The costs of fighting this crisis will be with us for years

We need to adjust to a world of more debt, less globalisation and greater digitalisation

Michael Mackenzie

Much rests with the recent actions of central banks such as the US Federal Reserve, above, which are buying government and corporate debt at a rapid pace © AP

Investors considering the coming decade can rely on one clear outcome from the great coronavirus shutdown: debt and plenty of it, with central banks bearing a significant amount of that burden.

The pandemic has triggered trillions of dollars in emergency spending. No one can quibble with governments trying to soften blows from shutdowns of economic activity.

Nor can they argue with companies raising cash reserves so that they can bridge gaps in revenues to make it to the eventual restoration of business activity.

The result is a likely surge of 10 to 15 percentage points in the ratio of debt to economic output for many countries as they finance extra spending.

This week, Moody’s estimated that the US government’s announced stimulus efforts “along with materially weaker revenues and growth” stand to propel the federal fiscal deficit from 4.6 per cent of gross domestic product last year to more than 15 per cent this year.

The legacy costs of fighting the virus, coupled with the biggest global economic contraction since the 1930s, will shape financial markets for much of the 2020s. Investors are on guard against so-called debt monetisation, where central banks enable unsustainable fiscal spending.

In such an environment, expect gold to benefit and currencies to suffer.

Dean Turner, economist at UBS Global Wealth Management, argues investors should focus on three factors from here: a world of more debt, less globalisation and greater digitalisation.

All economies will exit this crisis with much higher levels of debt, which will probably lead to a period of financial repression and higher taxation, both on corporations — and perhaps the digital economy in particular — and on personal wealth,” said Mr Turner.

With governments trying to narrow deficits, there is common ground among global policymakers for closing the loopholes in tax codes used by multinationals. A move to reduce the reliance on global supply chains following the crisis will also entail higher business costs, though some of those extra overheads may be offset by the greater use of automation, helping to preserve firms’ returns on capital.

All told, this suggests just modest growth and therefore limited upside for inflation, once the pandemic is finally behind us. Some observers anticipate that the recovery will emulate the path followed in the wake of the financial crisis: an initial economic rebound — where the more cyclical sectors of the stock market do well — but one that ultimately fades.

Much rests with the recent actions of central banks, which are buying government and corporate debt at a rapid pace. Some of the business support packages announced in recent weeks will sit heavily on public sector balance sheets, placing a further constraint on economic growth.

Central banks will do their best to alleviate debt loads through asset-purchase programmes and low interest rates. The balance sheets of the US Federal Reserve and the European Central Bank are currently north of $6tn and €5tn respectively. That is equivalent to about a 13 per cent share of the global economy, according to Unigestion. Expect that proportion to expand a lot further, as policymakers keep the borrowing costs of indebted countries and companies low for an extended period to allow growth to return.Coronavirus business update

The hope is that an eventual and sustained recovery in economic activity will ease the debt burden over time. As seen after the last financial crisis, creating a robust recovery that includes rising consumer prices is tough when debt loads and demographics are already challenging.

A bigger central bank presence in markets also limits efforts at normalising policy, given the sensitivity of asset prices to even a small rise in long-term interest rates.

Steven Blitz, economist at TS Lombard, reckons the “mammoth” deflationary forces of technology advances and ageing societies will intensify, offsetting loose monetary policy and the higher prices that will come as globalisation unwinds.

This should encourage investors to buy the shares of companies that are expanding quickly, and have pricing power for their goods and services, against a backdrop of slower economic growth.

James Paulsen, chief investment strategist at The Leuthold Group, says the most likely scenario is “another economic recovery with feeble growth, much like the last one”, held back by factors such as weak demographics.

“This should keep the defensive nature of growth stocks in favour,” he adds.

The combination of extended bond-buying programmes and greater fiscal spending has helped absorb shockwaves from the virus’s hit to the global economy. Investors can breathe a little easier for now, but looking beyond the pandemic is difficult.

The prospect of a more indebted financial system, with increasing distortions that encourage market and sector herding, is unlikely to lead to a genuine and powerful economic upswing.

Beijing hits back at Trump call to block US pension fund investment in China

Investors’ fears rise that trade conflict could spread to financial markets

Tom Mitchell in Singapore and Don Weinland in Beijing

Donald Trump’s latest salvo sent a signal to international investors and Chinese officials, say analysts © Bloomberg © AFP via Getty Images

Donald Trump’s order to stop the US government’s main pension fund from investing in Chinese equities will only hurt US investors, Beijing has warned as trade tensions between the countries threatened to turn into a “financial fight”.

Beijing officials have been worried since late last year that Mr Trump would follow up his two-year China trade battle with action in financial markets.

The latest shot in that conflict was fired on Tuesday by the US president. In letters to the head of the government’s main pension fund, which Mr Trump does not directly control, administration officials urged the Federal Retirement Thrift Investment Board not to invest in index funds that buy Chinese shares.

