COVID-19 Isn’t Scary, but its Economic Damage Sure Is
People are becoming more terrified each day of the health threat they believe COVID-19 is. The health risks aren’t scary at all, but the economic damage gets scarier each day.
When COVID-19 became perceived as a big enough threat to lockdown Hubei Province in China, we knew that their economy would take a meaningful hit, and in turn, the world economy as well. The biggest concern at the time was on the supply side, where China’s manufacturing would decline while this was still going on, even though that was only likely to be a short while, which we predicted would only last a short while, enough to punish the next quarter numbers but not much beyond that.
We saw this wildly disproportionate reaction with SARS, where we ended up paying a pretty big economic price by allowing us to be held hostage by a so-called epidemic that only affected about 8,000 people worldwide. If we view these numbers completely out of perspective, we might think that 8,098 cases and 774 deaths might mean something, but we need to realize that this places this on the ridiculously meaningless end of the scale in the world of infectious diseases.
This ended up costing the world’s economy $400 billion, which is a lot of money to prevent a few lives. When you compare this to the millions of deaths that we get every year from infectious diseases in general, why 774 would matter to anyone other than those personally touched by this is a question that no one has seemed to ever ask.
You don’t need to wonder about these things when you are in the grips of a panic, and the world sure panicked about this one. The economic cost was rung up in our response to these panic levels, which were indeed at an epidemic level even though the disease sure wasn’t.
SARS was more than 10 times more potent than COVID-19 is, and 100 times more potent than the flu, and if this only managed to spread at the rate that the flu does, we could have indeed seen an epidemic for the ages, easily eclipsing the 100 million deaths that the Spanish flu caused.
This didn’t happen of course, because coronaviruses are potent but fragile. SARS was 100 times more potent than the flu but the flu spreads at a rate that is a hundred thousand times higher, and when the bodies are counted, the flu kills almost a thousand times more people every year than SARS did.
We therefore don’t want to get hung up too much by the mortality rate of a virus, because even if it was 100%, enough people need to be infected for the deaths to pile up enough to be even worthy of a glance.
100 million deaths worldwide happen to be a very meaningful and scary number, but 774 just isn’t. 10 times this, like we’ve seen so far from this latest coronavirus, isn’t meaningful either, nor is 10 times that. We need to maintain perspective here and not just allow our terror to suspend our thinking to the point where it becomes paralyzed and we all sit in front of our TV sets and devices like zombies and become willing actors in a real-life horror movie.
The actual horror movies that deal with epidemics run up a body count that bends the imagination, which we would think would be required for so many people to get so scared. Perhaps they did not have to imagine their outbreak as tragic as they did, if this is all that it takes to work us up into a psychotic frenzy.
The CDC is on hand to protect Americans from real outbreaks, and they do release regular updates on the flu season, with the latest one being released on March 7. They have to use mathematical models to predict these things, since we don’t collect data on the flu anywhere near as diligently as a virus that scares us so much more like this one, so they provide a range instead of hard numbers.
We will use the mean of these ranges as this would represent the most likely situation. To provide some perspective on where we are currently at with the spread of COVID-19, we’ll compare the two.
So far this flu season, there have been 43.5 million infections from the flu in the U.S., versus 6,469 so far for the coronavirus. Since the coronavirus is 10 times more deadly, moving up to the same threat as the flu would require 4,350,000 cases, which is a lot bigger number than 6,469. We are currently 1/672 of the way there.
China has been trying hard to get to 81,000 cases, and just added 13 more yesterday. When you only get that few cases a day in a country that size, it’s all over but the wiping of your eyes and working the kinks out of your neck. The U.S., with less than a quarter of the population, needs to exceed China’s cases on a per-capita basis by 2,864 times to even get this virus up to the level of the flu in terms of risk.
Why China, where the virus started and where the concentration was at its highest, has stopped at only 1/2854 of the threat of the common flu, but the idea that we will be greatly exceeding the normal infection risk from just the flu hasn’t really been thought out.
The projections out there for the number of infections in the U.S. has been estimated at up to 100 million, although how China can get less than 100,000 but the U.S. gets to 100 million, a thousand times higher, just isn’t explained.
