March 21, 2020 Reading Time: 10 minutes

After only a few months of a quick global spread of the Wuhan China virus (“COVID-19”), evidence is mounting that it won’t prove as deadly as first projected; yet there’s still a high level of hysteria and an ominous spread of deleterious economic and public health policies, amounting to incarceration, monetization, and nationalization. What’s needed instead – if health and wealth are desired – is deregulation, tax relief, and capitalism.

It’s good news that some “red tape” has been removed to allow drug makers and health care pros to better (and more freely) do their jobs. That can improve and solve things, but it shouldn’t take an emergency for people to have more liberty, and the real problem today is the reverse: liberties are being lost out of an irrational obsession with safety and security, with a puerile need for a “social safety net” immunizing us from every change and risk. 

This phobia has led Mr. Trump and his team to close borders and declare “war” in peacetime, which means to declare war against citizens, even invoking a never-repealed Defense Production Act (1950) that gives the executive branch vast power to commandeer resources, nationalize industries, and impose wage-price controls.

Tragically, bipartisan support exists for this approach. This week the governors of California and New York – each of whom is a Democrat eyeing the prize of a future White House gig – mandated near-complete shutdowns of nearly all social-productive activity in their regal realms, including “non-essential business.” They and other state governors also want to use the National Guard, while mayors of major cities (Los Angeles, New York, etc.) impose curfews and adopt measures that are akin to martial law. Meanwhile, many officials are emptying prisons and refusing to fully enforce laws against shoplifting.

It’s well known that one side of the American bipartisan divide (Republican) favors policies reflecting nationalism while the other side (Democrat) favors policies reflecting socialism

That’s the case here too, in dealing with COVID-19. Sometimes the two sides clash, but we also all observe them finding common ground. A synthesis of the two, if you know your history, would be national socialism. Look it up and see whether it’s really something you want or, regardless, whether it’s something you’ll eventually get. 

Initially, according to an influential but catastrophist study from London Imperial College, which was widely promulgated by the World Health Organization (WHO), COVID-19 was estimated to have a global death rate of 3.4% for those eventually infected, peaking in mid-2020. But that high estimate came from a mere hypothetical model based solely on China’s early, most intense experience with COVID-19. 

Even if the actual, future global death rate of the virus becomes ten times the 0.1% historical death rate for those who contract the common flu each season, it would be 1.0%, or roughly 1/3rd of the 3.4% estimate. Even the New York Times, prone to sensationalizing COVID-19 out of political bias, reported recently that “Coronavirus Death Rate in Wuhan is Lower Than Previously Thought.” 

Globally, so far, Johns Hopkins University reports 255,305 cases of COVID-19 infections, with 157,510 of those (62%) unresolved, 87,351 (34%) recovered, and 10,444 (4%) ending in death. Many of those who’ve died were older folks and/or those with pre-existing conditions (diabetes, heart and respiratory diseases, etc.). Very little attention has been paid to the fact that there are many survivors, probably because it’s not sensationalist enough; yet epidemiologists say survivors provide valuable data for determining optimal treatment. Most of those who recovered weren’t spending their prior weeks in self-exile or home hibernation, as public officials now demand; older people are more likely to live alone.

An informative, compelling scientific analysis of COVID-19 was issued recently by Dr. John Ioannidis, professor of medicine, epidemiology and population health, of biomedical data science, and of statistics at Stanford University, and co-director of its Meta-Research Innovation Center. He contends that the COVID-19 event is a potential “fiasco in the making,” because decisions today, public and private alike, are not sufficiently based on reliable evidence or sound science, and the evidence suggests strongly that this is a virus likely to generate far less dire effects than many now believe. For Ioannidis:

Reasonable estimates for the case fatality ratio [of COVID-19] in the general U.S. population vary from 0.05% to 1%. . . If 1% of the U.S. population gets infected (about 3.3 million people), this would translate to about 10,000 deaths. This sounds like a huge number, but it is buried within the noise of the estimate of deaths from “influenza-like illness. If we had not known about a new virus out there, and had not checked individuals with PCR tests, the number of total deaths due to ‘influenza-like illness’ would not seem unusual this year. At most, we might have casually noted that the flu this season seems to be a bit worse than average. The media coverage would have been less than for an NBA game between the two most indifferent teams.

(See also his paper “Why Most Published Research Findings Are False,” cited more than 8,000 in the literature.)

Consider some other recent context. The H1N1 virus (aka “swine flu”) originated in Mexico in March 2009 and by mid-March of 2010 the U.S. Centers for Disease Control and Prevention (CDC) estimated that 59 million Americans were infected; of that, only 265,000 (0.4%) were hospitalized while 12,000 died. The death rate from H1N1 (0.02%, or total deaths divided by total infected) was twice the long-term average death rate of the common flu, but still miniscule. 

As of today, the U.S. has 17,962 confirmed cases of COVID-19 and 239 deaths from it, a fatality of 1.3%. Certainly, the case count will rise, perhaps by a lot, but to anything close to 59 million? Unlikely. COVID-19 isn’t yet like the H1N1 virus, although it’s now 1/3rd as old. 

