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.


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?


This entry was posted in Financial Implications and tagged , , , , by Gail Tverberg. Bookmark the permalink.

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.

2,589 thoughts on “Easily overlooked issues regarding COVID-19

  1. WTI 45.16

    Russia is one the major oil producers and dependent on oil revenues.

    Yesterday Russia bombed a NATO members (Turkey) HQ in Syria. Officially 33 dead.

    Today they sailed war ships through the Bosporus towards Syria.

    • 1/ Russia is the least dependent on oil revenue from the OPEC+ group
      2/ Turkish forces currently occupying northern province of Syria (mixed within proxy fighters group sponsored by US/Gulfies) were attacked by the local gov, most likely utilizing intel and armaments sourced from Russia. Turkey was asked politely for years to stop meddling in that area of sovereign and recognized state entity.. so forewarned..
      3/ Russia sailed two (more) ~mid sized ships into this theater

      +4 yes it could escalate further

      ..otherwise your news is more or less spot on.. 🙂

      • “Russia is the least dependent on oil revenue from OPEC” What does that mean? They are the best horse in the Glue factory? and if you are russian propagandist please don’t destroy my computer…..I love russia….

        • Not propagandist by any stretch just offering antidote to loudspeakers of W-propaganda, which is so pervasive as in the saying by which fish can’t conceptualize living inside water medium or earthlings breading air on the surface subconsciously.

      • Good Russia is fulfilling its obligations under the UN Charter to come t the aid of a fellow member state that has been aggressed against. Good for them where is the rest of the UN membership?

      • Russia didnt give turkey s400 to go to war with them. This is just a bit of elbowing over who gets what. USA and even Assad are not calling the shots. It wont get serious.

  2. Just when you thought it couldn’t get any better:

    Fido may be a carrier.


    Who knows? Assuming the dog breathes, even if it does not become a biologic carrier it makes sense the virus could tag along for the ride, how long as anyone’s guess at this point.

    “One can visualize some hot shot scientist at a meeting proudly displaying a novel virus recently manufactured, proudly beaming at the accomplishment.” Trouble is that virus just caused a world depression, sorry about that folks.

    Seems to me there is an old admonition about not eating an apple from a certain tree, one might even speculate a superior power gave humans some simple rules that were better followed without explanation because they worked. One might wonder how many more of these rules, old myths, old wives’ tales actually are better followed for the common good. It could result in significant cognative dissonance in woke culture. This stuff is hitting us very fast, very difficult to stay on one’s metaphorical feet.

    Dennis L.

  3. Don’t know if this was posted but..
    The US’s newest coronavirus patient had no known exposure to anyone sick and hadn’t gone to China, which suggests containment might be impossible
    insider@insider.com (Holly Secon,Dana Varinsky)
    Business InsiderFebruary 27, 2020, 11:49 PM EST
    A confirmed coronavirus patient in California had no travel history in China and no known exposure to anyone infected.
    It could be the first case of “community spread” in the US.
    One health official said this should prompt a transition “from trying to contain the disease to more of a mitigation approach.”
    A patient in California’s Solano County has gotten the COVID-19 coronavirus without traveling to China or having any known contact with someone sick, the Centers for Disease Control and Prevention confirmed on Wednesday.
    “This person appears to be a community-acquired case of coronavirus, which would be the first here in the United States,” Bela Matyas, the health officer of Solano County, which is located between San Francisco and Sacramento, said in a press conference on Thursday. He added, however, that he didn’t think this was the only such case.
    “There are probably cases of coronavirus from community acquisition in multiple parts of the country right now,” Matyas said

    The floor gates are open…

    • “The US’s newest coronavirus patient had no known exposure to anyone sick and hadn’t gone to China”

      …Except those that are sick don’t show any signs of the illness for 2-3 weeks. So it is almost next to impossible to know whether you have come in contact with someone who has been infected with the Coronavirus. I’ve know doubt that people might have said the same thing when Typhoid Mary was infecting countless of unsuspecting victims.

  4. The situation is GRIM…jNo SH#T Sherlock Holmes!

    If this weekend’s Chinese economic data isn’t ‘worse than 2008,’ the government is ‘lying,’ Miller said

    MarketWatch: Which is the single data point that’s most telling to you?

    Miller: The numbers in the property sector are remarkable. It confirms this sector is at the bottom of the food chain in China right now, the last priority for Beijing in a long list of priorities. Property is extremely important because it’s the sector in which most Chinese have large portions of their wealth. Chinese people can’t get money out of the country so they’re stuck with only a few opportunities to diversify. The bond market is scary. The stock market is scary. Property has always been the least scary thing and the Chinese government has always known how important it is as a store of household wealth. It shows they’re more afraid of the bankruptcies of small and medium-sized enterprises. At least there may finally be a culling of the herd in terms of (real estate) developers and overleveraged firms allowed to die.

    On the positive side, we’re seeing the job growth numbers in slight contraction. It’s remarkable they’re not much worse than that. This is an economy that could be in contraction for a long time, yet firms aren’t firing people. You can’t pay your people, you have no cash flow, no customers, so you’re paying them to stay home right now. (The lack of layoffs) is one reason you’re not seeing big-bang stimulus yet.

    Wait, just wait…..2020 the year of the beginning of the END!

    • They are not paying the workers at 100%, however, at least that is what some early reports said.

      Both businesses and the workers end up in a bad situation: The businesses cannot really afford to pay the workers anything, and the workers are not getting enough to keep paying all of their obligations, such as auto and home payments.

