Easily overlooked issues regarding COVID-19

We read a lot in the news about the new Wuhan coronavirus and the illness it causes (COVID-19), but some important points often get left out.

[1] COVID-19 is incredibly contagious.

COVID-19 transmits extremely easily from person to person. Interpersonal contact doesn’t need to be very long; a taxi driver can get the virus from a passenger, for example. The virus may be transmissible even before an infected person develops symptoms. It may also be transmissible for a few days after a person seems to be over the virus; it is possible to get positive virus tests, even after symptoms disappear. Some people may have the disease, but never show symptoms.

[2] The virus likely remains active on inanimate surfaces such as paper, plastic, or metal for many days.

There haven’t been tests on the COVID-19 virus per se, but studies on similar viruses suggest that human pathogens may remain infectious for up to eight days. Some viruses that only infect animals can survive for more than 28 days. China is reported to be destroying paper currency from the hardest hit area, because people do not want to accept money which may have viruses on it. Clearly, surfaces in airplanes, trains and buses may also harbor viruses, long after a passenger with the virus has left, unless they have been thoroughly wiped down with disinfectant.

[3] Given Issues [1] and [2], about the only way to avoid spreading COVID-19 seems to be geographic isolation. 

With all of today’s travel, geographic isolation doesn’t work very well in practice. People need food and medical supplies. They need to keep basic services such as electricity and garbage collection operating. Suppliers of food and other services need to come and leave the area and that tends to spread COVID-19. Also, the longer a geographic area is isolated, the larger the percentage of the people within the area that is likely to get COVID-19. The problem is that the people need to have contact with others in the area for purposes such as buying food, and that tends to spread the disease.

[4] The real story regarding the number of deaths and illnesses seems to be far worse than the story China is telling its own people and the world.

The real story seems to be that the number of deaths is far greater than the number reported–perhaps 10 times as high as being reported. The number of illnesses is also much higher. At one point, facilities doing cremations in the Wuhan area were reported to be doing four to five times the normal number of cremations. Some of the bodies in the Wuhan area now need to be sent to other areas of China because there is not enough local cremation capacity.

China doesn’t dare tell its people how bad the situation really is, for fear of panic. They want to tell a story of being in control and handling the situation well. The news media in the West repeat the stories that the government-controlled publications of China provide, even though they seem to present a much more favorable situation than really seems to be the case.

[5] Our ability to identify who has the new coronavirus is poor.

While there is a test for the coronavirus, it costs hundreds of dollars to administer. Even with this high cost, the results of the tests aren’t very reliable. The test tends to produce many false negatives. The virus may be present somewhere inside the person being tested, but not in the areas touched by swabs of the throat and nose.

[6] Some people get much more severe symptoms from COVID-19 than others.

Most people, perhaps 80% of people, seem to get a fairly light form of the COVID-19 illness. Groups that seem particularly prone to adverse outcomes include the elderly, smokers, those who are obese, and those with high blood pressure, diabetes, or poor immune systems. Males seem to have worse outcomes than females.

Strangely enough, there is speculation that people with East Asian ancestry (Chinese, Japanese, or Vietnamese) may have a higher risk of adverse outcomes than those of European or African ancestry. One of the things that is targeted by the disease is the ACE2 receptor. The 1000 Genome Project studied expected differences in ACE2 receptors among various groups. Based on this analysis, some researchers (in non-peer-reviewed studies, here and here) predict that those of European or African ancestry will tend to get lighter forms of the disease. These findings are contested in another, non-peer-reviewed study.

Bolstering the view that East Asians are more susceptible to viruses that target the ACE2 receptor is the fact that SARS, which also tends to target the ACE2 receptor, tended to stay primarily in China, Hong Kong, Taiwan, and Singapore. While there were cases elsewhere, they tended to have few deaths.

Observational data with respect to COVID-19 is needed to determine whether there truly is a difference in the severity of the illness among different populations.

