s the only province in Canada that seems to be entering that flattening stage (which may yet prove to be a mirage),"

My "eye test" look at BC's wiki page says the flattening is legit.

"When we have true mortality figures and can add up the economic cost per life saved, we're still going to get wildly divergent estimates, I'd bet"

For the sake of initial back-of-the-envelope calculation, I'm willing to allow that the "uncounted COVID deaths from people dying in their homes" and "people who died with COVID rather than from COVID but counted as the latter," which are the two trending extremes people are suggesting on Twitter, essentially cancel each other out.

I suspect that if significant numbers of people in the first category were dying of economic/cabin-fever/etc. related suicides instead, as a lot of people are fearing, we would've heard a lot more either estimates or anecdotal stories about them by now.

42 I don't think Sweden is a…

In reply to by sbond101

I don't think Sweden is a good model to look at, being one of the most sparsely populated countries in the world.  As with most viral infections, densely populated areas are hit the hardest.  In the case of COVID-19, hospitalized patients in urban areas seem to have a much higher mortality than people in the suburbs and rural areas.

73 The Sweden example doesn't…

The Sweden example doesn't necessarily show what you imply.

 

For one, despite Sweden's looser policies, Sweden's National Institute of Economic Research projects a 3.4% contraction in the country's GDP this year compared to only a 2.9% contraction in the US.  It also projects a 6% contraction for the Swedish economy in Q2 which about the same as the US is projected to have (25-30% annualized).  Now there are other factors beyond just COVID and its countermeasures that influence these projections (most notably that the US was projected for stronger growth than Sweden before COVID hit), but it does imply that Sweden is still taking a substantial economic hit from not locking down.

 

https://www.konj.se/download/18.6bd03603171362cacf2541e/1586176997460/SEApr2020.pdf

 

Also, while a large portion of the dead in a non-lockdown scenario would be elderly a good chunk of them would also be healthcare workers who are among the most expensive and time consuming to train.  They hold substantial economic value to society.

 

This is not to say that the economic hit from the lockdown will not exceed that of a hypothetical non-lockdown response (it probably will), but I think it is closer than you may realize.

 

(In a couple of years when we have a chance to compare the final costs it will be very interesting to compare Sweden's response to Norway's.)

80 I'm not familiar with Norway…

I'm not familiar with Norway's current situation, but comparing early days Canada vs Sweden data is interesting.

Canada's one of the most urbanized countries in the world, and I understand Sweden's much more rural, but otherwise education levels, healthcare quality, climate, etc are relatively similar.  Canada's pop is about 37.9 million versus Sweden's 10.3 million.  Canada's reported 898 deaths versus Sweden's 1,033 deaths, which as a ratio is about 23.7 deaths per million versus 100.3 deaths per million.

Neither level of death is meaningful on the grand scale at the moment, but we're presumably some distance away from the final death tolls.  We're also a long way from knowing what the true GDP impact will be of the varying approaches to social distancing.  

29 Just looking at the basic…

It seems the negative effects start cascading when the disease is allowed to run loose. I also saw a study that compared regions during the 1918 pandemic and concluded that the regions that took stronger measures made a faster economic recovery afterwards. In any case, the idea that we can just let some people die and the rest will be A-OK seems pretty naive to me.

41 That's the thing.  My…

That's the thing.  My limited sample size has seen the elderly and chronically ill to be only a slight majority of critically ill cases.  We've had plenty of youngish, previously healthy full time workers fall ill and end up on ventilators for days, sometimes weeks, and in some cases die.  Those people can't work, and their loved ones in some cases have to leave their work for providing childcare, bereavement, etc.  Economics is outside of my area of expertise, but I doubt the drain on the workforce is a good thing.

We're being presented with a series of shit sandwiches, and we have to decide which one is most palatable and simply bite down.  This is one time where I'm happy to be a simple grunt on the line, and have those decisions beyond my pay grade.

