It Is Easy to Overreact to the Chinese Coronavirus

Recently, a new coronavirus has been causing many illnesses and deaths. The virus first became active in Wuhan, China, but it has already spread to the rest of China. Scattered cases have been identified around the rest of the world as well.

There are two important questions that are already being encountered:

  • How much of an attempt should be made to limit the spread of the new virus? For example, should businesses close to prevent the spread of the virus?
  • Should this disease be publicized as being far worse than flu viruses that circulate each year and cause many deaths among the elderly and people in poor health? The median age of those dying from the new coronavirus seems to be about 75.

Unfortunately, there aren’t easy answers. We can easily see the likely outcome of under reaction. More people might die of the disease. More people might find themselves out of work for a couple of weeks or more with the illness. We tend to be especially concerned about ourselves and our own relatives.

The thing that is harder to see is that reacting too vigorously can have a hugely detrimental impact on the world economy. The world economy depends on international trade and tourism. China plays a key role in the world economy. Quarantines of whole regions that last for weeks and months can have a very detrimental impact on the wages of people in the area and profits of local companies. Problems with debt can be expected to spike. The greater the reaction to the coronavirus, the more likely the world economy will be pushed toward recession and job loss.

The following are a few of my thoughts regarding possible overreaction:

[1] The Chinese coronavirus seems to be extremely contagious, even before a person who has been exposed shows any symptoms. The only way we can be certain to contain the virus seems to be through quarantines lasting up to 14 days.

China’s National Health Minister, Ma Xiaowei, has provided information that seems quite alarming. With the new virus, a person may become communicable shortly after he/she has been infected, but symptoms may not appear for up to 14 days. This allows the infected person to infect many others without realizing that he/she is a carrier for the disease.

Today, the United States and many other countries screen for the virus by checking passengers arriving on planes from affected areas for fevers. Given the information provided by China’s National Health Minister, this approach seems unlikely to be sufficient to catch all of the people who may eventually come down with the disease. If a country really wants to identify all the potential carriers of the disease, it appears that a 14-day quarantine for all travelers from infected areas may be needed.

Such a quarantine becomes administratively difficult to handle for the huge number of people who are likely to travel from China. Such a quarantine would make it impossible for pilots and other airline workers to make a living, for example. They would be spending too much of their time in quarantine to do the work needed to support themselves and their families.

A related concern is that person-to-person transmission is very easy with the Chinese coronavirus. We don’t know for certain how many people each infected individual infects, but one estimate is that each infected person transmits the disease to an average of 2.5 other people. With this transmission rate, the number of people having the disease can be expected to grow exponentially, perhaps for several months.

Based on these concerns, it seems to me that funds spent on trying to contain the coronavirus are likely to be largely wasted. The new Chinese virus will spread widely, regardless of attempts to contain it. At most, quarantines will slightly slow the transmission of the disease. At the same time, quarantines will be quite disruptive of commerce. They will tend to reduce both total wages and total output of goods and services of the area.

[2] Deaths from pathogens are part of the natural cycle. They help prune back the population of the old and weak.

We know that in ecosystems, one of the functions of naturally occurring fires is to clear out “deadwood,” to allow healthy new growth to occur. In fact, some types of seeds seem to require smoke for germination. When inadequate natural burning takes place, bushfires as seen in Australia and forest fires as seen in California become an increasing problem.

Deaths from pathogens seem to play a similar role in human economies. This is especially the case with pathogens that especially target the weak and old. Most flu viruses have this characteristic. Early reports of deaths from the coronavirus suggest that this same pattern of targeting the old and weak is occurring with this virus as well. As noted above, the median age of those dying from the new coronavirus seems to be about 75 years.

Since the 1940s, modern medicine has been able to develop antibiotics and vaccines to counteract the impact of many pathogens. This, of course, makes citizens happy, but it has the disadvantage of changing the population in a way that leaves the economy with a much higher percentage of elderly people and others in poor health. This higher level of elderly and medically needy people makes it easy for viruses and other pathogens to make their rounds, just as leaving deadwood on the forest floor makes it easier for fires to spread.

With this rising population of people who cannot support themselves, tax rates for the remaining citizens tend to become very high. Young workers may become discouraged because they do not have enough income remaining after paying taxes to raise their own families. In effect, they cannot support both their young families and the many old people.

Viewed from this unusual perspective, the operation of the Chinese coronavirus might even be considered a benefit to society as a whole. The world has overcome the impact of measles, typhoid, polio, and many other diseases. In some sense, it “needs” a new disease added to its portfolio, to replace the ones that have been mostly taken care of by modern medicine. In this way, pensions and other payments targeting the old and weak don’t become too great a burden on the young.

