Coronavirus: Bracing for the Economic Shockwave

The information-aware and many in the medical industry are nervously watching the news about coronavirus spread and mortality rates. What we know so far isn’t pretty.

Why Optimism Is Unwarranted

The coronavirus appears to be highly contagious. China’s CDC, based on a comprehensive study of the data it has, said as of mid-February that the case fatality rate is 2.3%. Even though optimists have pointed out the case fatality rate in China was much lower outside Hubei, on the order of 0.7%, that appears to be significantly the result of its stringent lockdown, which greatly slowed disease spread outside Hubei. Critically, that meant a higher proportion of the severely ill could be treated.

Conversely, as we have pointed out, there is reason to think that in Hubei, at least twice as many cases as the ones reported are isolating at home. Over 150,000 people have represented themselves as being in desperate need of help on Weibo. A very high percentage likely does have the coronavirus and is also likely to suffer deaths at least at the level of the China CDC case fatality rate by virtue of not having been treated.

The WHO has also rejected the cheery line of thought, that the fatality rate may be way lower than commonly assumed because mild cases aren’t being captured. Their take is that those mild cases are so few in number as to not be meaningful. From StatNews:

Bruce Aylward, who led an international mission to China to learn about the virus and China’s response, said the specialists did not see evidence that a large number of mild cases of the novel disease called Covid-19 are evading detection….

…if there aren’t large numbers of uncounted cases, the severity seen in China is what the rest of the world should expect as the virus moves to new locations, especially if it spreads to the degree seen in Hubei province, where the outbreak began….

The case fatality rate — the percentage of known infected people who die — is between 2% and 4% in Hubei province, and 0.7% in other parts of China, he said.

The lower rate outside of Hubei is likely due to the draconian social distancing measures China has put in place to try to slow spread of the virus. Other parts of China have not had the huge explosion of cases seen in Hubei, Aylward said.

A case fatality rate of between 2% to 4% rivals and even exceeds that of the 1918 Spanish Flu pandemic, which is estimated to have killed upwards of 50 million people. Even a case fatality rate of 0.7% — which means 7 out of every 1,000 infected people would die — is sobering. It is seven times the fatality rate for seasonal flu, which is estimated to kill between 290,000 and 650,000 people a year globally.

In other words, there isn’t good reason to think the news about the coronavirus is going to get better soon, save perhaps the arrival of warmer weather slowing disease spread….but that may simply set us up for a revival in the fall. The lack of even adequate testing in the US and no prospect of getting it any time soon, the Trump Administration decision to opt for spin over transparency, the prohibitively high cost (for most) of getting tested, and financial insecurity and lack of sick days making it also too costly for many to stay home if they start exhibiting coronavirus symptoms, makes the US subject to more extensive propagation than might otherwise happen.

The absence of enough data for making sound risk assessments means once awareness of the disease becomes more widespread (US readers say they see a lot of complacency except in locations close to outbreaks) means those who are in an economic position to do so will take protective measures, while those who need a paycheck and can’t work remotely will keep showing up…unless and until a slowdown in their business forces hours and headcount cuts. So we see Amazon bans all “nonessential” travel and Nike temporarily shutters its headquarters campus for a “deep cleaning” while Amazon warehouse laborers are expected to keep up their punishing routines no matter how terrible they feel. Amazon seems far more concerned about coronavirus leading to Prime Day inventory shortages than to its warehouses becoming coronavirus clusters.

And to weigh heavily on the obvious, the US is not well positioned to cope with a massive public health crisis. The CDC’s poor calls on the test kits calls the agency’s sense of priorities into question. As most readers know, its staffing levels were cut under the Trump administration, particularly of “disease security” programs.

But the problem with our public health system extend well beyond Trump. Even if the CDC were well funded and staffed, it could not do all that much. Public health in the US is a state and local responsibility. That virtually assures that if the coronavirus were to become a large-scale problem, responses across the US are likely to be uncoordinated. Consider this discuss from the National Conference of State Legislatures:

The preservation of the public health has historically been the responsibility of state and local governments.

Clarity in leadership is crucial in a joint federal, state, and local response to any event which could cause harm to the public’s health. The public health authority of the states derive from the police powers granted by their constitutions and reserved to them by the 10th Amendment to the U.S. Constitution. The basis for the federal governments’ authority to prescribe a quarantine and other health measures is based on the Commerce Clause, which gives Congress exclusive authority to regulate interstate and foreign commerce.

To be specific, a comprehensive public health response to avert the spread of highly contagious diseases may call for the isolation of people, the quarantining of a community exposed to the infectious disease or both. Quarantine typically refers to the “separation of individuals who have been exposed to an infection but are not yet ill from others who have not been exposed to the transmissible infection.”[i] In contrast, isolation refers to the “(s)eperation of infected individuals from those who are not infected.”[ii] Primary quarantine authority typically resides with state health departments and health officials; however, the federal government has jurisdiction over interstate and foreign quarantine.

The article notes that the federal government can take charge if a state asks or of the Feds deem the state response inadequate. However, my impression is that for decades, the Feds have always been invited in; disaster areas are typically desperate for help. However, one can imagine the Trump team imposing its will on parts of California just for the hell of it.

In addition, neoliberalism and the precautionary principle do not co-exist happily. The public is already being conditioned to expect that any coronavirus vaccine won’t be free, but at least unlike being tested for the disease, will be “affordable”. So many won’t seek care unless and until they become desperately ill. The failure to get a diagnosis and isolate early will increase coronavirus spread.

Real Economy and Market Exposures

I don’t want to minimize the seriousness of the coronavirus health risks. But on top of that, people who do not become sick or come down with only a mild case may wind up suffering economically due to cuts in hours or job loss or for those who have them, damage to their pensions.

The markets are finally taking coronavirus very seriously, with the long bond trading at record highs and stock markets doing synchronized swan dives last week.

But unlike the financial crisis, where it was possible to identify the main drivers, housing debt and highly leveraged resecuritizations (CDOs) where the risks wound up concentrated at undercapitalized, systemically important financial institutions, here, many real economy sectors are seriously exposed: energy, travel and hospitality, aircraft manufacturers, automakers, restaurants, casinos.

Even though the business press is geared to covering stocks, it is high levels of downgrades and defaults that make for financial crises. Remember that the the dot-bomb era, despite a massive wipeout of equity values, didn’t result in a crisis due to limits on margin lending.

But as a result of the measures to move risks out of the banking sector, it may be harder to anticipate where ruptures will occur. The current leading edge conventional wisdom is that we’ll see a massive credit crunch as many companies start looking wobbly as their revenues shrink and investors get nervous about taking lending risk until they see a bottom to the disease and the economic damage.

The fact that the Telegraph’s Ambrose Evans-Pritchard is in top form is a bearish sign. In his latest article, he starts by describing Standard & Poors and Moody’s issuing broad-based warnings. Note that S&P and Moody’s are known for not downgrading until bonds are already trading as if they’d been notched down:

There are mounting risks of a credit crunch in vulnerable sectors of the corporate bond market, potentially rocking an unstable financial edifice with record levels of debt and set off a dangerous chain reaction….

Moody’s has issued a global recession alert should the coronavirus turn into a global pandemic, deemed inevitable by many of the world’s top virologists after exponential outbreaks in Korea, Iran, Italy, and now France. “The economy was already fragile before the outbreak and vulnerable to anything that did not stick to script. COVID-19 is way off script,” said the rating agency.

S&P’s [head of credit research for Europe and the Middle East] Mr [Paul] Watters said sectors with a toxic mix of high leverage and poor cash flow are coming under the microscope. Health care borrowers in the high-yield league are the most stretched with a debt-to-earnings ratio of six times, followed by media on 5.5 times.

Yves here. Bet you didn’t know there was lots of credit risk in the health care sector. I have to confess I found that out only recently due to some deep-dive research by a colleague that is being circulated privately. Upon reflection, it makes sense since private equity firms have long been buying in the medical space, both due to the perceived safety of cash flows and when they find a choke hold, their ability to jack up prices.

But it’s not just PE plays:

Europe’s car industry is also in the sights. Moody’s downgraded Renault to junk last month. S&P has placed the company on creditwatch negative at BBB-, just one rung short of junk status and alongside GKN, IHO Verwaltungs, and ZF Friedrichshafen. The world’s number one car-maker VW is at BBB+ and no longer has much buffer….

The US Treasury, the International Monetary Fund, and G20 Basel regulators have all warned that the underlying quality of high-yield debt and leveraged loans has deteriorated badly and is now more extreme than before the Lehman crisis.

But what they are even more worried about is a fat tranche of BBB rated securities that has mushroom fivefold since 2008 to $3.4 trillion and is precariously perched on the cliff-edge. The slightest shock could lead to a cascade of downgrades.

The US Treasury’s watchdog (OFR) said in its Stability Report that investment funds with strict mandates would be forced to sell these derated fallen angels, setting off firesales into a frozen market.

Among the companies sitting on the lowest investment rung of BBB- and also on negative watch are Samsonite, Vale, Suedzucker, Xerox, Western Digital, EQT, BlackRock TCP Capital, ArcelorMittal, Marks & Spencers, Abertis, and the state of Romania. Nokia and Macy’s have just been downgraded to junk. So has Kraft-Heinz with $32bn of debt.

A similar red alert comes from Anthony Rowley in the South China Morning Post:

Even before the coronavirus scare, it had already begun to look like a question of when, rather than if, such a debt crisis would erupt. All that was missing was the “trigger”. There always has to be a precipitating event for a crisis and the coronavirus could well be it.

International Monetary Fund managing director Kristalina Georgieva told the recent G20 finance ministers’ meeting in Riyadh that “high debt levels in countries and corporates could be affected by a rise in risk premia or an unanticipated tightening in financial conditions”.

She was being diplomatic, of course, but her comments could be interpreted in plain English to mean: countries and companies are up to their necks in debt and if lenders decide at this time of great uncertainty to raise lending rates or to call in loans, then we could be in trouble.

Some Asian economies are heavily debt-laden:

China itself has a steep corporate-debt-to-GDP ratio of 157 per cent, and after that come places like Singapore, South Korea, Japan and the euro area. At 74 per cent, the US corporate sector is less debt-addicted but that is partly a reflection of that country’s huge GDP.

When it comes to household debt, South Korea is well in the lead with borrowing equal to 95 per cent of GDP (and rising) while Hong Kong ranks second in Asia with a ratio of 77 per cent and Malaysia third at 68 per cent. Elsewhere, British households are debt addicted to a degree of 84 per cent.

State-owned enterprises represent 35% of China’s corporate borrowing, so they could be readily backstopped. The others would be messier. The first step is apparently already underway, the zombification of debt by having banks pretend that bad loans aren’t bad. We saw that playbook in Japan. It was such a failure that the Japanese took the uncharacteristic step in the early phases of the crisis of telling the West that their biggest mistake was not forcing banks to recognize loan losses and dealing with fallout. Even with the banks pretending the losses don’t exist, they still wind up being chary of extending more credit. From Bloomberg:

China’s financial regulators will allow the nation’s lenders to delay recognizing bad loans from smaller businesses reeling from the deadly coronavirus outbreak, giving temporary reprieve to trillions of yuan of debt.

Qualified small- and medium-sized businesses nationwide with principal or interest due between Jan 25 and June 30 can apply for a delay to the end of the second quarter, the China Banking and Insurance Regulatory said in a joint statement with the central bank on Sunday (March 1). In Hubei province, the centre of the outbreak, the waiver applies to all companies, including large firms, according to the statement.

