One more thing to worry about, and a myriad consequences

If there is one thing the current pandemic should teach us, it is how fragile life can be and how unexpectedly short it can also be. You could be hit by the proverbial bus tomorrow, such freak accidents will always happen. You might develop a serious and life threatening illness in a few days, that is also true, or indeed you might be one of the hundreds of thousands that die every year from complications arising from standard influenza (for reference the mortality rate for seasonal flu is c.0.1%).

So with so many things that might kill us anyway, why would we worry any more about this one additional threat to our life. I guess it is because we already either ignore the threats from all the other things that might harm us or we have simply come to terms with the and our chance of being struck down by them. Sure, there are some of us who spend everyday thinking about what we consume and what impact it is having on our bodies and thus the increased likelihood of developing something catastrophic as a result or maybe even of where we live and the incidence of pollution in the air.

So why worry too much about just one more thing like Covid-19?

Probably, apart from the 'one more thing' observation I have already made, I think it is also because we don't know where it is, when it might strike, whether it has already struck us or what the mortality rate really is. There are already many more people that have, or have had, the virus than appear in the figures that are released. That's because there are people that have had the virus and developed no, or minor symptoms. The only way of knowing whether someone has, or has had, the virus is through blood tests and that is not viable, at this time, to undertake on a large scale. The numbers that are being published, certainly the ones that you feel you can trust, will be extrapolations based up known infections and likely additional level infections based on knowledge of similar viruses based upon what is currently known about this virus which indeed is still largely being determined.

Apart from the trifling matter of death, there is the economic impact which, for any student of economics, will be absolutely fascinating because what will unfold in the next few months has never happened in modern times and could only be modeled on computers to try to understand, but the actuality which could never seriously or in anyway accurately be modelled will play out in real life.

We have already seen that closing factories in China has had an impact on forecasts for some of the worlds major companies due to shortages in supply chains, if not immediate then soon to appear once stockpiles are exhausted. That'll have an impact upon revenue and profit forecasts for the coming year which will affect dividends and thus will impact share valuations as has already been seen. Apart from all those worldwide companies that depend upon factories in China there are also the travel companies, airlines and cruise lines that are already seeing big drops in future business and so, again, with dividends and share prices.

The impact of dropping share prices which tend to act in concert through their own unique, and often irrational, viral infection has an impact upon ordinary people because most people that have pension funds have these funds invested, one way or another, in shares and funds of shares. This devaluations tends to have a negative impact on consumer sentiment as there is the feeling that suddenly an individual is poorer which consequently leads to less spending.

Going back to the closed factories, currently primarily in China, apart from the knock on impact of supply chains, there is also the local impacts of millions of people not being paid. Suddenly there is millions of dollars of money that is not in the system because these workers are not being paid and that means there is millions of dollars of goods that are not being purchased which in turn has knock on impacts back down each of those supply chains whether it be a noodle bar or a car showroom. This money does not come back into the system because it is gone from the system which is why you will hear talk of global recession.

This type of impact will happen around the world as the pandemic unfolds. As rates of mortality increase in individual countries there will be either self imposed or government ordered restrictions on events, movements, gatherings etc. Each and all will have knock on effects to the chains of people providing goods and services.

Some surprises will be seen in socalled safe havens as well. For instance gold might continue to rise in value but equally there are reasons why it might not. You would need to understand who holds the gold to understand fully what might happen. So countries might need to sell gold to support their countries infrastructure or large corporations holding gold might need to sell gold to cover debt servicing which can no longer be met via income due to aforementioned slow downs in general trade. So I for one will not be wholly surprised to see gold stabilise at its current level or even take a large correction.

You also have bond holdings that will be interesting to watch. China and the USA have for long existed in this death grip which has sustained them both for many many years now. The dollar is the unofficial world reserve currency, the fed issues more dollar bonds, China buys them with the money the country makes from US consumers buying goods which are made in Chinese factories and so the cycle continues, more dollars, more goods purchased, more bonds purchased etc. But what if after a slowdown like the one being experienced China needs to sell large amounts of US bond holdings? Who will buy them, who can buy them in a world recession! So one more thing we will see is panicked G20 leaders trying to figure out how to put liquidity into a stalled system. Worse that just a stalled system, a system that has never recovered from the 2008 financial crisis.

So that kinda brings me right back to the question of why worry about Covid-19 over and above every other thing we worry about every day. Well, one reason is, that from an economics perspective, countries could determine the best thing to do is not to have burdensome restrictions on gatherings and movements of people. There will be statisticians and actuaries producing numbers for government departments that will show things like the likely mortality rate of what age and health of people in the country. If, as is likely, the virus is most likely to kill those that are unwell and/or old (current estimates, with the limited information we have so far, is a mortality rate c.05% but rising to c.14% in the elderly and those with pre-existing serious health issues), I hate to mention that some government statisticians will note this is possibly a financial unburdening of government spending ie the people that are most likely to die are possibly a strain on government spending anyway so... However this is not the humanist approach, we shall all see how our governments actually respond, hopefully as humanists.

Apart from that, there is no reason to worry about it more than everything else. Enjoy your life but be safe and be sensible. Take the sensible precautions of not touching surfaces and then picking your nose or wiping your eye. Many of us, most of us even, have this propensity to be face touchers, where we are always pording our noses or wiping our lips or scratching our eyes. All of these things transmit viruses, bugs, bacteria etc to our bodies every day, most of the time our bodies already have a catalogue of these things and deal with them through our immune systems. Eventually Covid-19 will be just one more of those things that our immune systems have a manual to deal with but not yet, not until either we catch it and fight it off or there is a vaccine produced to do the same thing. the latter will likely be a year off although that could be sped up if the mortality rate became greater thus requiring more risks be accepted. We'll see.