 We're back, we're live, we're history lands, and John David Ann of HBU, before we begin I just want to try to put my thoughts and perspective on this. It's very important that we look at the coronavirus in the context of history. Why? Because right now all of us are like virus junkies. We watch the tube, they repeat themselves ad nauseam, they repeat ads that are unrelated ad nauseam, and we don't have the perspective of knowing how this connects dots with other times, other places, other experiences of other countries, and we need the perspective of history to appreciate this. You know, sort of back out for a minute, take a breather from all of that information that's being thrown at us and put it in context. Welcome to the show, John. It's so nice to have you here. Yeah, it's good to be here. Couldn't agree more. We need more history. Yes. Yeah, history. So, John, today we've been talking about the history of epidemics and pandemics, and we need to know about that. It's very important. So, tell us about where we developed a consciousness about this. Right. So, I'm not a coronavirus junkie like you are, Jay, but history is very important, and what we want to do today is we want to look at the economic impacts of these epidemics, not just, you know, so here's the question. The question of the week, I think, is, I mean, of course, the death toll is increasing, and you know, people are getting sick, and you know, some very serious cases. I know of people who are in the hospital on, you know, ventilators and stuff, so this is really serious stuff. So, I think the question that we're all asking is, where in the heck is this going to go? How long is this going to go on? You know, where are we going to be six months from now? I mean, and then for baseball fans, are they really going to play baseball the season in Arizona? Is that what they're going to do? They're actually considering this, playing the baseball season in Arizona. No, this is it, I just read this. No fans, the baseball team will not sit in the dugouts, they'll sit in the stands, social distanced, no umpire behind the plate, because of course, you know, you don't want him too close, and they would play the game that way. I don't know. Good luck with that, yeah. Yeah. So, what we're dealing with is this rolling thing, and it's really, it's disturbing markets, you know, looking at the economic impact. Disturbing markets, we don't know where the stock market's going to go, let's take the stock market first. So the stock market's down, it was down 30%, now it's dealing about 20%, and so, you know, is it going to go down some more, is it going to go up? So and we're looking at, I mean, some of these other estimates, when we, you know, GDP, it looks 30% dropped by July 1st, oh my gosh, unemployment, right now, we stand at, you know, 10 million new unemployment claims, and then, you know, where is this going to go? Some economists say we're at about 10% unemployment. Other economists say because not everybody applies for unemployment claims that we're probably at 15% to 17% unemployment already, and one estimate from a bank, one of these Wall Street banks says we can be looking at, you know, 35%, 40% unemployment, at least temporarily, so it's really frightening because, you know, these things, these epidemics, when you look at history, they can be civilization enders, so it's very concerning, for instance, the Justinian's plague, this is a plague that took place in the Byzantine Empire, Constantinople, which is today Istanbul, in 541, 542, yeah, this is, this is Justinian, this is a mosaic of Justinian in a church in Ravenna, I think. And so Justinian was this kind of, he led a renewal of the Roman Empire, you know, by this time the Roman Empire, the capital is Constantinople, and he won all these battles, and he was an effective administrator and such, and then the plague comes, and the plague came, so this is also interesting to me, plague came from the same spot, it came from the steppe region via the silk road, but then we think it came, this particular plague, this is Eursinia, Pestus, came from ships that were sailing the Persian Gulf, and then into the Red Sea and dropping stuff off, and then it being trans-shipped across on the Nile into Alexandria, and then from Alexandria into Constantinople, because of course the plague travels by rats, and you have rats on ships, and that's how it was transmitted, so the other interesting thing about this, and I'll get to the economic impact in a second, is that this particular plague was so strong that we think that about half of the population of Constantinople died, and the reason why, so the plague virus had been around for centuries before this, according to research, and what happens is there's a kind of mini ice age that takes place around 1540, pardon me, 540, and it gets colder, we have records of colder temperatures in Italy and the rest of the Mediterranean, and so what we have is, and this is an environment in which rats multiply, and the fleas on the rats multiply when it gets a little colder, when it gets too hot, then the rat population declines, so at any rate, so this little ice age contributed to it, oh my gosh, we're learning so much about this, so the plague makes its way to Constantinople, and Justinian gets sick, he lives actually, you know, he's sick for several weeks, but then it breaks out in the city, and oh my gosh, the dying is incredible, they run out of space in the cemeteries to bury people, they're stock stacking bodies up, they actually, and I know this is a story that was told in a book