Is the debt bubble supporting the world economy in danger of collapsing?
The years between 1981 and 2020 were very special years for the world economy because interest rates were generally falling:
Figure 1. Yields on 10-year and 3-month US Treasuries, in a chart made by the Federal Reserve of St. Louis, as of May 10, 2022.
In some sense, falling interest rates meant that debt was becoming increasingly affordable. The monthly out-of-pocket expense for a new $500,000 mortgage was falling lower and lower. Automobile payments for a new $30,000 vehicle could more easily be accommodated into a person’s budget. A business would find it more affordable to add $5,000,000 in new debt to open at an additional location. With these beneficial effects, it would be no surprise if a debt bubble were to form.
With an ever-lower cost of debt, the economy has had a hidden tailwind pushing it long between 1981 to 2020. Now that interest rates are again rising, the danger is that a substantial portion of this debt bubble may collapse. My concern is that the economy may be headed for an incredibly hard landing because of the inter-relationship between interest rates and energy prices (Figure 2), and the important role energy plays in powering the economy.
Figure 2. Chart showing the important role Quantitative Easing (QE) to lower interest rates plays in adjusting the level of “demand” (and thus the selling price) for oil. Lower interest rates make goods and services created with higher-priced oil more affordable. In addition to the items noted on the chart, US QE3 was discontinued in 2014, about the time of the 2014 oil price crash. Also, the debt bubble crash of 2008 seems to be the indirect result of the US raising short term interest rates (Figure 1) in the 2004 to 2007 period.
In this post, I will try to explain my concerns.
 Ever since civilization began, a combination of (a) energy consumption and (b) debt has been required to power the economy.
Under the laws of physics, energy is required to power the economy. This happens because it takes the “dissipation” of energy to perform any activity that contributes to GDP. The energy dissipated can be the food energy that a person eats, or it can be wood or coal or another material burned to provide energy. Sometimes the energy dissipated is in the form of electricity. Looking back, we can see the close relationship between total energy consumption and world total GDP.
Figure 3. World energy consumption for the period 1990 to 2020, based on energy data from BP’s 2021 Statistical Review of World Energy and world Purchasing Power Parity GDP in 2017 International Dollars, as published by the World Bank.
The need for debt or some other approach that acts as a funding mechanism for capital expenditures (sale of shares of stock, for example), comes from the fact that humans make investments that will not produce a return for many years. For example, ever since civilization began, people have been planting crops. In some cases, there is a delay of a few months before a crop is produced; in other cases, such as with fruit or nut trees, there can be a delay of years before the investment pays back. Even the purchase by an individual of a home or a vehicle is, in a sense, an investment that will offer a return over a period of years.
With all parts of the economy benefiting from the lower interest rates (except, perhaps, banks and others lending the funds, who are making less profit from the lower interest rates), it is easy to see why lower interest rates would tend to stimulate new investment and drive up demand for commodities.
Commodities are used in great quantity, but the supply available at any one time is tiny by comparison. A sudden increase in demand will tend to send the commodity price higher because the quantity of the commodity available will need to be rationed among more would-be purchasers. A sudden decrease in the demand for a commodity (for example, crude oil, or wheat) will tend to send prices lower. Therefore, we see the strange sharp corners in Figure 2 that seem to be related to changing debt levels and higher or lower interest rates.
 The current plan of central banks is to raise interest rates aggressively. My concern is that this approach will leave commodity prices too low for producers. They will be tempted to decrease or stop production.
Politicians are concerned about the price of food and fuel being too high for consumers. Lenders are concerned about interest rates being too low to properly compensate for the loss of value of their investments due to inflation. The plan, which is already being implemented in the United States, is to raise interest rates and to significantly reverse Quantitative Easing (QE). Some people call the latter Quantitative Tightening (QT).