The president’s instruction lacked the drama of the trade war’s repeated declarations of punitive tariffs and counter-tariffs that have rocked global financial markets for most of 2018 and 2019. But the latest salvo still sent a clear signal to international investors and Chinese officials, who have been bracing themselves for such a move.

Trump administration officials linked the action to the coronavirus pandemic, which the US and Chinese governments have blamed on each other in increasingly bitter exchanges. They warned the FRTIB that the Chinese companies it backed could be sanctioned for allegedly “culpable actions of the Chinese government with respect to the global spread of the [coronavirus]”.

On Wednesday, a Chinese foreign ministry spokesperson said Mr Trump’s move would only hurt US investors. “China’s capital markets are increasingly favoured by global investors,” Zhao Lijian said. “Using national security issues as an excuse to keep US investors from entering the Chinese market will only cause them to miss the opportunity.”

Thomas Fang, head of China global markets at UBS, said this was “quite a credible risk”.

“What we’re watching is: will this extend beyond certain federal investment funds to the broader investment community? This is not a positive sign,” he said.

In a speech in November, Lou Jiwei, a former Chinese finance minister, predicted that US-China tensions would flare up in a “financial war characterised by the use of long-arm jurisdiction” by the Trump administration.

In a commentary published this month, the PLA Daily, published by the People’s Liberation Army, warned of the need to “safeguard national financial security” and prepare for “smokeless wars in the financial markets”.

Chinese officials had hoped that moves to open the country’s financial markets to larger inflows of overseas capital would help pave the way for a lasting trade deal. In February, when economic disruption caused by the coronavirus pandemic peaked in China, foreign investors still poured $10.7bn into the country’s $13tn bond market.

The Trump administration, however, is signalling that it views portfolio investment flows into China to be just as undesirable as the migration of US supply chains to the country and Chinese investment into the US. Robert Lighthizer, the US Trade Representative, criticised the “lemming-like desire for efficiency” that had caused many US companies to move operations overseas, in a comment article published in the New York Times this week.

“The era of reflexive offshoring is over, and with it the old overzealous emphasis on efficiency and the concomitant lack of concern for the jobs that were lost,” he added.

The Trump administration’s greater scrutiny of Chinese acquisitions of American companies on national security grounds has also triggered a collapse of investment flows into the US.

Chinese direct investment in the US fell to just $5bn last year, compared with peak inflows of $45bn in 2016, according to figures published by the Rhodium Group, the research company.

Eswar Prasad, a China financial expert at Cornell University, said: “The Trump administration is clearly eager to initiate a financial decoupling from China.”

“This effort will be reinforced by tariffs and other trade restrictions that reduce direct investment flows between the two countries,” he said.The FRTIB rejected another request by US lawmakers to shun Chinese stocks in November, and is not legally bound to heed the Trump administration’s request.

For now, Prof Prasad noted, “portfolio flows will still be driven by economic factors such as expected returns rather than government pronouncements”.

It is also unlikely that China will retaliate if the FRTIB does follow Mr Trump’s directive.

After the coronavirus pandemic caused first-quarter economic output to collapse 6.8 per cent year on year, Chinese officials want more capital inflows to help boost the economy.

Intel Capital, the venture capital arm of the US chipmaker, announced on Wednesday it had backed two Chinese start-ups as part of a broader round of investments.

But Mr Trump’s de facto declaration of a financial war between the world’s two largest economies could also embolden hardliners in Beijing. They think the country should prepare itself for a more dramatic rupture with its largest trading partner, including the possible collapse of its “phase-one” trade deal agreed this year with the US.

The agreement focuses on increased Chinese purchases of US goods, with a two-year target of $200bn that many officials and analysts in Beijing thought were unrealistic even before the pandemic brought global economic activity to a halt.

“The agreed purchases were already beyond China’s capacity [to absorb] before the pandemic,” said Shi Yinhong, an international relations professor at Renmin University in Beijing.

Additional reporting by Xinning Liu

Getting on board

Emerging markets launch QE, too

Unconventional monetary policy is not just for the rich world

EMERGING MARKETS have long resented quantitative easing (QE). When America’s Federal Reserve began its third round of asset purchases in 2012, Guido Mantega, then Brazil’s finance minister, accused it of starting a “currency war”.

In 2013 Raghuram Rajan, then the chief economic adviser to India’s government, expressed his displeasure in the manner of Winston Churchill: “Never in the field of economic policy has so much been spent, with so little evidence, by so few.”

In response to the covid-19 pandemic, much is being spent again. But not by so few.

The central banks of America, the euro area, Britain and Japan are set to buy $6trn-worth of assets between them this year, according to Fitch, a rating agency, three times what they bought in 2013, the previous peak.

And emerging markets are no longer grumbling on the sidelines.

Monetary authorities in Chile, Colombia, Costa Rica, Croatia, Hungary, Indonesia, Poland, Romania, South Africa and Turkey have prepared or begun purchases of bonds of various kinds.

Still more are contemplating it.

Even in Brazil, congress has passed what it calls the “war budget” law, amending the constitution to give the central bank more freedom to buy government bonds and other assets during this crisis.