[3] If the Chinese coronavirus were simply allowed to run its course, without publicity that it was in any way unusual, somewhat less than 1% of the world’s population might be expected to die. 

To see what would happen if the Chinese coronavirus were to run its course, we might look at what happened with the Spanish Flu, back in 1918. At that time, doctors did not have a way of treating the virus and authorities downplayed concern for the disease. The US Center for Disease Control reports that 500 million people, or one-third of the world’s population, became infected. At least 50 million people (about 10% of those infected) died.

We don’t yet know with accuracy how many of those infected will die from the current virus. A recent estimate is that about 2.3% of those who are infected will die of the disease (based on 107 dying out of 4,600 infected). If we assume that the percentage of the population that will ultimately catch the new virus is 30%, then the share of the world’s population that would be expected to die would be about [(1/3) x 2.3% = 0.76%].

The UN estimates that the world’s population can be expected to grow by about 1.05% in 2020. If this is the case, the effect of the Chinese virus would be to sharply dampen the population increase for the year. Instead of population rising by 1.05%, it would rise by only 0.29% (= 1.05% – 0.76%), assuming all of the deaths associated with the Chinese coronavirus take place within a year. While this would be a change, it would be a fairly small, temporary change.

All of these deaths would be tragic for the families involved but, in a way, they would be less of a problem than the deaths that took place back in 1918. At that time, mortality was high for healthy 20- to 40-year olds, making the flu particularly disruptive for families. The total percentage of the population that died was also much higher, about 3% instead of 0.76%.

[4] A major danger of the virus seems to be one of overreaction.

Today’s world economy is fragile. China, like other countries, has a large amount of debt. Debt defaults related to poor profits of companies closing their operations for a time and workers losing income could easily skyrocket.

Closing down transportation from China would risk pushing the world economy into a very bad recession. In fact, simply having a very large number of people out sick from work would be expected to have an adverse impact on the economy. Spending a large amount of money on hospitalizations and face masks cannot compensate for the loss of productivity of the rest of the economy. Thus, the tendency would be toward recession in China, even if no action toward cutting off travel were taken.

China is a huge supplier of goods to the rest of the world. In fact, in 2016, it used more energy in producing industrial output than the United States, India, Russia and Japan combined.

Figure 1. Chart by the International Energy Agency showing total fuel consumed (TFC) by industry, for the top five fuel consuming nations of the world.

China’s economy has been growing very rapidly since 1990. Figure 2 shows this one way, in GDP comparisons using inflation-adjusted US dollars.

Figure 2. GDP of China and the United States, computed as percentages of World GDP. All amounts in 2010 US dollars, as provided by the World Bank.

Figure 3 is similar to Figure 2, except the growth comparison is made in “2011 Purchasing Power Parity International Dollars.” This adjustment is made because typically the currencies of less developed nations float far below the dollar, in terms of what the local currency will buy. The inflation-adjusted PPP comparison compares output on a basis that is expected to be more consistent with what the local currency will really purchase.

Figure 3. Ratios of the GDP of China and the United States to the World GDP. All amounts in 2011 Purchasing Power Parity International Dollars, as provided by the World Bank.

On this PPP basis, China’s GDP surpassed the US’s GDP in 2014. Figure 3 also shows that the United States has slipped from about 20% of the world’s GDP to about 15% on this basis.

We cannot simply cut off trade with China, regardless of how bad the situation is. China is too big and too important now. The rest of the world desperately needs goods and services produced in China, in spite of what is going wrong from an illness perspective. China plays too key a role in supply chains of many kinds for the country to be left out.

Even cutting off tourism becomes a problem. The share of China’s revenue from tourism amounted to 11% in 2018. While not all of this would drop off, even a dip would lead to lower employment in this part of its economy. Jet fuel use would drop as well.

[5] A particular problem today is low prices for many commodities, including oil and other fossil fuels. These prices are likely to fall further, if China’s economy falters further. 

We used to hear that the world would “run out of” oil and that oil prices would rise very high. In fact, if the people who were concerned about the issue had studied history, they would have figured out that a far more likely outcome would be “collapse.” In such a situation, prices of many commodities might fall too low. Revelation 18:11-13 provides a list of a number of commodities, including humans sold as slaves, for which prices dropped very low at the time of the collapse of ancient Babylon.

The problem is a different squeeze than a high-price squeeze. It is more of a growing wage disparity problem, with fewer and fewer of the world’s workers being able to afford the goods and services made by the world economy. This problem feeds back to commodity prices that fall too low for producers of many types. The problem is an affordability issue, rather than one of running out. I have written about this issue many times.

Prices of fossil fuels have been low for a very long time–essentially since late 2014. OPEC has cut back its oil production because of low oil prices. Several US natural gas producers have taken big write offs on natural gas investments. China’s coal production has remained below its 2013 level, because of low prices.