The concern that I have is that aggressively raising interest rates and reversing QE will lead to commodity prices that are too low for producers. There are likely to be many other impacts as well, such as the following:
Lower energy supply, due to cutbacks in production and lack of new investment
Lower food supply, due to inadequate fertilizer and broken supply lines
Much defaulting debt
Pension plans that reduce or stop payments because of debt-related problems
Falling prices of stock
Defaults on derivatives
 My analysis shows how important increased energy consumption has been to economic growth over the last 200 years. Energy consumption per capita has been growing during this entire period, except during times of serious economic distress.
Figure 4. World energy consumption from 1820-2010, based on data from Appendix A of Vaclav Smil’s Energy Transitions: History, Requirements and Prospects and BP Statistical Review of World Energy for 1965 and subsequent. Wind and solar energy are included in “Biofuels.”
Figure 4 shows the amazing growth in world energy consumption between 1820 and 2010. In the early part of the period, the energy used was mostly wood burned as fuel. In some parts of the world, animal dung was also used as fuel. Gradually, other fuels were added to the mix.
Figure 5. Estimated average annual increase in world energy consumption over 10-year periods using the data underlying Figure 4, plus similar additional data through 2020.
Figure 5 takes the same information shown in Figure 4 and calculates the average approximate annual increase in world energy consumption over 10-year periods. A person can see from this chart that the periods from 1951-1960 and from 1961-1970 were outliers on the high side. This was the time of rebuilding after World War II. Many families were able to own a car for the first time. The US highway interstate system was begun. Many pipelines and electricity transmission lines were built. This building continued into the 1971-1980 period.
Figure 6. Same chart as Figure 5, except that the portion of economic growth that was devoted to population growth is shown in blue at the bottom of each 10-year period. The amount of growth in energy consumption “left over” for improvement in the standard of living is shown in red.
Figure 6 displays the same information as Figure 5, except that each column is divided into two pieces. The lower (blue) portion represents the average annual growth in population during each period. The part left over at the top (in red) represents the growth in energy consumption that was available for increases in standard of living.
Figure 7. The same information displayed in Figure 6, displayed as an area chart. Blue areas represent average annual population growth percentages during these 10-year periods. The red area is determined by subtraction. It represents the amount of energy consumption growth that is “left over” for growth in the standard of living. Captions show distressing events during periods of low increases in the portion available to raise standards of living.
Figure 7 shows the same information as Figure 6, displayed as an area chart. I have also shown some of the distressing events that happened when growth in population was, in effect, taking up essentially all of energy consumption growth. The world economy could not grow normally. There was a tendency toward conflict. Strange events would happen during these periods, including the collapse of the central government of the Soviet Union and the restrictions associated with the COVID pandemic.
The economy is a self-organizing system that behaves strangely when there is not enough inexpensive energy of the right types available to the system. Wars tend to start. Layers of government may disappear. Strange lockdowns may occur, such as the current restrictions in China.
 The energy situation at the time of rising interest rates in the 1960 to 1980 period was very different from today.
If we define years with high inflation rates as those with inflation rates of 5% or higher, Figure 8 shows that the period with high US inflation rates included nearly all the years from 1969 through 1982. Using a 5% inflation cutoff, the year 2021 would not qualify as a high inflation rate year.
Figure 8. US inflation rates, based on Table 1.1.4 Price Index for Gross Domestic Product, published by the US Bureau of Economic Analysis.
It is only when we look at annualized quarterly data that inflation rates start spiking to high levels. Inflation rates have been above 5% in each of the four quarters ended 2022-Q1. Trade problems related to the Ukraine Conflict have tended to add to price pressures recently.
Figure 9. US inflation rates, based on Table 1.1.4 Price Index for Gross Domestic Product, published by the US Bureau of Economic Analysis.
Underlying these price spikes are increases in the prices of many commodities. Some of this represents a bounce back from artificially low prices that began in late 2014, probably related to the discontinuation of US QE3 (See Figure 2). These prices were far too low for producers. Coal and natural gas prices have also needed to rise, as a result of depletion and prior low prices. Food prices are also rising rapidly, since food is grown and transported using considerable quantities of fossil fuels.
