Economic implications of a SARS/Coronavirus outbreak

[qldfrog]

Mathematically, your death rate calculation is correct. However, there's reason to believe it much lower.
Given the number of cases in China, there are bound to be some undetected, potentially thousands. If they survived, nobody tested them. If not, you can be sure people asked if they died of coronavirus.
So deaths are added to the count, survivors are not.

Further, we have better medical care than China. It won't make a huge difference, but it'll definitely reduce the death rate in 1st world countries.

Those two factors alone should lower the death rate, the first much more than the second.
Or I'm just too optimistic...

Mathematically, your death rate calculation is correct. However, there's reason to believe it much lower.
Given the number of cases in China, there are bound to be some undetected, potentially thousands. If they survived, nobody tested them. If not, you can be sure people asked if they died of coronavirus.
So deaths are added to the count, survivors are not.

Further, we have better medical care than China. It won't make a huge difference, but it'll definitely reduce the death rate in 1st world countries.

Those two factors alone should lower the death rate, the first much more than the second.
Or I'm just too optimistic...

True but only if you trust the Chinese numbers.Italy is the place to check to validate figures

 

[Smurf1976]

Those two factors alone should lower the death rate, the first much more than the second.

I certainly hope you're right.....

 

[sptrawler]

I think people really need to think about which companies wont make it, if this becomes really protracted, some we are already seeing are struggling with China supply issues.
The next problem IMO, will be companies that supply China, they can only stockpile so long. Then when the trade frees up, China has been stockpiling end product also, it becomes a double whammy.
Just my thoughts.

 

[basilio]

We are all trying to make semi educated guesses about death ratios, quality of medical treatment, ease of infection whatever

For what its worth I suspect that Chinese efforts at controlling the population and treating the sick have been authoritarian and herculean. The authoritarian aspect has enabled them to take steps that may not be possible/palatable to other countries but may have been helpful in controlling the spread of the disease. At least for the last 5 weeks. I think the hospital system seems to have worked itself into the ground to treat and support the people who have fallen ill. Great effort. That's just my observations.

I also think the Chinese government will throw whatever monies it needs to keep businesses and people solvent while they try and muddle through. At least that is the impression I get and I think the point of a command economy like China is that the government can and does do this sort of thing. ( On that point its worth realising China has a very strong surplus and may need to sell US dollars to finance its support of the local economy.)

With those points in mind I wonder how effectively other countries will react if they are similarly challenged ? Would the US medical system work anywhere near as hard to treat thousands of sick people ? How well would control of population work ? How willing would a US government be to keep people and busineses solvent if the situation gets grim ?

We can be sure that many African countries will not have the resources to treat and effectively control populations. What about Iran ? Indonesia ? Japan ? South Korea ? Italy ?

Along side all this how will international finances hold up ? What happens when countries become simply unable to meet a range of corporate and international debts ?

What is the Plan to address these possibilities ? I can see these questions arising within a 1-2 months at the current rate of infections and society shutdowns. The world financial system is not in great shape. This isn't helping.

 

[IFocus]

Mathematically, your death rate calculation is correct. However, there's reason to believe it much lower.
Given the number of cases in China, there are bound to be some undetected, potentially thousands. If they survived, nobody tested them. If not, you can be sure people asked if they died of coronavirus.
So deaths are added to the count, survivors are not.

Further, we have better medical care than China. It won't make a huge difference, but it'll definitely reduce the death rate in 1st world countries.

Those two factors alone should lower the death rate, the first much more than the second.
Or I'm just too optimistic...

Numbers out of China are not real so unreliable trying for any sort of accuracy plenty of guessing going on but I believe the higher fatality rate in the developing countries will balance against the 1st world and still land at around 2 to 3%.

Risk going forward is infection rate can still overwhelmed health services in the 1st world who wont necessarily be able to be as a aggressive as China isolation of cities.

Problem with the virus is the lack of knowledge so lots of unknowns, testing of how the virus develops in the lungs has only just started etc.

As for the vaccine lots of development in reducing time has happened but note none of the big pharma's have been involved thus far so mass production will be an issue and there have already been a number of setbacks but hopefully some smart scientist cracks it.