Chinese banks are taking extraordinary steps to avoid recognising bad loans, seeking to protect themselves and cash-strapped borrowers from the economic fallout of the epidemic. Regulators told lenders not to downgrade loans with missed payments or report delinquencies to the country’s centralized credit-scoring system before the end of June, according to the statement.

For the West, two places to watch are junk bond positions and collateralized loan obligations. Banks would likely be holding some inventories of each. Collateralized loan obligation losses in the crisis weren’t terrible (banks also played games so as to underreport them), but they were generally believed to have taken ~15% losses, and they bounced back thanks to the liberal liquidity application by the Fed. The early thinking is CLOs could take worse hits this time around because so many different industry sectors could sink at the same time. And more of the underlying loans are “cov lite” which means junkier, so they’ll also have less value in times of stress.

We and others have warned of another possible point of failure: derivative central counterparties. From a 2018 post, which I hope you will read in full, Post Crisis Measures Have Failed to Tame Derivatives Risks:

The post crisis remedy settled on in 2009 was to require trades to be cleared through central counterparties who would be the ones to assume the credit risk of buyers and sellers. But as [derivatives expert Satyajit] Das and others (including your humble blogger) pointed out then, all this did was to move that risk out of banks and big leveraged financial players like hedge funds, and into the counterparties, which themselves are too big to fail entities.2 And even though it is true that a central counterparty will reduce overall credit exposures, as Das has explained numerous times, there is a big gap between theory and practice….

So the high-level conclusion is that CCPs in theory are an improvement over the old status quo, but they need to be implemented well to achieve their promise. Most important, they need to have strong enough capital buffers. Even then, they are not a magic bullet.

Now aside from [the Financial Times’ John] Dizard’s warning, there was reason to be concerned about the motivation for creating central counterparties, in that it was to reduce the “too big to fail” problem. In other words, given the limited, conditional risk reduction that would result, the idea of moving more credit risk to central counterparties was more than anything else to solve a political problem: to get the government out of the liquidity provider of last resort game…

But an inadequately capitalized CCP is just another “too big to fail” entity. And since the CCPs are private, there would be motivation for the participants to have the CCP be underresourced, since higher margins mean higher transaction costs and therefore lower trading volumes. And although no one would admit to this, bankers know full well that no financial regulator is willing to let markets seize up in our brave new world of market-based credit, as opposed to bank-loan-based credit.

Another effect of the officialdom’s post crisis to move credit out of risk was to move even more into the hands of investors. Those leveraged loans used to finance private equity deals, which are often bundled into those afore-mentioned collateralized loan obligations, often wind up in credit funds managed by private equity firms. Just as with private equity, investors in those credit funds are public pension funds, sovereign wealth funds, endowments and foundations, private pension funds, and life insurers. Fund managers like BlackRock, Fidelity and Vanguard also purchase them for their funds. The Financial Times reports that these investment managers are already reeling from withdrawals from their funds. By contrast, investors in private equity credit funds can’t liquidate, so they will have to take their lumps.

A big issue that astute commentators like Nouriel Roubini and Ambrose Evans-Pritchard have discussed is the Fed can’t fix a real economy crisis. Pray tell what can a central bank do to compensate for widespread business travel bans, which hit the particularly lucrative premium class international flights? Or the fact that restaurants in cities like New York are largely deserted? When hours and jobs for restaurant and hotel employees fall (for starters), you’ll see knock-ons to credit card, auto loan and student debt delinquencies. Only fiscal spending can compensate for the loss of business income and the US is allergic to that, save in the form of tax cuts to the rich.

Italy is on the right track although tax relief is less than idea than direct subsidies to workers and the amount looks too small. But it’s constrained by EU budget rules. From the Financial Times:

Roberto Gualtieri, Italy’s economy minister, said on Sunday the government would introduce tax credits for companies that reported a 25 per cent drop in revenues, as well as tax cuts and extra cash for the health system.

The package will amount to 0.2 per cent of GDP, he told La Repubblica, and would come in addition to €900m worth of measures unveiled on Friday for the most severely hit regions.

Rome will simultaneously seek authorisation from Brussels to increase the budget deficit for this year, the Treasury said over the weekend.

Italy does deserve credit for moving quickly on the health and real economy fronts. The US is likely to pay for its dilatory attitude in lives and in treasure.

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  1. Lina

    Non economic question. Many people here were discussing their prep plans last week, etc.

    Do people feel more or less worried about this after the past few days’ news? Ie, 2 deaths in US, nursing home in Seattle on lockdown, spread trends.

    I wanted to glean some optimism in the fact that we (US) are testing more and that hopefully this will die out come spring….. but I just can’t.

    1. Chris

      I feel about the same as I did at the beginning of last week. My family knew this kind of thing was coming. I have been and remain much more concerned about the both the economic aspects of this crisis as described here and the possibility of a resurgence in the fall.

      We live in a rural area. We have a septic system, our own well water, wood burning stoves, pellet stoves, oil heat on back up, and several weeks worth of food and supplies. Worst case scenario there is a creek at the edge of our property and we can use gas to boil the water. None of my immediate family rely on regular medication prescriptions. We have lots to do at the house if the Internet goes down. Our kids can be home schooled as necessary. We will be fine on those counts as long as everyone around us stays calm.

      But if we lose our jobs or need to open our doors to more family due to them losing jobs, or we’re put on an extended quarantine program that mandates limited social contact, things will get uncomfortable. We’re very much on a wait and see level right now. I also know that not everyone around us is set up the same way and we may need to prepare for additional charitable giving to our neighbors. Depending on how that is handled and how they take it, things could get ugly quick.

      1. Clive

        To be taken into account first and foremost as based on a small sample size, my soundings over the weekend and into today highlighted the dichotomy in response to COVID-19 related, who-could’a-guessed, to class and income/assets.

        In my mother-in-law’s reasonably well-heeled circle, the concerns were not around the possibility of having to self-isolate. Most had large freezers / store cupboards and, being of the immediate post-war generation, tended to keep these well filled, just because that’s how they’d been brought up. Non-US residents might not be aware of how a typical European’s outlook will likely differ from a, say, 60+ year-old US resident’s.

        This generation knew, or knew first-hand people who experienced, wartime shortages and rationing. It became ingrained that, what you had to-hand today, you might not be able to get tomorrow. So you put things by and assumed you might not be able to get restocked up for at least a week, maybe longer.

        And if they had to spend £100-200 extra on foodstuffs, they could and would do, having no problem at all finding that sort of money. They grumbled, of course, but nothing more than that. Most were more concerned about travel. Almost all had a cruise vacation booked, most due to depart in a few months, one in a couple of weeks, and wondered if they’d be able to travel, should they travel at all, who had the final say in whether they’d be able to cancel and get a refund. Easy to say “first world problem” but in terms of stress and anxiety, this is what caused most of what I saw.

        It’s important to note that most, if not all, had family and social networks they could call on. And, being the UK, it wasn’t like those networks were spread hundreds or thousands of miles away. Most had family within a couple of hours’ travel time and weren’t dependent on flights. Again, this is probably where a European outlook would differ form a US one.

        Back to my own squeezed middle / middle-class or skilled working class circle, the GFC produced a real sea-change in how they would respond to an economic setback. I was shocked, but then that says more about my own sheltered and conservative / conventional upbringing, as to what this group not only might do, but in some cases had done. Faced with a significant drop in income (such as one half of a couple being out of work or people on contracts not getting renewed for, say, six months) all had at least conducted a sketched thought-experiment in so far as they’d stop paying all consumer debt repayments apart from rent or mortgage (so that’s credit cards, (although they’d probably do the minimum payment in some cases), personal loans, car loans, TV subscription services, mobile phone contracts etc). In effect, they’d demand their own (albeit temporary) bailout and if the lenders insisted on chasing them through the courts, experience (in some cases) had shown that, in the short or even medium term, there wasn’t that much downside to inflicting a lender cram-down. Sure, they’d wreck their credit. But that was a can which could be kicked down the road.

        As I say, I was rather taken about by the casual (and, it seemed, already practiced) nonchalance at a volitional selective default. I would have felt social shame and, for want of a better expression, being morally deficient at even the prospect of not being able to meet my financial commitments. This holding up of the social (or maybe, financial) contract obviously went the way of the dinosaur 10-15 years ago.

        The impacts to the lenders of this depend on their ability, in turn, to be carried by their funding sources. But at the very least, you’ll get some asset impairments. What I think took everyone by surprise in the aftermath of the GFC was just how far governments were prepared to bail out the financial sector.

        1. PlutoniumKun

          In my circles, most people are only concerned about their holidays and how on earth they’ll cope with having kids cooped up for a few weeks if the schools close. There has been a little bit of hoarding (Aldi and Lidl are sold out of canned goods mostly), but not much. There is a strong sense of ‘well, it’ll be bad, but it’ll be worse in other countries, so we’ll muddle through). The history in Ireland to response to crises is to catch a boat/flight to the US or Australia. I don’t think poeple have realised that these options aren’t necessarily better ones.

          The debt thing is interesting in the UK, where I think its far worse than here (mostly cos the banks can’t do it since the GFC). I know there has always been a lot of worry about the sort of quasi debt in the UK system that people can walk away from, like lease cars and so on. The fear has always been a wave of non-payment. I think we might be at the verge of seeing what will happen if a significant proportion of the population just stop repaying.

        2. TimH

          A lot of office workers can work from home, and earn, while self-quarantined, but minimum wage earners can’t because the jobs involve doing something somewhere. So the poorer get screwed again.

          1. neo-realist

            Some office workers can. Many offices are economical in how they dole out the capacity to work from home–tend to be biased toward the more long term employees, the most skilled and the child caring ones in my experience. It’s not like a staff member can decide by him or herself to work from home; its up to the preferences of management to dole out the privilege to the minority.

            Then again, I haven’t worked in IT, so that’s, very likely, a different ball game.

        3. Redlife2017

          It depends on if you have family in the UK. The foreign-born people I have been catching up with are definitely more worried than native Brits. We don’t have family networks to fall back on if we get sick (or one parent gets sick and you have to take care of the child on your own in a quarantine – fun with an under-5, NOT).

          But the big banks are definitely getting worried. I was speaking with my Disaster Recovery Manager (DSM) this morning and they expect us to get sent home in the next 2 weeks, since it is very obvious that this is not going away and will only get worse. I have also been told by my firm to not go to a conference next week (in London) and not to go to a Labour Party meeting (filled with average age of 60 – no kidding) on Wednesday. DSM was shocked that over 60s aren’t already doing a partial quarantine on themselves, as they are at very high risk with this. I’m being asked by the DSM to make sure that my team can work from home for an extended period of time (one day on the iPad is one thing – 1 to 2 weeks requires a laptop or desktop to properly work).

          Also – quick question: Can we call this the OK Boomer virus?

          1. Clive

            That’s a very underrated data point — within the corporate hierarchy / pecking order, your place on the ladder is a determinator for what, exactly, being “able to work from home” means in reality.

            For do-nothing piddle-arser midlevel’ers like me, we get large screen laptops and VPN, so I’ve been sitting here wondering what all the fuss is about as it’s no real change. People a little lower down the line who actually do useful and productive work which needs to be done in something like real-time get stuck with BYOD (Bring Your Own Device), which is usually an iPad or even iPhone in reality. You can’t do much, productivity-wise, on that for long.

            So the people who genuinely keep the show on the road may not have the tools they need to actually achieve that.

            1. Redlife2017

              Exactly. The DRM said that lots of teams have one or two people who don’t have a set-up conducive to more than a day at home. Which even I was surprised by. So they are now trying to figure out how to make that work.