The scale of emerging-market purchases is small so far in comparison with the Churchillian appetites of central banks in the rich world. Bank Indonesia, which already owns about 15% of tradable government bonds, may end up adding significantly to its holdings.

The National Bank of Poland could end up owning bonds worth about 8.7% of GDP, according to UBS, a bank, if it buys all of the additional debt required to finance the country’s stimulus plan.

But no other central bank is poised to buy bonds worth more than 5% of GDP, UBS calculates.

By comparison, the Federal Reserve already held Treasuries equivalent to about 10% of GDP at the start of 2020, and is expected to roughly double that percentage over the course of the year.

Critics nonetheless worry that QE is both more dangerous and less necessary in emerging markets than it is elsewhere. It imperils the hard-won independence of monetary authorities that have struggled in the past to keep their distance from big-spending politicians.

Brazil’s constitutional limits on the central bank, for example, reflect its history of hyperinflation, when governments resorted to the printing press to finance their populism.

And although inflation is now firmly under control in most big emerging markets (exceptions include Argentina, Nigeria and Turkey), many of these countries still worry that monetary indiscipline can lead to destabilising runs on their currency.

QE is also, surely, less needed in the emerging world. In Chile and Peru benchmark interest rates are already about as low as they can go. But in most of their peers, central banks still have room to ease monetary policy by conventional means. In Indonesia and South Africa, for instance, the policy interest rate is still over 4%.

Why then are central banks pressing ahead?

They believe their bond purchases serve a distinct purpose. They are neither an unconventional way to lower borrowing costs nor an illicit one to finance the government.

The aim instead is to stabilise financial markets.

In Brazil the president of the central bank says its bond purchases will resemble foreign-exchange intervention.

It will not try to peg bond yields any more than it pegs the real. But it will try to smooth out jumps. The South African Reserve Bank says that its purchases are not meant “to stimulate demand”, but to ensure a “smoothly functioning market”.

In some quarters QE is still a tainted term, associated either with mercantilism, as a weapon in a currency war, or monetary adventurism. But the stigma is fading. Indeed some central banks now say they are doing QE even when they aren’t.

The Bank of Korea, for example, has resolved to buy unlimited amounts of bonds from financial institutions that promise to repurchase them after three months.

These “repo” operations amount to collateralised loans, not outright purchases. Few economists would describe them as QE. But far from resisting the term, the Bank of Korea has embraced it (“It wouldn’t be wrong to say we began quantitative easing,” noted one official).

Never in the field of central banking have so many worried so little about buying so much.

Debt relief for US consumers leaves investors flying blind

Forbearance and federal support programmes disguise how badly Americans have been hit

Robert Armstrong

Investors will not have information about who is, and who is not, able to pay their debts © AFP via Getty Images

If the US is flying towards a consumer credit crunch, it is flying blind.

This is not just because the duration of the lockdown is unknown. From the perspective of credit, the present is a mystery too.

This is because the forbearance and payment deferral programmes that the government and lenders have put in place will deprive investors of information about who is, and who is not, able to pay their debts.

The federal bailout law permits mortgage holders up to 12 months of payment forbearance, without consequences for their credit score or for the lender’s delinquency rates.

Other providers of consumer credit — credit card banks, auto lenders, and so on — are offering three months or more of payment deferrals. Consumers do not need to document that they are under duress; they just have to ask.

The result is that investors are left to look at lenders’ disclosures of forbearance take-up, and at loan volume trends, and make uneducated guesses about how these will translate into delinquencies and write-offs in the months and years to come.

There was a lot of consumer debt sloshing around when this crisis began: $14.3tn of it, $1.6tn above the financial crisis peak, according to the New York Fed’s quarterly household debt report.

Yes, the debt burden was historically low because of low interest rates; debt payments have hovered under 10 per cent of household disposable income for several years. But even before Covid-19 emerged, there were worrying trends, leading the bearish to talk of a turn in the cycle. Auto loan and credit card delinquencies have been ticking steadily up since 2017, for example.

The set-up is not great, then.

But — and one almost does not want to say this out loud — there are signs that the consumer is holding up so far.

Both Visa and Mastercard, which operate the largest card payment networks, reported big drops in spending across their rails in the first quarter © AP

When the shutdown began, all eyes were on credit cards.

The rule of thumb has been that card lenders’ write-offs and unemployment peak at about the same level, as they did at the last crisis. Would the unemployed start to put day-to-day expenses on their cards, and begin to fall behind?

In the event, the opposite has happened.

Both Visa and Mastercard, which operate the largest card payment networks, reported big drops in spending across their rails in the first quarter — and what spending there was, happened mostly on debit cards. Visa reported that credit card spending was down about 30 per cent through much of April.

Unsecured consumer loans at US banks, meanwhile, are 8 per cent lower than they were just six weeks ago, erasing two full years of loan growth.

Among mortgages, about 6 per cent held at banks are in forbearance, according to estimates from Autonomous Research.