Figure 1. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.

If China finds it necessary to cut back on production of goods and services for any reason (excessive sickness within China, visitors aren’t traveling to China, tariffs, customers around the world aren’t buying cars), this reduction in output would be likely to further lower the prices of commodities. More producers would go bankrupt. Countries exporting products as diverse as oil, iron ore, copper and lithium might have economic difficulties.

Lower fossil fuel prices may lead to a cutback in their output, but it is doubtful that this cutback would be offset by an increase in the production of renewables. Falling fossil fuel prices would make the price comparison of renewables to fossil fuels look even worse than it does today. China has cut back on its subsidies for solar panels, and this has led to decreasing Chinese solar installations in both 2018 and 2019.

[6] The best approach might just be to let the Chinese coronavirus run its course. Authorities might also discourage stories about how awful the illness is.

Today, we seem to think that we can fix all problems. Unfortunately, this medical problem doesn’t seem to be fixable in the near-term. We should probably do as governments through the ages have done, which is not very much. We should not publicize the disease as being a whole lot worse than flu viruses in general, for example.

We should certainly look for inexpensive treatments for the disease. For example, there seems to be an effort to examine the possibility of using existing antiviral drugs as a treatment. It seems like an effort could be made to look into ways of treating the disease at home, perhaps using supplemental oxygen for a period. In time, perhaps a vaccine can be developed.

Individuals around the world should be encouraged to get themselves in as good health as possible, so that their own immune systems can fight off pathogens of all types, not just this particular virus. Common sense should be used in washing hands and in avoiding being with sick people. I doubt that it makes sense to encourage the use of masks, goggles and other protective devices.

We, as individuals, cannot live forever on this earth. We also cannot spend an unlimited percentage of GDP on health care: It becomes too high-cost for most citizens. At some point, we need to call a halt to the expectation that we can fix all problems. We live in a world with limited resources. We need to start lowering our expectations, if we don’t want to make our problems worse.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,772 Responses to It Is Easy to Overreact to the Chinese Coronavirus

  1. Davidinamonthorayearoradecade says:

    if a virus multiplies quickly in a 99 degree human body, why should we think that the above-80 degree temperatures in Singapore will slow down or stop the virus?

    does the population density of Singapore make it a strong candidate for an epidemic?

    • Tim Groves says:

      Just a few thoughts, although I don’t know much about virology.

      Viruses need to attach themselves to living cells to replicate. Those that specialize in infecting humans can’t multiply outside of a human body, regardless of the temperature and humidity. They just hang around for a few days or weeks in most cases until they find a host to replicate in or they become inactive.

      I don’t think even the experts agree whether warmer or cooler temperatures are optimal for virus survival, but the coronaviruses and rhinoviruses tend to spread more effectively in the winter months. The reason may be more to do with the hosts than the viruses themselves.

      Possible reasons: Humans are tropical animals and they are not perfectly adapted to living at higher latitudes. In winter their immune systems are suppressed by living in cold conditions and lack of sunshine. Also, in winter people tend to spend more time inside with others, breathing each others’ air and sharing each others’ viruses.

      • Xabier says:

        A traditional treatment for illness in Europe was to eat a good meal, drink lots of brandy/wine, wear very warm clothes and get under as many sheepskins, etc, as you could, in order to ‘sweat it out’.

        My grandfather, who was a very sickly boy born 1909, did that, and lived to 93 yrs. His mother wrapped herself in a cocoon of blankets when she contracted the Spanish Flu in 1919.

        Some families had special shirts made of heavy wool to be worn by the sick and passed down through the generations: this saved the life of the writer Eric Newby during WW2 when an Italian shepherd made him sweat out a fever in his mountain hut.

        I have cured a very persistent chest infection by laying for a day on an electric blanket, on the highest setting, my chest against the heat.

        One can but experiment and listen to those who have gone before.

        • Xabier says:

          NB This traditional remedy involved both heat + lots of sleep – one role of the brandy and wine.

          Also no visit to hospital, which are sinks of disease and infection even today, and more so in the past.

          • Harry McGibbs says:

            I recall reading about a New Yorker who swore blind he had successfully fought off the Spanish Flu by knocking back half a bottle of whisky and going for a vigorous run through Central Park.

        • Dennis L. says:

          When a child, grade school age as I recall, when I was ill my mother would apply Vix Vapo Rub on my chest and place a flannel cloth over it between me and my pajamas. I do not recall if it worked or not, but it was an old remedy. I hated it, it stunk and did not feel good on my skin. I hesitate to repeat it in polite company, but it was also placed in the nose with a universal applicator. My mother comforted me as she applied it, she did not stop – in the old days, moms made the rules, dads enforced them.