The main differences between that period leading up to 1980 and now are the following:
[a] The big problem in the 1970s was spiking crude oil prices. Now, our problems seem to be spiking crude oil, natural gas and coal prices. In fact, nuclear power may also be a problem because a significant portion of uranium processing is performed in Russia. Thus, we now seem to be verging on losing nearly all our energy supplies to conflict or high prices!
[b] In the 1970s, there were many solutions to the crude oil problem, practically right around the corner. Electricity production could be switched from crude oil to coal or nuclear, with little problem, apart from building the new infrastructure. US cars were very large and fuel inefficient in the early 1970s. These could be replaced with smaller, more fuel-efficient vehicles that were already being manufactured in Europe and Japan. Home heating could be transferred to natural gas or propane, to save crude oil for places where energy density was really needed.
Today, we are told that a transition to green energy is a solution. Unfortunately, this is mostly wishful thinking. At best, a transition to green energy will need a huge investment of fossil fuels (which are increasingly unavailable) over a period of at least 30 to 50 years if it is to be successful. See my article, Limits to Green Energy Are Becoming Much Clearer. Vaclav Smil, in his book Energy Transitions: History, Requirements and Prospects, discusses the need for very long transitions because energy supply needs to match the devices using it. Furthermore, new energy types are generally only add-ons to other supply, not replacements for those supplies.
[c] The types of economic growth in (a) the 1960 to 1980 period and (b) the period since 2008 are very different. In the earlier of these periods (especially prior to 1973), it was easy to extract oil, coal and natural gas inexpensively. Inflation-adjusted oil prices of less than $20 per barrel were typical. An ever-increasing supply of this oil seemed to be available. New machines (created with fossil fuels) made workers increasingly efficient. The economy tended to “overheat” if interest rates were not repeatedly raised (Figure 1). While higher interest rates could be expected to slow the economy, this was of little concern because rapid growth seemed to be inevitable. The supply of finished goods and services made by the economy was growing rapidly, even with headwinds from the higher interest rates.
On the other hand, in the 2008 to 2020 period, economic growth is largely the result of financial manipulation. The system has been flooded with increasing amounts of debt at ever lower interest rates. By the time of the lockdowns of 2020, would-be workers were being paid for doing nothing. World production of finished goods and services declined in 2020, and it has had difficulty rising since. In the first quarter of 2022, the US economy contracted by -1.4%. If headwinds from higher interest rates and QT are added, the economic system is likely to encounter substantial debt defaults and increasing breakdowns of supply lines.
 Today’s spiking energy prices appear to be much more closely related to the problems of the 1913 to 1945 era than they are to the problems of the late 1970s.
Looking back at Figure 7, our current period is more like the period between the two world wars than the period in the 1970s that we often associate with high inflation. In both periods, the “red” portion of the chart (the portion I identify with rising standard of living), has pretty much disappeared. In both the 1913 to 1945 period and today, it is nearly all the energy supplies other than biofuels that are disappearing.
In the 1913 to 1945 period, the problem was coal. Mines were becoming increasingly depleted, but raising coal prices to pay for the higher cost of extracting coal from depleted mines tended to make the coal prohibitively expensive. Mine operators tried to reduce wages, but this was not a solution either. Fighting broke out among countries, almost certainly related to inadequate coal supplies. Countries wanted coal to supply to their citizens so that industry could continue, and so that citizens could continue heating their homes.
Figure 10. Slide prepared by Gail Tverberg showing peak coal estimates for the UK and for Germany.
As stated at the beginning of this section, today’s problem is that nearly all our energy supplies are becoming unaffordable. In some sense, wind and solar may look better, but this is because of mandates and subsidies. They are not suitable for operating the world economy within any reasonable time frame.
