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. My 2nd cousin, who lives in Tuscany, just posted a video of all the people in Milan getting on trains leaving town ahead of the lockdown. Presumably, many, untested, may be leaving with the virus to spread at varied destinations. With a shortage of testing kits, incubations and transmissions continue in the dark.

    • Perfect example of how not to do a regional quarantine.

      But the Brits are just as dumb: flights are still reaching London from Milan, no health checks either pre or post-flight – ‘the cabin crew are looking out for people with symptoms’….

      I suspect the British government hopes for a quick-burn epidemic, getting back to normal as soon as possible.

      But will normal still be there?

  2. S&P hit limit down at -7% at the open. I don’t know about you folks but I don’t consider our markets stable when they have to electronically prevent them from doing what they want. I think this week we may hear news of the Federal Reserve starting QE again, possibly expanding it to include stocks as well. They’re definitely 100% dropping interest rates when they meet in 10 days, the only question is how much?

    • QE worked to some extent after the 2008 financial crisis but seriously doubt it will now. QE now would be like tossing currency at spinning propeller blades. We just all need to get back to the business of BAU and stop being afraid of the Corona virus. We need to learn from ants that cross a stream by making a raft using themselves – if we ignore the virus and go about our business it can’t take down the economy, but if we run from the virus the economy will collapse. Let’s get across to the other side of the stream/virus together knowing many won’t make it but on the other side will be a whole economy.

      • It would be nice but on the other side I see an impoverished society with even deeper class divisions, and a sense of betrayal and deep distrust of governments due to the handling of the pandemic – all pervasive cynicism.

        The messaging about the virus has shocked so many people, above all the ‘only the sick and old’ meme. They won’t forget, above all when they have had dead to bury (or probably just getting the ashes much later after cremation).

  3. what I don’t understand is how does the market go up just a little bit? Why doesn’t it keep falling? Who would be buying when it is falling this fast? It seems like throwing cash onto a burning fire

    • We have electronics and computers these days, you see. If they’d had them in 1929, there would never have been a crash and a depression. 🙂

    • Things over react. Where does one run? There are still honest people in the world, some run companies, one must pick one’s friends carefully.

      Governments first job is to preserve their jobs, pensions, etc. They will do whatever necessary, print money comes to mind.

      We here at OFW are a very diverse group of people and we manage to be very civil towards each other. Thanks in no small part to Gail we have learned how to post without flame wars, we have learned not to panic; if you are going to die, it does no good, if there is a chance of survival, it does no good.

      Dennis L.

    • “what I don’t understand is how does the market go up just a little bit? Why doesn’t it keep falling? Who would be buying when it is falling this fast?”

      PPT = Plunge Protection Team. That who’s buying.

    • I remember 2009 – went from 14.5 to about 6.5
      Only reason it quit falling was TARP and ZIRP

      No telling what this bailout is going to look like and I doubt it is going to keep it propped up.
      I believe Russia just made their move to knock the dollar out by refusing the production cuts. Saudi can double down like they have but I think they’ll fold soon enough and at that point Russia will come out far stronger than they are now.

      This is definitely a power move. Here soon even though oil will be trading in the $20’s (maybe lower) nobody will be driving and using it because they’ll be unemployed and can’t afford it coupled with inflation through the roof.

      Gail I’ll say it here first – you called it.

  4. “If the stock market crash isn’t bad enough, the fallout in the US bond markets is perhaps even scarier to contemplate – particularly given a boom in risky borrowing by US oil and gas firms in recent years.

    “Deutsche Bank has just issued a note warning there could be a “Minsky moment” for high-yield American bonds…

    “The bank’s analysts warn that defaults – companies being unable to repay or refinance their debts – are now inevitable, with around $13bn of debts due for repayment before the end of 2021 from the most heavily-indebted oil and gas firms.

    “In a shocking sign of the chaos to come, it says the distress ratio for US oil and gas high yield debt – defined as the proportion of debt trading with a spread of at least 1,000 basis points (in other words, bonds with yields that are more than 1,000 basis points higher than a reference yield such as on a US Treasury bond) – was already 62.3% as of Friday before today’s oil price collapse.