          From Wikipedia, “A Penn State study showed Vicks VapoRub to be more effective than placebo petroleum rub for helping cough and congestion with regards to helping children and adults sleep.[6] However, the study also showed that, unlike with the petroleum rub placebo, Vicks VapoRub was associated with burning sensations to the skin (28%), nose (14%) and eyes (16%), with 5% of study participants reporting redness and rash when using the product.[7] The study’s first author is a paid consultant for Procter & Gamble, maker of VapoRub.

          I am here today, 73 with few medical issues, so at worst it didn’t hurt me. We used no cold pills, etc.

          Some of these old ideas seem to survive and they may very well be efficacious.

          Dennis L.

  2. Herbie R Ficklestein says:

    More bad news…
    Newspaper chain McClatchy files Chapter 11 bankruptcy after pension woes, print declines
    Nathan Bomey, USA TODAY
    USA TODAYFebruary 13, 2020, 8:49 PM UTC
    Newspaper chain McClatchy, owner of publications such as the Miami Herald and Kansas City Star, filed for Chapter 11 bankruptcy protection Thursday after grappling with a pension crisis and the news industry’s financial challenges.
    The Sacramento, California-based company, whose 30 newsrooms also include the Fort Worth Star-Telegram and The Charlotte Observer, proposed a deal to transfer ownership to one of its lenders and its largest shareholder, hedge fund Chatham Asset Management, and other lenders.
    As part of the deal, the McClatchy family is expected to give up control of the company after more than 160 years.
    “McClatchy remains a strong operating company with an enduring commitment to independent journalism that spans five generations of my family,” Kevin McClatchy, chairman of McClatchy’s Board of Directors and great-great grandson of the company’s founder, James McClatchy, said in a statement.
    “This restructuring is a necessary and positive step forward for the business, and the entire Board of Directors has made great efforts to ensure the company is able to operate as usual throughout this process.”
    The newspaper chain also said it expects to transfer management of its $1.4 billion pension plan to the U.S. government’s Pension Benefit Guaranty Corp. The costs of the company’s pension plan, a legacy of an era in which the newspaper industry was rich with profits, weighed it down in recent years.

    • These dinosaurs are no longer useful hence no PPT support for them, bankruptcy here we come. The key social-political control even moves (well already) moved from TV&Radio on the internet, especially these silly “social networks” where now censorship, propaganda and other forms of control are being massively phased in as we speak. The billions have been dully appropriated for this task and such support will continue as top priority. Only IC finally stumbling (Surplus/OFW crash) or volcano, perhaps asteroid could only stop this process. Sorry, this is a prison planet after-all.

      • Herbie R Ficklestein says:

        Not these Dino’s haven’t tried to adapt. The Miami Herald here in South Florida has been promoting web based issues at a very reasonable subscription. About $10.00 a month, with an intro rate of only 30$ for the first year.
        We still get the weekend editions in paper delivered and it is still a decent well written newspaper. Unfortunately, buying it at the newsstand is priced like 2$ for a weekday issue now in hard copy.
        Seems they are not getting online subscribers in enough numbers to offset the decrease in retail sales. When I go in stores that actually offer newspapers there as only a few there and doubt they sell. Some have stopped selling them.
        Seems the public doesn’t want to pay for journalism in enough numbers and the revenue from selling ads and advertising reflects the decline in readership.
        What does this mean for an informed public? I read recently that only for four major companies control 90% of the media in the United States.
        Concentration of wealth

    • One article headline says, McClatchy’s Bankruptcy Means Another Newspaper Chain Is (Very Likely) Going to a Hedge Fund

      McClatchy’s Chapter 11 plan, if approved, will cede control of the company to Chatham Asset Management, making it the latest newspaper chain to be taken over by a hedge fund or a private equity firm as local newspapers have struggled to survive due in part to dwindling ad revenue. . .

      Chatham also has controlling stakes in the Canadian newspaper chain Postmedia, which publishes The National Post, and American Media, Inc., which owns the National Enquirer.

  3. Herbie R Ficklestein says:

    No way Jose is this going to be contained…😭

    By Phuong Nguyen

    HANOI (Reuters) – Vietnam has quarantined a community of 10,000 people near the capital, Hanoi, for 20 days because of fears the coronavirus could spread there, two local officials told Reuters on Thursday.

    The rural commune of Son Loi, in the northern Vietnameseprovince of Vinh Phuc, 44 km (27 miles) from Hanoi, is home to11 of the 16 coronavirus cases in the Southeast Asian country,including a three-month-old baby.

    “Over 10,000 residents of the commune will not be permitted to leave for the next 20 days, starting from today,” the second of the two the officials told Reuters on Thursday.