The reason is that this is pure insanity, and we need to hold the CDC and other health officials to a much higher standard than this.
Officials at the CDC need to Compare Notes
The CDC also tells us that there have been 520,000 hospitalizations due to the flu this season, yet somehow the medical system has been able to accommodate this many without building field hospitals, M*A*S*H units, like they do during a war. M*A*S*H wasn’t this funny, thinking that we need to build these things when there are only hundreds of beds needed right now for those sick enough to require hospitalization.
The mean estimate of deaths caused by the flu in the U.S. this season is 33,500. We have barely broken 100 with the coronavirus. We need to at least get to 33,500 to get to the point where COVID-19 becomes as worthy of discussion as the flu is, which we have decided is not worthy of discussion at all, even with twice this many deaths as we see in the worst flu seasons.
We actually need to use 60,000 as our reference point because that’s now many Americans died of the flu two seasons ago. 120,000 coronavirus deaths would mean twice as much concern at the flu, but we’re doubling a number that doesn’t even really make the news because no one cares about deaths as few as 60,000 from common diseases, or hasn’t until now.
This 60,000 might seem like a big number but it is only two hundredths of a percentage of our overall population, so 120,000 is only four hundredths of a percentage, still far from meaningful.
Given how long this virus has been on our shores, and we’re just at around 100, it would need to grow over a thousand times more to get to this bigger but still extremely small body count. Based upon the very low infection rate that we’re seeing in countries like China, where only 6/100 of a percent of their population contracted this and this number stopped going up three weeks ago, we need to start putting 2 and 2 together better and come up with another number besides infinity as the answer.
As far as anyone knows, there is no special immunity that Chinese and Koreans have that the rest of the world, including Americans, don’t have, but we would need to show this to even pretend to justify the truly absurd infection rate projections we’re seeing. There’s a big gap indeed between 0.006% in China and the 30% or more for the United States.
If we just forget the numbers, and allow our panic to guide us, perhaps we can see ourselves getting there. When authorities who are supposed to be experts on the spread of viruses go crazy too, hardly any of us are left to call them out, and everyone just accepts this fraud as they have perpetuated.
Some do speak up, but their voices are completely drowned out by the cacophony of screams that you hear from both from the media, health authorities, and the public at large. The level of absurdity that authorities play with knows no bounds, wishing us to think that this is the biggest threat to humanity we’ll see in our lifetimes, or perhaps even the biggest of all time.
This has prompted them to take extremely drastic measures, and this is where the financial side of the equation enters the stage. We are now locking down entire cities, such as the 7 million people that live in the San Francisco area, based upon a handful of deaths in the area. You would think this was the Spanish flu by the way that they are reacting, but we didn’t even do anywhere near this much back then, and we are behaving like we do with the viruses in the horror movies, capable of wiping us all out in a matter of days or a few weeks.
We cannot call this an over-reaction, or even an extreme over-reaction, because those terms are far too tame for what we need to describe here. It is as if we have all been poisoned by something that has disengaged our brains and turned us into robots commanded by the empire, although the empire does not win in this scenario, and everyone loses.
We’re Courting Economic Disaster, and We’re Doing it to Ourselves
We could not have ever imagined the U.S. placing such draconian restrictions in place unless the situation was truly dire, things that would seriously threaten the lives or well-being of a large percentage of the population. 1 in 3,300,000 Americans dying is light years away from this. There will be more deaths, but even if the percentage makes it up to where China ended up, that’s still only 1 in 433,000, and ten times as bad as China only adds up to 1 in 43,330.
Somehow, our lives are all in great peril, so much that many of us already are told by the government to only go out in public when absolutely necessary. This has already created enough of a hardship for the U.S. government to spend trillions of dollars on this already, billions of dollars so far for every corpse.
It isn’t that easy to come up with a monetary value for a life, but it’s not in the billions. We spent almost a billion a body with SARS, and we’re going much bigger this time.
The U.S. is planning on sending out checks to everyone, excluding the very wealthy, it’s gotten that bad. When you are told you can’t work though, you need to get by somehow, and a lot of people are in this boat already, with much more likely to come.