Card payment deferrals are running at a broadly similar rate. Those numbers are not frighteningly high, if you assume a significant proportion of those borrowers will get back on track when the crisis passes. And being in forbearance is not the same as being unable or unwilling to pay.

Flagstar Bank, a mortgage specialist, reported last week that some 11 per cent of its borrowers had requested forbearance, but half of those had made their April payments anyway. A few other banks gave similar indications. A similar pattern has appeared in non-card unsecured lending.

Both Lending Club and OneMain specialise in credit-card consolidation loans, and both have noted that after an initial spike in requests for payment deferrals, requests have slowed notably in recent weeks.

Doug Shulman, chief executive of OneMain, said on an earnings call last week that some customers who accepted deferrals early on have started paying again.

“There’s a number of customers either who have some kind of lumpy expenses because of [a] specific issue or got their government stimulus check . . . and [then] were able to pay,” he said.

Lending Club pointed out this week that customers who requested payment deferrals tended to be good borrowers. More than 90 per cent of them were up to date with their payments when they requested deferrals, and almost 80 per cent had never been delinquent on a payment before. This looks like caution, not desperation.

One obvious reason that the early signals have been reasonably encouraging is that the federal government has been pushing cash into consumers’ pockets.

The small business bailout programme has passed $350bn to small businesses, earmarked specifically for paying workers, and more is on its way.

Direct consumer stimulus payments, worth $1,200 for an individual or $3,400 for a family of four, have begun to hit bank accounts.

The bailouts are good news for investors in credit. But, like the forbearance offers, they obscure the underlying picture.

At some point, special measures will expire, the stimulus cheques will be spent — and we will discover how badly the American consumer has been hurt.

Until then, analysis will have to be supplemented with a lot of guesswork.

The End of the US-China Relationship

From an unnecessary trade war to an increasingly desperate coronavirus war, two angry countries are trapped in a blame game with no easy way out. Now more than ever, both sides need to contemplate the economic and geopolitical consequences of a full ruptura.

Stephen S. Roach

roach115_stockdevilGetty Images_uschinaflags

NEW HAVEN – It didn’t have to end this way, but the die is now cast. After 48 years of painstaking progress, a major rupture of the US-China relationship is at hand. This is a tragic outcome for both sides – and for the world. From an unnecessary trade war to an increasingly desperate coronavirus war, two angry countries are trapped in a blame game with no easy way out.

A nationalistic American public is fed up with China. According to a new poll by the Pew Research Center, 66% of US citizens now view China in an unfavorable light – six points worse than last summer and the highest negative reading since Pew introduced this question some 15 years ago. While this shift was more evident for Republicans, those older than 50, and college graduates, unfavorable sentiment among Democrats, younger cohorts, and the less educated also hit record highs.

An equally nationalistic Chinese public is also irate at the United States. That is not just because President Donald Trump insisted on dubbing a global pandemic the “Chinese virus.” It is also because whispers turned into shouts linking the outbreak of COVID-19 to alleged suspicious activities at the Wuhan National Biosafety Laboratory.

Just as most children are taught that two wrongs don’t make a right, tit-for-tat blame does not justify severing the world’s most important bilateral relationship. But the time for dispassionate logic is over. We must, instead, contemplate the harsh consequences of this rupture.

Both economies, entwined in a deeply embedded codependency, will be hurt. China stands to lose its largest source of foreign demand, at a time when exports still account for 20% of its GDP. It will also lose access to US technology components required to advance indigenous innovation. And the loss of a currency anchor to the US dollar could lead to greater financial instability.

But the consequences will similarly be problematic for the US, which will lose a major source of low-cost goods that income-constrained consumers have long counted on to make ends meet. A growth-starved US economy will also lose a major source of external demand, because China has become America’s third-largest and fastest-growing export market. And the US will lose its largest source of foreign demand for Treasury securities, all the more worrisome in light of the looming funding requirements of the biggest government deficits in history.

This rupture does not come as a great surprise. As is the case in interpersonal relationships, geopolitical codependency can lead to conflict, especially if one partner starts to go its own way. And China’s decade of rebalancing – shifting away from exports and investment to consumer-led growth, from manufacturing to services, from surplus saving to saving absorption, and from imported to indigenous innovation – did indeed put it on a very different path.

This turned out to be an increasingly uncomfortable development for a China-dependent US. Left behind, America felt scorned, and that scorn led first to blame, and now to open conflict.

The consequences of the US-China rupture go far beyond economics. A decisive shift in the balance of global power, ushering in a new cold war, could well be at hand.

Under Trump’s “America First” administration, the US has turned inward, heaping scorn on its once-loyal allies, withdrawing support for key multilateral institutions (including the World Trade Organization and, in the midst of a pandemic, the World Health Organization), and embracing trade protectionism.

Meanwhile, China is filling the void, partly by design (through its Belt and Road Initiative, the Asian Infrastructure Investment Bank, and airlifts of medical supplies to pandemic-ravaged countries in Europe and elsewhere), but also by default, as the US retreats.