        4. xkeyscored

          As I say, I was rather taken about by the casual (and, it seemed, already practiced) nonchalance at a volitional selective default. I would have felt social shame and, for want of a better expression, being morally deficient at even the prospect of not being able to meet my financial commitments. This holding up of the social (or maybe, financial) contract obviously went the way of the dinosaur 10-15 years ago.

          I suspect many people understand full well that finance is a millstone round their necks, an attempt to keep their noses to the grindstone while funding the 0.1%’s cocaine habits and lavish lifestyles. They may lack the economic sophistication found here with which to analyse and critique it, but they sure feel no moral obligation to give the parasites their pound of flesh.

        5. shtove

          I wonder if there’s anything in the pipeline in England to tighten up on the 12 month discharge from personal bankruptcy. Not necessarily to extend the period, but to restrict judges’ discretion.

    2. fajensen

      No change.

      I have had a sense of Dread, of something unseen and terrible happening which I missed. Since the beginning of last year without being able to pin it on something specific, just some shadows like “the weather” random “out of stock” of things that are never out of stock, the farce that it is becoming a little too obvious that the only purpose allowed for Civilisation is to somehow drive asset prices higher.

      The events unfolding now are sort of what one expected was already happening. Due to the virus, the western leadership failure will become cartoonishly obvious. If we do something with that, we might even make it, if darker forces are the first to grab the ball and run with it, well, then we won’t.

      The Corona virus epidemic in a way has revolutionary potential: It’s “target group” are people above 50 who travels a lot and goes to lots of meetings -> People like Me, the CEO-segment, VIP’s like Putin, Erdogan, Donald Trump and so on (Maybe a whole bunch of Tunberg-haters, Brexiteer and Climate Denier foot-soldiers who goes on cruises and Egyptian package tours will “get it” too, enough to move political majorities, I’d imagine).

      Now, the risky phase as I see it, is that for those “winners” to Win, they have to end up with all of the assets.

      Which means that they will do something stupid Now because pre-virus they had all the time in the world, post-virus they don’t know, they might yet get it, they might even already have it, so they have to make their moves on each others stashes Now before it is Too Late.

      Therefore we will now see lots of gross leadership stupidity playing out (just look at Syria and Turkey), never mind that all the religious folks will “See The Signs” and go off the rails, at least for the whole of 2020 and at least until someone cooks up a vaccine!

      And I was planning to sell my house and move!!

    3. Shiloh1

      Jack Welch dead. Will he be looking up and cheering the markets on today? GE retirees may want to pay their respects at his gravesite.

    4. The Historian

      More worried for three reasons:

      1) I have children living in the Seattle area. One of my daughter-in-law’s has an autoimmune disease and is on medication to keep her immune system from attacking her body. She and her doctors definitely needed to know immediately if there was Covid-19 in her area so that they could take extra protective actions. Her doctors were only informed last week about Covid in Seattle.

      2) The fact that the State of WA didn’t report Covid-19 until two people were about to die doesn’t give me much faith in our health agencies. I always thought that the WA State health agency was one of the best in this country, but now I am not so sure. The State of Washington is now saying that Covid-19 may have been loose for a while in the Seattle area.

      3) We are just getting drips and drabs from the states about Covid-19. The Federal Government doesn’t seem to have a plan to keep all of us informed of its spread, so I am now depending on state newspapers and sites like this to gather information.

      1. Procopius

        Despite the failure, it may still be one of the best in the country. In the Army I was involved in casualty reporting. Sometimes it’s just hard to get information to pass on. You don’t want to be reporting cases that turn out not to be SARS Cov2. Test kits haven’t been available. When I had flu last year in a small city in Thailand, I was immediately tested for which type of flu it was. I understand that until recently that was not done in the US; that only a random sample were tested. I suppose that if they were tested for influenza and it turned out not to be type A, B, or C, someone might have suspected it was COVID19, but how confident would they be? I guess I’m just urging people to calm down. There is not a conspiracy to fool the public. At least not at state level — yet. Health workers are doing the best they can, and diagnosis is not easy.

    5. Krystyn Walentka

      Listening to AM radio in Texas is disturbing. I thought the anti-vaxers were bad…

      All these people saying the coronavirus is “no worse than the flu”, that SXSW should not be canceled! Pretty much just repeating it becasue that is what Trump siad and now they need to defend him.

      And I have been watching to see if anyone has changed their behavior, like how they could and wash and touch their face….nope.

      And they all talk about how China is getting “better”. Well, it is not and they STILL have millions of people in lockdown.

      It is going to suck here pretty soon, no because of the virus, but because of people’s late reaction to it. And I’ll tell you, all these overweight diabetic people will suffer the most.

      And 10 Year Treasury yields are still tanking so…

      1. The Historian

        Way too many people are living paycheck to paycheck in this country. They have to believe that Covid-19 won’t be that bad – the alternative is just too desperate to consider. If employment falls, most of those people will be in a situation of possibly being sick with no job, no money, and no insurance.

        For their sakes, I hope that what they believe is how it works out. I do have my very serious doubts about that, however.

        1. ShamanicFallout

          The Historian- yes, this. What country do people think we live in? Do you think the banks, insurance companies, bill collectors give a rip if you can’t work or there are closures and lock downs? This country is Paulie’s restaurant in Goodfellas: “But now the guy’s gotta come up with Paulie’s money every week, no matter what. Business bad? “F**k you, pay me.” Oh, you had a fire? “F**k you, pay me.” Place got hit by lightning, huh? “F**k you, pay me.”

          1. Tony Wright

            Refreshingly blunt analysis ShamanicFallout.
            It will also be interesting to see how this plays out in the context of the US election:
            It is likely that the impact of Covid 19 on the majority who cannot afford to not turnup to work, who have insecure jobs (which may disappear due to the economic impacts of the virus e.g. restaurants), and who cannot afford healthcare or virus testing, will be much greater. Covid19 also has a greater mortality amongst the old and those with chronic comorbidity such as obesity induced diabetes.
            Are these not the groups who by and large abandoned the neoliberal Democrats in favour of Trump in 2016?
            Some of these 2016 Trump voters will die and others will be seriously and adversely economically impacted by Covid 19. They probably will not be so inclined to vote for Trump in November, by which time the public health and economic dominoes will have fallen.
            It follows logically that if Bernie can overcome sabotage by the DNC and be anointed the Democratic Presidential Candidate, his policy of M4A may become a lot more attractive to an electorate exposed to the glaring deficiencies in the US health system. Let alone all of those voters who believed Trump would bring more blue collar jobs.
            For the sake of the planet those of us living outside the US can only hope that this happens.
            Another perhaps relevent consideration:
            It is widely accepted that in so-called first world countries we use half of our lifetimes’ worth of medical resources in the final five years of life.
            Therefore if Covid19 gets rid of a whole lot of us old farts (I am almost 67), logically Bernie’s M4A will cost a lot less anyway.
            “The old get old, and the young get stronger,
            It may take a week, and it may take longer…”
            Jim Morrison

            1. Procopius

              I was thinking that if it reaches the point where hospitals are overwhelmed, the “health insurance” companies are going to be in a serious negative cash flow, it may be necessary for the government to nationalize the hospitals, as happened in England during the Blitz when they had large numbers of civilian casualties who couldn’t pay. It may be necessary for the government to bail out the insurance companies, perhaps in return for equity (ownership). That would create conditions that would make M4A much easier. Please understand this is just speculation, and I really, really hope it doesn’t happen.

      2. Jim A.

        People tend to go directly from “Nothing to see, don’t worry,” to “PANIC!” without going through prudent preparation in between. You see that in building fires ALL THE TIME. People don’t do anything in response to the smell of burning and maybe a little smoke until they see flames on the ceiling and then they trample each other to death trying to make it to the exits. That is why calmly exiting the building is something that gets practiced in fire drills. Of course part of the difficulty here is that we have little real idea what the equivalent of calmly exiting the building is even if we realize that NOW is the time to do it? It’s probably a good idea to cancel any travel plans that you can get reimbursed for. But the vast majority of people can’t really afford to stay home for a month or two if they had to and so advising them to be ready to do so is unhelpful. And even if they were able to economically swing it, the Amazon warehouse workers and USPS postal workers that would enable them to do that are likely to be disrupted and may become transmission vectors.

        1. clarky90

          In NZ sick people usually seek medical treatment. Doctor’s visits are about $30. Hospitalization is free for as long as required. Covid19 tests are free (but Health Department is doing limited testing! bad news). Ambulances are free. Prescriptions are a few dollars. Workers have sick leave. The Unemployed have The Sickness Benefit.

          The USA’s “rotten to the core” health system will compell the precariate, who become infected with covid19, to keep working until they are unable to stand. They will avoid testing, treatment and hospitalization, for fear of bankruptcy. This will ensure that the 1% who are habituated to being continuously waited on, to often, have extremely high exposure to the virus.

        2. Krystyn Walentka

          My friend was is the 2nd tower that was hit on 9/11, ten stories below where the plane hit.

          Before the plane hit is tower he was standing at stairwell and a guard was telling them not to go down, don’t panic, everything would be fine. He saw people falling out the other building, he said no it is not fine, and he and a bunch of others pushed through the guard and started the long decent down. They made it to one of the lower floors when the plane hit his building and bounced him around the stairwell. He made it out but PTSD followed.

          So who is to say when is the right time to panic?

        3. KiWeTO

          Calmly exit the building works when there is an exit that works and one is willing/able to use it.
          We are still stuck on this 3rd rock from Sol. Which exit can one really use?

        4. Shiloh1

          Its about 10 years after Hugh Hendry’s famous “I recommend you panic” quote.

          He was speaking about the central banks and corporate financial chicanery and debt. Those matters are way worse now.

    6. Brooklin Bridge

      Definitely more worried. Even though I knew it would be absurdly bad in a 3rd world country like the US before hand, now that it’s here, it’s still hard to believe what a train wreck the CDC (with incomplete testing and poor planing) and Trump’s response has been. The fact that he wants to keep us in the dark is more than worrying. Our hospitals are salivating at the profits and will therefore be overwhelmed by the reality. I have visions of triage being based on $$ rather than need, and no planning whatsoever to contain things so as to avoid being overwhelmed.

      1. ambrit

        Down here, some of us have ‘visions’ of triage being based on flying lead. There is a perfectly good reason for hospitals in America to have armed guards on campus. They will need them. What is more disturbing is the thought that the needed medications and supplies for those who do get treatment will eventually run out.
        The “thing of value” that has been depleted almost into extinction over the previous four decades has been “Social Capital.” This shock can work either way, to revive it or put it out of it’s misery.
        For those who plan to “bug in,” stocking up on “alternative” treatments, which are really olde tyme folk medicine, is a go. Many “traditional treatments” have pretty good track records.
        I take heart from Keynes’ statement that: “In the long run we are all dead.”

    7. rtah100

      There are some intriguing posts on reddit/r/Coronavirus etc. hypothesising that USG and CDC is doing for COVID19 what the USG and Fed did for the GFC, throttling back the bad news and foaming the runway. All the announcements of confirmed cases are routed through CDC, CDC issues a duff test kit… If you cannot test, you cannot report and you cannot panic. Meanwhile, CDC and other entities use the period of “purdah” to prepare and then, belatedly, start testing and use the high incidence to justify necessary measures.

      As theories of public administration go, it’s somewhere between Sir Humphrey and tinfoil hat, I am just not sure where.

    8. Ian Ollmann

      Calm before the storm, in my opinion. Exponential growth can be boring at first when the numbers are small. Maybe we will get lucky and it will just go away, but the experts don’t think so. The stock market on the other hand was in rare form today. Epidemic, what epidemic?

