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. Mark Thompson says:

    Thanks for all your extensive research. Very informative!

    Mark

    Sent from my iPhone

    >

  2. Yoshua says:

    “Iran’s state-run IRNA news agency reported Wednesday that the new virus has killed two Iranian citizens.

    IRNA quoted Alireza Vahabzadeh, an adviser to the country’s health minister, as saying both of the elderly victims had been carrying the coronavirus and were located in Qom, about 140 kilometers (86 miles) south of the capital Tehran.

    Earlier on Wednesday, Iranian authorities had confirmed two cases of the new virus, the first in the country.”

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  7. peatmoss says:

    My friend buys construction equipment from China. He received word from today that everything was peachy from one of the manufacturers. Back at work crisis over. I feel compelled to point out that BAU has continued for a long time. There seems to be a lot of confidence here that this is the big one whether economic or physical. No one knows the future. It could be exactly as bad as the opinion is here or exactly as good as the MSM is preaching. Or somewhere in between. Or better or worse than either. We dont know. We dont know the day we will die either.

    The fact is this Blog has been predicting bleak outcomes for a long time now. That takes nothing away from its brilliant analysis. The fact is that BAU continues. That cant be ignored either.

    Myself I chilled out after learning about ACE2. A much lower ACE2 amount could well turn this tiger into a kitten. Speculation? No different from doomster speculation. Am I deluding myself? Maybe. Humans are real good at that. What species are the patrons of ourfiniteworld I forget? Oh yeah JIT economic etc. I get it . I appreciate the analysis very much.

    If and when next Valentines day rolls around and this blog is discussing a different impending doom will Gail and comenters address the fact that BAU rolls on? It rolls on until it doesn’t. Just like the day we die. Long live the king. Long live BAU. Crazy? Like a fox . 🙂 All we have is this day. It is important IMO that we love ourselves. This allows us to love others. If we really want to have the analysis presented here evaluated it has to accommodate love and humor too. Without that its just more doomster noise.

    • Covidinamonthorayearoradecade says:

      I enjoy a good daily dose of doomster noise… 😉

      when I joined in on reading and adding to these comments in 2017, I honestly found some of the Deep Doomers to be quite entertaining in a somewhat amusing fashion… too bad they have all moved on…

      many probably find some of my comments to be unintentionally hilarious… who knows?

      but the Deep Doomers could have been correct at any time… they just were not…

      but it’s coming… could be in a month or a year or a decade, but it’s coming…

      in the meantime, there is much valuable insight here on a daily basis…

      perhaps this is a perfect time for…

      BAU tonight, baby!

    • We know that looking back at history, a very common pattern of economies has been overshoot and collapse. The population essentially outgrew their resources. After a period of plateauing, the economies collapsed. In some cases, the central government collapsed, as the central government of the Soviet Union did in 1991, leaving the member republics. Other times, war was involved. Most wars are resource wars. Countries that collapse are the ones that lose these wars.

      Another version of collapse involves epidemics. This often happens when the population is not in good health to begin with, due to poor nutrition. Too much pollution could enter in as well.

      Another version involves changing weather/climate. If an economy is doing well enough, it can build up surpluses for lean times. An economy operating too close to its maximum output will collapse during a period of adverse weather.

      In our opinion, the world today is operating close to its limit. The 2008-2009 crisis gives a hint as to where we are headed. The thing that will ultimately bring the world economy down is likely a financial crash. But it could have elements of other problems as well, including an epidemic that “messes up” supply lines badly.

      Regarding:

      My friend buys construction equipment from China. He received word from today that everything was peachy from one of the manufacturers. Back at work crisis over.

      I wonder whether this will really be the case, a month or two from now. The government of China doesn’t want to let outsiders know how bad things are. It is possible that the company has some inventory it can send now. It is also possible that this order relates to a part of China that is relatively untouched by the coronavirus crisis so far. It is possible that the Chinese contact is lying to the friend who buys construction equipment.