      • Neither the Lizard King, Jim Morrison….Club 27….R.I.P.
        We are Riders on the Storm!

        This was the last song on the last Doors album with Morrison. Fittingly, it ends with the storm fading slowly to silence.

  5. The corona virus has been confirmed as spreading to New Zealand now (yesterday, Friday). Straight away there were reports of long queues at supermarkets as people stock up on food and other essentials. Only a matter of time before we start running our of things, given that Just In Time has been standard practice for a while now.

  6. FED will work with central banks over the weekend and have something for the markets to chew on….will it be big enough to get markets excited?

      • COVID-19 – regardless of its actual mortality rate risks (which now approximates the mortality rate of the Spanish flu [2-3%] in the early 1900s – https://en.wikipedia.org/wiki/Biosafety_level) – its economic impacts will continue to echo through international economies for years to come. The degree of direct impacts are just becoming evident. The indirect impacts will parasitize the global economy for a long time – and of course be blamed and attributed to non-viral political enemies and their agendas in the US (and elsewhere) – indefinitely. Some warranted, but mostly not.

  7. Some anecdotal information. The global company I work for here in the US issued a travel ban on all domestic and international flights effective immediately this morning. Anyone currently traveling was offered the choice to cut their trip short and return. We have over 100,000 employees worldwide. I wonder what the effects will be if many big companies start doing this?

    • If companies cut off all flights for more than a week or two, it will gradually work in the direction of making a big mess out of the world economy.

      It is possible to handle some things by phone and video meetings, but not everything. I expect that there will be a gradual loss of control of the various parts of the company. Each part will operate more and more independently, as time goes on. This will especially be the case, if there are electrical outages to go with the loss of flying from place to place. Instead of hearing about companies buying new subsidiaries, we should expect to see a lot of subsidiaries spun off.

      Of course, the reduced use of airplanes will adversely affect both airline companies and companies producing oil. Many airline companies will likely go bankrupt. Oil companies will as well. There will likely be a lot of bond defaults as a result, adversely affecting banks and insurance companies.

      • Congress and senate were working on tele conferencing today so they dont have to leave their bunkers I mean homes and can still do their “job” should CV19 become widespread.

      • Gail, four hundred years ago there were no telephones, no video conferences, and travel was very slow. The East India Company, one of the most famous and successful in history, adopted exact;y the strategy of decentralisation and delegation of power to local representatives. It was this strategy, in part, that created their success. And globalisation has been a great creator of failure, because it centralises control in small groups remote from the action. Just ask Deutsche Bank.

        • Robert, you make that sound like an ‘option’

          it wasn’t an option. It was all there was, and in a world of less than 1 bn people.

          No one could move faster than the speed of hoof or sail. Right outside my house is the road where stagecoaches traversed over 100miles in a single day for the first time (1820s) It was the wonder of the age and the latest thing in modernity.

          But Its prime function was to speed up government links between London and Dublin so that control could be centralised on London and prevent Ireland from ‘doing its own thing’. Didnt prevent the later Irish famine of course)

          25 years later this had been wiped out by the railways. (More energy input-more speed-more profit)

          With india in the 17th/18th c there was no option but to let them ‘get on with it’–it was too far away. The end result was the company creating its own army, and inevitably becoming a petty dictatorship under the nominal rule of the British crown.
          It was successful only through looting of resources and oppression of native peoples.

          Clive of India ran a protection racket in UK before he set up shop in India and expanded his business
          Which was OK as long as profits fed back to london

          Too much to go into here, but the India people eventually rebelled against the practices of the company, and Britain had to take overall control of the country—which didn’t really work either due to the racist and avaricious attitudes of the British ‘rulers’

          The Britich tried a similar system in the US colonies. We all know how that ended up.

          • William Dalrymple has written wonderful books on this subject, and the British in Afghanistan.

            Life for ordinary Indian peasants in the 18th-century was often an unmitigated Hell: their own rulers were corrupt and violent, and as the Moghul Empire disintegrated they were prey to any passing bandits.

            The sack of Delhi by the Iranians set the tone for the whole century: mass slaughter of innocent people.

            The earliest British in India were not at all racists, but had become so by the early 19th-century – a very sad story.

    • Life insurance and pension insurance are sold by the same companies. If deaths increase, they raise payouts for life insurance policies, but they reduce payouts on pension policies. So within a company, there are likely offsetting impacts.

      My background is in “Non-Life” Insurance, so I haven’t looked at the details of life insurance companies. I would expect that debt defaults on bonds and loss of value on shares of stock would be bigger issues than mortality changes.

      Most pension plans have been underfunded. If some older people die, this would help these pension plans (assuming that there isn’t too much loss of value because of bond defaults and falling stock prices).

      • Gail, you are correct. The same companies offer life insurance, which is betting you will live, and annuities, which is betting you will die. And there is enough “spread” that they will win on either end of the bet. (Gee, having two accountants as parents is sometimes useful)

  8. And So It Begins

    I picked up some parts from a major plumbing retailer yesterday and asked if they were running short of anything.

    “Oh ya, some of the distributors sent a memo advising that some parts are out of stock due because they have not arrived from China”

    First drug shortage reported https://www.cnbc.com/2020/02/28/fda-reports-first-coronavirus-related-drug-shortage.html

    There is still time (a couple of weeks?) to atone for your sins and beg me for forgiveness.

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