There’s a couple things on my mind this morning. First and foremost is the Coronavirus concerns that have been spreading. It’s become apparent to me that this virus is a black swan that that has already put the global economy into recession. Here, I write about why this disease is a big deal, how my family will react, as well as some of the societal, economic and political ramifications.
What to expect
My prediction, based on information I’ve seen reported by epidemiologists, is that we should expect somewhere between four and five hundred thousands deaths in the United States over the next twelve to eighteen months. The doubling rate for this virus is around six days, with a four week incubation period. This spread, if it continues, could cause a full-scale collapse of the hospital system by late May.
The failure of the Trump administration to properly deal with the beginning of this disease over the last few weeks has already set the stage for massive spread of the virus. Trump’s self interest, mainly his failure to acknowledge the true risks of COVID-19 due to fears to spook the markets and jepoardize his chances for re-election, is the main factor in the coming pandemic. Three years of cronyism within the hall of government, replacing qualified careerists at places with the CDC with Trump sycophants, is what will make this a historical failure.
My wife, who works at a Federal hospital, is of course concerned, and I have already come to terms with the fact that everyone in our family will likely get the virus. Statistically, given the long incubation period of this disease, there is a non-zero chance that I may already have the virus, and so my response at this point is to basically act like I’m an asymptomatic carrier. My goal is to not be some sort of COVID Mary and spread it to everyone around me. So I’m going to minimize my trips out of the house as much as possible, and use hand sanitizer before and after I enter any public spaces where I touch a door or other such surface. Tissues, wipes, hand sanitizer are all proper items to carry, and maybe even nitrate gloves, face masks and eye protection if forced in a situation where close contact with crowds is unavoidable.
How to react
This epidemic will no doubt have a huge effect on how we gather. The tech industry has already cancelled a number of professional conferences, and I suspect that any organizations that have events planned in the next few weeks will follow suit. This excellent article on the COVID growth rate notes how the tech and finance industry is dealing with the COVID threat notes that the industry’s familiarity with compound or exponential growth, and network effects, give them a better understanding of how quickly this disease may spread. This exponential mindset is at odds with the “base-rate” experiences of most politicians and policy makers, who deal in a world of linear growth.
My wife and I are most concerned for our parents, mostly our fathers, who are far from the paragons of health. I’m also concerned for my grandmother, who is in her late eighties. There is no doubt in my mind, though, that my children are most likely to be the ones most likely to be vectors for contagion. My littlest one is currently nursing a cold, but there is no doubt that the schools and day care are ill prepared to deal with the situation. Cities on the West Coast are already cancelling school and university, and with the first coronavirus case in my state being reported yesterday, I know it is just a matter of one or two weeks before cities in my region are going to be forced to do the same.
The question my wife and I are asking right now is whether we are prepared to self-quarantine. I would have no problem working from home since I already do. Having the kids home would be more a challenge, as a parent. Thankfully, we’re probably close to having supplies to quarantine ourselves for two weeks, which I think will ultimately happen. Of course, our family is privileged, and it is how we deal with the economically vulnerable, the homeless, e.g. those without sick leave or savings, that will determine how quickly COVID spreads.
I’ve left aside the economic ramifications of all this, but I’m sure they are going to be massive. The response from central banks have been telling, but given that they’ve exhausted their traditional stimulus activities over the past few years trying to artificially keep the bull market running, they will be ineffective. The pullback in the markets the last week or two is probably just the start. The banks only effective measure at this point is to print cash, the question is whether they’ll be able to get it where it is needed, to the working class.
The effects on travel and hospitality business like restaurants, hotels, and yes cruise lines, is going to be massive. (I saw a report last night that transatlantic air flights were less than three hundred dollars!) While demand-side issues will be problematic for most small businesses due to quarantine, it’s the supply-side ones that are really going to test our economic system. Apple was the first to note that they were unable to meet numbers due to shortages in chip fabrication, and we’ll likely see this play out again and again across all manufacturing sectors.
So while the Fed will be forced to provide stimulus to keep business and workers afloat, there will be shortages of necessary supplies as the population stocks up and prepares to self-quarantine. There may be a short-term boom in certain sectors like toilet paper, but expect price-gouging in the longer-term as other sectors are unable to keep up demand. The influx of cash, coupled with the upcoming bitcoin halving in May, should lead to new all time highs for the cryptocurrency.
What all this means for the Presidential race is anyone’s guess. I would think that Trump is done, but I’ve given up trying to predict what will happen with this Administration. He’ll likely blame and deflect responsibility, possibly even declare martial law to delay the election. I would think that this crisis makes Sanders the likely nominee, since his health and economic platforms would likely be more effective in stemming the spread of this disease, but it may be too late for him to win the nomination. We will likely know for sure in the next few weeks.
Finally, given reports that attendees at both Davos and CPAC have tested positive for the disease, it is clear that this is one disease that will hit the elites as much as the common man. In fact, given that the Trump, Biden, Bernie, and most of Congress are in their seventies, there is a chance that a significant number of them may die from this disease . It has been said that one of the mitigating factors for income or wealth inequality over the time span of human history has been periods of wealth destruction, such as famines or wars, which leveled the previous orders of the day and reset the game back to a more equitable level. The Coronavirus may be the catalyst which leads to the greatest redistribution of wealth in eighty years.