EJ: The countdown to the next crisis of The System has started.

[EJ]

Re: EJ: The countdown to the next crisis of The System has started.

If you are operating a corporation in the US, today you received a communication that included the following:

During this time, you may want to review your business continuity plans. For business continuity planning resources, please refer to the CDC and Federal Emergency Management Agency (FEMA) websites:

CDC: Get Your Workplace Ready for Pandemic Flu and Business Pandemic Influenza Planning Checklist
FEMA: Pandemic Influenza Continuity of Operations

[santafe2]

Re: EJ: The countdown to the next crisis of The System has started.

A novel virus with an R0 over 2 will spread at an exponential rate, and with a fatality rate over 1% will cause 10x as many fatalities per person infected as seasonal flu. The terminal number of illnesses, hospitalizations and deaths caused by COVID-19 if not effectively contained will be many times higher, as we are seeing in South Korea where four times as many cases and deaths have occurred out of a population of similar size as the province of Anhui, China over the same length of time. The quickly executed draconian measures taken by the Chinese government to contain the outbreak reflects both their comprehension of this math and their autocratic power to control their population.

My concern is that health officials and politicians in democratic republics like South Korean and Italy may have worked out the math that leads logically to the conclusion that drastic containment methods are required, but lack the institutional means and political mandate to implement them, and the result will be higher percentage of illnesses and deaths in proportion to the population size of those countries.

I would argue that while the draconian measures were executed in China, it was not quick precisely because of China's authoritarian system. Dr. Li Wenliang discovered this SARS like virus on December 30 and was ordered to stand down for "making false comments" and "disturbing the social order", when he warned his colleagues to wear protective clothing. Had he been listened to instead of reprimanded, this disease may have been controlled at the source. For those who don't know, Dr. Li was 34 years old and died from COVID-19 infection.

Regarding South Korea, we are still early in the infection cycle and it's too early to understand if government structure and control will differentiate disease spread rate. There is also a much higher population density in South Korea vs. China and since COVID-19 is often asymptomatic for weeks, population density will likely prove to play a key role in transmission. See the Diamond Princess for a dark example.

As for the US, this is a crap shoot. We've gutted our worldwide pandemic response team, we have a mini-dictator-lite and we're clearly reacting, ("it's a hoax", "It will be over by April", etc). On our side is our low population density. If we assume COVID-19 will grow at a similar rate as it did in China and currently in South Korea, we should see ~700 cases in 2 weeks, ~4,700 in 4 weeks and ~32,000 in 6 weeks. We'll all know a lot more by mid-April.

[Woodsman]

Re: EJ: The countdown to the next crisis of The System has started.

...we have a mini-dictator-lite and we're clearly reacting...

A demotion from "literally Hitler" down to "mini-dictator-lite." Now that's what I call progress!

[Chris Coles]

Re: EJ: The countdown to the next crisis of The System has started.

This is a valid point and one that I considered carefully.

The difference in mortality rate between COVID-19 and seasonal flu is due to the fact that COVID-19 is a novel coronavirus, meaning that it is entirely new and the general population has no immunity, whereas each seasonal flu is a variation on previously existing version to which the majority of the general population has some degree of immunity either because of previous infection with one or more genetically similar viruses or because they have regularly received annual flu shots. This is why getting a flu shot every year is recommended; over time one accumulates antibodies that are cumulatively effective at improving immunity to future flu variations.

The relatively high number of illnesses, hospitalizations and deaths caused by seasonal flu in the US in a flu season that you quote represents the terminal rate of infection in a population of 325 million of an non-contained flu with a fatality rate of 0.1% and an R0 of 1.4. Due to the seasonality and relatively low transmission and death rate of the seasonal flu, no resources are expended in an effort to contain it every year; instead, flu shots are manufactured and widely offered to improve immunity.