In 2009-10, the media infrequently and quietly covered the “swine flu;” there was no widespread phobia, no government bans on peaceful assembly, no shutdowns of economic activity, no stock-price crash. 

Given the impeachment hysteria of 2018-20 and the partisan motives that drove it, perhaps the main difference between the mild reaction to the more lethal H1NI virus in 2010 and the hyped, heated reaction to the Wuhan China virus in 2020 is the difference between President Obama, who was adored by most of the media, and President Trump, who, we know, is reviled by most of it.

AIER has been an important, sober, and objective source of evidence, analysis, and context for COVID-19, tracking and reporting the vital information which seems lost on the sensationalists in media and the power-seekers in politics. It’s also been careful to consider a full context, not just the bio-medical aspects but also the social, economic, financial, and political aspects. It knows we mustn’t be myopic. 

Other good sources include Johns Hopkins University and Our World in Data. I’m an economist and political scientist, not an epidemiologist or virologist, but I also know that data and models can be manipulated by credentialed ideologies seeking to grind an axe or push a pre-virus agenda. 

There’s good reason to believe that such manipulation is happening with COVID-19, and even if it is a minor factor, it’s a major factor if heavily relied upon by public officials wielding political power and imposing potentially harmful policies on millions of people.

Now let’s briefly examine the three main public (and private) policy approaches to the arrival of COVID-19 in America: incarceration, monetization, and nationalization.


To “incarcerate” means to imprison people who are guilty and justly convicted of legally criminal acts. That’s not quite what’s happening now, but it isn’t far from the truth either. The policy now spreading nationwide is called “lockdown,” a prison term; some call it “shelter in place,” which seems less harsh, but isn’t if it’s enforced or its disobedience is penalized. The technique of “house arrest” incarcerates people in their abode and restricts their freedom of movement, but such people nonetheless have been convicted of criminal acts, and if they violate the conditions of their home confinement, they risk more severe imprisonment. Today, in contrast, we’re witnessing a near-universal house arrest of innocents, of people presumed to be guilty (i.e., infected, thus dangerous to others) unless they can prove their innocence, which is a direct contravention of fair jurisprudence; moreover, this is happening without much complaint, opposition or civil disobedience.

A nationwide government mandate of near-universal house arrest is not only a brazen assault on civil liberties, but also on economic liberties, for it violates the freedom to peaceably assemble, to associate, to produce in groups at firms, to interact, exchange, trade, profit, and prosper. It undermines the confidence people might have in the intelligence, integrity, and poise of their leaders; it makes the future more difficult to predict, thus freezing activity, and more difficult even than predicting the future path of the familiar, bell-shaped disease curve. As such, it erodes the preservation of both wealth and health, not to mention sabotaging people’s natural and healthy desire to socialize, entertain, recreate and “refuel.” It’s certainly no solution to the problem of COVID-19.

There’s some common sense, of course, in identifying, testing, and treating the infected, if necessary even to declare publicly that people will be held liable if they know they’re sick and yet knowingly interact with and jeopardize the health and life of others. Quarantines are justified if selective and fact-based, even for restricting entry from those arriving from suspect areas; but to indiscriminately quarantine everyone is unjust, impractical, and destructive. For COVID-19 already, death rates are low and recoveries high, so there’s good evidence that, like prior viruses, human interaction (not “social distancing”) may help us develop antibodies and immunities, all of which is lost if we’re forcibly confined to homes.

Is there also no possible manifestation here of the law of unintended consequences? Consider only the possible viral effects of compelling millions of college students, just back from intensely congregating during “spring break,” to board thousands of airplanes to go home and intermingle with parents and grandparents. The young can carry a virus with low infection rates, but the elderly are highly vulnerable; COVID-19 death rates are high in Italy partly because of its socialized medicine (which limits the system’s capacity, quality and responsiveness) but also because it has one of the world’s oldest populations.


Monetization, another policy adopted in the wake of the arrival of COVID-19 entails the U.S. government (the Fed, Treasury, and various agencies) printing, borrowing, and spending vast sums of money – $1-2 trillion at latest count – on firms lacking sufficient revenues only because employees and customers were told to vacate and hibernate, and on citizens who’ve been dismissed from jobs and now do little or nothing at home (its untrue that “everyone can work from home” or that those doing so work as productively).

Since when does the mere creation of money – especially unbacked, inconvertible fiat money – create employment, wealth or prosperity? It doesn’t; it can’t; it only means that real wealth is being redistributed arbitrarily, not created freely and objectively. Wealth, we should all know by now, isn’t multiplied by dividing it, nor by rearranging it via monetary manipulations. In fact, these manipulations make production less likely, because the bias of issuance, including through public lending, is towards subsidizing and rewarding the illiquid and/or insolvent, at the expense of betters. Money represents wealth; it is not itself wealth. Is this so difficult to grasp?