Although these tectonic shifts will leave most Americans worse off, the US seems to be shrugging its collective shoulders. America First has resonated with widespread wariness of globalization (now reinforced by concerns over supply-chain vulnerability).

Many Americans are angry over allegedly unfair trade deals and practices, indignant at seemingly disproportionate US funding for institutions like the International Monetary Fund and the World Bank, and suspicious that the US security umbrella in Europe, Asia, and elsewhere encourages free riders and others not paying their fair share.

Paradoxically, this inward turn comes at precisely the moment when America’s already depressed domestic saving is likely to come under enormous pressure from an explosion of pandemic-related government deficits. Not only does that imply deepening current-account and trade deficits (the nemesis of the America First agenda), but it also poses a major challenge to longer-term economic growth.

America’s public debt-to-GDP ratio, which reached 79% in 2019, will now almost certainly go well above the 106% record hit at the end of World War II. With interest rates pinned at zero, no one seems to care. But that’s just the problem: interest rates will not stay at zero forever, and economic growth in an overly indebted US will wither under just the slightest rise in borrowing costs.

Can the broken US-China relationship be salvaged? Ironically, COVID-19 offers an outside chance. Both countries’ leaders would need to end the blame game and begin restoring trust.

To do so, they would need to come clean on what really happened in the early days of the pandemic – December for China, and January and February for the US.

This is not a time for false pride or nationalistic bluster. True leaders often emerge – or are revealed – at history’s darkest moments. Is it really too late for Trump and Chinese President Xi Jinping to comprehend what’s at stake and seize this opportunity?

Stephen S. Roach, a faculty member at Yale University and former Chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China (Yale University Press, 2014).

The Doctor Will Zoom You Now

The pandemic lockdown is proof of concept for mass telemedicine.

By The Editorial Board

Photo: Getty Images 

With most of the U.S. under some kind of directive to stay home, these are boom times for digital doctors. Besides worried patients whose symptoms sound like Covid-19, there are plenty of asthmatics, diabetics and discoverers of alarming rashes who still need prescriptions, even if they’re not allowed within two yardsticks of a live physician.

The health system Ascension, with facilities in 20 states, says its online care increased nearly 2,000%, to about 10,000 visits in March from 500 in earlier months.

CommonSpirit Health, which operates in 21 states, says its virtual care doubled about every seven days, up to 33,000 televisits for the week ending April 3.

The Sanger Heart and Vascular Institute, part of North Carolina-based Atrium Health, says it moved 95% of its outpatient office visits to the cloud, for about 450 virtual patients a day.

Zipnosis, whose telehealth platform is used by 51 health systems, says that in March it facilitated 463,208 patient interactions, mostly via its text-based “adaptive interview.” That’s up from 37,170 in February. Direct-to-patient services are growing fast, too. Two telemedicine companies, Doctor on Demand and 98point6, each say their volume tripled recently.

The patient pool is deeper than ever: Thanks to pandemic waivers of the usual rules, 40 million seniors on traditional Medicare can dial a doc today with minimal hassle. Under current law, Medicare generally covers telehealth visits only in certain rural areas. Also, the patient must be physically present at a medical facility before calling a distant provider. No surprise that as of 2016 only about 0.25% of traditional Medicare beneficiaries used any telemedicine.

Last month Congress passed waiver authority in a coronavirus aid law, and the Trump Administration says it won’t enforce other rules. For now, seniors on Medicare will be able to phone a physician from the comfort of their sofas. Covered services have been added by the dozens, including psychological testing and physical therapy. Doctors can bill for audio-only calls and consult with new patients. They can use off-the-shelf products like FaceTime or Zoom.

The big question is what will happen when the virus recedes and life returns to normal. In the private economy, it’s hard to imagine that a newly popular telehealth service will fall off completely. If a mom with young kids grows accustomed to getting a routine prescription refill via video chat, she might resist schlepping tots across town.

Those 40 million seniors, on the other hand, are at the mercy of Congress, because Medicare’s waivers will end with the pandemic. But if beneficiaries like this approach, as a way to cut travel time or widen geographical choice, will it be tenable for the government to go back?

Sanger says roughly 60% of its virtual heart patients are on traditional Medicare or Medicare Advantage. A data expert with the Centers for Medicare and Medicaid Services (CMS) says beneficiaries receiving telehealth visits have gone from about 10,000 a week to 300,000 already for the week ending March 28, and that very preliminary number will keep rising.

“I think the genie’s out of the bottle on this one,” says Seema Verma, the CMS administrator.

“I think it’s fair to say that the advent of telehealth has been just completely accelerated, that it’s taken this crisis to push us to a new frontier, but there’s absolutely no going back.”

Lawmakers might worry that permanently easing access could increase spending, and that effect will no doubt need to be evaluated. “But this, to me,” Ms. Verma says, “is the most clear example of untapped innovation.”

Congress ought to tear down other regulatory barriers, too. For example, 98point6 says it hears from grocers and fast-food chains that would like to give telemedicine services to their low-wage, part-time employees who aren’t eligible for full medical benefits. According to 98point6, this isn’t feasible under current law.