A novel virus with an R0 over 2 will spread at an exponential rate, and with a fatality rate over 1% will cause 10x as many fatalities per person infected as seasonal flu. The terminal number of illnesses, hospitalizations and deaths caused by COVID-19 if not effectively contained will be many times higher, as we are seeing in South Korea where four times as many cases and deaths have occurred out of a population of similar size as the province of Anhui, China over the same length of time. The quickly executed draconian measures taken by the Chinese government to contain the outbreak reflects both their comprehension of this math and their autocratic power to control their population.

My concern is that health officials and politicians in democratic republics like South Korean and Italy may have worked out the math that leads logically to the conclusion that drastic containment methods are required, but lack the institutional means and political mandate to implement them, and the result will be higher percentage of illnesses and deaths in proportion to the population size of those countries.

Your answer made me realise that I was using statistics, rather than deeper thinking to explain my underlying reasoning.

First of all, over Christmas I experienced, (as many others here in my UK village), very similar symptoms to those we are told relate to COVID-19, only to discover that family members that, six months earlier had emigrated to the Gold coast of Australia, were experiencing exactly the same symptoms; which made me return to a work published during 1979, which debate I had followed for some time afterwards.

https://en.wikipedia.org/wiki/Diseases_from_Space
Diseases from Space is a book published in 1979 that authored by astronomers Fred Hoyle and Chandra Wickramasinghe, where they propose that many of the most common diseases which afflict humanity, such as influenza, the common cold and whooping cough, have their origins in extraterrestrial sources. The two authors argue the case for outer space being the main source for these pathogens- or at least their causative agents.^[1][2][3]

So I am left wondering if I may have experienced COVID-19 over last Christmas.

Them, looking deeper into myself, I realise that there are two ways to look at what may be coming towards all of us.

1. I am going to die, horror, depression, fateful belief that my end is nigh!

2. Get on with it, no way of knowing what is down the line; I am coming up to 76 years old and death is a reality, particularly many friends made here are even older than me, so I might just as well do what I can to mitigate any such disease, and simply get on with my life. If I am going to catch it; such is life!

At my age, the best strategy is to make the best of every day and always look forward with enthusiasm to anything I can do to keep my brain alive and well. To do my level best not to become a statistic!

[jk]

Re: EJ: The countdown to the next crisis of The System has started.

Your answer made me realise that I was using statistics, rather than deeper thinking to explain my underlying reasoning.

First of all, over Christmas I experienced, (as many others here in my UK village), very similar symptoms to those we are told relate to COVID-19, only to discover that family members that, six months earlier had emigrated to the Gold coast of Australia, were experiencing exactly the same symptoms;

most likely you had a common cold, possibly the flu. i doubt covid-19 had reached your village by that date. probably hasn't arrived yet.

we have to remember that ordinary uri viruses are endemic- they are everywhere. flu is enormously widespread but spread is retarded by vaccines, and is in general of low severity.

covid-19 is a NOVEL virus, with a clear point of origin in wuhan and a clear time of origin in late 2019. it is still spreading, and it is still early in its history- it has not had time to spread that widely, but the lack of a vaccine plus its r0>2 imply it will eventually spread very widely indeed.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

[Mega]

Re: EJ: The countdown to the next crisis of The System has started.

UK RED ALERT
https://www.independent.co.uk/news/h...-a9373071.html

[thriftyandboringinohio]

Re: EJ: The countdown to the next crisis of The System has started.

Around iTulip we used to talk at length about "sudden stop events". In past discussions we were focused on sudden stops caused by purely financial causes like the quick dry up of credit, capital or liquidity.

COVID-19 looks to have created something in China that feels an awful lot like a sudden stop event.
Is it accurate to view it that way, economically?

[Down Under]

Re: EJ: The countdown to the next crisis of The System has started.

Around iTulip we used to talk at length about "sudden stop events". In past discussions we were focused on sudden stops caused by purely financial causes like the quick dry up of credit, capital or liquidity.

COVID-19 looks to have created something in China that feels an awful lot like a sudden stop event.
Is it accurate to view it that way, economically?