      Or, I suppose it is possible that at least parts of China are really getting back to work.

      A major concern I have is the big cutbacks in wages Chinese workers seem to be receiving. This is terrible for the economy as a whole. Workers need enough wages to buy food and pay their mortgages. We won’t know for certain exactly what is happening for a little while longer.

      I keep talking about enjoying BAU, for as long as it lasts. So I am with you on that one.

      Let’s keep watching this over the next few weeks. Epidemics often grow exponentially. We don’t seem to have a good way of stopping this one yet.

    • Hill Billy says:

      I received word from our computer supplier as follows yesterday:

      [2:01 PM, 19/02/2020] (name deleted) : from our Lenovo rep directly; Due to Covid-19 and CPU shoratge impact, all CTO and back to back order require up to 8 to 12 weeks ordering lead time.

      [2:02 PM, 19/02/2020] (name deleted): CTO is custom built orders – 8-12 weeks is actually 2.5x the norm

      Then JPMorgan has put this out:

      I just read that the CCP has employed 1600 trolls to fight against negative news.

      How much are they paying you?

  8. Covidinamonthorayearoradecade says:

    https://www.worldometers.info/coronavirus/

    daily update:

    South Korea almost doubles in cases from 31 to 58…

    Japan up from 74 to 84… a 13% increase… exponential growth…

    Singapore up from 81 to 84… 4% (exponential) increase… but at least they’re trying…

    • peatmoss says:

      Well even a .0000001% growth is “exponential”. The doubling period is somewhat long :).
      Atypically exponential growth refers to human population and financial instruments. AS such it is demonstrably unsustainable IF constant. So there exponential growth is a problem because we are in overshoot. All growth is exponential growth. In the mentioned cases it remained CONSTANT for too long.
      This is different. We want CV19 to be unsustainable but certainly not because it runs out of all available resources , its human hosts.

      The real question is the rate of infection growing or slowing. Slowing could mean we are approaching a peak shortly. 10 more cases is exponential growth is but so is 1. Certainly you would agree 10 more cases a day is better than 100? they are both exponential growth. Why is a peak important? It means the growth is no longer CONSTANT.

      The assumption is there will be a reasonable peak. The assumption is the exponential growth will not be constant and that its peak will not affect BAU for long.
      The truth is that without SUSTAINED growth this virus is just a flash in the pan.

      None of these other Asian countries show just a tiny percentage of Hubei in numbers.
      Thats why no one is alarmed. Hubei is seen as a anomaly. Numbers are tiny small everywhere else. Hubei has peaked (supposedly). The peaks will be tiny in other countries compared to Hubei.(assumption). Back to work. Engines on full. MOAR.

      Time will tell. Nothing else.
      China says back to work. That may mean more infections. But they will be trace vector containment infections.
      Thats the story. Their sticking too it.
      Sorry I like my doom tasty not flavorless :).
      I promise you flavorless doom will be mentioned annually. 🙂

      • Covidinamonthorayearoradecade says:

        if the real Hubei numbers are 10x the reported numbers, that would be some sumptuous doom… too bad we don’t know the real numbers…

        you’re correct about the math…

        but the stats in other countries besides China will tell us the direction of the storyline…

        SK went up from 31 to 58 in one day…

        a week or month from now, if the next chapter is that they went up from 310 to 580 in one day, then we will be getting nearer to more tasty doom…

      • Robert Firth says:

        peatmoss: when yeast ferments sugar into alcohol, it also grows exponentially until it reaches a peak. The peak occurs when there is no more sugar. That is also the natural life cycle of a virus, but we almost always have some defence against it. Almost always; during the Black Death many communities were indeed wiped out completely, so the defence is not guaranteed.

        We also know from the cruise concentration camps that exposure in such an environment will peak only at 100%. Food for thought (and viruses).

  9. Covidinamonthorayearoradecade says:

    if…

    if Chinese manufacturing has slowed to a crawl and may stay there for a long time…

    then does the reduction of products on the world market cause a major rise in inflation?

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