    “As of this evening, we will still allow those who wish to return home to enter but, in the next few days, this place will be totally be sealed,” the official told Reuters by phone.

    Both officials declined to be identified citing the sensitivity of the situation.

    The coronavirus arrived in Vinh Phuc after people from the province who had been in the central Chinese city of Wuhan, where the virus was first detected, returned home to Vietnam for the Lunar New Year holiday.

    The province is home to factories operated by Japan’s Honda and Toyota.

    On Wednesday, state media indicated that Vietnam’s Communist-ruled government could completely seal off the Son Loi commune.

    On the same day, a Reuters photographer could see checkpoints manned by police and marked by coronavirus warning signs already in place outside Son Loi. People were still allowed to enter and leave the commune, which has a population of 10,641, according to official data.

    Health officials wearing protective suits sprayed disinfectant on vehicles at the checkpoints. Local authorities have set up shops and provided food and face masks for residents there, the first official said.

    “Everything is still under control,” said the official. “We are trying very hard to stop the virus spreading to other areas and provinces.”

    Vietnam declared a public health emergency over the epidemic on Feb. 1 and banned all flights to and from China, where more than 1,300 people have died from the virus.

    The southeast Asia country has made plans to quarantine hundreds of Vietnamese citizens returning from China, including 950 at military camps outside Hanoi, and another 900 at temporary facilities on the Vietnam-China border.

    • China sets the pattern and others try to follow. The camps are likely to be places where the infection is passed around. Same with the city of 10,000. It will spread and spread.

  4. Chrome Mags says:

    Regarding official corona virus numbers out of China, which we know is likely only part of the count:

    We all know about the 15000+ jump in corona virus count out of China yesterday, but what isn’t being reported much is today’s jump of 4,854. Compared to the daily increases before yesterday’s big jump, today’s is a big jump. The total official count is now 65,247 of which 10,608 are in serious/critical condition.

    • Chrome Mags says:

      Wow, really good video by Martenson about the virus. He says an independent study was done of the virus and they estimate the Ro transmission rate is 4.7-6.6 which is huge! And that even with all the draconian measures taken by the Chinese govt. to stop the spread only reduced the Ro to 2.3-3. But here’s the interesting part, it would have had to have reduced it to an Ro of less than 1 to stop the spread. So it’s failing.

      Martenson is convinced it will become a pandemic, that it is unstoppable. You can get the summary at 17:20 of the video. I highly recommend seeing this video.

      • Thanks! Very interesting!

        I looked up the Los Alamos academic paper referred to in the video. It is a preprint that has not been peer reviewed.

        • squideater says:

          2 days is a rather short doubling period.
          The Novel Coronavirus, 2019-nCoV, is Highly Contagious and More Infectious Than Initially Estimated
          Steven Sanche, Yen Ting Lin, Chonggang Xu, Ethan Romero-Severson, Nick Hengartner, View ORCID ProfileRuian Ke
          This article is a preprint and has not been peer-reviewed [what does this mean?]. It reports new medical research that has yet to be evaluated and so should not be used to guide clinical practice.
          AbstractInfo/HistoryMetrics Preview PDF
          The novel coronavirus (2019-nCoV) is a recently emerged human pathogen that has spread widely since January 2020. Initially, the basic reproductive number, R0, was estimated to be 2.2 to 2.7. Here we provide a new estimate of this quantity. We collected extensive individual case reports and estimated key epidemiology parameters, including the incubation period. Integrating these estimates and high-resolution real-time human travel and infection data with mathematical models, we estimated that the number of infected individuals during early epidemic double every 2.4 days, and the R0 value is likely to be between 4.7 and 6.6. We further show that quarantine and contact tracing of symptomatic individuals alone may not be effective and early, strong control measures are needed to stop transmission of the virus.

          Competing Interest Statement
          The authors have declared no competing interest.

          Funding Statement
          SS and RK would like to acknowledge funding from DARPA (HR0011938513). CX acknowledges the support from the Laboratory Directed Research and Development (LDRD) Program at Los Alamos National Laboratory. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

          • The study sees the growth rate of infections in China falling from an increase of 29% per day to an increase of 14% per day after the Wuhan travel restrictions were put in place. At this lower rate, the doubling time increases from 2.4 days, to between 5 and 6 days. I had to calculate the alternative doubling time myself; it is not shown in the paper.

            At the original doubling time, the entire world population could theoretically be infected in 90 days (my calculation, not the paper’s). At the slowed rate, it takes about six months.

            Hopefully, the rate slows from this lower level as it crosses borders, or as the weather gets warmer, but we don’t know.

      • squideater says:

        If there indeed long term debilitating damage to a significant number of those infected by CV19 could actions taken contain it thus reducing RO transmission rate until herd immunization is provided via vaccine actually make sense economically?