There are other parallels to the 1913 to 1945 period. One of the big problems of the 1930s was prices that would not rise high enough for farmers to make a profit. Oil prices in the United States were extraordinarily low then. BP 2021 Statistical Review of World Energy reports that the average oil price in 1931, in 2020 US$, was $11.08. This is the lowest inflation-adjusted price of any year back to 1865. Such a price was almost certainly too low for producers to make a profit. Low prices, relative to rising costs, have recently been problems for both farmer and oil producers.
Another major problem of the 1930s was huge income disparity. Wide income disparity is again an issue today, thanks increased specialization. Competition with unskilled workers in low wage countries is also an issue.
It is important to note that the big problem of the 1930s was deflation rather than inflation, as the debt bubble started popping in 1929.
 If a person looks only at the outcome of raising interest rates in the 1960s to 1980 timeframe, it is easy to get a misleading idea of the impact of increased interest rates now.
If people look only at what happened in the 1980s, the longer-term impact of the spike in interest rates doesn’t seem too severe. The world economy was growing well before the interest rates were raised. After the peak in interest rates, the world economy generally continued to grow. As a result of the high oil prices and the spiking interest rates, the world hastened its transition to using a bit less crude oil per person.
Figure 11. Per capita crude oil production from 1973 through 2021. Crude oil amounts are from international statistics of the US Energy Information Administration. Population estimates are from UN 2019 population estimates. The low population growth projection from the UN data is used for 2021.
At the same time, the world economy was able to expand the use of other energy products, at least through 2018.
Figure 12. World per capita total energy supply based on data from BP’s 2021 Statistical Review of World Energy. World per capita crude oil is based on international data of the EIA, together with UN 2019 population estimates. Note that crude oil data is through 2021, but total energy amounts are only through 2020.
Since 2019, our problem has been that the total energy supply has not been keeping up with the rising population. The cost of extraction of all kinds of oil, coal and natural gas keeps rising due to depletion, but the ability of customers to afford the higher prices of finished goods and services made with those energy products does not rise to match these higher costs. Energy prices probably would have spiked in 2020 if it were not for COVID-related restrictions. Production of oil, coal and natural gas has not been able to rise sufficiently after the lockdowns for economies to fully re-open. This is the primary reason for the recent spiking of energy prices.
Turning to inflation rates, the relationship between higher interest rates (Figure 1) and annual inflation rates (Figure 8) is surprisingly not very close. Inflation rates rose during the 1960 to 1973 period despite rising interest rates, mostly likely because of the rapid growth of the economy from an increased per-capita supply of inexpensive energy.
Figure 8 shows that inflation rates did not come down immediately after interest rates were raised to a high level in 1980, either. There was a decline in the inflation rate to 4% in 1983, but it was not until the collapse of the central government of the Soviet Union in 1991 that inflation rates have tended to stay close to 2% per year.
 A more relevant recent example with respect to the expected impact of rising interest rates is the impact of the increase in US short-term interest rates in the 2004 to 2007 period. This led to the subprime debt collapse in the US, associated with the Great Recession of 2008-2009.
Looking back at Figure 1, a person can see the effect of raising short-term interest rates in the 2004 to 2007 era. This eventually led to the Great Recession of 2008-2009. I wrote about this in my academic paper, Oil Supply Limits and the Continuing Financial Crisis, published in the journal Energy in 2010.
The situation we are facing today is much more severe than in 2008. The debt bubble is much larger. The shortage of energy products has spread beyond oil to coal and natural gas, as well. The idea of raising interest rates today is very much like going into the Great Depression and deciding to raise interest rates because bankers don’t feel like they are getting an adequate share of the goods and services produced by the economy. If there really aren’t enough goods and services for everyone, giving lenders a larger share of the total supply cannot work out well.
 The problems we are encountering have been hidden for many years by an outdated understanding of how the economy operates.