One hangup for any stand-alone telehealth benefit is ObamaCare’s minimum coverage requirements. Isn’t a doctor on a smartphone better than nothing? Telemedicine isn’t a panacea, but it has great potential to make health care more efficient, flexible and patient focused.

32 Days on a Ventilator: One Covid Patient’s Fight to Breathe Again

Jim Bello, 49 and healthy, fell gravely ill, highlighting agonizing mysteries of the coronavirus. Doctors’ relentless effort to save him was a roller-coaster of devastating and triumphant twists.

By Pam Belluck

A family photo of Jim Bello in the bedroom of his daughter Hadley, 13, pictured.Credit...Kayana Szymczak for The New York Times

HINGHAM, Mass. — “Is he going to make it?” Kim Bello asked, clutching her phone, alone in her yard.

She had slipped outside so her three children, playing games in the living room, could be shielded from a wrenching conversation with a doctor treating her husband, Jim. For two weeks, he had been battling the coronavirus at Massachusetts General Hospital, on a ventilator and, for the past nine days, connected to a last-resort artificial heart-lung machine as well.

The physician, Dr. Emmy Rubin, gently told Ms. Bello that while her husband had a chance of surviving, “If you’re asking for an honest opinion, it’s more likely than not that he won’t.”

Mr. Bello, 49, an athletic and healthy lawyer, had developed a 103 degree fever in early March after a hike in the White Mountains in New Hampshire and landed in a suburban emergency room six days later, struggling to breathe.

Now, despite all his doctors had done, his lungs looked white as bone on his latest X-ray, with virtually no air-filled spaces — “one of the worst chest X-rays I’ve ever seen,” Dr. Paul Currier, another of his doctors, said.

As he lay in the intensive care unit, even a touch that caused slight movement to his heavily sedated and chemically paralyzed body could send his oxygen levels into a tailspin. Doctors worried his heart would stop, and if it did, they realized they wouldn’t be able to resuscitate him.

They had tried everything to help him, including experimental drugs, a low-tech maneuver of flipping him on his belly to improve airflow and the most sophisticated life support machine.

They were considering one more “Hail Mary” medical maneuver, but setting it up required cutting the machine-supplied oxygen for 30 seconds, a gap they did not think he could survive.

Dr. Paul Currier, a pulmonologist at Mass General, who treated Mr. Bello.Credit...Kayana Szymczak for The New York Times

“Even if those were things that could help him, trying to do those would kill him,” said Dr. Yuval Raz, a key specialist on Mr. Bello’s team.

Mr. Bello’s cataclysmic spiral from avid skier, cyclist and runner to grievously ill patient — and the heartbreaking and triumphant twists in doctors’ relentless efforts to save him — underscores the agonizing challenges confronting even highly trained physicians and well-equipped hospitals battling a ferociously capricious virus.

Hospitals have never before had, simultaneously, so many patients so sick that their lungs have basically stopped functioning. And while doctors are experienced at treating similar respiratory failure, the path of patients with Covid-19 can be maddeningly unpredictable.

“It’s like they fall off a cliff,” said Dr. Peggy Lai, a critical care doctor at Mass General. “You see young patients getting sicker and sicker by the day despite everything that you know is good standard of care.”

Without proven therapies to extinguish the infection, doctors ride roller-coasters of trial and error. They weigh risks of uncertain treatments and painstakingly adjust machines in hopes of shoring up patients’ lungs enough that their bodies clear the inflammation and heal.

“The tricky part with this disease,” Dr. Lai said, “is that we have nothing to follow, to know what predicts how sick someone will be and what predicts them getting better.”

On March 7, after Mr. Bello hiked Loon Mountain in New Hampshire, where his family has a condo and skis regularly, he was suddenly struck by a high fever.

After several feverish days, he developed a cough and chest tightness and visited a doctor, who prescribed antibiotics for pneumonia. But by March 13, he had so much trouble breathing that he went to a suburban Boston hospital’s emergency room. Doctors quickly decided he needed a ventilator.

“What if I don’t make it?” he asked his wife.

After she reassured him, she recalled, “He winked at me the same way he winked at me when we first met.”

Overnight, Mr. Bello was transferred to Mass General, becoming its first intubated coronavirus patient. His case initially seemed straightforward and manageable, said Dr. Currier, his first attending physician.

Like many Covid-19 patients, Mr. Bello had Acute Respiratory Distress Syndrome, or ARDS. His lungs were so inflamed and flooded with fluid that the tiny air sacs that transfer oxygen to the blood had become ineffectual sodden balloons.

Ventilator settings are precisely calibrated and continually adjusted: oxygen, breathing rate, breath volume and pressure. Doctors work to give enough pressure to keep airways open but not so much that lungs are overstretched and further injured.

Intubated patients are sedated and often given paralytic drugs so they don’t try to breathe themselves, allowing the machine to take over.