44 The Economics

The Economics behind the choices are somewhat grim but are relatively straightforward to explain. based on the Italian data ~85% of all fatalities occur in those over 65 in a situation where healthcare rationing exists. Based on the German data where healthcare rationing does not exist that split is more extreme. The strictly economic impact of a deaths concentrated on the elderly is net positive, heartless though that calculation may be. There will be huge loss of productivity as this moves through the population, but spreading that productivity loss out over a longer period of time does not ameliorate that loss the way that it does when speaking in terms of the loss of life because the length of incapacitation is not meaningfully impacted by medical intervention at present (unless the experimental therapeutics are effective and become widely available to non-critical patients). From a dollars & cents point of view, almost any decision towards mitigation at this point costs more than it returns in saved lost productivity. The above isn't to advocate one position or another - my position on that issue is almost entirely concerned with the probability of social unrest and the attendant devastation - it's just a straightforward look at the costs. 

The comparable to the Spanish Flu epidemic is an interesting one. Spanish Influenza was unusual in that it killed by cytokine storm (auto-immune response) and as a result disproportionately killed working aged adults. This created a cost-benefit profile for the economic costs of response that was very different than any event of any scale we've seen since.

46 We've been finding that…

In reply to by sbond101

We've been finding that COVID-19 also kills primarily by cytokine storm (especially in the young and previously healthy).  Only a minority of patients (immunosuppressed primarily) seem to succumb to direct viral damage during the replication phase.

Also, Italy's population tends to skew older, which is one of the explanations for the extremely high death rate in the elderly.  They also have a very high smoking rate, so that could be a possible explanation for a mortality rate that was much higher than China's.

51 There is so little reliable…

There is so little reliable data, outside of China, with regard to what has happened in China, that it has really degraded our understanding of this virus. I'd call it a tragedy if not for the probable mendacity entailed in having whatever reliable data exists hidden.

50 Patient Distribution

"We've been finding that COVID-19 also kills primarily by cytokine storm (especially in the young and previously healthy)." - This is interesting; I've read some on the pathology and understood that it pricipally killed due to resperatory failure due to pnemonia, something the young & healthy are extremely resistant to on a relative basis. 

"Also, Italy's population tends to skew older, which is one of the explanations for the extremely high death rate in the elderly." - This is correct, but misses the point at the population level. Italy's population does skew older, 21.8% PoP are >65 based on the 2018 census vs. 16% in the US - but this still means that in the US 62.4% of the dead should be expected to be 65 & older by extrapolation in a broken-healthcare situation. It also means that overall mortality in the Italian case is an over-estimation of the population level cost in the US. This doesn't change the basic picture really; the hit to the US workforce as a consequence of increased mortality from the Virus is imperceptably small compared to the costs of the public-health level mitigation strategy now being persued as to make the effort and effective dead-cost from an economic point of view. That's not to say it shouldn't be done - but it's important that everyone understand what were doing.

67 “This is interesting; I've…

“This is interesting; I've read some on the pathology and understood that it pricipally killed due to resperatory failure due to pnemonia, something the young & healthy are extremely resistant to on a relative basis.”

People initially find themselves in trouble due pneumonia causing respiratory failure.  Normally that’s not a huge problem, you can buy them time by supporting them on a ventilator until the pneumonia resolves.  Some develop ARDS (basicallly lung inflammation and fluid leak), but thats nothing new.  We deal with that every year with the flu.  The problems start when the cytokine storm causes multiorgan failure.  Most of the experimental treatments are working on mitigating this (as of now, we still haven’t found a reliable treatment other than trying our best to support the patient and hope the cytokine storm dies down before the patient dies). Some have tried corticosteroids and biologic immunomodulators, but the jury is still out on whether these help or hurt until we get some good randomized/controlled trials.

88 As far as I can see, it…

As far as I can see, it increasingly looks like smoking makes you significantly less likely to get infected in the first place, but significantly more likely to have severe symptoms if you do catch it.

14 In large part because the…

In large part because the data isn't there.  At least not the critical data of how many people have the virus and how many people each of them, on average, pass it on to (transmission rate).

