Perspective on Coronavirus
Coronavirus is creating panic and economic concern around the globe.
As you may have heard, there is global panic about
bird flu swine flu ebola coronavirus (COVID-19). We don’t mention the previous high-profile epidemic concerns to minimize the danger or the very real death toll. In fact, Mark Alexander recently provided a comprehensive analysis (and has since added updates) about exactly how seriously we should take this outbreak and what people should be prepared to do about it. COVID-19 is estimated to be much more lethal than the 0.1% fatality rate of seasonal flu bugs in the U.S., which have killed more than 60,000 Americans in a single year.
But let’s keep things in proper perspective amidst the epidemic of media panic.
To date, there have been more than 2,700 deaths from coronavirus, though 94% of them have been in China’s Hubei province, where the outbreak began. More than 80,000 cases have been confirmed in more than 30 countries, and there have been dozens of deaths (total) in Iran, South Korea, Japan, Taiwan, the Philippines, Italy, and France. The virus is spreading and serious; it has a long incubation period and may be mutating, but, so far, the mortality rate remains at about 3%. The World Health Organization has not yet declared coronavirus a pandemic.
The economic impact is huge. China alone accounts for roughly a third of global trade, so with many of its factories shut down and a big decline in container traffic, the rest of the world is feeling the pain. The Wall Street Journal warns, “Some economists are predicting that the epidemic could cause China’s GDP to shrink up to 10% year-over-year in the first quarter.” That’s astounding, and if that happens it will impact the United States greatly.
The Journal’s Walter Russell Mead wrote earlier this month, “Given the accumulated costs of decades of state-driven lending, massive malfeasance by local officials in cahoots with local banks, a towering property bubble, and vast industrial overcapacity, China is as ripe as a country can be for a massive economic correction. Even a small initial shock could lead to a massive bonfire of the vanities as all the false values, inflated expectations and misallocated assets implode.” (Chinese officials ejected three Journal reporters after that article because they argued its headline, “China Is the Real Sick Man of Asia,” is racist.)
One major effect of coronavirus which impacts all working Americans and their families now, is the equities-market selloff — a bellwether indicator of economic concerns. Stocks dropped 3.5% in value Monday on coronavirus fears.
“The second-largest economy in the world [China] is completely shut down. People aren’t totally pricing that in,” said Larry Benedict, CEO of The Opportunistic Trader, who forecasts a 10% to 15% correction in stocks. “It seems like there’s much more to come.”
But Chinese business owners we consulted indicate that a major reason coronavirus is so economically damaging is because about 70% of China’s workers are migrant — and they went home for the Chinese New Year national holiday from January 25 to February 8. Once the quarantines began, Chinese workers delayed going back to the cities in mid-February and are only now filtering back to work as they are allowed. So the Chinese have produced very little for six weeks — they didn’t ship and they didn’t buy. But business owners expected to be back in full production in by mid-to-late March.
As for the U.S. response, the Trump administration has requested Congress authorize $2.5 billion in emergency funding to fight any outbreak here, and it has already taken actions to several limit travel and implement quarantines to protect American citizens. That notwithstanding, seeking to politicize the pandemic fear, House Speaker Nancy Pelosi responded that President Donald Trump’s request is “long overdue and completely inadequate.” Senate Minority Leader Chuck Schumer complained that Trump is “asleep at the wheel.” Democrats are playing politics with the wealth and job stability of all Americans by cavalierly undermining consumer and business confidence, and thus the equities markets, for political gain.
Evidently, Trump Derangement Syndrome is also still a threat.