called Justinian's Flea, is that troops actually, there was these towers that were built on the wall, the wall of Constantinople, and these towers were actually hollow, in other words, they were built as a square, but then with a hollow opening in the center, and they were dumping bodies down this hollow opening, because they couldn't find places for the bodies, so so the plague in the Roman Empire of Justinian really takes out the Roman Empire, I mean it leads to a pretty rapid decline in the Roman Empire within a few decades, the Roman Empire is shrunk so that it, you know, goes beyond the borders of Constantinople, but not that far, it also affects the Persian Empire in this time period, so if we go back far enough we can see that the economic impacts are really devastating, I mean trade stopped, the even the ovens, the bakery ovens in Constantinople were stopped because people couldn't go out of work because they were either so sick or they didn't want to get sick, and so, you know, there was a lot of starvation in the city during the plague time, so yeah, so it's really rough, and, you know, so, well let's, let me just comment on a couple of things there, number one is, yeah, I mean if you lose half the population of a big city, that city's going to be different, and it's going to be changed, and if you have big cities that are, you know, inherently part of a large, say, Roman Empire, that Roman Empire, the civilization around that Roman Empire will decline, and I guess if I were in your class I would say, well Professor David Ann, I guess one of the known and understood and agreed factors for the decline of the Roman Empire was this kind of plague disease, it was one of the things, and thus, any civilization which loses a lot of people, which becomes discombobulated because of a plague type pandemic is subject to that possibility. The other thing I wanted to mention to you is that it seems to me that we forget, that we are affected, our lives are affected, I mean collectively, the Roman Empire was definitely affected, but say two or three hundred years down the road, absence another, another plague in the interim, we can't even remember, we don't want to remember, you know what they say, the story of the war is told by the survivors, not the victims, the story of the plague is told by the survivors, not the victims. It's true, and in the histories of the Roman Empire, the plague has not received really that much tension, given classic history of the decline and fall of the Roman Empire, he doesn't really talk that much about the plague, so it's something that we're, you know, we're understanding now that we need to do more of, more study of in our kind of, and get into our regular kind of history text, our textbooks. So, but this plague actually was around a lot longer, it was around until about 750 CE, and you know, with the plague, the thing about the plague that's so kind of unique is it's, of course it's a bacterium, and the plague is so devastating that it will burn itself out eventually, I mean it did in Constantinople, and then it spread to other cities, but you have to have the right kind of conditions, and then you have to have, you know, honestly, you have to have live people in order to spread the plague, and so it eventually burned itself out, and now when we look at the Black Death, this is the great plague of 1349, the source, the origin is the same, but when we look at the economic impacts of the plague, of course we talked before about the great death of all, you know, maybe half of Europe died from this plague, and it's, but when we look at the economic impacts, you know, you have to imagine half of your population gone, and really historians estimate that this plague set Europe back maybe 300 years to about a thousand CE, it's certainly in population terms, that's what it did, it pushed it back to about 1,000 CE, and then of course it created all kinds of problems in the European economy, so we actually have a new law, the text of a new law that was passed in England in 1351, if we can bring that one up, this one, yes, so let's leave this up for a while, let me look at it and read it, so this is called the Statue of Labor is 1351, and this is called what happens is you get a lot of people dying, and now labor is scarce and it becomes more valuable, so workers want higher pay, you know, they want higher pay to take the risk, and they want higher pay because honestly they're in demand, and they're getting some higher pay, but the state, the crown does not like this, and the nobles are complaining about this because they'll have to pay their workers more money, and so they pass a law, and the law says because a great part of the people has now died, some seeing the straits of the masters and the scarcity of the servants are not willing to serve unless they receive excessive wages and others prefer to beg in idleness. We have seen fit to ordain that every man and woman of our kingdom in England who is able-bodied below the age of 60 years, not living from a trader carrying on a fixed crap, shall be bound to serve him who is seen fit so to seek after him, and he shall take only the wages which were accustomed to be paid in 1346 before the plague, and if any man or woman who does not do this, he should be sent and taken to the jail. Okay, so they're putting people who want higher wages into stocks. I mean, you can't make that up. It's amazing. We've come a long way, we've come a long way. You know, at least we're not doing that this time around. I think the government, we could say by comparison, the