So not all the risks are understood but interesting the change in language about everyone becoming exposed so I am guessing economics will trump deaths borders will open to facilitate trade maybe sooner than later.

One of the issues with the China lock down is many medicines are now made there and a short fall is coming.

 

[Smurf1976]

On the economic side something to consider is that the falls in markets are so widespread that there'd be very few people who haven't lost money.

It's not a "winners and losers" situation, there'd be very few winners out of this at the moment. The odd one but certainly not mainstream.

This reality won't encourage consumer spending.

 

[qldfrog]

On the economic side something to consider is that the falls in markets are so widespread that there'd be very few people who haven't lost money.

It's not a "winners and losers" situation, there'd be very few winners out of this at the moment. The odd one but certainly not mainstream.

This reality won't encourage consumer spending.

isnt it the beauty of mandatory Super than even low paid workers in they 40 or 50ies while risking loosing their job in the next quarter will have lost more in the last 3 days than they will earn for the month, and probably lost more than their overall disposable income after mandatory expenses in the whole quarter.
There are no real winner, even a very conservative approach is seeing loses: gold was going down , as were bonds and AUD, the 3 together in a falling market....

 

[So_Cynical]

A couple of videos from the HK based South China Morning Post.
~

.

 

[Dona Ferentes]

Hope this works
https://cdn.newsapi.com.au/image/v1/a1e5d49466c3a617215fdae1859c0cc4

 

[basilio]

The German paper offers a European perspective on the spread of the virus. The numbers are rising rapidly in Sth Koree and Japan.
New cases are popping up with seemingly no connection to current known outbreaks


News
COVID-19 updates: Germany facing a 'coronavirus epidemic'
The coronavirus epidemic has triggered several warnings from officials about an impending pandemic. Follow DW for the latest updates across the globe as public health authorities struggle to contain the virus.

https://www.dw.com/en/covid-19-updates-germany-facing-a-coronavirus-epidemic/a-52536472

 

[fergee]

I think it would be a prudent move by the government to employ some pretty radical emergency regulation right now.

STICK:
Taiwan has implemented US$60k fines or two years in jail for breaking quarantine and going to public places where there are a lot of people. This is not a bad idea imo.

CARROTS:
Also I think the some helicopter money is in order, like the free $1k giveaway the Aus government did, just so people who lose income due to being in quarantine have money to get the basics and are not tempted to leave the house for work or to go find money to stay on top of bills etc. Hong Kong is currently doing something like this.

Another option could be interest free loan facilities to any that need it to cover mortgage interest, car payments, HP, BNPL payments etc just to save some strain on the retail, banking and real estate industries and to keep the velocity of money up.

Just a thought.

 

[Dona Ferentes]

Adding the views of another eminence grise:
" ....the combination of warmer weather in the northern hemisphere and unprecedented containment measures could mean that the infection rate peaks at some point in the next few months. But the economic response will undoubtedly lag the virus infection curve, as a premature relaxation of quarantines and travel restrictions could spur a new and more widespread wave of COVID-19.

That implies, at a minimum, a two-quarter growth shortfall for China, double the duration of the shortfall during SARS, suggesting that China could miss its 6 per cent annual growth target for 2020 by as much as one percentage point. China’s recent stimulus measures, aimed largely at the post-quarantine rebound, will not offset the draconian restrictions currently in place.

This matters little to the optimistic consensus of investors. After all, by definition shocks are merely temporary disruptions of an underlying trend. While it is tempting to dismiss this shock for that very reason, the key is to heed the implications of the underlying trend. The world economy was weak, and getting weaker, when COVID-19 struck.

The V-shaped recovery trajectory of a SARS-like episode will thus be much tougher to replicate – especially with monetary and fiscal authorities in the US, Japan, and Europe having such little ammunition at their disposal. That, of course, was the big risk all along In these days of dip-buying froth, China’s sneeze may prove to be especially vexing for long-complacent financial markets.
Stephen Roach

- all this talk of V shaped recovery, or more realistically W, maybe U shaped.... But what if it's L-shaped (as in, going to L?)

 

[fergee]

I hope the government is currently planning to mobilise the armed forces and get ready for the possibility of martial law. It sounds drastic but it may be what is required to maintain law and order and facilitate life under quarantine. An ounce of prevention is worth a pound of cure at the end of the day.