    “To put that in context, it says the distress ratio hit 43.9% in March 2016 when oil prices last crashed. In good times, when the oil price peaked in late 2018, it was 4.8%. In other words, well more than half of heavily-indebted US energy companies have borrowing costs that are going through the roof. Gulp.

    “In another illustration of how risky the situation is, Standard & Poors says the percentage of oil and gas borrowers with negative outlooks on their credit rating – which gauges their financial strength and is key for borrowing money on reasonable terms – is around 33%, which is well above the long-term average of 19%.

    “Central bankers have been worrying about the US high yield bond markets for quite a while now already. This could be the start of something quite dramatic indeed.”


      • Italia have spread BTP . Bund douchland are 220 now. Before was 140. When Will be 500 Will be defoult

      • Bass seems to be vindicating FE’s ~2018-9 worry in the sense HK’s economy singled out as to be completely devastated. There are other comments and guess-timates put forward, like US should adapt SKorean drive through testing, reaching “peak corona” in one month/summer months, and so on..

        • Should read adopt the testing..
          Also rather ominous is the hint at geopolitical consequences for internal (virus) turmoil in Iran, which could be sort of preparing the msm talking point grounds for strike them when they are weak.. as I tend to evaluate Bass as speaker-charmer for one of the tentacles (be it fresh) of the global money hydra..

  5. The fed will buy all of it thats important if they have to. Watch. Its magic.
    When your your own counterparty there is no counterparty risk.

  6. The global economic system that we gave ourselves is a monster. It requires growth all the time. There is no in between, we either grow or die, as simple as that. As long as conventional oil production increased, the system worked okay (with many inequalities but still we grew). We added humans and we made the economy grow. The serious problems started in 2005 when conventional oil production peaked. As a result we had the 2008 debacle. However with QE and low interest rates we were able to resume growth, albeit with those measures. But the papering over could not last forever as the physical reality of conventional peaking in 2005 would never go away. Sooner or later there would be a snowflake that would cause the avalanche, collapsing the world economy. I believe now that COVID-19 might be that snowflake. Mind you even if we had for example abiotic oil, infinite conventional oil, we might not have had all these economic problems but the result would have been us asphalting the world over and adding billions of people and thus bringing about environmental collapse…and not in 100 years, but a few years later than today. The result however, whether from global economic collapse (maybe this year) or environmental collapse (maybe 2040?) the result would have been the same = human extinction…Anyway whether you agree or not, I wish you all here Carpe Diem, now more than ever.

    • Great post, how true.

      I’d love to Carpe Diem, but as I’m self-isolating now it’s a bit tricky! One kiss could be Death…. 🙂

      • Lollll Thanks Xabier! I just came back here recently to read the comments section…I see the regulars are still here, except one BIG ONE….Where da hell is FE? Did he already crash his car on the side of a mountain? 😉

      • My son is a school teacher in Brooklyn. He is home for the weekend. First bad cold, then headache and stiff neck, now fever. He first bad cold, now headache and stiff neck and slight fever. 100 miles north of NYC. Time for more vitamin C. Xabier, stay isolated, stay safe. How far from London?

  7. https://community.oilprice.com/topic/9936-ccp-holding-back-virus-data-spanish-flu-1918-mutated-came-in-3-waves-lasted-14-months-and-killed-upward-5-world-population/

    “CCP holding back virus data . . . . . . Spanish Flu 1918 MUTATED, Came in 3 waves, Lasted 14 months and killed upward 5% World population”

    “After the Spanish Flu mutated it became extremely virulent. It subsided and re-emerged in three waves and lasted more than a year. Killed between 50 million to 100 million.”

    Vaccines not discovered yet.
    (1) Spanish Flu first recorded in March 1918. Very contagious. Deaths resulted.
    (2) By July 1918 the flu abated. All was good. All clear.
    (3) August 1918 the Second Wave of a MUTATED Spanish Flu appeared and was both contagious and exceedingly deadly.
    (4) Third wave , also a mutation, started November 1918. Not as deadly as 2nd wave, but more than the first wave. This continued until Spring 1919. Some reports say still killed until 1920.
    Don’t think it can’t happen again ? Better to be prepared.

    • someone, somewhere on the internets discussed the 1918 Flu remedy in terms of applying boost to bodily ph level acidity.. true/false.. don’t have time to evaluate at the moment though.. there could be some “cheap hack” to Corona as well..

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