government is responding better than that, but so what happens to the European economy is the European economy is, of course, it's agricultural. You have this early agricultural revolution that takes place from about 1000 CE to the time of the plague. And this, what happens is they institute a two-field system where you leave one part of the field fallow and, sorry, a three-field system where you leave one third fallow, you plant two thirds, and then you're actually able to improve upon the two-field system and get more food. And so the population of Europe goes up. There's more trade. There's more kind of local and regional trade. And many of these towns people are actually engaged in some sort of manufacturer associated with those local and regional trade. All of that stops in the plague, just kind of like what's happening right now. Commerce basically grinds to a halt. And so those trade networks, first of all, you need a population involved in this kind of handicraft manufacturing, mostly textiles and other handicrafts. So you need a population to manufacture the goods. And you also need those trade networks. You need merchants and middlemen and the merchants are dying like flies as well. So what happens is it's really only in the 1600s with what we call the putting out system that European economy begins to come back. And what accompanies that is a dramatic increase in population growth in the rise of population in Europe in the 1600s. So you're talking another 300 years or 250 years after the plague for Europe to recover from this. It's devastating. Yeah, it's really bad. I'm looking at the dates for a minute. The first one you spoke about, the Justinian one, was 560 or something. The next one was 1350 or so. Let me do the math on that. That's 800 years later. So I would imagine that people had completely forgotten what happened in Justinian's day. And that by the time we get to 1350, it's a big surprise to them. And they really weren't prepared for it. Yeah, so what you have is you have chronicles that are written about the plague. One of the most famous chronicles from that time period is by Procopius from Caesarea. But this manuscript is lost in kind of the early medieval period. And I think it probably was available to people by the time of the plague in 1349. So yeah, there is some lost knowledge. And honestly, it wouldn't have mattered that much because the way that in terms of the medicine that was practiced, the medicine is basically the same in 542 as it is in 1349. And it's not very effective. If you don't know what causes the plague, and this is the key, if you don't know what causes it, then you can't really kind of stop the epidemic. And so yeah, that's definitely a problem. The other thing is we were going to examine pandemics. And I take it that neither the plague in 550 and change or the plague in 1350 and change were really pandemics. They were more regional. They were limited to Europe and the Middle East, maybe, but not, they were stretching all over the world. Right, they weren't, they didn't go all over the world. That's true. But they weren't contained within one nation. So I mean, we can debate about how you define a pandemic, but I think that I think you probably could call them a pandemic. So the thing is, so here's the real kind of controversy is what about the Spanish flu of 1918? That's the kind of the best comparison to the present day in terms of, okay, what happened in the Spanish flu? What happened to the American economy? The Spanish flu took place 1918 and really kind of lasted until early 1920 with various phases of it. But so the short answer is we don't have a lot of information about what happened because there's not very good economic data from that time period. For instance, we don't know what the unemployment rate was because that was statistic was actually not gathered by the Federal Reserve or by any of the states. And so we have to rely on newspaper reports. That's really, there was this study done by the Federal Reserve in 2007. And the study actually, they were forced to rely on newspaper reports from Arkansas and Tennessee and some other places. The study was done of the southern district of the Federal Reserve. And when we look at those, shopkeepers were seeing a decline of 40%, 50%. So in the short term, when the the influenza was at its worst, then things were shut down and shopkeepers were, they were having to just live without income. Maybe 50% of their income was simply gone. And so it definitely had an impact. But interesting, the studies that we've done of it have shown that those cities and those places that crack down early and shut everything down, their economies came back quicker and much more successfully than those places that tried to prolong, you know, tried to ignore it. You remember the Philadelphia example where the mayor and the director of the city just simply ignored it and it spread like crazy. Well, Philadelphia was, its economy was much hurt much more deeply than the economies. It's interesting. In Minneapolis, where I'm from, they shut everything down and the economy came back. Well, in St. Paul, which is right across the river, they didn't do as many quarantine measures and they had more trouble with their economy and more long term damage to their economy. So let me talk about in years to build the economy back. Well, so here's one more interesting thing about all of these is that because people die and workers die, then essentially you have inflation taking place and you have higher wages for workers because the labor becomes more scarce and it