24 THENEWYORKER,APRIL20, 2020
resorts in Europe and North America
were already emerging as super-spreaders
(“Après-ski is a virus spewer,” an Aus-
trian epidemiologist said of Ischgl, for-
merly the Ibiza of the Alps and now its
Wuhan), Tilson’s apparent disregard for
the commonweal touched a nerve with
his readers, who flooded him with angry
replies. “I think you are totally wrong and
causing harm,” Ackman told him. “This
makes you look incredibly ignorant.” Like
Mayor Bill de Blasio, who, slow on the
draw, had urged New Yorkers to “go about
your lives,” as the corona clouds massed,
before grudgingly coming around, Til-
son began to revise his opinions, as well
as his tone. Soon he was volunteering to
help build a field hospital in Central Park’s
East Meadow, across the street from
Mount Sinai Hospital and his apartment
building. “I’m working so hard that I’ve
lost five pounds (going from 169 to 163),”
he wrote, on April 2nd, proving that in-
numeracy is contagious. “Can you believe
we all used to pay for workout classes?”
T
he Fokkers found it hard to let go
of the conviction that the crisis was
overblown, and that the shutdown could
do more harm than good. One of the
more clamorous champions of this opin-
ion went quiet for a while, as he battled
the virus at home, in some terror over
his mounting inability to breathe. An-
other had a cousin on a re-breather, a
firefighter who’d worked the pile at
Ground Zero. And yet within a week
both of them were sharing a wish that
there were a way to short the price of
ventilators in June or September, in the
belief that we wouldn’t need nearly as
many as the governors of the most be-
leaguered states were claiming. Some-
one floated the idea of a job-losses-per-
death calculation. Hope was expressed:
in the levelling off of death rates in Italy;
in the F.D.A.’s emergency approval of
the experimental treatment of hydroxy-
chloroquine; in the antibody tests com-
ing out of the United Kingdom, which
might determine who’d had the virus,
and therefore who was immune and able
to rejoin the workforce. Perhaps “the
manufactured hysteria,” as one investor
put it, was finally collapsing.
But no one doubted that, in economic
terms, the situation was grave almost
beyond imagining. A fund manager
wrote, “Virus is like a huge sink hole in
global economy. No one (not even any-
one on this chat!) knows how big/deep
it is. And every day world in lockdown
it gets bigger and deeper. Policy makers
also have no clue, but they have to do
something, so they have started shovel-
ing fiscal and monetary ‘dirt’ into hole.
If hole bigger than dirt, we get deflation
and you do the obvious. If dirt bigger
than hole, you get... inflation. And if
by complete dumb luck, dirt=hole, back
to Goldilocks.” He reckoned “hole>dirt.”
Either way, it’s going to require a lot
of fill. Whether you favor or abhor deficits,
whether you’re a Keynesian, a Hayekian,
or an advocate of Modern Monetary
Theory, we have little choice at this point
except to run up a huge deficit to fund
rescue and stimulus on an unprecedented
scale. This is the world we’ve made, or that
our parents and grandparents have. There’s
no real constituency now for austerity.
Another fund manager on the Fok-
ker chain was modelling this behavior,
on his own balance sheet. His advice:
Borrow as much as you can. Mortgage
everything. With interest rates at his-
toric lows, you could accumulate cash
and have money on hand to buy dis-
tressed assets on the cheap, whether
they’re stocks, bonds, or real estate, and
be well positioned to make money again
when the world got back to work. This
too shall pass, the old-timers said, as they
always did. During the grimmer days of
the 2008 financial crisis, most investors
had hesitated as their more intrepid peers
waded back in. They watched the hedge-
fund manager David Tepper, who keeps
a brass cast of a pair of testicles on his
desk, make seven billion dollars by bet-
ting early on the recovery of the banks.
No one wanted to miss it this time. At
the end of March, there was a frenzy, in
the debt markets, of “breathless buying,”
as the trader put it. Optimism ran through
them like a fever. Last week, the Dow
and the S. & P. surged. “They have the
playbook,” the hopeful ones said, of the
central banks, which were rolling out
every play they’d run in 2008.
I asked Mohamed El-Erian, the long-
time co-chief investment officer at
PIMCO, the world’s biggest bond fund
(he now advises Allianz, PIMCO’s parent
company), about the confidence of the
Fokkers and the would-be Teppers. “It’s
idiotic,” he said. “Well, I shouldn’t use
that word. This notion of a V, of a quickbounce back to where we were before—
people don’t understand the dynamics
of paralysis.”
He said, “This is much bigger than- 2008 was a massive heart attack
that happened suddenly to the financial
markets. You could identify the prob-
lem and apply emergency remedies and
revive the patient quickly. This is not
just a financial stop. This is infection all
over the body, damage to virtually every
limb and organ. The body was already
so fragile. Those of us who have had the
privilege of studying failed states have
seen this before, but never in a big coun-
try like the United States, let alone a
global economy.”
He went on, “In the financial crisis,
we won the war but lost the peace.” Instead
of investing in infrastructure, education,
and job retraining, we emphasized, via a
central-bank policy of quantitative eas-
ing (what some people call printing
money), the value of risk assets, like stocks.
“We collectively fell in love with finance,”
he said. Apparently, we’re still in love.
Last Thursday, amid news that an-
other 6.6 million Americans had lost
their jobs, the Fed announced the in-
fusion of an additional $2.3 trillion, in-
cluding hundreds of billions to purchase
corporate debt, ranging from investment-
grade to junk: big dirt. Stocks surged
anew. The Fed was propping up risk as-
sets again, at a scale that dwarfed the
interventions of 2008, and the bankers
were back, hats in hand. They get paid
like geniuses, and yet, every ten years,
they need bailing out.
A popular meme dusted off in recent
weeks is an illustration of a few dino-
saurs looking up at an asteroid blazing
toward Earth, with a T. rex saying, “Oh
shit! The economy!!” Silly dinosaurs. It
can certainly seem ghoulish to worry
about capital when people are dying in
droves, but this isn’t an extinction event.
At a certain point, the pandemic will re-
cede and leave behind a severe economic
crisis, affecting everyone in ways and de-
grees that are impossible to predict. The
financial markets are a bellwether, at
least. Deflation or inflation? Rising rates?
Negative rates? Three months? Six? Two
years? Schools? Museums? Airplanes?
Concerts? Nobody knows anything. The
only thing we can say with certainty is
that the pain will be unfairly distributed.
People are betting on it.