US: reopening economy

Unplugging

On Thursday, US President announced that he is going to gradually steer the country out of the “full armor” state. He shared a three-stage plan which suggests that 29 states are now qualified to lift most of the quarantine measures within a month’s time.

“A national shutdown is not a sustainable long-term solution”.

Two questions

The authorities of the US are trying to minimize the time during which the country stays economically frozen because each day under quarantine costs a lot and contributes to the accumulating risk of recession. That is understandable.

The question is whether the states are ready for that: in some of them, the infections are still rising. Plus there is still a big problem to actually measure these infections because the testing methodology and equipment are not yet fully adequate.

Another question is: how effective this plan may be if the federal government practically shifts the responsibility to set the guidelines and monitor the lifting of the virus restrictions to the state authorities. There is generally very little detail and even less federal support presented in the several-page document Donald Trump referred to.

Reaction

Although similar doubts were expressed by observers and the prevailing reaction among them was unconvinced, the market took this news as a relatively positive sign. The US dollar eased a bit, gold eased a lot, stocks climbed.