becomes more dear. But you know, so is that going to happen in this case? I'm not sure. Honestly, it depends upon how many people are just, you know, put out of work and actually actually die from the plague as to whether or not the labor value will go up. So the thing is, I think the same thing is going to happen with COVID is that those places that have planned for this, that have responded very quickly and in a kind of concerted manner, you know, everybody working together, they're going to be least hurt. So my guess is China is going to recover pretty quickly in terms of its economy. South Korea is probably going to experience a boom. Some of the other Southeast Asian nations are also going to experience a boom out of this. The United States, we were late to it. The president waited more than a month to implement any measures. So even though some states began implementing measures, there was nothing systematic about it. So I think we could be in for a lot more hurt than some other parts of the world that responded to this more effectively. Yeah, it may not be a zero sum game. What I mean is if you recover quickly in a global setting, then you're going to be way ahead of the guy who didn't. Because you're going to take some of his, you're going to eat his lunch going forward. And I think that's what's going to happen to us. Yeah, it's possible. I mean, I think the United States will still come out of this, but the lack of coordination here, the kind of the fumbles of the White House and the Trump administration, and especially the denial early on, my gosh, that just is so damaging to efforts to try to contain this thing. Now, of course, the stimulus package, the payments to people is the payments I don't think are going to be as big of a deal as the loans to small businesses and the work of the Federal Reserve. The loans to small businesses are going to be crucial because they have to keep people employed. And that's, you know, what we didn't do in the 2008 Great Recession is we allowed unemployment to spike up very quickly. Now, unemployment, of course, has spiked up even more quickly than during the Great Recession. But you could bring maybe at least some of these workers back into employment once they get these federal loans. And so we might see some of that unemployment mitigated because of these federal, these loans that require, you know, they're forgivable if you bring back your employees and you keep your employees employed for the time of the quarantine. And so that could prove to be very important. Now, the other thing is the Federal Reserve, the Federal Reserve dropped interest rates to zero. This I don't think is going to be effective in really producing much of a stimulus. The problem is interest rates were already too low in this economy. And this is quite frankly, this is something which needs to be laying at the feet of President Trump, because he pressured these, he pressured, you know, the head of the Federal Reserve to keep interest rates low when it looked like the Fed was going to be raising interest rates. And they should have raised interest rates because now they've got very little place to go to stimulate the economy in terms of interest rates. And interest rates are at zero. And does this remind you of another economy that drove interest rates down to zero during a crisis? And they've actually have hardly gone up from Japan. The Japanese economy, since the crash in 1990, has grown very little, if at all. And without the ability to stimulate economy by lowering interest rates, Japan lost that ability because they drove their rates down to zero. And you just, you don't have that kind of leverage. If, for instance, if the Federal Reserve had pushed interest rates up to, you know, 6%, and it would have slowed down the economy some, but then when the crisis comes, then you drop interest rates down to four or three, or even 2%, then you can create some real, there's some real difference there, you know. So this is the problem with the Federal Reserve and interest rates. But the other piece of the Federal Reserve, which is, I think, going to be much more effective, is the Federal Reserve can produce money. And they are busily producing a lot of money right now. They're offering credit to big corporations. They've essentially become the commercial credit kind of vendor for the entire nation and actually probably for the globe. They're going to be offering credit to other central banks as well. So you've got that part of it, and then the Federal Reserve is also commenced by American bonds, government bonds, T-bills. And they did this in after the 2008 crisis, and this was actually quite effective in kind of bolstering up industry in a very distressed time. So the Federal Reserve, you know, like I say, the interest rate thing, I don't think it's going to have much effect. And let's hope we don't end up like the Japanese in an economy that simply cannot grow after this. And the Japanese continue to spend, they spend, their public debt to GDP ratio is over 200%. It's about 220%. Ours is about 100%, but it's going to go up from there. And so when your debt levels get to a certain point, you're spending so much money to service the debt that you're not going to be able to use that money for other kinds of things. And, you know, economic stimulus is going to be less effective. So, yeah. Well, that leaves me with one question. And that is, you know, is it a bottomless pit in the lens of history? Is it a bottomless pit? No matter what your economy is, if you spend what you don't have, and you keep on spending