Because of the physics of the economy, it behaves very differently than most people assume. People almost invariably assume that all aspects of the economy can “stay together” regardless of whether there are shortages of energy or of other products. People also assume that shortages will be immediately become obvious through high prices, without realizing the huge role interest rates and debt levels play. People further assume that these spiking prices will somehow bring about greater supply, and the whole system will go on as before. Furthermore, they expect that whatever resources are in the ground, which we have the technical capability to extract, can be extracted.
It is important to note that prices are not necessarily a good indicator of shortages. Just as a fever can have many causes, high prices can have many causes.
The economy can only continue as long as all of its important parts continue. We cannot assume that reported reserves of anything can really be extracted, even if the reserves have been audited by a reliable auditor. What actually can be extracted depends on prices staying high enough to generate funds for additional investment as required. The amount that can be extracted also depends on the continuation of international supply lines providing goods such as steel pipe. The continued existence of governments that can keep order in the areas where extraction is to take place is important, as well.
What we should be most concerned about is a very rapidly shrinking economic system that cannot accommodate very many people. It seems that such a situation might occur if the debt bubble is popped and too many supply lines are broken. There may be a time lag between when interest rates are raised and when the adverse impacts on the economy are seen. This is a reason why central bankers should be very cautious about the increases in interest rates they make as well as QT. The situation may turn out much worse than planned!
U.S. FDA will decide on redesigned COVID vaccines by early July
U.S. regulators plan to decide by early July on whether to change the design of COVID-19 vaccines this fall in order to combat more recent variants of…
U.S. FDA will decide on redesigned COVID vaccines by early July
June 28, 2022, 9:58 AM EDT
By Michael Erman
“The better the match of the vaccines to the circulating strain we believe may correspond to improve vaccine effectiveness, and potentially to a better durability of protection,” Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, said at a meeting of outside advisers to the regulator.
The committee is scheduled to vote on a recommendation on whether to make the change later on Tuesday.
The updated shots are likely to be redesigned to fight the Omicron variant of the coronavirus, experts say. read more The exact composition of the retooled shots and whether they also will include some of the original vaccine alongside new components will be considered at the meeting.
Pfizer Inc (PFE.N), Moderna Inc (MRNA.O) and Novavax Inc. (NVAX.O) are scheduled to present data at the meeting. All three companies have been testing versions of their vaccines updated to combat the BA.1 Omicron variant that was circulating and led to a massive surge in infections last winter.
Both Moderna and Pfizer with partner BioNTech (22UAy.DE) have said that their respective redesigned vaccines generate a better immune response against BA.1 than their current shots that were designed for the original virus that emerged from China.
They have said that their new vaccines also appear to work against the more recently circulating BA.4 and BA.5 Omicron subvariants, even though that protection is not as strong as against BA.1.
Experts also want to know if the new shots will boost protection against severe disease and death for younger, healthier people or merely offer a few months’ additional safeguard against mild infection.
Scientists who have questioned the value of booster shots for young and healthy people have said a broad campaign is not needed with an updated shot either.
Other experts have championed any additional protection new vaccines may offer.
Our Standards: The Thomson Reuters Trust Principles.
Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock Surges From China Covid Easing
Markets opened in the green today as they rebound from Monday’s losses.
The post Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock…
Stock Market Today Mid-Morning Updates
On Tuesday, the Dow Jones Industrial Average is up by 270 points as it followed modest losses on Wall Street. Investors are still weighing the risks of red-hot inflation as rates continue to rise. Aside from the U.S., European Central Bank Leader Christine Lagarde downplayed recession concerns in the eurozone, already being destabilized by Russia’s war on Ukraine. She also says that her team is ready to raise rates at a faster pace if needed, in order to combat inflation.
Shares of Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and Goldman Sachs (NYSE: GS) raised their dividends after passing their annual stress tests. For instance, Goldman Sachs is boosting its dividend payout by 25% to $2.50 per share. On the other hand, shares of Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are up today after China announced that it will be easing Covid-19 quarantine rules for international arrivals.