      • Alfonso says:

        Well, in truth, theoretical results for epidemic spreading in scale-free networks (to which real-world networks may resemble more closely) say that in the thermodynamic limit, that is for very large number of nodes/components, the epidemic threshold vanishes. That is, the epidemic may occur at any R_0 value. On the other hand, it is said that the network heterogeneity allows to develop a more efficient immunization procedure since it is easier to identify the most influential spreaders.

        • A major problem is that people seem to be spreading the virus, even before they come down with the illness. They have no symptoms at all.

          A second issue is that we don’t have any way of immunizing people. In fact, we cannot even determine who has already had the disease and has antibodies to it in their blood.

          Anyone who has been exposed to the disease and enters a public space (rides a train or bus, or attends a concert, for example) is quite possibly a spreader. We can’t know who these people are.

  5. Herbie R Ficklestein says:

    We have sooo🚀much gas we don’t know what to do with it all!

    Gas Writedowns Hit Europe With $1.4 Billion Blow to Centrica
    (Bloomberg) — Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

    Centrica Plc became the first energy company to book a major writedown on production assets in Europe as the global natural gas glut slashed valuations on both sides of the Atlantic.

    The U.K.’s biggest energy supplier to homes followed oil majors from Royal Dutch Shell Plc to Chevron Corp. in feeling the pain from a worldwide slump in the heating and power-plant fuel that’s sent prices to their lowest level in a decade in Europe.

    Centrica booked a net exceptional charge before tax of 1.1 billion pounds ($1.4 billion) for a lower value of its exploration and production arm, as well as a stake in U.K. nuclear plants. The writedown also includes restructuring costs of 356 million pounds.

    While gas is preferred to coal as a power generation fuel because it is much cleaner to burn, there are no signs of the glut coming to an end anytime soon. Nations from the U.S. to Australia are exporting record amounts of the commodity at the same time as the coronavirus is curbing demand in China, sending prices down further.

    “The gas market is very oversupplied right now because of associated gas from shale oil in the U.S. and lower levels of demand in Asia and to trump it all the coronavirus,” Centrica Chief Executive Officer Iain Conn said on a call with reporters on Thursday.

    The gas slump adds to the company’s woes after millions of customers have left in the past few years and lawmakers clamped down on prices utilities can charge their customers

    Enjoy the fantasy age of plenty now…it’s being flared up😘in smoke as fast as possible

    • We have too little demand for gas. Many economies around the world are doing poorly. Adding natural gas demand is tricky. It requires adding a whole system of distributing this natural gas. It also requires places to store the natural gas for use in winter and end users who can afford this natural gas.

      The US made the mistake of believing that high-priced LNG would be salable in Europe and Japan, but prices have fallen greatly there as well. The shipping cost of LNG is absurd. It only makes sense to send natural gas as LNG, if extraction is incredibly cheap and the country is very nearby.

      • Apart from selling their own stuff, the US hoped that newly constructed land based natgas pipeline will be laid down from Gulfies across Syria and then via Turkey to Balkans and the EU. Plus dropping the sanction regime on the next branch of the traditional Geman-Russian connector. This largely failed, but not everything in vain, Syria democratically and in humanitarian fashion bombed to stone age (and post conflict continued expenses to prop it up on Russian shoulders), refugee waves banging on EU’s door. Hence on balance and in relative terms the US “wins enough” to allow for yet another day of privileged opulent consumerism. Pirate-gangsterism for the win.

      • Harry McGibbs says:

        Talk about converging crises! Also depressing demand:

        “Last month was the warmest January on record across the northern hemisphere, sending demand for heating oil, natural gas and coal plunging in all the major consumption centres of the world…

        “The massive and widespread warm anomaly has cut fuel consumption in all the major centres by probably the largest weather-driven amount in history.

        “Coupled with a global economy that is still sluggish after the U.S./China trade war, and is now hit by a coronavirus-driven downturn, the warm winter has worsened the existing oversupply of oil, gas and coal.”

        • I know that it has been warm here. We had daffodils blooming in January. It is hard to believe that fruit trees have had enough “chill hours.” February has been perhaps more normal, so far.

    • ssincoski says:

      I wish some of that cheap gas was available here in Poland. After my bill last month (751PLN) I essentially turned off the central heating and just used the fireplace/stove. Next bill was only 286 PLN. We are comfortable(house stays around 20C during the day) and we like it cooler in the bedroom. We have good blankets. Of course it heps that we have had a very mild winter.