      The corporate debt thing has been bothering me for a while. With near zero interest rates for a decade, you gotta think that anybody who wanted debt sold some bonds. Lots of debt fueled stock buybacks. Companies that do that don’t buy an asset they can use to pay off the bonds. If they are in trouble reissuing stock won’t get much return. Unless dividends are greater than bond interest, this seems like net expense to no ones gain. The main difference though is that stocks don’t mature in the way bonds do. You never *have* to pay back the principal with stocks. I fear many companies have been foolish in the name of parasite return.

      1. Jim A.

        Lots of debt fueled stock buybacks.

        Which is why I think that at a fundamental level, most of the gains in the stock market over the last decade are not supportable.

  2. pretzelattack

    i feel more threatened, like watching a dam collapse in slow motion. does anybody have a figure on how much it costs to get tested? need to call my insurance company to see if they cover that if it costs a lot.
    i can already hear “sorry, act of god” or some such in my head.

    1. rd

      I don’t think it is possible to get privately tested through an insurance company at this time. Some universities etc have developed tests, but I don’t think it is in the marketplace yet.

    2. MLTPB

      A test offers a snapshot at a particular moment in time.

      Even if we test the entire population.

      In the meanwhile, time marches on.

      Are we going to have real time, full coverage, streaming data?

  3. PlutoniumKun

    Hong Kong looks to be ground zero for anything bad in the economy. Retail sales there were down 20% even before the virus hit. There must be a lot of international exposure to HK companies and property. They’ve already announced a big fiscal boost funded by dipping into reserves, but that can only go so far.

    Interesting to see Renault is in big trouble. They announced a new budget priced EV a few months ago for the European market. The only problem is…. the main factory for its manufacture is in Hubei.

    I think the first big casualties will be in hospitality. I’m hearing lots of stories of companies stopping travel, cancelling conferences and so on, and many people holding off their holiday plans. This is possibly the worst possible timing for the whole hotel/travel/tourism industry as they depend on early year bookings to get their cash flow going. This will obviously have chain effects through numerous suppliers, the property industry and so on.

    1. fajensen

      All ‘non business-critical travel’ (as the word-slingers in communications so clearly put it) is On Hold at my TBTF-project. We did have a lot of travelling to Northern Italy too, “commuting”, almost.

      Wife and I have just recovered from the normal flu (normal, as far as we know). I am taking the opportunity to stay away from my place of work for another week, solely out of kind consideration to my colleagues.

      When the supply lines officially blow up in March/April or some colleagues tests positive … maybe we will get even more time off!

      1. aleric

        All foreign travel for business was cancelled last week at my wife’s mid-sized, midwestern, (with divisions in 30 other countries) insurance co. If you travel for personal reasons you will need to work from home for two weeks before returning to the office.

      2. Redlife2017

        All non business-critical travel on hold – That’s just about to be announced in my big firm as well.

    2. RBHoughton

      Not quite persuaded Kun. HK has large liquid reserves underpinning the peg. We had thought we would not see those again but they are underwriting the largesse Govt is paying out now. Capitalists have been making new issues on the market too – that helps. The disease appears to be diminishing in China and rippling out to the rest of the world.

      We have a second problem. The man who finances the riots here was arrested by police a couple of days ago and his dependents were instantly on the streets burning plastic rubbish bins and destroying traffic lights. The leaders of these terrorists have declared an intention to destroy HK so we may survive one danger only to be caught by another.

  4. Tom Stone

    I will reiterate a prediction regarding Real Estate that I made in comments at “Wolf Street” last week, and also in private to some individuals.
    I expect transactions to drop by 50% and median prices to drop by 25% by mid June 2021 for residential properties in California.
    And perhaps nationwide.

    1. WobblyTelomeres

      Is that based upon projected drops in demand from Asian (Korean/Chinese) buyers in addition to US contraction?

      1. pretzelattack

        maybe demand from asian buyers will increase, depending on the course of the disease in the u.s.

        1. PlutoniumKun

          There are much stricter limits now on taking money out of China, that will be a major limitation. If there is a crisis in China over this, a big question is whether wealthy Chinese will be able to make their property assets liquid. If they can’t sell their apartments, etc., then they won’t be able to sell abroad even if they can get their money out. Also, the crackdowns in HK probably won’t help, as HK is the main through-route for dodgy money out of China.

          My feeling is that the days of Asian money fluffing western property are gone for all but certain peripheral markets (i.e. where they can be more discreet, or they can negotiate passports).

          1. PlutoniumKun

            Just to add to that (sorry, I can’t do a link right now), its been reported by GlobalTimes (an official government paper) that Chinas real estate market might plunge as much as 50% in Q1 this year due to the coronavirus. This is really serious for so many Chinese people as property is the primary source of savings for many middle to high income Chinese.

          2. Wukchumni

            When we were selling my childhood home 5 years ago, I assumed a PRC Chinese buyer would end up with it as every other house on the street-being less than a mile from a Buddhist Temple, but about 6 months earlier stricter limits had come into play and an individual could only take the equivalent of US $50k out, and if you combined it with a few family members, maybe you could sweeten the pot to a couple hundred large, but that doesn’t buy you a home for cash in the City of Angles, and our realtor told us more than likely it would end up with somebody else, which is what happened, a WASP’y family with 3 kids. Hope they enjoy my late dad’s orchard as much as we did, and the 13 Giant Sequoias now around 50 feet tall and 50 years old.

        2. c_heale

          Nope. From my experience (S. Korea), there has been a massive housing boom ever here too. But I can’t see anyone buying now. Real estate is finished for the moment. No one from Asia will be investing in the West imo. I think a depression like the ’30’s is on the cards.

          1. PlutoniumKun

            A friend has a small business helping Chinese people relocate/invest in Irish property and she says there is still quite a lot of interest – but the main impediment is getting the money out of China. So much depends on whether people have managed to keep enough liquidity – I think many Chinese in particular will want to leave quickly if things get bad, even if they take a finanical hit. Its very different obviously for South Koreans and Japanese.

          2. dearieme

            I think a depression like the ’30’s is on the cards.

            I think there’s a real chance of that. Yet all the public discussion I’ve seen never mentions the possibility. Mind you, in some ways little is known about this virus yet – e.g. its sensitivity to the weather, its potential to mutate. In fact, unless you choose to believe Chinese data you’d probably have to admit that none of the crucial parameters are known. Perhaps South Korean data will clear up some of the mysteries.

            My source in Singapore tells me that they’ve expelled some ex-pats who violated quarantine and banned them permanently from returning.

            1. KiWeTO

              Said “expat” violated quarantine order after returning to Singaporefrom China, and then he wanted to go back to China. He was warned at the airport that he would not be allowed back into Singapore for violating the quarantine order [multiple re-entry visa would not be renewed due to quarantine violation) if he left for China at Changi Airport, but he still wanted to leave Singapore. So he left.

              Probably won’t be allowed in any way into Singapore ever again, as our immigration people have long memories and longer records.

              Self expelled?

        3. The Rev Kev

          I heard on the news a few hours ago that here in Oz there is a real estate sales boon going on at the moment. Considering the way events are unfolding, you would think that if they waited, that there would be a glut of places coming onto the market in the next year or two’s time.

          But seriously, what would be the effect of an order banning for several months all gathering of people as happened a century ago. That would mean restaurants, cinemas, theaters, weddings, funerals, markets, parties, political rallies, etc. Who would want to take an Uber or book an Airbnb or take part in a shred workspace and be automatically enrolled in a Coronavirus sweepstakes? How will all those workers survive without their pay checks? Goodbye sharing economy?

          And Dr. Evil may want those Amazon fulfillment hell-holes to stay open to pump out goods but sooner or later they will have to be shut down as they get infected with the virus and workers cannot be found that stay healthy enough to work there before collapsing. As this virus will be sweeping the world again and again over the next two or three years, I think that the whole economy will have to be substantially revamped into a totally different model so maybe we can kiss the consumer economy goodbye and go back to being citizens again.

          1. clarky90

            In NZ, becoming and recovering from sickness is primarily a medical/social problem. There are financial ramifications of course, but they are usually minor and not in the forefront of one’s mind. Ourr Health Care is free for as long as you need it. There is a robust social welfare net. Sick leave for the employed, The Sickness Benefit for the unemployed. Free ambulances. Drug prescription s are a few dollars.

            In the USA, I fear that precariate people, who become infected with covid19 will usually not go to a doctor; will still go to work; will still mingle with the uninfected; will not be tested; will avoid the hospital…..For fear of being bankrupted….

            Also, I believe that the 1% are far more vulnerable than they can ever imagine; BECAUSE of the “rotten to the core” health care in the USA. In general, they are used to being waited on, head to foot. I can’t imagine that more than a few have the descipline and resourcefulness to shelter in place for more than a week or two?…..

          2. Code Name D

            What really scares me is the possibility that Amazon (and Walmart) could be an open transmission path. Think about it. The majority of their products are manufactured in china, using the cheapest labor they can find. Which happens to be the viral hot zones. Many of these products are incased in thick plastic containers that protect the product from UV light (So colors do not get washed out under harsh florescent lighting while on display.) Creating a nice little heaven for the virus. It’s also impossible to decontaminate the product that way, after the fact.

            You know darn good and well nether Walmart or Amazon will test their products for potential contamination. I mean, what if the tests come back positive. -GASP- We can no longer sell our product. And even after it becomes known that they could be a transmission vector, its up to Amazon/Walmart to stop shipment. The US government can not order them to stop or veto their decision to not stop shipping contaminated product. In fact, they will go to great lengths to prevent such news from getting out. News stories will get buried, reporters will be intimidated. The spice must flow.

            Now maybe my tin-foil hat is on too tight. I sure hope it is. Because if it’s not – its already too late.

            1. KiWeTO

              Think that definitely is a tin foil hat worry.

              Anyway, you won’t have to worry much as the product won’t be able to leave China to get to your Walmart shelf to have the potential to infect you when you expose mucous-membranes to virus by rubbing product on your eyes or kissing it?

              The transmission vectors are flu-like. Your example is a hollywood zombie infection script? (Apologies for ab absurdem…)

            2. Ian Ollmann

              If you are concerned about this, the virus lives something like 9 days on surfaces, so just stick the packages in the garage in quarantine for 2 weeks — wear gloves! — and then you can have your Amazon booty without worry.

      2. Tom Stone

        Buying a home is the biggest purchase most people make in their lifetime, in times of uncertainty buyers back off.
        If you have to stretch to buy ( And even with low rates most buyers have to stretch to buy at these prices) and all of a sudden you aren’t sure you will have a job in three months and the value of you 401K has cratered…
        No one ever has to buy, someone always has to sell.

    2. polecat

      Thing is, imho, 25% is not enough of a drop for most .. considering how extremely cray cray real estate appreciation has been, since the housing bubble 2.0 re inflation !

      Unaffordable .. is still Unaffordable !

      but then, what isn’t, that lies in the shadow of the almighty DOW ..

      1. jrs

        Yea it’s like good, but at 25% off housing in almost all of CA is still unaffordable on even most middle class incomes.

  5. Chris

    The first sign of crisis to my mind is when parody and reality become indistinguishable. Not sure if you’re serious by that statement. Hope you’re doing well regardless.

    1. Samuel Conner

      If parody, it is well done.

      OTOH, “end of system of things” is, I think, not a bad rendering into modern language of the New Testament language of “fulfillment of the aion” (Jesus’ “Olivet Discourse”). I think that a sober historical reading of sayings like that would see this language as referring to the imminent crisis that was faced by Israel under pagan occupation and roiled with nationalist ferment. The agony of the siege of Jerusalem was something that could justly be described as unprecedented suffering. In terms of number of dead per duration of siege, I think it was arguably an order of magnitude worse than the siege of Leningrad by the Nazis.