Among the Dow Jones leaders, shares of Apple (NASDAQ: AAPL) are up by 0.13% today while Microsoft (NASDAQ: MSFT) is down by 0.79%. Meanwhile, Disney (NYSE: DIS) and Nike (NYSE: NKE) are trading mixed on Tuesday. Among the Dow financial leaders, Visa (NYSE: V) is up by 0.17% while JPMorgan Chase (NYSE: JPM) is also up by 1.67%
Shares of EV leader Tesla (NASDAQ: TSLA) are up by 0.83% on Tuesday. Rival EV companies like Rivian (NASDAQ: RIVN) are down by 0.17%. Lucid Group (NASDAQ: LCID) is down by 1.09% today as well. However, Chinese EV leaders like Nio (NYSE: NIO) and Xpeng Motors (NYSE: XPEV) are trading mixed today.
Dow Jones Today: U.S. Treasury Yields Inches Higher; House Price Increases Slows Down In April
Following the stock market opening on Tuesday, the S&P 500, Dow, and Nasdaq are trading higher at 0.68%, 0.89%, and 0.31% respectively. Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (NASDAQ: QQQ) is up by 0.28% while the SPDR S&P 500 ETF (NYSEARCA: SPY) is also up by 0.67%.
The benchmark 10-year U.S. Treasury yield currently hovers around 3.22% as the market continues to push against a bear market. Oil prices rallied for the third day today as major producers like Saudi Arabia looked unlikely to be able to boost output significantly. This comes as the West agreed to explore ways to cap the price of Russian oil. Brent crude, for instance, currently trades at around $116 per barrel.
Home prices increased slower than before in April and could be a potential sign of a cooling in prices. Diving in, prices rose by 20.4% nationally in April compared with a year earlier. This is according to the S&P CoreLogic Case-Shiller Index. For comparison, home prices increased by 20.6% year-over-year in March. Cities like Tampa, Miami, and Phoenix continue to lead the pack with the strongest price gains. Tampa home prices, for instance, are up by a whopping 35.8% year-over-year.
[Read More] Top Stock Market News For Today June 28, 2022
Trip.com Stock Gains Following Better-Than-Expected Quarterly Performance On Travel Rebound; China Covid Easing
Trip.com Group (NASDAQ: TCOM) seems to be among the top gainers in the stock market now. Evidently, TCOM stock is now up by over 14% at the opening bell today. Overall, this likely stems from the company’s latest financial update. Getting straight into it, Trip.com reported a quarterly loss per share of $0.01. Furthermore, the company’s total quarterly revenue is $649 million. For reference, consensus figures on Wall Street are a loss per share of $0.08 on revenue of $575.04 million. With these commendable results, investors looking to bet on the return of travel would be considering TCOM stock.
According to Trip.com, the company has recovering travel demand in global markets to thank for its latest quarterly performance. In particular, Trip.com highlights a bump in activity from consumers across its Europe and Asia Pacific user bases. This, the company believes, is a result of easing travel restrictions amidst countries in these regions. Moreover, Trip.com also notes that staycation-related travel in China is another notable contributor to growth for the quarter. Accordingly, its local hotel bookings are now up by 20% year-over-year.
On the whole, travel firms like Trip.com continue to thrive as consumers book their vacations. For its latest quarter, the company’s air-ticket bookings on global platforms are now up by a whopping 270% year-over-year. As mentioned earlier, this is mainly led by a rebound in demand from its European and Asian Pacific operations. Looking forward, CEO Jane sun notes that Trip.com will “remain adaptive to embrace the changing environment and be flexible with our strategies to swiftly seize growth opportunities.” With all this in mind, I could understand if TCOM stock is turning some heads in the stock market today.