Until testing ramps up, the "number of people infected" numbers are just noise.  Which makes all of the projections based on that data noise, as well.

The only reliable data, for most countries, is the literally morbid one, the number of deaths.  And that's a lagging indicator.

While I hesitate to draw even a silly analogy to football stats, the closest thing I could think of is trying to assess the effectiveness of an RB when the only reliable stat we have is how many TDs he scored, and then combining that with an incomplete count of how many carries he got, but without knowing how many other carries he may have had that we don't know about, and only anecdotal evidence on his starting field position when he got the ball.

19 I wish I felt better about…

I wish I felt better about the quality of the testing. From what I've been told by people in health care, who have themselves been tested, there is a nontrivial chance that the nasal swabs, when performed by harried personnel, can fail to to collect a good sample. It's just a really difficult virus. The serology testing will be helpful, but I think a lot of people are going to fail to appreciate the limits of it, when applied to a huge number of people. Even the death counts are something to be wary of, in either direction. It will be years before we get a good handle on excess deaths. In the short to medium term, we really need a good medicine chest, a handful of proven effective treatments, hopefully with some firm grasp of why they are effective for which patients.

26 Serology

"The serology testing will be helpful, but I think a lot of people are going to fail to appreciate the limits of it, when applied to a huge number of people." - this is a very good point. Serology testing is hugely important from the point of view of public health and understanding the progress of the pandemic; but it's likely that, especially at first, it will have a non-trivial error rate like the swab testing. As a consequence it may well bestow on many people a false sense of security that may be quite harmful induvidually.

39 The testing in our hospital…

The testing in our hospital suggests a 15-20% false negative rate.  There were some patients (where we were still suspicious) that we tested up to 3 times (on one case 4 times) before they came up positive.  And you're right that user error is probably the source of most false negatives.  The false positive rate has thus far found to be negligible, and of course, most hospitalized patients will display confirmatory symptoms.

45 A reliable, accurate, easy…

A reliable, accurate, easy-to-do (perhaps even home) antibody test is the only thing that will get us out of this mess.  Of course, antibodies will have to be shown to provide some immunity for COVID-19, but I think that's likely.

52 I'm concerned that people…

I'm concerned that people will interpret a 94-95 % accuracy rate on a serology test to mean that getting a positive result establishes immunity with enough confidence to drop all precaution. I'm no Bayesian expert, but I know enough to know that this is miles from reality.

55 Even if it does provide…

Even if it does provide immunity, we have no guarantee at this point how long that immunity will last. For instance, having a common cold doesn't prevent you from getting another one for very long.

56 From what I've read about…

From what I've read about the RNA blueprint of this virus, there is reason to hope that it will be far more stable than an influenza or common cold virus, but you are right; we are so in the dark still that one would be foolish to be confident.

57 Attenuated Development

The outlook here I think is more hopeful. Corona virus's are much more genetically stable than influenza so mutation rendering immunity invalid is unlikely in the short term. If COVID-19 proves to be an exception to that general observation it's probably a good thing since virus's tend to become less deadly when they mutate for straightforward reasons of natural selection (killing patients is bad survival strategy for viruses). We don't know yet - but there's good reason to be hopeful here. 

65 "I'm concerned that people…

"I'm concerned that people will interpret a 94-95 % accuracy rate on a serology test to mean that getting a positive result establishes immunity with enough confidence to drop all precaution. I'm no Bayesian expert, but I know enough to know that this is miles from reality."

You're not thinking of it in a biological transmission case. If you restrict activities to people who test immune, even a 95% accurate test would reduce the R0 by a huge factor. Testing positive shouldn't make you confident to go out in a high-risk situation, but it should make you confident to go out among others who've tested positive. 5% on 5% is pretty darn low.