[7] China has been using geographical quarantine to try to hold down the number of COVID-19 cases. The danger with such a quarantine is that once the economy is down, it is very difficult to come back to the pre-quarantine state.

Data shows that China’s economy is not reopening quickly after the extended New Year holiday finished.

Figure 2. China daily passenger flows, relative to Chinese New Year. Amounts are now down more than 80% and have not increased, even as some businesses are theoretically reopening. Chart by ANZ, copied by WSJ Daily Shot Feb. 17, 2020.

Figure 3. China property transactions, before and after Chinese New Year. Chart by Goldman Sachs. Reprinted by WSJ Daily Shot, Feb. 17, 2020.

All businesses will be adversely affected by a lack of sales if they need to continue to pay overhead expenses. Small and medium-sized businesses will be especially adversely affected. Bloomberg reports that if a shutdown lasts for three months, there is a substantial chance that these businesses will run through their savings and fail. Thus, these businesses may be permanently lost if the economy is down for several months.

Also, restarting after a shut-down is more difficult than it might appear. Take, for example, a mother who wants to go back to work. She will likely need:

  • Public transportation to be operating, so she has a way to get to work;
  • School to be open, so she doesn’t need to worry about her child while she is at work;
  • Masks to be available, so that she and her child can comply with requirements to wear them;
  • Stores providing necessities such as food to be open, or she may be too hungry to work

If anything is missing, the mother is likely not to go back to work. Required masks seem to be a problem right now, but other pieces could be missing as well.

Businesses, too, need a full range of workers to restart their operations. If the inspector doing the final inspection is not available, the business may not really be able to ship finished products, even if most of the workers are back.

[8] A shutdown of as little as three months is likely to be damaging to the world economy.

Multiple things are likely to go wrong:

(a) Commodity prices are likely to fall steeply, because of low demand from China. Oil prices, in particular, are likely to fall steeply, perhaps to $30 to $35 per barrel. Besides cutbacks in oil demand from China, there is the issue of a general reduction in long distance travel, because of fear of traveling with other passengers with COVID-19.

(b) US businesses, such as Apple, will find their supply chains broken. They won’t know when, and if, they can ship products.

(c) Debt defaults are likely to become more common, especially in China. The longer the slowdown/shutdown lasts, the greater the extent to which debt defaults are likely to spread around the world.

(d) The world economy is likely to be pushed into recession, without an easy way to get out again.

[9] The longer the shutdown lasts, the more likely there is to be a major collapse of the Chinese economy. 

In the event of a long-term shutdown, it would seem likely that, at a minimum, a new leader would take over. In fact, there would seem to be a significant chance of major changes within the economy. For example, the provinces of China that are able to restart might attempt to restart, leaving the more damaged areas behind. In such a case, instead of having a single Chinese government to deal with, there might be multiple governmental units to deal with.

Each governmental unit might consist of a few provinces trying to provide services such as they are able, without the benefit of the parts of the economy that are still shut down. Each governmental unit might have its own currency. If this should happen, China will be able to provide far fewer goods and services than it has in the recent past.

[10] Planners everywhere have been guilty of “putting too many eggs in one basket.”

Planners today look for efficiency. For example, placing a large share of the world’s industry in China looks like it is an efficient approach. Unfortunately, we are asking for trouble if the Chinese economy hits a bump in the road. Using just-in-time supply lines looks like a good idea as well, but if a major supplier cannot provide parts for a while, then having inventory on hand would have been a better approach.

If we want systems to be sustainable, they really need a lot of redundancy. Redundant systems are not as efficient, but they are much more likely to be sustainable through difficult times. There is a recent article in Nature that talks about this issue. One of the things it says is,

A system with a single cycle is the most unstable because the deletion of any cycle-node or link breaks the sustaining feedback mechanism.

“A system with a single cycle” is basically similar to “putting all of our eggs in one basket.” “Deletion of any cycle-node or link” is something like China running into coronavirus problems. We probably need a world economy that consists of many nearly separate local economies to be certain of long-term world economy stability. Alternatively, we need a great deal of redundancy built into our systems. For example, we need large inventories to work around the possibility of missing contributions from one country, in the case of a problem such as a major epidemic.