Occidental Petroleum On The Rise Following Latest Berkshire Hathaway Stake Increase
Meanwhile, the likes of Occidental Petroleum (NYSE: OXY) seem to be gaining attention in the stock market now. For the most part, this is likely a result of the latest regulatory filing from Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A). Namely, Berkshire disclosed a purchase of an additional 794,000 shares of Occidental. This adds up to a $44 million transaction, bringing its total stake to about 16.4%. In total, Berkshire currently holds about 153.5 million shares of OXY stock, worth $9 billion.
All in all, Buffett’s focus on Occidental would likely draw attention to the energy firm’s shares. This is apparent as OXY stock is currently gaining by over 6% in the stock market now. According to Berkshire’s filings since March, the company’s average purchase price per share of OXY stock is $53. Following this investment, Berkshire would be bolstering its position as Occidental’s largest stakeholder. In second place on this front is investment firm Vanguard with an almost 11% stake. As a result of all this, it would not surprise me to see OXY stock making the rounds in the stock market now.
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The post Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock Surges From China Covid Easing appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.recession covid-19 dow jones sp 500 nasdaq stocks etf quarantine recession oil european europe russia ukraine china
Royal Caribbean Shares Huge News on Covid Testing, Vaccine Rules
President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise…
President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise line's President's Cruise.
Being on a cruise has largely returned to the same experience it was before the pandemic. Mask requirements have been dropped, capacities have returned to normal, and social distancing requirements have been dropped.
In fact, aside from crew members still having to wear masks and some stray passengers opting to do so in certain indoor situations, there's really no sign of covid rules once you board your cruise.
Before you board, however, the pandemic still has an effect on cruising. Every passenger 12 and older must be vaccinated (and must prove so before getting on board) and all passengers must produce a negative covid test taken no more than two days before getting on the ship.
And, while covid remains a problem, the cruise industry sees some light at the end of the tunnel when it comes to pre-cruise protocols. Executives from the major cruise lines -- Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report -- have said very little about plans to drop pre-cruise testing and vaccination requirements,
Now, however, Royal Caribbean President Michael Bayley has spoken out on both issues and has given cruise fans some real answers.
When Will Covid Tests and Vaccinations Get Dropped?
The major cruise lines have largely stayed quiet about covid protocols because they remain somewhat beholden to the Centers for Disease Control (CDC). The current CDC rules are voluntary, but voluntary is sort of a relative term when it comes to the power the federal agency has over the cruise industry.
It makes sense that the industry has been cautious in commenting on when covid protocols may change, but with the end at least seeming feasible Bayley answered questions about both the end of pre-cruise testing and potentially dropping vaccination requirements during the 2022 Royal Caribbean President's Cruise on Ovation of the Seas, the Royal Caribbean Blog reported.
"I think pre-cruise testing is going to be around for another couple of months," Bayley said. "We obviously want it to go back to normal, but we're incredibly cognizant of our responsibilities to keep our crew, the communities and our guests safe."
Bayley was less hopeful about the end of vaccinations, according to the blog, which has no connection to Royal Caribbean.
"The no vaccine question is is a huge question that none of us know the answer to," he said. "I'm skeptical that's going to change in the in the real short term. Many and most of the destinations that we visit require a high degree of vaccination, and they expect our crew to be vaccinated."
Cruise Lines Covid Protocols Are Working
Covid has not gone anywhere, but the cruise industry has been very successful at controlling the impact of the virus. Bayley noted that the CDC shares some information with him about the "millions" of people who have sailed from U.S. ports over the past 12 months.
"And the number of people who died from COVID who'd sailed on ships over the past year was two," the Royal Caribbean Blog reported. "Two is terrible. But against the context of everything we've seen, that's it's truly been a remarkable success."
Vaccine requirements remain a touchy issue as some people have chosen not to be vaccinated and that means they cannot cruise. That seems unlikely to change anytime soon given the destinations Royal Caribbean visits and the CDC information which shows that the current protocols are working.cdc disease control pandemic vaccine testing social distancing
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