Year Of The Gripping Hand

I also think today’s Wall Street Journal lead editorial is on target. When the WSJ editorial board calls for a sitting president to resign, no further comment is needed. It should give you reason to pause and reflect. I don’t know about you, but I find myself running the gamut of emotions then trying to take a deep breath and reflect. Each of the above expresses some of what I feel.

Now, on to my forecast for a Year of the Gripping Hand.

One reason humans love to divide everything in half is the two-handed design of our bodies. Thinking in pairs is a simple, intuitive, mental shortcut. Harry Truman famously asked for a one-handed economist so he could stop hearing, “On the one hand, but then on the other hand...” But what if we had three hands?

That’s exactly the kind of strange scenario science fiction writers love. Larry Niven and Jerry Pournelle related one in their 1974 book The Mote in God’s Eye. The story features an alien species with three arms — two “normal” hands and a stronger, but less dexterous one called the “gripping hand.” So when humans might describe a question as “On the one hand/on the other hand,” these aliens would add a third alternative, “On the gripping hand.” The strong gripping hand was their most powerful alternative.

That seems simple, but it opens up a profoundly different thought process, one the authors explored in a later sequel, The Gripping Hand. Today I will do the same in a smaller way. Every January I give you my yearly forecast, but this time two hands simply can’t capture the nature of the forces we face.

On one hand, we have some extraordinarily good reasons for optimism. On the other hand are several potentially severe problems. On the far stronger gripping hand, we have the coronavirus that overwhelmed everything else last year. And could do so again, if we let it.

Reasons for Hope

We’ll start with the good news. There’s plenty of it out there, but I’ll focus on four key points.

First, we now have weapons against the virus. The US has two approved vaccines. England, China, and Russia have developed their own vaccines. Additional options are under development, and will likely be available later this year. These will be game changers if we manage to deploy them widely and quickly. Which, I admit, is a big “if.”

The initial rollout has been slow almost everywhere. (Israel and surprisingly West Virginia being impressive exceptions. West Virginia was the one state that did not use the federal nursing home rollout plan. They ran their own process, showing how this is really a state-by-state problem.) But I think the logistical issues will get solved and people will gain confidence as side effects prove minimal.

Moreover, we will see improvement long before the “herd immunity” threshold. Protecting the most vulnerable groups will reduce pressure on hospitals and hopefully let governments lighten business restrictions. I don’t expect anything like normalcy until the second half of the year at the earliest, but we should feel a difference sooner.

Second, the recently passed fiscal package will give some relief to unemployed workers and small businesses. The process was late-night political sausage-making at its worst. It took way too long. I dislike some of it but had the bill not passed, I think we would certainly be looking at a double-dip recession in early 2021.

With the Democrats controlling the Senate, we will probably see more cash payments, at least an increase to the $2,000 many wanted (adding to the $600 that passed). It will aggravate an already high national debt, but should also boost consumer spending, as we saw with similar payments last year.

And, if the vaccines do their part, this time people will be more inclined to spend it in the hard-hit restaurant, entertainment, and travel sectors. We are also likely to see a major infrastructure bill as well as additional stimulus. Again, this will blow apart any thought of budget restraint.

Third, 2020 was (of necessity) a year of massive innovation throughout the economy. Businesses forced into an “adapt or die” position worked hard to adapt. A disturbingly high number didn’t make it but many did, finding creative ways to operate under new constraints. Those investments having been made, we can now begin to reap the benefits.

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Disclaimer: The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, Just One ...

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