Conclusion

The world economy may become very different, simply because of COVID-19. The new virus doesn’t even need to directly affect the rest of the world very much to create a problem. The United States, Europe, and the rest of the world are very much dependent on the continued operation of China. The world economy has effectively put way too many eggs in one basket, and this basket is now not functioning as expected.

If China is barely producing anything for world markets, the rest of the world will suddenly discover that long supply chains weren’t such a good idea. There will be a big scramble to try to fill in the missing pieces of supply chains, but many goods are likely to be less available. We may discover quickly how much we depend upon China for everything from shoes to automobiles to furniture to electronics. World carbon dioxide emissions are likely to fall dramatically because of China’s problems, but will the accompanying issues be ones that the world economy can tolerate?

The thing that is ironic is that it is possible that the West’s fear of the new coronavirus may be overblown–we really won’t know what the impact will be with respect to people of European or of African descent until we have had a better chance to examine how the virus affects different populations. The next few weeks and months are likely to be quite instructive. For example, how will the Americans and Australians who caught COVID-19 on the cruise ships fare? What will the health outcomes be of non-Asians being brought back from Wuhan to their native countries on special planes?

 

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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2,589 Responses to Easily overlooked issues regarding COVID-19

  1. Jason says:

    If this has already been calculated, sorry for repeat. Big picture numbers. If China was expecting 3% growth this year, and lets assume by end of first quarter back to normal production. Now lets be conservative and say first quarter production was down by 50%. so .25x.5=.125 loss of production or .875 production from expected. 1.03x.875= .90125, or 10% decline in GDP for China this year. During first year of the Great Depression USA GDP – 8.5%, 2nd year, -6.4%, and 3rd year -12.5%.
    This is what we are dealing with. If my numbers seem too extreme, let me know where you disagree.

    • Covidinamonthorayearoradecade says:

      sure, the Q1 hit could put China at minus 10% for 2020…

      but I would guess that the virus will be spreading throughout 2020…

      so then their GDP might be down 20 or 30% for the year…

      if my numbers seem too extreme, let me know…

      they could be too optimistic… 😉

      • Denial says:

        Something tells me they will still report positive numbers no matter what and most will look the other way. So yes your numbers are wrong in a wat

  2. peatmoss says:

    Really hard to put a positive spin on things when men in class a hazmat gear are taking bodies from your block.

  3. Dan says:

    Hong Kong is handing most of its residents a pile of cash to spend as it tries to save its slumping economy from the aftermath of protests and the coronavirus outbreak.

    https://www.msn.com/en-us/money/markets/hong-kong-is-giving-7-million-people-dollar1200-in-cash-to-boost-its-recession-hit-economy/ar-BB10pms1?li=BBnbfcN

    I have to wonder what they are going to spend it on and more so how quick whatever they buy will it be restocked. Be interesting to watch this play out.

    • Malcopian says:

      Is this the first example of helicopter money? They daren’t drop it from helicopters in case the pilots die of Chinese flu mid-flight and plummet to the ground.

      • Malcopian says:

        And what about Xi Jinping, after all those Hong Kong riots and now the Chinese plague? Is he looking like ‘here today, gone tomorrow?’ He has such a benign face and looks so avuncular, yet he is a hardliner among Chinese communists – if their system can really be called communist any more.

      • Dan says:

        1st that I am aware for this particular event. If you’ll remember G.W. Bush gave everybody $600 back in 2008 and then Obama cut SS taxes for about a year or so when he came in.
        As much as I like a random check from my slave masters they might as well as farted in everyone’s face. People mostly paid some debts off instead of wasting it on crap (good on the people they are not always dumsh!ts). In the grand scheme of fraud and mismanagement it really wasn’t very much money – $600 x 150 million adults = $90 billion. Wall street wipes their asses with $90 billion – hell the FED is pumping at least that a day in the repo markets which winds up in markets (Not QE).