and printing and spending and printing at the end of the day, you have to somehow get to pay it back. You can't just spending without some obligation or some secondary effect to pay it back. And I wonder, in the historical review of this, what happens when a country hits a crisis like this, and they spend everything they have and more and more and more than that, that's got to have an effect on them going forward. What has happened historically? And what would you imagine? Well, sure. So you have the Japan case, and they've been able to float that much debt, I think, and keep the interest rates or the rates on their bonds relatively low because they still have a viable economy. You know, they still have a strong manufacturing sector, and there's still a lot of money in the economy. And almost all of that debt is actually generated by Japanese. The bonds are being bought by Japanese, so they can control that, and there's some sense that, okay, I'm Japanese, I'm investing in Japan. I'm not worried about the country defaulting because they won't default on me, right? There's a sense of loyalty that drives some of that investing. In the United States, right now, we have our bond markets are still pretty active, and other countries are buying our bonds, even now. So what could happen is the cost of the federal government to get other people to buy our bonds might go up as people begin to lose faith in the American economy as a global leader, and if that happens, then people will be less likely to buy those bonds, and then you'll have trouble, then you'll have trouble generating. This is what happened in the 1970s, and you'll begin to have inflation. Now, we're not there. That's not even close to there, but so big gets historically, you know, there's a book that was published recently that's called This Time It's Different, and this book actually mapped national debt defaults through like from the 1800s through the present, and it's astonishing. I mean, you look at the countries that have defaulted and over time they become weak, you know, second-grade, third-grade powers. For instance, Germany, take Germany after World War I. Germany had massive debt, and they were printing money. I suppose a little bit like the Fed is doing right now, and they continued to print money, and the value of that money is simply declined and declined and declined, and they had this enormous inflation. I mean, by 1923, you know, to buy a cup of coffee, you had to bring a bushel full of rights marks to the store to buy a cup of coffee or to buy a loaf of bread, and so we don't have that. We're just the opposite. I think we'd like to see a little bit of inflation, so that hasn't happened yet. But over time, if we don't demonstrate kind of the power of the economy, the efficiency of the economy, the faith of the people in its government, if we lose that and we've lost some of it already actually, then, you know, I'm not saying it's going to happen in the United States, but anything's possible over time, and it's something to be aware of. I mean, we could very quickly become a second-rate power if we get to indebted. Well, that goes to one other thing I think we need to discuss before we close on this, and that is, you know, you mentioned how the Roman Empire, you know, it declined, and that was to at least a substantial part to the plague. So, I mean, we know that this has political implications. Now, what's really funny about this one, this one's different, because we have a president who doesn't tell us the truth and who doesn't do anything, really, he hasn't done anything, and he's been, aside from being late, even now, he's not doing anything. He spends his time blaming everyone, and yet, you know, his polls are up, his base still, they still love him, and I wonder what the natural, you know, the natural consequence of this is going to be. Are they going to continue to love him to the point where we have more years of Trump, or is this going to have a, again, through the lens of history, or is this going to have a very serious effect in terms of punishing him and the Republican Party for leading us to where we are now, unprepared and uncaring and unable to deal with the crisis. Is this going to change things dramatically? I know there are multiple, multiple effects all happening at the same time, but what does history tell us about where the political animal goes in the next, say, six or eight months, the next couple of years? Right. So I can think of two examples, one kind of very different examples. So let's take the 1896 election where William McKinley, Republican, ran against William Jennings, Brian, Democrat, and the country was still in a depression, a very serious depression, unemployment of over 10%, a significant drop in GDP, lots of businesses closing down, lots of unrest, strikes, and violence between labor and police forces, and just a very disturbing time. And one would have thought, and so the established powers, of course, that the Democrats were in office in that time, if your Grover Cleveland was president, so you might say, well, Cleveland was blamed, and then McKinley won because the Republicans were out of power and now they could come back into power. And I think there's some truth in that. But the other thing about this is that the Democrats ran as a very populist party in the 1896 election. They ran on the side of farmers and redistributing income and adding silver to the monetary system to increase money supply so that farmers and other people could make loans at low interest rates. And it didn't work in the election, except