Two articles from Bill Gates about Covid19 that are worth reading

The first is an AMA:

A therapeutic could be available well before a vaccine. Ideally this would reduce the number of people who need intensive care including respirators. The Foundation has organized a Therapeutics Accelerator to look at all the most promising ideas and bring all the capabilities of industry into play. So I am hopeful something will come out of this. It could be an anti-viral or antibodies or something else.

One idea that is being explored is using the blood (plasma) from people who are recovered. This may have antibodies to protect people. If it works it would be the fastest way to protect health care workers and patients who have severe disease.

And speaking of convalescent blood therapy, this is also worth reading:

A simple and medically feasible strategy is available now for treating COVID-19 patients, transfuse blood plasma from recovered patients. The idea is that the antibodies from the recovered patients will help the infected patients. The idea is an old one and has been used before with some success.

And this is the second article by Bill Gates, worth reading in full, and so I will not provide an excerpt. Consistently applied restrictions on movement across the entire country, a clear strategy on how to prioritize testing, and a clear plan on developing a treatment and a vaccine are the key takeaways. Applicable mostly to America, or written with America in mind, but really works across the entire planet. India has applied the first of these as well as she could have.

 

Understanding interest rates

Simran, a first year BSc student at the Gokhale Institute writes in with this question:

Why is it that some developed countries have 0% interest rates? How are they sustained and is that a mark of a developed country? Is it good/ bad?

Is it related to their inflation rates? Because that’s the only thing I could think of.

They (the BSc students) will have macro only in the next semester, and I’m sure this question will be dealt with then. (I can’t resist adding that the question of how those classes will be conducted is topmost on my mind right now!)

But how would you go about answering this question when your audience has not been subjected to a semester’s worth of classes in macroeconomics?

The challenge I have set myself is that I will not refer to a single economist, or theory, while answering this question.

So: let’s think of it this way, Simran – you have a hundred rupee note with you, and I need a hundred rupees. So I approach you, and ask if you would be willing to give it to me. We’re both students of economics, you and I, so you quite reasonably ask what you will get in return.

Since I have nothing to give you right now, I say well, how about this: I’ll take a hundred rupees from you today, and give back an amount more than that a year from now.

That excess amount, obviously, is the rate of interest. But how much should it be? You would like two hundred rupees a year from now, and I might propose a hundred and one. Neither one of us is likely to accept the others proposal, and so we start looking for other people to cut a deal with.

You start to look for folks who are open to the idea of borrowing a hundred rupees from you, and returning two hundred (or thereabouts). I, on the other hand, start to look for folks who will lend me a hundred, and accept one hundred and one from me.

We, you and I, are now participants in the financial markets of our country. You are on the lender (or supply) side, and I on the borrower (or demand) side.

If there are a lot of people on Team Suppliers, you guys will find it difficult to find the same number of people willing to borrow. And so some of you might decide to cut the rate at which you are willing to lend. And if these financial markets are efficient – what that means is people are easily able to find out the rate/price at which transactions are taking place – then the rate of interest will come down.

Ask yourself what might happen if there are, instead, a lot of people on Team Borrowers.

Well, during these times, can you imagine a lot of people looking to borrow? I, for one, can’t imagine people wanting to set up factories, buy new TV’s, buy new houses etc. There’s hardly anybody playing on Team Borrowers!

But practically everybody in these financial markets is on Team Lenders! And so rates are going to come down:

Headline from Business Today

In fact, right now, there are so many people on Team Lenders right now, that interest rates are not just down to zero, they may well end up being negative! That’s right, you will have to pay to put money in the bank in some of these economies, and you will be paid if you borrow. Boggles the mind, but true!

And kudos for asking if interest rates are linked to inflation – yes, absolutely. But I’ll take a rain check on answering this question right now, simply because it takes us into really deep waters. Macroeconomists are prone to start squawking indignantly whenever they start thinking about inflation and interest rates (myself included), so this is best left for another day.

But for the moment, here’s the key takeaway: there are far too many people on the lending side, and nowhere near enough folks on the borrowing side, and so the price of this market – interest rates – will fall. More so in developed countries than in developing, perhaps, but they’ll fall the world over.

You’ll be able to power through the videos in this section of the macro class on MRU easily enough.

If you, or anybody else who has seen these videos, has any questions, shoot away!

 

Economic Policy Responses: What are India’s options?

V. Anantha Nageswaran and Gulzar Natarajan write in the Swarajyamag about what India’s policy responses can be. They advise erring on the side of too much, rather than too little:

…the nature of the crisis threatens to create economic, social and health distress among the low-income and poor households. This can have potentially adverse consequences for social and economic stability for many years to come.

Therefore, Indian policymakers have not much to lose by tearing up the conventional playbook. The risk-reward ratio is in favour of being bold rather than timid.

Even if they are not as effective or, worse, even if they backfire, history will not judge them harshly for trying harder and unconventionally to support the economy now.

Please go through the entire article carefully, it is worth your time.

Niranjan Rajadhakshya informs us about the history of quantity planning in India.

Just consider some of the key questions that are being asked right now. How many ventilators are available? Are there ample food stocks? Can more hospital beds be made available? How many masks be produced in the next few weeks? Can the production of testing kits be ramped up? It’s all about quantities, quantities, quantities.

P Sainath has some suggestions (they come towards the end of this article)

The very first thing that needs doing: preparing for emergency distribution of our close to 60 million tons of ‘surplus’ foodgrain stocks. And reaching out at once to the millions of migrant workers and other poor devastated by this crisis. Declare all presently shut community spaces (schools, colleges, community halls and buildings) to be shelters for stranded migrants and the homeless.

Shankkar Aiyar in The New Indian Express on the triage of relief, rescue and recovery.

And finally, Gautam Chikermane with 10 different suggestions, of which I find the last one to be currently dramatically under-rated:

Embed entrepreneurs and managers in crisis management. The corporate sector is not just about money or physical infrastructure. It is equally about infusing efficiency in projects, operations, crises management, innovation and entrepreneurship – that’s how they are trained, that’s what they do, that’s who they are. While hard money will flow easily, this expertise must not be held back by turf or administrative frictions. Patriotism doesn’t have a net worth and is not restricted to one sector (the government) alone. A start can be made by setting up a task force of technology entrepreneurs and big businesses that can support government initiatives with knowledge and insights.