        Dump $ from helicopters / shoot $ it from fire hoses. It doesn’t matter at this point.

        Let us pray this is the haymaker and this is the death of this charade.

        • peatmoss says:

          Let us pray that we patch this old horse together for one last ride

        • info says:

          @Dan

          You know they should have a debt jubilee. Wipe out all debt across Nation.

          • Robert Firth says:

            Agreed. But don’t just wipe out debt, wipe out fiat money. Abolish the US dollar, and enact a Constitutional amendment that “No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts…”

            Oh, but they did that in 1789. And somewhere along the way, they forgot that Constitutions are like the Walls of the City: useless unless defended. And the last line of defence? As the Romans knew: Bellum est ultima ratio regum.

    • The distant echos of ~UBI are getting closer by each passing day, week, month, yr..

  4. But wait – there’s more (impacts):Virus’s Spread Puts a Question Mark Over Tokyo Olympics
    https://www.bloomberg.com/news/articles/2020-02-26/virus-s-spread-puts-a-question-mark-over-tokyo-olympics

    • Malcopian says:

      And I’m old enough to remember the first Tokyo Olympics. My aunt had the catchy theme tune record.

  5. Denial says:

    During the market crash of 1929 the stock exchange sent people on the floor to start buying stocks to turn the situation around and it did for half a day and then the panic ensued again with more gusto. I think we are going to see a version of this playing out with t.v shows telling people if you look at long term history etc…. but how old is the stock market really not very old so there is no real long term measure…Buy..buy…buy!!!!

  6. Malcopian says:

    And what about Xi Jinping, after all those Hong Kong riots and now the Chinese plague? Is he looking like ‘here today, gone tomorrow?’ He has such a benign face and looks so avuncular, yet he is a hardliner among Chinese communists – if their system can really be called communist any more.

  7. peatmoss says:

    What do we know about cv19? It only takes one asymptomatic super spreader. Sooner or later this is going to spread it. Air travel to Italy remains unchecked. Shouldnt we be checking temperatures of all travelors as a minimum? If its as bad as we think it will cost trump the election. Im afraid its demonstrating he is not tooo bright. A bright trump would be playing it safe. Taking some actions effective or not. Highlighting this as a important national security issue. Padding some friends pockets in select tech medical companies. All the time while being optimistic.

    I encounter a lot of Christians who think cv19 is just a asian thing. God wouldnt let us down. Is it possible Trump believes his own drivel? look we are a great country. we have a lot to be proud of. That doesn’t mean that we are protected by god. We wernt protected by god in 1918 and we were a hell of a lot more moral then.

    I just dont understand. This would be a perfect chance to expand the MIC in a brand new direction.
    Thermal viewers at the airport. ecetera ecetera. Think of the possibilities! a whole new frontier! Covering your bets for the election at the same time.

    Not too bright Im afraid.

    If there was a bigger plan. A hero at the last moment plan. The noises he is making now would be different.

    Or maybe Trumps right. much adiu over nothing. We are all wrong. again. I sure hope so!

    • Xabier says:

      Muslims, too, believe that their piety will protect them.

      Have western Christians not heard of Asian Christians by any chance? 🙂

    • You most likely can’t find the super spreader by checking temperatures. It just gives the appearance you can.

      We are dealing with a virus that spreads incredibly easily, both through continuing infectiousness on inanimate objects and from people. Many of these people have no idea that they are infectious.

      In the past, these viruses just ran through populations until there was enough immunity in the aggregate so the spread rate went down. People worked to the extent they could, even when they were sick.

      We might have some drugs that can be ramped up that can help with symptoms, but even that takes time. We have to first identify which drugs work, and then put together entire supply chains. If too many in the supply chain are out sick, we can’t even get the needed drugs.

