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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?
Larry Niven and Jerry Pournelle's 1974 book, "The Mote in God’s Eye," features an alien species with three arms. It has two “normal” hands and a stronger, but less dexterous one called the “gripping hand.”
The gripping hand was their most powerful alternative.
This book comes to mind when I think about what's in store for 2021:
- 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, the coronavirus could continue to overwhelm everything else.
Viruses spread until something stops them. We now have some vaccines to deprive the virus of new hosts. If enough of us get vaccinated, it will have nowhere to go and recede to manageable levels.
That’s probably this year’s most critical economic variable. The global economy will recover in direct proportion to our success in vaccinating people. But even if everyone wanted it (some 50% of US healthcare workers say they don't), it's not going to be that easy or quick to come by.
Potential production of the vaccines approved so far is nowhere near enough to cover the most vulnerable in the US and Europe by the end of the third quarter, let alone emerging markets. This is sadly realistic math.
We desperately need the vaccine Johnson & Johnson (JNJ) is developing, with their enormous potential production capacity. We also need additional new vaccines.
Without a great deal of new production, 2020’s lockdowns and restricted economic environment may continue long into 2021. The 100,000 small businesses we have lost? More may follow.
The World Bank’s annual forecast was very plain about this. They have four scenarios in which global growth ranges from 5% this year on the upside, to an unspecified below-zero number in their “severe downside” scenario.
The primary difference between these scenarios is—you guessed it—vaccine progress. If it goes well, we could bounce back quickly and strongly. If not, we will stay in recession.
That’s the gripping hand, and it really isn’t complicated.
And it’s why investors and business people ought to be very concerned about the slow start, though fortunately it is improving somewhat. We don’t have weeks to waste here.
Just to make matters more interesting, the virus is not waiting for us to get our act together. New variants are emerging that seem to spread faster. They may slow down progress when time is not on our side, economically speaking.
Longtime readers may remember I last used this gripping hand analogy 15 years ago in my 2006 forecast. That year turned out OK, but some of the issues I mentioned worsened considerably in the years that followed.
As for 2021, on the one hand I’m confident. On the other hand, I’m cautious. But the gripping hand is strongest. It could go either way.
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