Hi TBO, as Finster would put it,

I'm far from any sort of expert on these matters, but I think the difficulty with COVID-19 is that no-one knows how it will play out, not even EJ himself, and that's not meant as any discredit to EJ.

I think it has the potential to cause a sudden stop event, depending on how widespread it gets and the severity of the crisis.

However, I'm not saying anything I'm sure you don't already know. Just felt like commenting, that's all, from the land down under

[shiny!]

Re: EJ: The countdown to the next crisis of The System has started.

Around iTulip we used to talk at length about "sudden stop events". In past discussions we were focused on sudden stops caused by purely financial causes like the quick dry up of credit, capital or liquidity.

COVID-19 looks to have created something in China that feels an awful lot like a sudden stop event.
Is it accurate to view it that way, economically?

Good observation. And speaking of potential sudden stop events, I would appreciate hearing EJ's take on how the Repo crisis might play out. Could these two issues play together or separately to create a Sudden Stop?

[thriftyandboringinohio]

Re: EJ: The countdown to the next crisis of The System has started.

Hi TBO, as Finster would put it,

I'm far from any sort of expert on these matters, but I think the difficulty with COVID-19 is that no-one knows how it will play out, not even EJ himself, and that's not meant as any discredit to EJ.

I think it has the potential to cause a sudden stop event, depending on how widespread it gets and the severity of the crisis.

However, I'm not saying anything I'm sure you don't already know. Just felt like commenting, that's all, from the land down under

Great to hear from you again Down Under!
I agree no one knows how that virus will play out, medically and from the viewpoint of human health.
I'm wondering instead if we can view it economically as a rolling series of sudden stop events going from nation to nation.
We have a pretty good understanding of how a sudden stop plays out for economics and finance, even if we don't understand the virus much

[gugion]

Re: EJ: The countdown to the next crisis of The System has started.

ka?

Exactly what I thought! Is this the "Ka" in The Janszen Scenario?

[gugion]

Re: EJ: The countdown to the next crisis of The System has started.

I've had my hands full running VirZOOM and this hasn't left me much time to elaborate. The Tweet on February 20 was intended to at least give a heads up that a correction was in the pipeline.

The antecedent is nearly a decade of capital misallocation, and the market correction proportionate in extent and speed to the level of complacency that a decade of continuous stock market growth -- with only minor corrections -- produces, but amplified by an unprecedented form of global economic shock.

The trigger could be seen coming from a mile away as COVID-19 spread from 6 to 50 countries over the past month and a half, and details of developments in Italy demonstrated that COVID-19 growth dynamics are not a phenomenon confined to densely populated Asian countries like China, Japan, and South Korea.

I'm not a medical professional so will not opine on the virus itself. There's a fair amount of misinformation out there. I recommended these sites:

Study of 72,000 COVID-19 patients finds 2.3% death rate

12 Coronavirus myths busted by science

While the COVID-19 is nowhere near as deadly as a virus like SARS, with the vast majority (81%) experiencing minor cold-like symptoms, it is far more transmissible. Infected persons can be infectious and asymptomatic for as long as a month, and spread the illness without knowing it. While not proven for COVID-19 yet, some human coronaviruses could remain infective on materials such as metal, glass, or plastic for up to nine days. As this article warns, common face masks offer little protection. If you don't happen to have access to N95 respirators, the best way to protect yourself is by keeping your distance (six feet or more) from infected persons, which is easier said than done if you're in the presence of someone who is infected but isn't presenting symptoms and doesn't know they are infectious. Combine the aforementioned with the fact of 100,000 daily flights, and you have a prescription for the world's first global pandemic.

The market correction accelerated over the course of the week as market participants observed the epidemic dynamics of COVID-19 that first occurred in Italy started to repeat independently and nearly simultaneously in Germany, Spain, and France. This implies that eventually a similar epidemic dynamic will occur in every country where COVID-19 is present, including the US, and the CDC confirmed US inevitability early this week. That in turn implies that economically disruptive steps that needed to be taken in Italy -- including public events cancellations, school and business closures, and regional population quarantines -- could be both widespread and simultaneous in major economies throughout the world.