      In this crisis we appear to be facing the end of an “era” or “age” of optimism about the possibilities of globalization and unfettered markets. I hope that something better is born “out of the crisis.”

      It seems that we have a hard time, as a matter of institutions and governance, remembering the painful lessons that our grandparents and great-grandparents learned.

    2. LowellHighlander

      “When parody and reality become indistinguishable.” You nailed it. I’ll remember that one, and try to give credit to you.

  6. Vichy Chicago

    I wonder if any companies are considering testing their workforces, in an effort to quantify initial impacts.

    From the anecdotal files:
    I work at Northern Trust in Chicago and all layers of management have to report by noon Tuesday the impact of 20%, 30%, and 40% decrease in staff.

    1. The Rev Kev

      Do they also have to report the impact of 20%, 30%, and 40% decrease in management as well? The only way to cope with that effect is to push responsibilities down a rung or two.

      1. James

        Do they also have to report the impact of 20%, 30%, and 40% decrease in management as well?

        Without even researching that one, I’d be confident in predicting 20%, 30%, and 40% increases in productivity, maybe more.

        1. carl

          Bullshit Jobs, David Graeber, posits that fully 50% of the jobs and parts of jobs in Western economies are essentially useless. Maybe a lot of people could stay home without a lot of damage to the economy if that is so.

          1. Watt4Bob

            David Graeber, posits that fully 50% of the jobs and parts of jobs in Western economies are essentially useless.

            Probably worse than useless, because there’s a huge mass of young folks working in the FIRE sector, which is to say, working for, essentially criminal enterprises, who aren’t aware that their employers are criminals.

            I see vast condominium developments in the Twin Cities in Minnesota where I live, and in Chicago where my Mom, and most of my extended family lives, those condos are filled with the clueless youngsters working for the criminals, and when they all loose their jobs at once, there’s gonna be wailing and the gnashing of teeth.

            They may well survive mild forms of Covid19 infection, but fall victim to the economic fallout.

    2. Potted Frog

      I work for a Major Financial Institution ™ and was on a call this morning in which the lead requested working-from-home status and responsibilities across the board. Report delivery time: today and sooner is better.

  7. Samuel Conner

    Is there any clarity at this point on the questions of “distribution of severity of symptoms” and “typical course of infection from exposure to resolution”?

    There is a respectable but (since released prior to review due to the fast-moving character of the crisis) not yet peer-reviewed genetic analysis of virus samples from two cases in the North-West that suggests that there may have been undetected spread in the community for weeks, perhaps as many as six weeks.

    This might imply “mild symptoms in many who are infected” or “slow progress to symptoms”, neither of which is helpful from the standpoint of surveillance and containment.

    It was pointed out in links or comments yesterday that DJT has authority to declare a national medical emergency, after which (admittedly subject to appropriations, which at the moment is a sticking point, though even the Rs appear to be demanding a larger initial target than DJT’s team wants to ask for) Federal govt would (at one remove — via reimbursement; we always make it hard, don’t we?) pay for medical care related to the emergency declaration. Perhaps the time for such a declaration is rapidly approaching.

    1. Ignacio

      2 deaths reported in Washington after 13 confirmed and 1 recovered is an awfully large number of deaths, though too small to be considered representative of anything except the possibility that there are many more infected but undetected for whatever reason.

    2. False Solace

      > after which (…) Federal govt would (…) pay for medical care related to the emergency declaration

      While I don’t recall the exact link where it was discussed, I believe that closer reading of the bill stated Federal reimbursement only applied to victims who were transported to the hospital by a Federal agency. Possibly victims of hurricanes and such. Furthermore, the victim’s insurance was expected to kick in first, with the victim fully responsible for copays, deductibles, and coinsurance. For insured people that means financial ruin regardless. Most people who make it to the hospital are going to get there on their own power.

      I understand there’a a difference for patients who are in “quarantine” vs “isolation”, with the ones in federal quarantine not responsible for the charges racked up during their stay, but the ones in isolation not so lucky. Once again, some people go to Happytown and some are in Screwedsville to paraphrase Lambert.

      Besides that, I sincerely do not believe our government would ever intervene to pay medical bills on a widespread basis short of an apocalyptic scenario (meaning current regime loses power entirely). Their sincere mantra is 1) Because Markets and 2) Go Die. They don’t even want to ensure the vaccine is affordable, much less free. Trump has been slashing health spending left and right and is politically invested in minimizing the scale of the disease. He is not going to buck orthodoxy on this. We’re on our own.

  8. CallMeTeach

    Though it seems that the young aren’t as affected in terms of symptoms, they probably are good at spreading the disease. Spring Breaks are beginning for universities, which means lots of young people congregating in crowded areas and then returning to school. Next up will be traditional schools who generally take break around Easter and all of the concomitant traveling to crowd heavy theme parks and beaches. I wonder if people will not travel, which will be one impact, or will travel and hasten the spread of the disease, which will be another. Things could get interesting fast.

    1. ptb

      oh man that is a good point. plane tickets will be cheap, so that drinking party in the Caribbean (w hook ups w random people from other states) will be extra tempting. followed by return to university in a week – possibly before the incubation period is over. the timing couldn’t be worse.

    2. norm de plume

      Yes, my wife and I are thinking our main danger might be from our kids, one of whom is still at school, the other working in child care. Lower infection and death rate might lead people to disregard the threat they pose, but presumably they have a greater capacity for asymptomatic carrying, and using the same taps and doorknobs and drinking cups as each other without thought is so ingrained as to be almost ineradicable.

      I am one of 5 sons of a father now 80 who smoked for 40 years. All bar one of us spent at least 20 years smoking, and two still do. We are 48-58 in age range. The one who didn’t smoke has a chronic lung condition and always gets the flu worse than the rest of us. Most of us have small children. Statistically, we will be lucky to come thru unscathed.

      Concentrates the mind, not in a good way.

    3. Anon

      No need to wait for Spring Break. I’m on a college campus, at this moment, where a Chinese student just walked into a study area and sprayed the room with an exuberant, uncovered sneeze! I need to leave this discussion right now!

      See ya’ later (hopefully).

    4. Yves Smith Post author

      You can’t spread a virus unless you actually have it. Viruses do not grow outside of cells. They CAN live on surfaces, and there is evidence (I read this in a hospital sanitation journal!) that coronaviruses can live on surfaces for as long as 9 days, but I think 2-4 days is already a bad enough assumption.

      However, having said that, the reason this virus has propagated so well (aside from apparently being contagious at a low viral load) is

      1. Long incubation period (it may even be longer than 14 days)

      2. 5-7 days of normal sinus flu symptoms before it turns serious in serious cases (viral pneumonia).

      So you have people who have been infected can look perfectly normal (incubation period, then what looks like a typical winter flu). That is why this has been able to get out in the wild in Washington state.

      Even a high percentage of older people follow this same path. It’s only a minority that gets viral pneumonia.

  9. xkeyscored

    Thank you, Yves. I too think this is going to be big.
    Forgive my ignorance of money markets and stuff, but do you, or other readers, expect vulture capitalists to hoover up vast amounts of foreclosed mortgages and so on? If interest rates are lowered and liquidity etc pumped into the finance sector, won’t that just encourage and facilitate such a move? Might be a lot of folk who can’t pay and desperately need cash for various WURS-related reasons.
    I didn’t notice any mention of this, but perhaps it was expressed in jargon I’m less than familiar with. Any clarification from people who know how these things work?

    1. Lil’D

      Capitalists with access to capital (& leverage I.e. other people’s money) will buy available distressed assets. That’s what they do. I am VC-adjacent and see plenty of this…

      There’s a lot of liquidity now though not evenly distributed. There will be some “winners “ and many losers

      1. clarky90

        IMO, I expect the entire FIRE economy to disappear in a flash; As if watching an utterly immersive crime/drama movie, AND then the projector malfunctions, the screen goes blank, and the house lights automatically, come back on…….

        Now what? I don’t know; but it will certainly be different….

        God’s Jubilee?

  10. Jason Boxman

    Just started reading The Great Influenza: The Epic Story of the Deadliest Plague in History / John M. Barry based on recommendation here; It’s already an interesting read and his writing is engaging. It begins with a discussion of the importance of science and medicine as science in fighting disease and the original pioneers in American medicine that brought forth this change in medical and scientific practice.

    We need that kind of skill and grit today.

    1. rd

      That skill and grit has moved into the financial sector creating numerous novel and innovative financial products. What didn’t move into the financial sector, is in the tech sector creating videogames.

      1. mle detroit

        I read Barry some years ago. One thing that struck me was that places did better if they had a strong social structure of middle to upper class women, mostly the wives of business owners, who organized volunteer visiting nurses. These days it would take all genders, but if people can’t work and could be paid by the government, that would be good for both nursing assistance and reporting/transparency.

  11. vlade

    On the mortality – I’m still not entirely convinced. Based on the anecdotes I saw, some of the testing in China was even post-hoc, when the patients were recovering. On testing, I suspect South Korea is way ahead of anytone else, if they really can test 10k people/day. On worldmeters, SK has 4335 cases, with 26 deaths, which is about 0.6% mortality.

    Italy has 1.7k cases with 41 deaths, 2.4% mortality, which is more in line with China – but I know that there are some deaths which may _not_ be attributed to CV alone (i.e. people who were seriously sick and while CV definitely contributed to their death, it’s not clear they would not have died w/o it anyways).

    Iran is highly dubious IMO, and the numbers are manufactured.

    On China – the numbers might not be as bad as Iran, but TBH, China has massive incentives to play with numbers, so I’m wary.

    That’s not to say CV is not a problem. Even if SK turns out ot be the case, with 0.6%, it’s still 5-6 times worse than seasonal flu.

    But I really don’t think we can say much, as some people may be asymptotic for a long time (which also implies that some people may be asymptotic _always_), and short of testing the complete population at once, or repeatedly and very often we won’t know.

    TBH, the asymptotic for a long time is what scares me personally, as asymptotic stuff that can randomly flare up badly is what’s the worst.

    Or, we may just have to learn to live with it (at least for a time), the same way as people lived with the chances of dying of random small infection hundred of years ago.

    A friend of mine has a slightly different theory here – that we (mandkind) gone soft, and too overprotective (while at the same time weirdly accepting some real risks w/o batting an eyelid). Which means that anything that does breach that protective barrier, we just can’t cope anymore properly.

    1. rd

      My big concern is the Ro=2 number with a novel disease that appears to have little natural immunity nor a vaccine. So, a high degree of hygiene and social distancing is the only way to stop it at this time.

      The main thing that keeps the main flu bugs under control is that they have been circulating for a long time, so many people tend to have at least partial immunity and there are vaccines available that can often significantly reduce the spread. Those are the reasons that the flu has Ro of 1.1 and yet 10 million people in the US still get it every year.

      An Ro of 2 means that a much higher percentage of the population could get coronavirus than the flu. In five rounds of transmission potential, less than 2 people would get the flu but over 30 people would get coronavirus. Many people have had the measles vaccine, but recently we have been seeing how fast measles can spread in an un-vaccinated local population (measles has Ro=12-18). Coronavirus wouldn’t spread as fast measles but there are no vaccination/immunity buffers to stop it leaving a local population like there is with measles.

      1. clarky90

        The 1918 Flu swept around the World in 3 great waves. It was the H1N1 strain, that still visits us every year, to this day. The H1N1 Case Fatality Rate is much, much lower now, because of herd immunity, immunization. The people who were highly vulnerable succumbed, early in the last century.