      I suspect that vaccines are a lost cause. They take too long; the virus mutates too much. We likely will need a new vaccine every year. It might be that the virus is like Dengue Fever, and a prior infection makes a new infection worse, not better. It might be that different variants evolve, in different parts of the world. Early information shows that the virus evolves enough that it is possible to determine chains of infection for different countries and parts of China.

  8. Herbie R Ficklestein says:

    Both the new coronavirus and SARS outbreaks likely started in Chinese wet market
    awoodward@businessinsider.com (Aylin Woodward)
    Business InsiderFebruary 26, 2020, 3:04 PM EST
    Edward Wong/South China Morning Post/Getty
    A novel coronavirus outbreak that originated in Wuhan, China, has killed at least 2,700 people and infected more than 80,000 others.
    Coronaviruses are zoonotic diseases, meaning they jump from animals to humans.
    The Huanan Seafood Wholesale Market in Wuhan may have been the starting point of this outbreak. It was shuttered January 1.
    At any wet markets, meat, poultry, and seafood are sold alongside live animals for consumption.
    On February 24, China’s top legislature banned the buying, selling, and eating of wildlife.
    The novel coronavirus and the SARS outbreak of 2003 have two things in common: Both are from the coronavirus family, and both most likely started in wet markets.
    At such markets, outdoor stalls are squeezed together to form narrow lanes, where locals and visitors shop for cuts of meat and ripe produce. A stall selling caged chickens may abut a butcher counter, where meat is chopped as nearby dogs watch hungrily. Some vendors hock hares, while seafood stalls display glistening fish and shrimp.
    Wet markets put people and live and dead animals — dogs, chickens, pigs, snakes, civets, and more — in constant close contact. That makes it easy for zoonotic diseases to jump from animals to humans.
    “Poorly regulated, live-animal markets mixed with illegal wildlife trade offer a unique opportunity for viruses to spill over from wildlife hosts into the human population,” the Wildlife Conservation Society said in a statement.

    Trump😭 not going to like this at all….more government regulation.,

  9. WSJ’s lead article only is now, As China’s Economy Suffers, Xi Faces Pressure to Lift Virus Restrictions
    China’s lockdowns credited with helping contain coronavirus, but companies and officials stress need to get factories and workers moving again

    Despite Mr. Xi’s displays of confidence, the economy is fast weakening. Factories remain idle, and consumption and investment have plunged. While China has delayed the release of official economic data until mid-March, other indicators point to a significant downturn.

    Average coal consumption at major power companies was about 40% lower from a year earlier in the week through Feb. 25, Goldman Sachs said. Home sales were one-quarter of the seasonal norm, it said, and demand for steel was around 50% its normal rate in the past three years.

    Using migration data from map-and-search company Baidu Inc., Nomura estimates that a little more than a third of the people who left cities such as Beijing, Shanghai and Shenzhen for the Chinese Lunar New Year in late January and early February have returned. By this time last year, nearly all had. Migrant laborers make up about 40% of China’s workforce and are needed for manufacturers to resume production.

    In some places, authorities have shut public transportation and locked down residents. Even some cities far from the epicenter have been allowing residents outside only every few days. Currently, hundreds of millions of people in China are on lockdowns of varying degrees.

    It sounds like the WSJ is trying to tell some of the story the way it is. The Dow ended down 124. I expect it will fall further tomorrow.

    • Chrome Mags says:

      Hi Gail, I put a post on with a link to a video and it was held for moderation, but now its completely gone. It wasn’t a bad video, it just had information on China downgrading the virus, with people coming out now to shop and go to work, with some not wearing masks. But maybe it’s just offline while it’s being considered?

      • I am afraid I don’t know anything about it.

        I did delete one comment of someone else’s after it was up. I didn’t check what responses there were to that comment. (I can’t see the responses on the screen that I normally review comments on.) If your comment was in response to that comment, it could have accidentally been deleted, because deleting one comment deletes any responses to that comment.

        I would suggest putting up a new comment with that information. If it gets stuck in moderation, it may have to wait a while, though, because it is time for me to “call it a day.”

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