By the end of Mr. Bello’s first day at Mass General, the ventilator was supplying 65 percent oxygen, lower than what he’d needed upon arrival. The next day, it was further reduced to 35 percent, a good sign, given that the lowest setting, 21 percent, is equivalent to room air.

“He actually seemed to be improving,” said Dr. Currier, a pulmonary and critical care physician.

But then his condition inexplicably worsened, and his ventilator-supplied oxygen was ratcheted to the maximum, 100 percent.

Alarmed, around 2 a.m. on March 18, the medical team tried a maneuver called proning, Dr. Currier said. They carefully turned him onto his stomach to minimize the pressure of his heart against his lungs, decompressing his airways.

The results were encouraging. “This is great,” Dr. Currier thought before grabbing some sleep. “We fixed him.”

But as the day progressed, Mr. Bello’s blood oxygen levels plummeted.

Doctors had already started him on medications that many hospitals are trying: hydroxychloroquine, the anti-malarial drug President Trump has promoted; and a statin, which was eventually stopped because it affected his liver. He was also enrolled in a clinical trial of an antiviral drug being tested for Covid-19, Remdesivir, although nobody knew whether he was receiving it or a placebo.

That afternoon, increasingly concerned about his lung inflammation, doctors tried an immunosuppressive medication, tocilizumab.

Nothing was working. So doctors turned to an 11th-hour method. An eight-person team repositioned Mr. Bello onto his back, inserted large tubes into his neck and leg, and connected him to a specialized heart-lung bypass machine.

Called extracorporeal membrane oxygenation, or ECMO, the technique siphons blood out of the patient, runs it through an oxygenator and pumps it back into the body. It is intricately challenging to manage and isn’t available at many hospitals.

“ECMO is not a benign therapy,” said Dr. Raz, the medical director of Mass General’s ECMO department. “There’s a lot of bad things that can happen even with a good outcome.”

Risks can include bleeding complications and strokes. ECMO specialists must continually ensure that the blood volume circulating through the machine isn’t too low or too high, so that patients don’t get too much fluid and their blood vessels don’t collapse.

So far, ECMO has been used for hundreds of coronavirus patients worldwide, according to the nonprofit Extracorporeal Life Support Organization. Most are still on the machines, and data is incomplete, so survival rates are unclear.

“ECMO doesn’t fix anything,” Dr. Raz said. “It keeps you alive while other things, hopefully, take place.”

Mr. Bello’s lungs were so stiff that his “lung compliance” — a measure of elasticity that is usually over 100 in healthy people and about 30 in people with severe respiratory failure — was in the single digits.

His lungs could handle breaths only the size of a tablespoon, a tiny fraction of a normal-size breath. Blood began oozing from around the tubes, so blood thinners were stopped, Dr. Raz said.

Chest X-rays documented the decline. His first on March 13 showed significant fluid and inflammation, but “you could still see the lungs,” Dr. Raz said. On March 18, the X-ray was worse, but lung space was still visible. By March 20, “he had essentially what we call a whiteout.”

Daily, doctors and nurses updated Ms. Bello, 48, who took a leave from her part-time marketing job to help their children — Hadley, 13, and twins Riley and Taylor, 11 — cope with their father’s illness. Ms. Bello also raised thousands of dollars to provide the I.C.U. with meals from local restaurants, along with other needs.

She and Hadley developed mild symptoms like chest tightness, but doctors had considered it unnecessary to test them for the coronavirus.

Because visitors are largely prohibited in order to limit the virus’s spread, a nurse, Kerri Voelkel, put the family on speaker phone in Mr. Bello's room several times daily.

“Hadley would have baked a cake, and she would joke ‘It didn’t come out so good, Dad, I’m going to try again,’” Ms. Voelkel recalled. “Taylor said, ‘I did my soccer drills out in the backyard.’ It’s heartbreaking to be the caregiver standing there and listen to these children talking to their father.”

As of March 27, Mr. Bello’s ninth day on ECMO, there was no improvement. When nurses tucked pillows under him or subtly shifted him to prevent bedsores, his oxygen levels would crater.

Dr. Rubin called Ms. Bello to explain the gravity of the situation. If Mr. Bello went into cardiac arrest, she said, doctors didn’t believe they could revive him. Ms. Bello agreed to a do-not-resuscitate order.

“Be honest,” she implored Dr. Rubin.

Dr. Rubin assured her they were not giving up and Mr. Bello could still survive. But, she said, “Honestly, I think all of our assessment at that point was that he’s probably more likely to die.”

Devastated, Ms. Bello rolled into a ball on the grass.

The following morning, March 28, the medical team dialed down Mr. Bello’s paralytic medication to see if he could manage with less, Ms. Voelkel said.

The effect was striking. “Jim woke up,” she said. He raised his eyebrows, and “you could tell he was trying to open his eyes.”

When prompted, he squeezed both of Ms. Voelkel’s hands. He nodded yes or no to simple questions. And when the nurses said they were going to adjust his position, he gave a thumbs up.

“We were like, ‘Oh my gosh, he’s in there!’” Ms. Voelkel said.