        We are all descended from ancestors who survived the 1918 pandemic…

        1. Anon

          Yes, my mother was one of the lucky ones. I rarely got the flu as a young buck. After I turned 60 the flu devastates my health. Covid-19 has me revisiting my last will and testament (and an attorney to implement it).

          Covid-19 is likely to be OK, Boomer Revenge.

          (I’m outa’ here.)

        2. The Rev Kev

          The thought occurred to me a long time ago that we are also the descendants of those that survived the Black Death when a third of Europe was wiped out.

          1. clarky90

            Absolutely RK. I actually think that the Black Death was a hemorrhagic Influenza. The bubonic bacteria was a “theory” that was repeated so often, that it became “fact”. Imo.

            “Plague without rats: The case of fifteenth-century Iceland”


            “In the fifteenth century Iceland was ravaged by two epidemics which usually have been identified as plague. It is shown here that these epidemics were no less lethal than the Black Death in Europe. The first one probably killed half the population or more and persisted in the country for at least a year and a half. Since, for several reasons, it can safely be assumed that Iceland was not populated by rats at this time, this may offer the strongest available proof that an epidemic like the Black Death was not dependent on rats for its dissemination.”

    2. Brooklin Bridge

      I can understand the fatalism of your friend, but the issue is we have the science, the rationality and the means to do the right things. Many countries could stop this or at least slow it down to manageable numbers, but due to corruption, the profit above all global production economy, and for us here in the US, the health care system going blindly for profit over health, we are in many instances going to do the opposite.

      That is infuriating. Look at the World Health Organization, they haven’t even declared this a pandemic yet. Money money everywhere and not a cent to spend. A tainted ship upon a tainted sea.

    3. Ignacio

      South Korea suffered the largest MERS outbreak recorded outside the Arabic Peninsula in 2015. It was basically a nosocomial outbreak with very high mortality and I believe this is what prompted them to be so stark on Covid-19 infection analysis applied to whoever has been in the vicinity of known cases but not necessarily in close contact. This contrasts with the approach taken elsewhere. And yes, this says a lot about the many mild infections that have not been detected in China or elsewhere simply because the procedures are different. In Europe you must be symptomatic or a very close contact to a confirmed case to be analysed.

      1. dearieme

        The British government announced a few days ago that it was going to do testing at 8 hospitals and 100 GPs’ practices of everyone with “flu-like” symptoms. I assume that’s a sensible way to try to establish the scale of the problem.

    4. PlutoniumKun

      On the point of South Korean mortality, given the huge rise in positive tests in the past two weeks, I’d suggest that the correct level is well in excess of 0.6%. Even if you just step back one week, there were around 2000 cases, which suggests well over 1%.

      I think the Italian mortality cases may be skewed because the disease seems to have gotten a hold early in a hospital, so it claimed quite a few lives quickly from patients who may already have been very sick.

      So I think roughly speaking we are looking at around 1.5% mortality, even in countries with good medical systems. So overall deaths could reach Spanish Flu levels.

      1. Kevin C. Smith

        The Italian hospital fatalities in particular were on a psych ward. That kind of patient tends to be out of shape, and a great many psych patients are smokers. Smoking induces the expression of the AT2 receptors which SARS-nCoV-19 binds; so you’d expect this group of unfortunates to have high rates of infection and mortality.

    5. Greg Taylor

      Mortality rate calculations will depend on

      1. the percentage of people who actually have the virus that get tested.
      2. the percentage of people who don’t have the virus that get tested.
      3. how accurately people are classified by testing procedures.

      Some of the differences in reported mortality rates are due to the different screening criteria used for testing and sensitivity/selectivity (accuracy) differences in the tests.

      It’s hard to find published accuracy rates of the various tests being used. One recent submission to the Journal of Medical Virology claimed a quick finger prick test had false positive and false negative rates of approximately 10% each. Swab tests evidently have false negative rates of closer to 50%.

      If the false positive / negative rates of the tests being used are even remotely as high as 10%, then the mortality rate will be underestimated if loose screening criteria are used. For example, suppose you screen anyone with a fever and 5% of those with a fever have a virus. Screen 1000 people – 50 actually have the virus and 950 do not. The test with 10% false positive/negative rates will detect 45 of the 50 accurately and 95 of the 950 inaccurately. The test classifies 140 people as having the virus when only 45 of them actually have it.

      Now suppose 4 of these 140 people die. You report mortality of 2.8%. The actual mortality among those meeting testing criteria is actually 4/45 = 8.9%.

      Moral: If you are going to use widespread screening, you need false positive/negative rates on tests to be extremely low, 0.1% or less, before making public health decisions (quarantine,…) It’s not at all clear that we have such tests. That may be the reason that the US CDC has seemingly been dragging its feet on testing.

    6. Ignacio

      On your questions on the asymptomatic infection that might turn later in a more severe case: you are touching here many of the unknowns about this disease. I won’t bother you with with the theoretical possibilities around the different ways this new virus can infect us with a variety of outcomes because these are so many involving from pathogen virulence, persistence, latency, or the strength of our immune response (if there is always a immune response) and some other possibilities I have read (some of them really weird). I wouldn’t resort to any strange theory of mankind and instead focus in this new pathogen-host relationship that didn’t exist before having a lot of unknowns. From a practical point of view this means that not only you have to take personal precautions to avoid being infected but more importantly after you are infected. This means keeping or even improving hygienic habits, eating&drinking habits and activity habits in order to keep your body strong with good immune response for a long time avoiding strenuous activities and excesses for a while.

    7. False Solace

      Well, I’m going to side with the Chinese on this one. They know more than we do. And they shuttered much of their economy for weeks running and had entire regions on lockdown. If the threat weren’t real they wouldn’t have taken those concrete material actions.

      I suspect when the health care system gets overwhelmed the numbers get a bit ad hoc, and leading up to that they are politicized, but you can’t argue with mass quarantine. I don’t think they would have done that on a whim. I really don’t think one can say the Chinese are overprotective or soft, either.

    8. Yves Smith Post author

      I’ve said before, you cannot rely on naive computations of death rates (total cases v deaths) as the # of infected is growing. You need to look at resolved cases, and we don’t have a lot of breakouts of that.

      The WHO is under pressure from China to not call this a pandemic, and they are saying a 2-4% death rate. It appears to become lower only with extreme social distancing (China lockdown) so more of the seriously ill can get treated.

      In other words, as infection rates rise in a region, death rates will too as hospitals and respirator capacity gets eaten up.

  12. rd

    I was at a concert at a regional casino in Upstate NY Saturday night. The place was very busy. Thousands of people milling around. Coronavirus seemed to be the last thing on people’s minds. There were a lot of people working in the place whose jobs depend on thousands of people showing up.

    The US is largely a service business now. There are two types of services – ones that need lots of in-person interaction with people, and ones that don’t.

    The business I am in already uses “virtual teams” from all around the country and much of our work is already done over e-mail, IM, web conferences, etc. In some cases, I have worked with people for years and never even seen a photo of them. Very few people have desktop computers (mainly high-end technical computing), so everybody is very portable with laptops/VPN and can work from home/hotels etc. We could all-self quarantine at home and still get 40 hrs per week in without breaking a sweat. We would cancel some in-person meetings where people fly in from all over the country and just do them by web conference instead.

    However, much of the service industry is based on “experiences” and require in-person interactions in a specific locale. That business would get gutted by coronavirus and many would not re-open if they were carrying debt etc.. We went to Disneyworld a little while after 9/11 and the place was vacant. The kids could do multiple rides per hour. Everybody had their own row on the airplane. I think coronavirus could be similar, which is interesting considering the US can’t get more than 40% of people to get the flu vaccine each year but that doesn’t stop people from going out.

  13. Wukchumni

    We’ve been living in a virtual world on the internet for about 20 years, inflecting one another with our thoughts in a way that was impossible in the 20th century, and what amazing reach.

    Covid-19 seems similar, sans internet.

  14. Trick Shroadé

    I’m surprised at the level of panic and gloom and doom here. People seem to be envisioning mass graves and packs of feral dogs roaming the streets. It’s sounding increasingly like this things has actually been in the US for weeks or months already and largely undetected because most people are either asymptomatic or don’t feel bad enough to go to the doctor. Plus maybe this is one way that global warming will benefit us with spring arriving early in many places thus slowing the spread.

    I’m cutting back on my news reading (since they have a vested interest in keeping us all panicked) and just making sure I wash my hands a little more often.

    1. rd

      The problem with exponential growth is that it starts off very slowly so people don’t even realize there is a snowball rolling down the hill.

      The Chinese didn’t react initially but then slammed the gate down once they realized they had thousands of cases. That likely prevented it from expanding it to millions of cases in China.

      The US has allowed that initial snowball to get started. It is unclear now if it peeters out or continues to grow. With the amount of plane and car travel in the US, it could spring to every corner very quickly once it really gets going. That is how the flu works – there are usually very few cases in October but millions by January – this appears to have the capability to spread faster than the flu. The 1918 Flu looked manageable in the spring of 1918. There were 50 million dead globally by the end of 1919 (antibiotics, etc. today would cut the fatalities from secondary infections).

      If there was a semblance of competence in Washington, I think there would be less concern. but so far the CDC has been a mess and the Trump Administration’s primary concern is the impact on the stock market and his re-election. So the number of cases right now is still very much an unknown. It could be what they say it is or it could be an order of magnitude or two larger. There is no way of knowing right now. To date, the early cases appear to have been hiding in the middle of similar flu cases, so we probably won’t start getting an accurate count until next weekend at the earliest as the testing ramps up.

      More on the CDC lab in Atlanta:

      So no panic, but we have stocked up on cleaning and disinfecting supplies as well as making sure we have enough food staples in the house to go a couple of weeks without going out. We have very good public water supply with large lakes full of water, so water isn’t a big concern for us unless all of civilization breaks down around us.

      We have a balanced portfolio in retirement accounts, so no panic on the financial front as the bonds are cushioning the stock market. We have good health insurance, so we can go to the doctor or hospital if needed and not end up with thousands of dollars in bills. Many people are guaranteed a $3,000 bill just for walking through the door of an emergency room, so a large percentage of the population will avoid that.

      1. Math is Your Friend

        Medical bills are something I hadn’t really thought about.

        It may be informative, after this dies down, to compare ‘expensive medicine’ regions to those where there is no significant incremental personal cost for doctors, emergency rooms, hospitals and many prescription drugs.

        Will the latter have a better outcome because more people get medical care, or a worse outcome because heavily used medical facilities become sources of infection?

        1. rd

          Where are the regions without incremental personal costs?

          The ACA made a big push for high deductible plans with self-funded HSAs (that many people don’t fund). So a fair percentage of insured people now have deductibles of $2,000 to $6,000. If you have medical costs, that is what you pick up to begin with. Very few people making $30k-$40k per year can easily afford to pony up $3k just to go to the emergency room.

          People with high deductible employer-based plans have increased to half of employer-based insurance plans. Throw that on top of about 20% of the population without insurance, and you have over 50% of the people below age 64 who have to pony up serious cash to participate in healthcare.

          People over 65 are eligible for Medicare and/or Medicaid, so they are in a better place than much of the rest of the population, but they still have costs.