A major global economic shock occurring after a 10-year period of a capital misallocation and asset price inflation is unprecedented, and it's the lack of precedent and fear of the unknown that is fueling a sense of panic today.

While the economic shock may be severe it may also be fairly short. Stock markets in China are starting to show signs of recovery as the rate of new COVID-19 cases levels off and declines, Chinese workers return to factories, businesses re-open, and daily life slowly returns to normal. If you consider the fact that cases in China did not start to appear until mid-January, and arguably the crisis was badly mismanaged from the beginning, the full course of the epidemic nationally start to finish may be on the order of three to four months, and perhaps shorter if well managed. Estimates of the duration, form, and intensity of the effects on the US economy and markets of the COVID-19 pandemic is the subject of the analysis that I'm working on and hope to complete when I am able to come up for air.

In the near term, I'd be surprised not to see a coordinated global central bank response next week, and expect that any hedge funds where were short stocks going into the week -- I know of at least one that took a large short position last Friday and likely had a very good week -- closed our their short positions today ahead of a possible Fed announcement on Monday.

More later...

Great to see you back, EJ. I know "The" virus is the big thing all of a sudden, but for what it's worth, I have a friend who is high up in the dept of health of a major metropolitan US city and when I asked her if we should panic, to summarize she said, "No, people are idiots. Anyone who knows about Coronavirus isn't hysterical". Now that's obviously subjective coming from a science-background and doesn't necessarily capture what might happen on an economic-scale, but my two cents anyway.

Also, I'm wondering if this could be the "Ka" in the "Ka-Poom" of The Janszen Scenario? I ask because my personal market analysis indicates that the market isn't necessarily discounting the virus' impact, but instead is discounting a potential Sanders win of the Democratic Primary. Now, personally, I find this low odds, considering I highly doubt an anti-FIRE economy candidate could actually win, but not many thought Trump could win in 2016 and look where we are now. My theory is, if Sanders really does have a shot at the nomination, I fully expect him to defeat Trump in November (I don't think Biden stands a chance). If I were loaded with capital within the FIRE sector and I knew Bernie would be chosen as the Democratic candidate, I would send my money out of the US and hide it. This is the very definition of capital outflow, no? In the Janszen scenario, could this Coronavirus fear be the "Ka" and if Bernie wins, we get a "Poom" when capital flows out of the US, the dollar collapses, and rates rise along with import inflation? Thanks in advance for any insight.

[sunpearl71]

Re: EJ: The countdown to the next crisis of The System has started.

Great to hear from you again Down Under!
I agree no one knows how that virus will play out, medically and from the viewpoint of human health.
I'm wondering instead if we can view it economically as a rolling series of sudden stop events going from nation to nation.
We have a pretty good understanding of how a sudden stop plays out for economics and finance, even if we don't understand the virus much

I think we should also consider the role of politics and the decisions taken by politicians to manage their crisis on a local basis that can have a global impact. It looks like a case of falling dominoes but in 4-D that can have direct and indirect consequences.

Here in the UK, FlyBe, which narrowly avoided going under in January has finally succumbed today, placing some of the blame on the COVID-19 outbreak.
https://www.bbc.co.uk/news/business-51746564

[Chris Coles]

Re: EJ: The countdown to the next crisis of The System has started.

I think we should also consider the role of politics and the decisions taken by politicians to manage their crisis on a local basis that can have a global impact. It looks like a case of falling dominoes but in 4-D that can have direct and indirect consequences.

Here in the UK, FlyBe, which narrowly avoided going under in January has finally succumbed today, placing some of the blame on the COVID-19 outbreak.
https://www.bbc.co.uk/news/business-51746564

Having recently purchased a flight to and from Paris, flight purchase via Air France but flight was on Flybe out of Southampton, I was intrigued to find my bill from Air France showed the flight cost as £50 and tax also as £50. Which means government pocketing the same income with no related overhead; not a wonder Flybe has failed.