Consider also the policy of zero interest rates, now almost universally adopted by major central banks; everyone seems convinced that this should “stimulate” the economy by stimulating borrowing; ignored is the supply side of credit markets, and the lack of incentive for creditors to lend when they aren’t compensated. Is this difficult to grasp? Moreover, should firms and people borrow more when they’re shut down and making less or no money? The Keynesians love the zero-interest-rate policy, which is a major reason we’re seeing it adopted; they say it entails a welcome “euthanasia of the rentier” (the despised lender); now watch, as it also euthanizes the economy and credit markets.

Likewise, issuing more public debt and placing it on an already-indebted economy compelled to produce less is irresponsible and self-defeating. More leverage means more debt relative to equity or net worth; more leverage is certainly not more wealth. Is this difficult to grasp? There is also no so-called “government spending multiplier,” despite what Keynesians like Paul Krugman have been claiming and preaching for decades. There’s no magic wand whereby a dollar spent by politicians in the public sector creates wealth relative to what producers achieve in the private sector by spending the same dollar. Such mystical powers “exist” only in Potterism, not in capitalism (or reality). 

Not only does the issuance of fake money and debt create no real wealth, but those who believe it does so also seem to believe that wealth creation itself is a “problem” to be “solved” by curbing or stopping it. This is the Keynesian myth that economic recessions reflect “deficient demand,” which allegedly results from previous “overproduction.”

So-called “general glut theorists” have been around for centuries, at least since the non-scientific Reverend Malthus (in the late 1700s) and persists to this day despite repeated refutations (by J.B. Say, Frederic Bastiat, Henry Hazlitt, etc.). It’s incredible that anyone today would still believe it, especially in today’s context; is the arrival of COVID-19 proof that the world previously “overproduced?”

Yet the U.S. Secretary of Energy recently said that he and Mr. Trump were trying to reduce oil output, to boost the oil price. Similar policies, adopted in the early 1930s, transformed a recession into a multi-year Great Depression. Most notably, FDR’s New Deal AAA (Agricultural Adjustment Administration) paid farmers not to produce, even to burn crops, slaughter farm animals, and pour milk down drains — all to boost agriculture prices and keep the supply-side in business. Meanwhile the demand side of the market, the millions of consumers suffering in bread lines and soup kitchens, faced mass unemployment (25%, peak, 1933), due to a similar Keynesian scheme of keeping prices (wage rates) artificially high.


Finally, consider the growing calls for the U.S. government to nationalize and/or control American businesses, in whole or part, allegedly to fight COVID-19. This is the hoped-for policy of the likes of avowed anti-capitalists Bernie Sanders and Elizabeth Warren, but now Mr. Trump also wants to wield the power. He’s perfectly comfortable with it.

This week Mr. Trump invoked the Defense Production Act (1950), not to fight a war but to fight a virus, which is odd, because virus fighting should be the job of chemists, virologists, and epidemiologists. 

What motivates this? The DPA gives the U.S. executive branch near-limitless power to impose wage-price controls, commandeer private resources, and nationalize firms and industries. The DPA neither cures a virus nor boosts investor confidence. It doesn’t create wealth but destroys it. It says when times are tough, policy should be based on emotion, coercion, and socialism, not on reason, incentives, and capitalism. President Truman used the DPA, but it didn’t help the U.S. win the Korean War.

The scheme of government in the U.S. taking shares or board seats in companies sometimes relates only to the policy of publicly subsidizing or bailing them out. But the subsidies and bailouts are themselves unjustified; two wrongs don’t make a right. Is this difficult to grasp? 

Other people argue that the subsidies and bailouts are warranted if the illiquidity, insolvency and failures are due mainly to the government’s policy of mandating closures. But that policy is itself unjustified; again, two wrongs don’t make a right. We also hear that firms receiving government financial aid or loans shouldn’t be free to pay executives as they wish, nor be free to pay their shareholders, whether by dividends or share buybacks. 

Yes, being a creditor or owner of a firm implies some control, but government bailouts, as mentioned, are unjustified, as is the policy of government ownership, and so also is the policy of decreeing how a firm shall be managed or how its executives and shareholders should be paid. Is this difficult to grasp?

When these three policies take hold, production plummets, and the full carnage is finally tallied, just watch as the culprits are again held blameless, indeed, extolled, as they were in 2008-09, as they insist (as they did then) that things would have been worse had their policies not been adopted. 

Richard M. Salsman

Richard Salsman

AIER Senior Fellow Richard M. Salsman is president of InterMarket Forecasting, Inc. and a visiting assistant professor of political economy at Duke University. Previously he was an economist at Wainwright Economics, Inc. and a banker at the Bank of New York and Citibank. Dr. Salsman has authored the books Gold and Liberty (1995), The Collapse of Deposit Insurance and the Case for Abolition (1993) and Breaking the Banks: Central Banking Problems and Free Banking Solutions (1990), all published by AIER, and The Political Economy of Public Debt: Three Centuries of Theory and Evidence (2017).  His fifth book – Where Have all the Capitalists Gone? Essays in Moral Political Economy – was published by AIER in 2021.

Dr. Salsman earned a B.A. in economics from Bowdoin College (1981), an M.A. in economics from New York University (1988), and a Ph.D. in political economy from Duke University (2012). His personal website is


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