    2. xkeyscored

      I do hope you’re right. But six weeks ago many people were just waking up to Wuhan? What? Where? Will that affect us/US? Two weeks ago, it was still all ChinaChinaChina, even in most articles and comments here. Now it’s very plainly a lot bigger than China or even Asia.
      Mass graves? Maybe the USA’ll escape. (Though perhaps by means of mobile crematoria, courtesy of the aptly named Uber, ready to lift your soul above it all. “Throw out your dead, triple-wrapped in plastic please.”)
      Mass packs of feral dogs? Or feral looters, crazies, vigilantes, cops and soldiers?
      I fully admit some of these scenarios are a bit OTT, but things sure ain’t gonna be pretty, especially in a country like the US, with half the population armed to the teeth and regarding anything government does as an assault on their individual freedoms, while said government respects those views by doing effectively nothing other than plan the next handouts of cash to the FIRE sector..

    3. Dita

      Because of the way the U.S. operates, a pandemic will amplify the flaws in our system. Those who are very online can be over aware and can choose to take precautions, but what of people who are not? Or those who can’t afford to stay home? What of 80,000 homeless people in NYC? What’s the plan?
      My office just released a contingency plan that focuses on ensuring continuation of business by having the 10’ers work remotely. But no plan for the support people, who need it be said, have high deductibles, pto limits, etc.
      It’s not gloom and doom so much as recognizing that we are poorly prepared, on state or local level, let alone the feds.

      1. Eustache de Saint Pierre

        I don’t see any signs of panic here but rather a lack of complacency about the fact that there is a new predator out there. It appears to me that it is sensible to be wary of something that we are not familiar with, while trying to glean any information that is available on how it operates so as to best keep it at bay.

        If our early ancestors had not done so out of necessity, we probably would not be here now.

  15. eg

    The US is going to have get over its allergy to fiscal stimulation (other than tax cuts for the rich) stat

    1. Ian Ollmann

      I expect we will find that at the end of the day capital rots if no one shows up to work. Fiscal stimulus will only go so far.

  16. Wukchumni

    I’m going to inquire today with friends that work for NPS, the status of things Covis-19 as far as Sequoia NP is concerned.

    I’ve mentioned previously the 2 bottlenecks where masses of humans hang out way too close-Sherman Tree & Moro Rock, I wonder if they have a contingency plan, as both are by far the most popular destinations for visitors on their been there-done that tour. You can only get to the Sherman Tree now, as the road to Moro Rock is closed, and will open in a month or 2.

  17. chuck roast

    The crocodile tears will soon be in full flow soon as the Hedgies and PE parasites flood Capitol Hill demanding to be saved upon pain of the extinction of Western Civilization in its entirety. Timmy and Hank will put down their golf clubs for a bit to orchestrate the pain amelioration of the .0001%. Stay off Constitution or get run over by the black limos racing down to the Fed from the Hill so the ethereal and elect can pick up their Bank-charters. We are saved!!

    1. Susan the other

      So nice that the central banks have no control over the real economy (They probably don’t even know what it is – which would be why they don’t even acknowledge it!) – we’ll watch this cortege of limos get their fix and then we’ll watch them die a miserable death anyway. If we had handled the GFC differently – with streamlined bankruptcies for people and banks (hello Joe Biden, are you hearing this?) we would not have immediately begun all over again with the same ill-fated behavior, like all the new derivatives; all the impossible corporate debt. The only thing that will do anything now is a total moratorium on debt and then do immediate emergency fiscal spending directly into the grassroots economy – everywhere all at once. For years to come. The GFC was a rainbow swan compared to Covid.

  18. freedomny

    I’m wondering if this will have any effect on climate change re the aerosol masking effect. For instance – with so much of China on lockdown…what is the decrease in industrial production? And, could this decrease trigger the masking effect and more abrupt climate change….

    1. urblintz

      I’ve read that de-industrialization in China could raise global temps by as much as 1c…
      and soon… I believe that’s MacPherson’s take on it and realize he is very controversial.

        1. urblintz

          yeah… I wasn’t sure how strong to make my disclaimer since I found the link here. I’m pretty sure it was him and indeed the flames were visible. He said something like “all we can do now is treat people nice cause we’re done for…in 2 weeks!

    2. drumlin woodchuckles

      When you say the “masking” effect, do you mean the “de-masking” effect?

      As in, stripping away the mask currently in place from massive particulate pollution?

    1. xkeyscored

      Sure does. The medical-type info’s a bit suspect and maybe misleading:
      It is impossible to say with 100% confidence that the coronavirus will be just like the flu in its seasonality. However, given that all of the above listed factors are equally applicable to both illnesses, it seems likely that the same trend will hold.
      So far as I know, it is not a fact (yet) that all factors mentioned apply equally to ‘flu and WURS, though there are reasons to hope at least some do.

      Then there’s this graph, linked to in the article, according to which “This graph looks scary. Until we adjust the zoom. As of January 26th, there were 56 cases outside of the U.S. Over the course of the following month, that number shot up to the current 4,289 cases.”
      Hmm. Still looks pretty scary to me, as in the trend is very clearly upward and increasingly so.

      More to the point is the enormous economic and social disruption this is causing, and will cause. Even if we shouldn’t be worrying about the virus itself (highly dubious), what do we do when our jobs have gone, our shops and markets are empty, and we’ve no money for food even if they were open and had any supplies? Maybe it won’t get that bad, but I wouldn’t be too sanguine.

  19. Ignacio

    I was wondering, given that this time we are facing (apart from the health issues) an economic crisis originated in the Real Economy rather than a financial crisis, if given the outsized role of the financial markets, these can act as amplifiers of the signal. Looks like we live in a world submerged in a giant inverted balance sheet were many will not be able to service their loans and the corresponding credit crunch could make things much worse than anticipated.

    1. WobblyTelomeres

      Quickly, now, more quantitative easing! To the spigots, men. Put your backs into it.

    2. Jeremy Grimm

      I am not sure what Real Economy we still have in the U.S. The years of stock buy-backs to drive equity prices further undermines my sense of a Real Economy. The Real Economy was shipped away and what was left has been heavily leveraged to accommodate looting. I would think that makes a financial crisis quite an amplifier to a crisis in the Real Economy. Many of the details in this post are over-my-head but my impression is that little or nothing was done to repair the instabilities innovated into the financial markets which lead to the crash in 2008, and it sounds like there have been some new innovations. Just as business is heavily indebted so too is much of the Populace, and incomes have been so low as costs have grown that even those in the Populace without debt lack the savings to meet an emergency like getting a bad cold or a garden variety flu, or getting their hours cut, or getting temporarily laid-off, or just seeing tips substantially reduced as customers grow scarce.

      I suspect many of the small and medium sized firms will be allowed to collapse, along with members of the Populace, and as before the Government will pump money to the large firms and allow them to scavenge the loosers and further consolidate our economy. The squeeze on the Populace will ratchet tighter. I suspect there will be some new end-nodes substituted into the U.S. economy’s long and narrow supply chains to replace some end-nodes deemed too risky but I doubt there will be any long-term increases in the redundancy of the end-nodes.

      1. Susan the other

        Resuscitating the real economy of manufacturing in China will require demand here in the US. But the only money we’ll make will be on retail and service/wages. That will be how we’ll start to dig out, along with fiscal projects and subsidizing many essential domestic manufacturing ventures. PPP lobbyists are lining up in the foyer. But before any of that usual stuff even gets off the ground we will be subsidizing the essentials, food, medicine, distribution; natgas & electricity. Maybe all the utilities. If banking is given a new designation – a chartered non-profit designation – as a utility they might make some money too but how they can without giving up their big fantasies is beyond me.

        1. drumlin woodchuckles

          We should not bother ourselves with resucitating the real thing-making economy of China. We should bother ourselves with resuscitating a survival-based real thing-making economy in America. It would take several decades to do. It would not be rebuilding all that was shipped to China. It would be rebuilding some small fraction of that to make some small fraction of the things we currently use one way or another. But that small fraction should be totally made here.

          The silver lining to this dark coronavirus cloud is that it gives us an opportunity to pursue the survival goal of ZERO trade between America and China. And in fact, ZERO contact between America and China of any kind whatsoever.

      2. Ian Ollmann

        Yawn. You eat the real economy every day. When it’s literally fiscal stimulus for dinner then you’ll know.

  20. Brooklin Bridge

    We need to let the rich know that covid-19 risks obliterating enough of the poor so they, the rich, won’t have enough immiserated folks with underfed kids to make them feel good and be proud about themselves their wealth. They’ll be stuck being like everyone else.

    On the other hand, perhaps it’s worth it to them after all since they might be able to get rid of a lot of folks on Medicare all in one fell swoop. The smell of fresh tax cuts for the rich and ginormous profits for health care vultures is heavy in the air.

  21. Glipn

    “The lower rate outside of Hubei is likely due to the draconian social distancing measures China has put in place to try to slow spread of the virus.”

    Is the fatality rate somehow dependent on how many other people have the virus nearby? This makes no sense.

    1. Samuel Conner

      By slowing the rate of spread, you also “spread out” the burden on critical care facilities that provide supportive care to patients with the most severe symptoms. There is no doubt that in Hubei province, and especially in Wuhan city, the medical infrastructure was not able to keep up with the case load. It seems very difficult to believe that there were not numerous deaths that might have been prevented had the medical system not been so overburdened.

      So, yes, “how many people also have the virus” nearby in space and time will affect the mortality rate among those whose symptoms are severe enough to require supportive care. It’s a capacity problem.

      And the prospect of capacity shortages in US should be worrying. Our for-profit medical system is designed more with “return on investment” than “resilience to exogenous shocks” in mind.

      It seems that we are already seeing evidence of inadequate testing capacity. So our surveillance is not functioning at 100%. How will our care provision systems function if taxed well beyond capacity? I hope we don’t find out.

      1. Monty

        On January 18, Wuhan’s Baibuting neighborhood held a mass “10,000-family feast,” with 13,986 courses served in the Party-masses Events Center main events area and across nine secondary areas.

        This event, a few weeks into the outbreak, was probably the reason it got so bad all at once there. Dr John claims the virus spreading via asymptomatic shedding, it also starts this 24/48 hours after you are exposed.

        I heard Trump saying his huge political rallies are “very safe”, and Bernie doing that 35000 person show with public enemy… You wouldn’t catch me within a country mile of a rally or polling place.

        1. Samuel Conner

          Don Jr is reported to have alleged that Ds want this to become a mass casualty event/process for the sake of political damage to DJT.

          But that cuts two ways, I think. Encouraging people to attend D rallies in the middle of an epidemic might have political benefits to the Rs, in terms of sickening the D electorate.

          Again, maybe the claim was true (there are surely sociopaths among the upper reaches of the D establishment, and among the Rs), but that doesn’t mean that he wasn’t projecting.

          If the Parties are waging rhetorical biological warfare against each other, we would seem to be moving in the direction of some kind of rupture.

    2. Cuibono

      it is a feature of some epidemics that the epicenter has higher mortality. Poorly understood imo.of course some part of it is overwhelming the care resources…but not all of it

  22. Drake

    My eyes were mostly glued to the markets last week. I’ve been awaiting a repricing for some time. I mostly sold out of equities and bought into bonds over the course of last year, a little prematurely for catching the final melt-up of the last few months but that was not unexpected. I started nibbling late last week, nothing too serious since I can easily see things getting a lot worse, but I just can’t watch 5 straight down days, nearly straight-down days, and not think there’s going to be an equally sharp bounce, even of the dead-cat variety. Whipsawing from maximum complacency to maximum fear always puts me in a buying mood. I’m still awaiting and expecting more violent repricings if people stop attending public events (concerts, movies, sporting events, voting, etc), traveling, etc. In that case hello recession.