 

[moXJO]

Thinking about this more...
How is business going to handle sick leave?
Quarantine period alone would wipe out most business. Then if large numbers get hit the country would shut down.

Hopefully it fizzles out

 

[fergee]

Thinking about this more...
How is business going to handle sick leave?
Quarantine period alone would wipe out most business. Then if large numbers get hit the country would shut down.

Hopefully it fizzles out

Interest free loans from the government. SME's especially will need financial assistance to keep the lights on otherwise this could lead to a major financial contagion.

 

[fergee]

Adding the views of another eminence grise:
" ....the combination of warmer weather in the northern hemisphere and unprecedented containment measures could mean that the infection rate peaks at some point in the next few months. But the economic response will undoubtedly lag the virus infection curve, as a premature relaxation of quarantines and travel restrictions could spur a new and more widespread wave of COVID-19.

That implies, at a minimum, a two-quarter growth shortfall for China, double the duration of the shortfall during SARS, suggesting that China could miss its 6 per cent annual growth target for 2020 by as much as one percentage point. China’s recent stimulus measures, aimed largely at the post-quarantine rebound, will not offset the draconian restrictions currently in place.

This matters little to the optimistic consensus of investors. After all, by definition shocks are merely temporary disruptions of an underlying trend. While it is tempting to dismiss this shock for that very reason, the key is to heed the implications of the underlying trend. The world economy was weak, and getting weaker, when COVID-19 struck.

The V-shaped recovery trajectory of a SARS-like episode will thus be much tougher to replicate – especially with monetary and fiscal authorities in the US, Japan, and Europe having such little ammunition at their disposal. That, of course, was the big risk all along In these days of dip-buying froth, China’s sneeze may prove to be especially vexing for long-complacent financial markets.
Stephen Roach

- all this talk of V shaped recovery, or more realistically W, maybe U shaped.... But what if it's L-shaped (as in, going to L?)

I think the buy the dip crowd are still in that mode of thinking and there will be a big dead cat bounce as money managers buy up and shorts cover but if that can manifest into a resumption of the last few years upward market trajectory will remain to be seen.

I think this event will cause wider systemic problems and as Warren Buffet famously said "Only when the tide goes out do you discover who's been swimming naked."

 

[basilio]

The US should breathe easier today.

Donald Trump believes they have it well in hand and that there won't be any serious outbreak.
In any case he has appointed Mike Pence to be responsible for overseeing US preparations and response to the CORVID 19 virus. That is so reassuring..

------------------------------------
As far as people swimming naked. If countries face extended quarantine periods with millions of people unable to work no business will be secure. It would be just too much of a strain on cashflow.

Honestly I think it should be a time of governments printing and distributing cash to keep people and businesses solvent until the crisis is over. It would be so dumb to "survive" a 2-4 week quarantine period but go bankrupt, lose homes, lose businesses and everything else in the process. Not to mention dealing with the desperation of millions of broke, hungry, homeless people people. Just doesn't make sense IMV.

 

[IFocus]

It will be interesting how it plays out economy wise as already mentioned apologies for covering the same ground.

Election year for the US so I imagine Trump will look to throw stimulus from helicopters if necessary but how to manage the rate of infections so health care services are not overwhelmed, length of isolation for the work force and the implications that surround that such as small business no work no income etc hard to see many that could have minor symptoms staying home going broke.

That's before you get to nursing homes etc.

All this while keeping supply chains open.

So far it looks like the Australian Federal government are following advice based on science hope that continues but clearly discussions about enforcement of isolations etc would also be happening that would be scary.

Still prepare for the worse hope for the best.

 

[Dona Ferentes]

I hope the government is currently planning to mobilise ....

was at the hospital today, visiting a bed bound relative .
Got the distinct impression non urgents were being delayed, and wards cleared, bed by bed.

 

[basilio]

was at the hospital today, visiting a bed bound relative .
Got the distinct impression non urgents were being delayed, and wards cleared, bed by bed.

Interesting. I wonder how they will deal with the infectious nature of the disease in a mixed public hospital ? Could be sticky with cross infection.

I hope/guess this issue has been through and sorted.