Our economy was very strong not so long ago, before this mess, but we’re about to take it down significantly from this exercise in economic self-mutilation. No price seems too high it seems to prevent a few deaths, which is the scariest part of all. We seem willing to take down the house over this, with hundreds dead and hundreds of millions harmed financially.
For those concerned about fiscal responsibility, trying to get more control on a level of debt that has already passed the point of no return and will doom us for real in the future, we’ve just given up a few years of survival at least from this. All this money will accrue interest over time, speeding up the debt levels that are growing like an out of control virus and will one day take all of us and set us back thousands of years at least in financial evolutionary terms.
While there may be a situation that arises that will be so dire that it’s worth it to shorten the amount of time our prosperous way of life has left, this can’t be it, unless we have gone crazy. Unfortunately, that’s exactly what has happened.
The economic situation has deteriorated to the point where we’ve gone from very low default levels to risking some real damage here. If your company is just getting by, and gets hurt by this economic contraction to the point where you can’t meet their bond obligations, a real crisis is knocking at the door.
The actions of the Fed so far will only make this all worse, as they will have to retrace their steps at some point, and sooner rather than later. Fed Chairman Jay Powell’s language suggests that he feels that these cuts are temporary, but at some point, this will drive inflation up too much and things will really begin to unravel. Of all the damage here, this is the biggest because the effects of this will persist years after this virus is gone.
We are no longer in any sort of economic condition that we could call mid-cycle, although that was true a couple of months ago. This is like being pushed to the end of the map and beyond, where monsters be there, and there are some big monsters indeed in this area.
The response to this virus has been an unqualified disaster so far, causing more and more damage every day, not to the people from this virus, but to the economy. There is no telling just how bad this might get given that this a novel financial virus and we’ve never done anything this close to demolishing our economy before.
As we move further and further into states of chaos, we now are toying with the potential of a real recession, and perhaps even a bad one, if we continue to escalate this damage. Given the state of mind that we are in, this mental virus that has infected us is beyond treatment and will just have to be allowed to run its natural course.
There is only one cure, for these infections to go away, although we may wonder whether even getting the infection rate down to 13 people a day like China has will even be enough of an antidote to this stupor that we find just about everyone in right now.
The show is all but over in South Korea, who used to be number two, but Italy and Iran have now taken their place. While it’s too soon to say that the tide has turned, their time will come as well. Italy has stabilized over the last few days, settling into the 3,500 per day range, and Iran has done the same in their 1,000 cases a day range.
Both these countries are ahead of the U.S. in terms of the time they have spent with significant daily infections, but the time for the United States will come as well, albeit a little later, as will be the case in many other countries.
In the meantime, we have to try much harder to keep these numbers that we are seeing every day in better perspective. This virus is plenty fragile and there’s no reason at all to think it even possible for it to engulf the world or even make any kind of meaningful dent in it. That isn’t stopping anyone though.
The Fed has now used all the weapons on us that they dare, and when you see the stock market have its biggest down day ever points wise after a full point rate cut and $700 billion’ of easing, you know just how afraid the market is right now. The thought of the Fed being willing to throw everything that they have left at us in a single moment, on a Sunday no less, just served to stoke the fire.
Things returned to closer to normal on the stock market front at least on Tuesday, where the Dow gained back 1000 points of its recent losses on hopes for more economic stimulus from Washington. This is at least something that can help, unlike the Fed’s moves, although the market has an insatiable appetite for these things and just chew these things over for a bit and then spit them out and resume their downward course.
There is quite a bit to be afraid of right now, but this all is based on being afraid of contracting our economy more and more and spending more and more at the same time. We will try to put together the first back to back up days in weeks on Wednesday, but this virus fear punches harder and more often than the politicians do, who are fighting well above their weight class this time.
When the fake news even fools Donald Trump, who was our last hope for any sensibility, you know we’re really in the grasp of it. This is a once in a lifetime event, after all, as the whole world does not usually go crazy at the same time. We’re about to find out what happens when they do.
Editor, MarketReview.com
Robert really stands out in the way that he is able to clarify things through the application of simple economic principles which he also makes easy to understand.
Contact Robert: robert@marketreview.com
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