  6. Herbie R Ficklestein says:

    Hyundai bet big on China. Now coronavirus is twisting its supply chain
    By Joyce Lee and Hyunjoo Jin
    ReutersFebruary 12, 2020, 9:16 PM EST
    South Korea sources more than 80% of wiring harnesses from China, according to the government, as the parts require labour-intensive assembly and lower labour costs are crucial.
    “Suppliers have no choice but to go to China because of cost pressure,” said one of the sources of the supply disruption.
    Another of the sources, a senior industry figure, told Reuters the latest disruption caused by the coronavirus outbreak had underscored how exposed Hyundai’s South Korean operations were to problems in China.
    “This is an opportunity to address that,” the source told Reuters.
    Analysts said that, while the disruption would put pressure on Hyundai to rethink its China strategy, diversifying supplies would take time, money and diplomacy.
    “Hyundai had close relationships with local suppliers. It was not easy to go beyond the relationships,” said Jo Hyung-je, an adviser to Hyundai and its union, referring to how many suppliers like Kyungshin have grown up with the automaker.
    “They share a common destiny.”
    (Reporting by Joyce Lee and Hyunjoo Jin; Editing by Pravin Char)

    Boy, costs are too high in South Korea!?

  7. Harry McGibbs says:

    “The coronavirus outbreak could leave the world economy in its worst state since the global financial crisis, with economic activity tipped to shrink through the first quarter of the year as manufacturing and travel falters…

    “Capital Economics believes global GDP will shrink by 1 per cent annualised through the start of 2020.

    “It would be the first global economic contraction since the first quarter of 2009, which was during the depths of the GFC.”

  8. Harry McGibbs says:

    “Exuberant equity markets have been telling one story since the coronavirus first escaped control in Wuhan. The bond, currency, and commodity markets are reading from a different, darker script.

    “Safe-haven flight into the Swiss franc, the Japanese yen, and the dollar suggests that some large funds are battening down the hatches. The Australian dollar, a proxy for risk appetite, is plumbing depths last seen during the Lehman crisis.”

    • Harry McGibbs says:

      “Coronavirus outbreaks effect on economy could push Australia into a recession… Economist Martin North said coronavirus could spark new GFC, hit house prices.”

      • Harry McGibbs says:

        “JCB, the British digger maker, has cut working hours and suspended overtime for 4,000 UK employees after the coronavirus outbreak prompted a shortage in parts coming from China… JCB’s decision came as companies around the world counted the mounting cost of disruption caused by the coronavirus,

        “The boss of China’s biggest listed company, Alibaba, described the coronavirus outbreak as a “black swan” event…”

        • Xabier says:

          One may imagine the harvest failing, if this is prolonged, as there is a distinct shortage of men with scythes, and rather too many large machines dependent on parts from China.

          Moreover, the harvest is often done in a short window of opportunity when the weather is favourable. Miss that and it can all be lost.

          Same with the big dryers for cereal crops I imagine.

          JIT: lovely until it breaks down.

          I see Foxconn are denying they can resume 50% production in China by the end of February.

          What did CTG say once? You may find that your country doesn’t even make toothbrushes……

          • Xabier says:

            A ‘Korowicz Cascade’ is underway…..

            • Chrome Mags says:


              Xabier, I got curious from your post and found a link on David Korowicz. One scenario he talks about is the potential damage from a pandemic outbreak in South-East Asia w/comparable or greater impact than the Spanish Flu, which is very interesting especially considering he wrote it in 2013 with the article is dated in 2014.

              “The globalized economy has become more complex (connectivity, interdependence, and speed), delocalized, with increasing concentration within critical systems. This has made us all more vulnerable to systemic shocks. This paper provides an overview of the effect of a major pandemic on the operation of complex socio-economic systems using some simple models. It discusses the links between initial pandemic absenteeism and supply-chain contagion, and the evolution and rate of shock propagation. It discusses systemic collapse and the difficulties of re-booting socio-economic systems.”

              “Consider the following scenarios:
              ◾A highly contagious pandemic outbreak in South-East Asia (of comparable or greater human impact than the 1918 influenza outbreak) .
              ◾A disorderly break-up of the Eurozone and global financial system implosion.
              ◾A “perfect storm” during a time of major global financial instability – there are terrorist attacks on North African oil installations (partially driven by social unrest arising from record food prices) & a category 5 hurricane hits a major population/ industrial/ oil producing regions of the US east coast.”

              “These are all examples of potential global shocks, that is hazards that could drive fast and severe cascading impacts mediated through global systems.”

            • I hadn’t remembered that Dave Korovicz wrote about the possibility of an epidemic being part of collapse. Of course, it can be. We have just assumed that this is not possible.

          • Robert Firth says:

            “Hope for the best, but prepare for the worst”
            “Save for a rainy day”
            “A chain is no stronger than its weakest link”
            “Keep your powder dry”
            “God helps those who help themselves”

            Centuries of folk wisdom, accumulated by peasants and yeomen through bitter experience, all abandoned by the architects of our global economy. Verily, whom the Gods would destroy, they first make mad.