now the economy improved in 1896. That's so complicated. But the economy improved in 1896 and that certainly helped, I think McKinley, who was arguing status quo, and probably hurt William Jennings' grind because in the end, many farmers actually voted for McKinley. So you have that situation where kind of the status quo was looked to coming out of a very serious depression. And then you have the Great Depression of 1920, starts in 1930. But you have a Republican leader. You have Herbert Hoover, who is president of the United States. And Hoover was one of these guys who just didn't do anything. And because the government was controlled by Republicans, they didn't do anything. And they just let this thing go on. I mean, you know, it started in 1930, business closures, bank runs. And Hoover very belatedly puts into place a $500 million fund for farmers and businesses. But still, Hoover didn't do much of anything to help people, right? And Roosevelt runs and says, hey, I'm going to help people. I'm going to mobilize the institution of government to help people. And Roosevelt selected in a landslide. So now in this case, the government has actually acted. Because it's quite frankly, it's divided government. Who knows what would have happened if the Republicans had been in charge of the House of Representatives. They might not have done anything, because when the Republicans in the Senate first saw that this was going to be a crisis, what did they say? Let's give another tax cut to corporations. It was a very ideological response. Trump didn't even respond that way. Trump said, well, we need to get this money out to the common guy. You know, we need to go big on this. So it's hard to say what's going to happen in this election. Trump has a lot of baggage, of course. And one would assume, look, you know, you've got a president who's been incredibly unpopular, historically unpopular, up to this point, who was actually impeached. And there was a trial in the Senate that's very clearly that he abused his power. You have a guy who has violated the Constitution with his emergency declaration on the wall. So you've got a guy who has a lot. And after the Charlottesville riots in 2017 said, well, these white supremacists, there's good people among them too. And, you know, those things all are a drag on him. And in a normal election cycle, you know, the Democrats, once they come out of the convention, of course, you know, the old saying is that people don't really think about this until September 1st, right after Labor Day. In a normal cycle, the Democrats could, you know, pile on him when and do all these ads and everything and bring down his numbers. So in a normal cycle, I think the Democrats probably, I think somebody like Biden can win. The fact that Trump has actually agreed to this big stimulus package and wants more has served him well, and his numbers are improving. He's still losing in important states. He's still losing in some polls in Wisconsin and Michigan. I'm not sure about Pennsylvania. I haven't seen a poll on that recently. So it's hard to say how this is going to play. But, you know, the thing is we're talking in April. And if we have 100,000 deaths by July, and the economy really craters like it looks like it's going to, then how will people feel in November? You know, he's got some, and these daily, you know, briefings to that, you know, the American people are going to get tired at looking at him. So this is not going to go on forever. And so I think in the short run, it's helping him. In the long run, over six months or nine months, it's hard to imagine that he's going to be. The virus will have its way. The virus will have its way. We're in the middle of a dynamic here. It's changing every day. And, you know, it could go up to 100,000, 240,000, 50,000. It could go up to half a million. I think at the end of the day, we may have the worst case result. And at that point, it's going to be the media, the social media, the way you approach the public, how gullible the public may be. It's going to be what Biden has to say, what Trump has to say. And it's going to be the blame game. Here we are in a pickle. Let's see if we'll throw the blame on the wall and see whether it sticks. And everybody's going to be trying to do that. If Trump can deflect the blame, you know, and I think that makes it different from previous experiences because there's so many ways that you could deflect the blame and confuse the public. And that's going to be the test between the time the thing hits rock bottom, which is probably going to be soon, and the time of the election if there is an election. Would you agree with me on that? Yeah, I think it's an incredibly dynamic situation. But the thing about the blame stuff is politicians have been doing this for centuries. In the 1896 election, William Jennings Bryan, he didn't actually campaign. He sat on his front porch and gave speeches. But then his campaign lieutenants went out and they sowed such fear into the minds of Americans about William Jennings Bryan's proposal for the minting of silver. I mean, they really did. They did a very effective propaganda job of, you know, frightening the population. So it's, this is nothing new. Yeah. Okay. Well, we'll watch it. You and me will watch it. I'm looking forward to our next discussion because I know there'll be a lot more to discuss to compare it against things that have happened in history and to look at it through the lens of history. Thank you so much, John. John, David, and you're in one specific universe. Okay. Take care, Dave. Be well.