75 FO's own Zach Binney had a…

FO's own Zach Binney had a great breakdown the other day on how "95% accuracy" could be helpful, but unfortunately could also not be very helpful depending on just how many people have been exposed to the virus. If only a small percentage of the population has been exposed, there can be far more false positives than actual positives:

https://twitter.com/zbinney_NFLinj/status/1245789672833417217

It actually is a pretty interesting statistical concept that the crowd here might like to learn and read about:

https://en.wikipedia.org/wiki/Base_rate_fallacy

78 That's why the biggest…

That's why the biggest question is what to *do* about a positive antibody test result. It's easy to disentangle the effects due to false positives/false negatives because you can correlate the test results by location: false positives are randomly distributed, whereas true positives will be centered around disease hotspots. So statisticians can easily correct for the testing biases and get a proper estimate of exactly how much of the population has been exposed. It's *entirely* possible that exposure in certain parts of the country is much, much higher. 

That's the part that Zach's pointing out near the end, although he states it as "if you're in a high risk group." It's actually better stated that studying the test result distribution *allows* you to determine the confidence of the test result (barring systematics) for a group. As in, suppose the NBA comes out and tests everyone with the serological test, and you get back like, 40-50% positive. In that case, the players that tested positive have a *much* higher confidence that they're actually immune (well - antibody positive, assuming that provides immunity!). Whereas if it comes back 5% positive, you know those results are useless.

But as Zach stated the biggest benefit for this is for groups like health care workers, where you already know the exposure rate is likely much higher than a few percent.

69 This is not true. Flu…

This is not true.

Flu vaccines efficacy decays incredibly quickly, and the effect isn't really understood at all. For the most susceptible population, the key is just to reinject the vaccine multiple times. This isn't necessarily related to the mutation rate of the virus (i.e. why they need to keep coming up with new flu vaccines), it's also somehow due to how the immune system learns to fight off the infection (or how it responds to the vaccine).

And of course if the virus is mutating quickly (so a vaccine's short-term efficacy declines over time), its mortality rate will almost certainly drop as well, as killing your host isn't an effective way of spreading to new hosts.

54 Tavaris Jackson killed in a…

Tavaris Jackson killed in a single vehicle car accident. Doubt there will be a seperate XP for it, so I thought I'd pay respects here. Really appeared to be a classy guy; never made any excuses for poor outcomes on the field. Terrible news, continuing a streak of bad football news since the Super Bowl. Ugh.

 

61 Was disappointed to see that…

Was disappointed to see that he had a - dropped - domestic violence charge in 2016, per his wiki; it also noted that he needed a public defender, which is really bad news considering he had just finished 10 years of collecting an NFL paycheck.

 

I hope his family is not struggling, but between that and Jared Lorenzen's family needing a gofundme for his kids, it doesn't paint a good picture of former non-star NFL players' finances.

63 Not to stamp on a dead man's…

Not to stamp on a dead man's grave, but how did he end up with money troubles with 10 years worth of NFL paychecks. I get that he was unable to parlay his career into earnings the way Chase Daniels did, but still. The minimum salary for an nfl player is around 400k plus benefits. 10 years of that should have given him a pretty decent chunk of earnings(yes I am aware taxes can eat half of that). 

64 I don't see it as "stamping…

I don't see it as "stamping." There's some room for discussion, just as there was some room to discuss the Colorado incident when Kobe died.

The thing with Lorenzen is that he never really used much in the way of medical expenses, surprising as it may seem - he noted in the infamous ESPN cover article that he went many years without even stepping on a scale, which is a pretty normal part of a checkup.

Edit, it looks like T.Jackson was denied the public defender request, likely meaning his financial situation was determined to not be dire enough to allow, but still the fact that he claimed he wanted one is a problem.

86 And Von Miller now has…

And Von Miller now has tested positive for Covid19.

 

Once more, the NFL is kidding themselves if they think they will be on schedule to play real games. A full contact sport with 53 man roster + practice squads + coaching staff + medical staff + referees + stadium attendees + support staff  + immense travel = containment impossibility. 

I am the world's worst prognosticator, but the season looks to be in jeopardy.