Ms. Voelkel described the scene to Ms. Bello over the phone. That afternoon, the family’s golden retriever, Bruno, grabbed Mr. Bello’s Boston Celtics cap, holding it in his mouth. Ms. Bello texted Dr. Rubin a photo of the dog with the cap and wrote, “Please do everything you can.”

Dr. Rubin’s eyes welled up. “I give you my word that we are doing everything we can,” she texted back.

But later, several hours after the paralytic medication was stopped, Mr. Bello, alone in the room while nurses monitored from outside, shifted his body slightly, movement that increased pressure on his blood vessels. This happens normally when we breathe, but he was too unstable to withstand it, Dr. Raz said. His oxygen levels nose-dived.

Both Ms. Voelkel and Tyler Texeira, a respiratory therapist, threw on their protective gear and rushed in. “We rescued him, we got him back,” Ms. Voelkel said.

“This is a man who, his lungs are so bad that we can’t have him awake,” she said they realized. “So we had to re-paralyze him in order to essentially keep him alive.”

Doctors’ last option involved trying to drain more fluid by adding another tube to the heart-lung machine, a maneuver that would require a brief stoppage of oxygen flow from the machine.

“He was so tenuous that we felt honestly 30 seconds off the ECMO circuit, he wouldn’t survive that,” said Dr. Rubin, a pulmonary and critical care physician.

After her shift ended, Ms. Voelkel said, “I cried the whole way home.” She thought of the phone calls from Mr. Bello’s children, similar in age to hers. “The despair I felt that we couldn’t save this man was beyond anything I could comprehend.”

Dr. Rubin called Ms. Bello and suggested that she visit her husband that night, something she’d been allowed to do only once before. The hospital hallways felt eerie. She donned protective gear and entered his room.

“I felt like, ‘Oh my God, if I keep talking to him, if I talk to him for hours, maybe he’ll stabilize, and maybe he’ll be OK,’” she said. “I was just telling him how much we need him, he has to fight this, he cannot leave us.”

She was told she'd have 15 minutes, but was given more than three hours.

“I’m squeezing your hand right now, I’m holding your arm, I’m laying on your arm, I’m touching your head,” she told her husband.

Within three days, an X-ray showed hope — some clearing in his left lung.

“Then, it just started improving, slowly,” Dr. Currier said. “And then it just got dramatically better.”

On April 4, Mr. Bello’s 17th day on ECMO, Todd Mover, a respiratory therapist, suggested he might be ready to come off the machine. The next day, Mr. Bello was disconnected from ECMO. He remained on a ventilator, but began handling reduced oxygen levels supplied by the ventilator, so doctors started easing paralytic medication and sedation.

Days later, in a milestone, physical therapists sat Mr. Bello on the edge of the bed. Ms. Voelkel FaceTimed Ms. Bello. She saw her husband kick his leg.

“I love you, blow me a kiss,” she cried. Mr. Bello, groggy from sedation, breathing tube in his mouth, moved his hand to blow his wife a kiss.

On April 11, nearly a month after her husband’s hospitalization, Ms. Bello sat at their dining room table for another FaceTime session. She had her daughters sit across the table, to spare them the sight of their father on the ventilator. They held an iPad so their brother, Riley, who was in New Hampshire, could also listen and talk.

“Hi Daddy, it’s Hadley and Taylor. We miss you so much. Riley’s also on FaceTime with us. We just want to say keep fighting, and you’re going to be OK. We love you so much.”

Mr. Bello, unable to speak because of the breathing tube, lifted his head, opened his eyes briefly and waved his hand slightly. “Love, love, love,” his wife said.

Doctors said they did not know why Mr. Bello survived. Their best guess is time. Although in some cases, people’s odds worsen the longer they’re on a ventilator, other patients recover after long intubations. The doctors don’t know if any of the medications worked.

Dr. Currier said he wouldn’t be surprised if Ms. Bello’s visit helped.

“She was in there for three hours by the bedside,” he said. “It was at its darkest at that point in time.

You just can’t underestimate how much a difference something like that makes.”

On April 14, Mr. Bello was disconnected from the ventilator and began breathing on his own for the first time in 32 days.

This time, when she received a FaceTime call from the hospital, his wife gathered the children around. On the screen, he whispered the first words he’d been able to say to his family in a month: “I love you.”

As he was wheeled out of the I.C.U. to a regular floor, the medical staff, previously despondent about his case, lined the hospital hallway, erupting in applause. He waved.

“It’s phenomenal,” Dr. Rubin said. Noting Mr. Bello’s previous health and fitness, she added, “everyone is very optimistic that he’ll have a full recovery.”

In brief comments from a rehabilitation hospital where he was transferred three days after coming off the ventilator, Mr. Bello said he was looking forward to getting back to working as a lawyer representing medical providers. “I’m alive today because of those very same people,” he said.

Already able to eat and to walk, he said he was proud of his wife and was eager to be back with his family.

Not long after that, on Friday afternoon, Mr. Bello came home.