            • “A chain is no stronger than its weakest link” is a particularly good one. Too much dependence on China, and on its leader, Mr. Xi, is a problem.

              Of course, Donald Trump would like to be in charge of US policies in the same way as Xi is in China.

          • Good point about the harvest.

            Also, China now has several animal epidemics going on at this time. These continue, regardless of how the human epidemic plays out.

      • A 40% decline in housing prices (something talked about in this article) would hugely affect whatever organizations (banks?) are holding the mortgages on this debt. I am sure that some Chinese owners will simply default on their loans. Finding enough non-Chinese owners will take much lower prices.

        • Robert Firth says:

          Gail, I paid over EUR 250,000 for my house. If its value falls by 40%, I shall still sleep easy, in my house. It won’t lose 40% of its roof, walls, floor or furniture. Money is not wealth; things of enduring value are wealth. And value is whatever makes your life more worth living. Such as my five children, who are value beyond price.

          I grew up in that world, and then found a monetised economy being built around me. Yes, I take advantage of it as an investor, but in my personal life try to insulate myself from it as much as possible. If others also find their way out, good for them.

          • My husband and I bought a home we could easily afford and paid off the mortgage quickly. Since it is a modest home, the taxes are not high either.

            This approach (if you can manage it) leaves money for other expenses and few concerns about what the sales price of the house might be today. It is easy to keep up with the Joneses, next door, because most of the people living nearby are of modest means.

            The choice of part of the city is important. If we had chosen to live in a more upscale part of the Atlanta area, we might have spent a whole lot more on housing.

            • Robert Firth says:

              Thank you, Gail, we seem to be in agreement. I bought my house on a small island with minimal property speculation, from owners who could afford to have their furniture made locally of solid wood and with good craftsmanship. And where there are no property taxes. With 1800 sq ft of space, and about 1000 sq ft of roof terrace, it was a bargain. A few home improvements, about EUR4000 overall, and it is eminently liveable.

              Yes, at a certain age it is important to create a nest and be prepared to live in it until called to another place, and I wish you well with your own plans and hopes.

            • Dennis L. says:

              We live similarly, I never sought an expensive home although one was presented to me and in terms of value, the price was good and it did appreciate greatly. A good roof over one’s head is a blessing and gives great comfort.

              Dennis L.

            • You live in one of the most walkable cities in the world. However, you had excellent timing.

    • I can see why people would want to get away from the Australian dollar.

      I can understand fleeing to the US dollar and Swiss Frank. But fleeing to the Japanese yen? Japan gets too many imports from China and too many tourists from China. It has too many elderly people who are likely to be affected by the virus. It seems like Japan will be hit relatively early on.

  9. Titania says:

    And the “DAX” and “Dow Jones” rising and rising……..

    • Even crude oil prices are up right now. WTI = $52.01. The Euro keeps falling relative to the dollar, however.

      • Harry McGibbs says:

        Crazy and utterly unfounded optimism. But then if that is the glue needed to keep the global economy from falling apart right now I suppose we should cheer it on:

        “Stock markets across the world ticked higher on Friday, as investors bet that the damage to the global economy from China’s coronavirus outbreak would not be long-lasting…

        “Oil edged higher and was on track for its first weekly gain in six weeks, backed by expectations that producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic.”

    • Davidinamonthorayearoradecade says:

      “And the “DAX” and “Dow Jones” rising and rising……..”

      Covid-19 is the major news, but the Dow will soon hit 30,000 and Nasdaq will hit 10,000…

      doesn’t mean a thing to the real economy, and these numbers might never be reached if the virus continues to spread exponentially…

      but I bet we will see these levels before the 2020 global Great Depression hits later this year…

      we live in interesting times…

  10. Harry McGibbs says:

    A personal account:

    “A coronavirus survivor has lifted the lid on what it’s like to contract the killer disease – including a soaring temperature, pains, and a cough so bad ‘I thought I might die’.

    “The 21-year-old student, going under the pseudonym Tiger Ye, said he first noticed symptoms on January 21 while at home in Wuhan, ground zero for the disease.

    “Ye said that the first signs he was ill came when he was too weak to finish his dinner, and noticed that he had a raised temperature…

    “Speaking about the first four days of his illness to Bloomberg, he said: ‘I suffered from a high fever and pains that tortured every part of my body.

    “‘I was coughing like I was going to die.’

    “…Ye said his temperature soared to 102F (39C) and he thought he was ‘knocking on hell’s door’.”

    • Chrome Mags says:

      Interesting personal account from someone 21 years of age w/Corona virus. Sounds like no picnic. Now I can see how so many elderly with it pass on.

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