    One of my fears is that there is a lot of bad news out there that companies of all stripes have been trying to sweep under the rug for a number of years, and that this is all going to start coming out now that they have a convenient scapegoat to blame. In other words, “yes, we’ve been profitless for years, loaded with debt, and spent most of our cash on buybacks when our stock was overpriced, and haven’t had a new product in years, but this quarter’s disaster was entirely due to coronavirus. Yeah, see. Coronavirus.” I expect to see a lot of that in the next couple of earnings periods, in addition to whatever carnage the disease and reaction to it really cause. Typical blame-shifting, ass-covering, lame excuses. It will likely make current-earnings look worse than they really are just because we’re catching up with 2-5 years of fantasy-based reporting in previous quarters.

    It also worries me that this ‘repricing’ has only taken us back about 3-5 months on major market indexes. I was mostly sold out of equities at that point due to how expensive they looked, and now I’ve somehow managed to convince myself they’re cheapish-looking. The 2007/8 repricing took price levels back about 10 years. When you take a step back it’s hard to even consider this a repricing, let alone a fire-sale. I think any significant rallies at this point are things to be sold.

  23. Monty

    China was the place for the best performing stock indices in February. If the PBOC can keep it ll propped up through this catastrophe, what is to stop other CBs from doing likewise. They seem to be unshackled since 2008, and surely the global economy is TBTF, so what’s to stop them conjuring money to buy any old thing to prevent it all cratering?

    1. Yves Smith Post author

      I like this part of that story even less:

      As of Wednesday, the mortality rate – a statistic that measures the deadliness of the virus on infected persons – of coronavirus is 3.4 percent. That figure has risen since the initial discovery of the virus, when the mortality rate hovered around 2.2%.

  24. Jen

    Possible case in NH now – an employee of or local hospital who recently traveled in Italy, presenting COVID-19 like symptoms and tested negative for flu and cold.

    Here’s hoping for a false alarm.

      1. Jen

        Yep. And our local “small liberal arts college” is evaluating its ability to proceed with its spring foreign exchange programs.

        My long term observation about said local hospital is that their infectious disease team is extremely knowledgeable and has their stuff together.

        My long term observation about the leadership of said small liberal arts college is they don’t like making decisions, especially those that are likely to be unpopular.

  25. Tomonthebeach

    It sure seems to me that we should be using the DE-word; not the RE word these days. First, the administration and the brokers called the big sell-off a correction vs a panic sell-off. Today, the market is doing a happy dance for no logical reason. Soon, as more Coronavirus deaths in the US pop up, the market will tank again, then freak when it looks globally.

    As Yves points out, over the long run, we could be seeing massive business failures, job losses, and increased medical debts. With record personal debt, a clueless and ignorant president, and a frozen Congress – that spells DEpression; not REcession.

    1. Susan the other

      But one pleasant thought is that Covid-19 will bankrupt all private health insurance companies as well as an avalanche of hospital corporations… if the Trump administration lifts a finger to bail them out and then forces medical debt on the public he’s going to bring the the “real economy” back under the umbrella of the FIRE industry and prolong the depression. I think he’s probably not smart enough to think this through. God forbid we get smokin’ Joe making these decisions. He’s the dumbest stump in the entire political class.

      1. Samuel Conner

        Am I right in remembering that back in 2017, during the “let’s repeal/replace the ACA” agenda on the R side, that in some conference with the R leadership of both houses, DJT inquired “why not just enroll everyone in Medicare?”

        It doesn’t seem remotely possible that this could get done from the R side, but OTOH if the medical emergency becomes sufficiently dire and R governance is at stake, perhaps strange new policy alignments might become possible.

  26. dearieme

    Suppose the USA were to have an epiphany and sweep away the corrupt crony-capitalist mess that is its health care system, with a view to replacing it by free markets. It would still be necessary to have a system of government intervention on public health matters, principally infectious diseases. Moreover it is probably true that some of that should be a federal rather than a state matter.

    (I dunno about the US but in the UK the people who are meant to be in charge of public health seem to spend their time and energy on preaching about private health matters that are fairly widespread – which are a plain different thing.)

  27. Phil in KC

    I work in a hotel. I handle luggage, car keys, and I get into people’s cars to prep them for valet parking. (I am resigned to getting the virus). Can’t do this from home, and there’s no doing this work via an app. We will be open as long as people are traveling I suppose. Once our occupancy levels start dropping because of cancellation and few new reservations, I’d guess we would get by on a skeleton crew composed of the healthy and willing. Once a decision to close the doors is made, I will apply for unemployment insurance, and I do have savings that could last for a year or longer without tapping into retirement accounts.

    I am also about the only one of my peers prepared to ride this thing out.

    That said, our “management team” (cough, cough) awaits instructions from Marriott Int’l. We are a franchise and so often the mangers are told what to do by the Marriott people. In this case, however, they are clueless. Never have I ever had less faith than I do now with our PMC.

      1. Phil in KC

        I could wear gloves, yes. Provided they are not in short supply. I can’t be certain that the hotel has thought ahead enough to lay in extra provisions.

        I already have hand sanitizer at work of the recommended strength.

        It is the air in the vehicle cabins that I would be breathing in that causes me to be less than optimistic. You can’t practice social distancing when parking someone’s car.

        I won’t be the only one in this situation. There will be TENS of millions of people in the same boat like me, unable to work from home, but forced to negotiate the risks of working, i.e. interacting with the public. While people are still buying hardware and groceries, eating in restaurants and staying in hotels, then we in this line have some gainful employment but are likely to be exposed to carriers. Once the virus become widespread, we will be out of work. This will be a Depression-era event.

        I do value the concern shown here. Thank you.

  28. DHG

    Could have fooled me, appears the moneyed have decided that their money will save them, Dow closed up nearly 1300, this should start Trump crowing that he alone has saved us from the virus and he will point to the accelerating market… The virus will come for all equally rich, middle or poor…..

    1. jrs

      Only I don’t believe it. Sure it may come for the rich, but you think the rich can’t hole out indefinitely if they want to. They could. Working people? Nah, no way, they have to work and live. Like everything else this virus may effect all but it won’t be equally distributed, expect deaths to inversely correlate with wealth.

    2. Chauncey Gardiner

      Agree. Points well made in Yves’ post, but just noise to the “We Control The Money, We Control The Markets, and We Create Our Own Reality” policy elite. Why, just look at where the Dow Joans closed today, as you mentioned, DHG.

    3. David Carl Grimes

      During the Black Death, the money of the rich did save most of them. They isolated themselves in their country estates, minimizing contact with the dying serfs. They had more access to clean water, clean clothes, and hygiene.

      Once the plague was over, society quickly normalized. Serfs remained serfs and aristocrats remained aristocrats. The structure of society did not break down but was restored even though 50% of the population had died off over a four year period.

      Will that happen again this time around?

      1. Anon

        Actually, it wasn’t the water or clean clothes, but freedom from vermin that carried the plague bacterium and transmitted to humans through the bites of fleas.

        Understanding Covid-19 is essential.

      2. Bazarov

        This is not an accurate gloss of the social consequences of the Black Death.

        For one, things did not “normalize”–population fell so much that the peasants were able to demand much higher wages and much improved working conditions due to labor scarcity. This new sense of freedom has serious cultural impacts that you can trace directly to innovative developments like the Free Cities that arose at the end of the middle ages.

        That’s just one example! The terror of dying before one had “done enough” to go to heaven gave rise the practice of indulgences, which the church would later milk to such an obscene extent as to help spur the Reformation.

      3. The Rev Kev

        Actually things did change. Because so many serfs died off, their labour came into huge demand. Wages rose and some serfs shot through on their lords and worked at a higher paying lord’s fields. It left behind a lot of fracture points in the political, religious and economic establishment which eventually allowed space for the Renaissance to grow down the track.

  29. ShamanicFallout

    Thought I’d relay a personal story- the Natural Products Expo in Anaheim that my company was set to exhibit at this week just canceled the whole thing. 90,000 attendees. A very big trade show. A few days ago all the big retailers and etailers started pulling out, then the big brands. The smaller companies like us were in a pickle because we’d already spent a lot of money on booths, travel, hotels etc. but today it started to snowball and by mid day about 600 companies had pulled out and the show staff were stating that attendance was going to be 60% lower (which probably means more like 80%). Basically it was going to be a ghost town. They did the right thing and canceled and will be working on credits for future shows, but a lot of small companies will just have to eat a lot losses no matter how it shakes out

    1. Wukchumni

      Thanks, appreciate insiders tales such as yours~

      The first MLB game of the season is on March 26th, with just about every seat within the 6 foot infection distance of the person sitting on either side of you.

      There’s a little over 3 weeks for this to play out, but would it even be considered safe for teams to play each other in empty ballparks by that point?

      1. Phil in KC

        I have been thinking about MLB and the upcoming NCAA tournaments as well. And then there’s the Olympics in Japan, of all places, and then the Dem and Repub conventions this summer. The Dem superdelegates would, I am sure, prefer to work from home.

  30. VietnamVet

    The deaths in Washington State have risen to six. There is an outbreak in Seattle, its size is unknown. The Federal Government has broken down. There is no indication of a quarantine of travelers from the West Coast that has three hot spots. So far there have been three gigantic SNAFUS; 1) flying the infected and uninfected in the same airplane to Travis AFB where there is an outbreak outside the base, 2) failure of the coronavirus tests, and 3) the shortage and expense of the tests and lack of surveillance so nobody knows exactly what is happening.

    A consumer/service economy is sure to crash if there is nothing to sell and close contact with others can kill you. On top of this, the government PR is saying don’t worry about the shortage of face masks. Except, if the police, firemen, utility workers, grocery clerks and healthcare providers don’t have the Personnel Protective Equipment (PPE) that will keep them safe while doing their jobs; society itself will collapse.

    The White House is facing two huge black swan events at once, a pandemic and an economic depression. The frightening thing is that they don’t seem to realize it.

    1. The Rev Kev

      If the US acted like China, then the whole State of Washington and maybe California as well would be shut down and put into quarantine by now with mass testing of the people and field hospitals being set up.


    Prepping means different things to different people. We are stepping up our hand washing with a new routine. Coming in from outside we have a sink in our laundry mud room off the garage set up with soap and an new paper towel dispenser that we don’t have to touch anything but our towel. We have sanitizing wipes to then carefully wipe the door lever, the garage door close button and the faucet and a trash can we step on to throw away the towel and wipes. We are trying to be far more vigilant about touching our faces whilst out in public and before we wash our hands at home. Everyone who enters the house is required to do the same thing as we do. For deliveries we wear dish gloves, open in garage, remove plastic.. clothes go immediately in washer other things are wiped down. Then the dish gloves are washed when we do our hands. We wipe down the steering wheel and door handles screen et al when getting into the car after doing errands. We are not using cash. Only debit and credit cards. It sounds like a lot but it is really only a few extra minutes a day. And of course doing all the things we ought to be doing every day like getting enough sleep, keep down stress, eat healthy foods etc.
    The only reason we are doing some of is spouse is diabetic, we ( well mostly me!) are being nanny to our six month old grandchild and both his parents are teachers And son who lives at home is in retail management so that’s a lot of people exposure via them. Spouse works at home anyway So that’s not an issue.
    Lol. This morning ( I live in the western Philadelphia burbs) I woke up with a cough, headache and sore throat though and I never get much of anything Let alone really sick!! Hope it’s just a late winter mild cold.. I haven’t had a cold for almost three years I think!!

    ***Note.. the wipes are making my hands irritated so I now use the dish gloves to wipe down then wash them. The doc Just toLd my told my daughter This week to be careful with alcohol wipes and gel sanitizer as if the skin gets really dry from constant use it will cause micro cracks where infection can enter!!! Just an FYI…

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