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Coronavirus – The Catalyst For System Failure?
Coronavirus – The Catalyst For System Failure?
Overview
Today’s global economic system is more intertwined than at any point in history. For the past 30 years in particular, globalization and the Theory of Comparative Advantage have been alive and well. Technological advancements and transportation improvements have truly ‘shrunk the world’, allowing more countries to participate and benefit from international trade.
The globalized world economy has become a vast network of complex supply chains, interconnectedness and co-dependence. The benefits have been wide-spread and done more to lift the human condition, and more people out of poverty, than any development in history. However, this increase in economic complexity has magnified global vulnerabilities, opening up the risk of rapid and large-scale failure and contagion: a period of anti-globalization. COVID-19 is the catalyst that is triggering a supply-side crisis; one that is further exacerbated by a simultaneous demand-side shock.
Consensus View
The consensus view seems to be that the COVID-19 will die out with warmer weather; after all this is what typically happens with the common flu. In terms of markets, most believe that governments and central banks will come to the rescue with proactive stimulus which will be exceptionally good for markets, because the economy is viewed to be on solid footing already. The stimulus will come to be viewed as an over-reaction that merely serves to provide more economic fuel, particularly once the Coronavirus sputters away. This scenario is logical and possible, but not a view that I share.
US Coronavirus Response
The US has a relatively low number of confirmed cases, but it is in direct proportion to the low number people tested. There is a shortage of testing kits and slow distribution to provide more. This is likely intentional. Trump is on Twitter bragging about the low number of positive cases in the United States as being a result of his administration’s actions.
…click on the above link to read the rest of the article…
Pandemic Pandemania Causes Global Economic Crisis
Pandemic Pandemania Causes Global Economic Crisis
Back in the oil-embargo recession of the early 70s when Boeing was Seattle’s economy and was laying off thousands of Seattleites, a billboard on the edge of town by Sea-Tac Airport read, “Will the last person leaving Seattle turn the lights out?” (Boeing had gone from 100,800 employees in 1967 to 38,690 in 1971.)
Since Seattle is the first area where the coronavirus made landfall in the US, I’ll present Seattle’s viral transformation in the last forty-eight hours (about two weeks since the first cases were reported) as an anecdote for the extremely rapid changes already sweeping many cities in the US as outbreaks begin to show elsewhere.
You may recall I recently wrote that the COVID-19 virus, whether it grew to become one of the world’s great killers or just the cause of one of the world’s great panics, would certainly bring rapid economic damage. It would also help take down the stock market by accelerating us into recession, which is how I’ve been predicting this bull run will finally die. (See “COVID-19 (Coronavirus) Economic Impact Sweeps Down on Global Economy Like a Fat Black Swan.”)
The crisis has now become economic suicide because it is not the death of millions of people that is tearing the economy apart; it is the fear that there may be deaths of millions of people that is causing humanity to tear the already fragile fabric of the global economy apart with actions taken on the political level, the corporate level and the individual consumer level. It is a fabric already worn thin by two years of trade wars, moth-eaten by corruption and greed, and badly woven in the first place from materially flawed economic ideas, patched with bailouts.
…click on the above link to read the rest of the article…
All Hospital Beds In The US Will Be Filled With Patients ‘By About May 8th’ Due To Coronavirus: Analysis
All Hospital Beds In The US Will Be Filled With Patients ‘By About May 8th’ Due To Coronavirus: Analysis
A sobering analysis of how coronavirus is likely to impact the US healthcare system suggests that hospitals will be quickly overwhelmed with patients, and that all available beds will be filled by around May 8th if the virus tracks with Italy’s figures and 10% of patients require an ICU.
Of note, the Straits Times reported last week that thousands of people were waiting for hospital beds in South Korea as the disease surges.
Liz Specht, a PhD in biology and the associate director of Science and Technology for the Good Food Institute laid out her concerns in a lengthy Twitter thread on Friday, which you can see here on Twitter, or continue reading below.
I think most people aren’t aware of the risk of systemic healthcare failure due to #COVID19 because they simply haven’t run the numbers yet. Let’s talk math. 1/n
Let’s conservatively assume that there are 2,000 current cases in the US today, March 6th. This is about 8x the number of confirmed (lab-diagnosed) cases. We know there is substantial under-Dx due to lack of test kits; I’ll address implications later of under-/over-estimate. 2/n
- We can expect that we’ll continue to see a doubling of cases every 6 days (this is a typical doubling time across several epidemiological studies). Here I mean *actual* cases. Confirmed cases may appear to rise faster in the short term due to new test kit rollouts.
- We’re looking at about 1M US cases by the end of April, 2M by ~May 5, 4M by ~May 11, and so on. Exponentials are hard to grasp, but this is how they go.
…click on the above link to read the rest of the article…
“No Deal In Sight” – Oil Plunges After Russia Rejects Additional OPEC+ Cut
“No Deal In Sight” – Oil Plunges After Russia Rejects Additional OPEC+ Cut
Brent crude futures tumbled by more than 4% on Friday after Reuters reported that Russia had rejected steep production cuts by OPEC to prop up oil prices amid the Covid-19 outbreak triggering demand shocks in China and across the world.
A high-level Russian source told Reuters that Moscow has no interest in backing an OPEC reduction that calls for extended cuts and would only agree to existing cuts that OPEC already agreed on.
OPEC has held several days of talks in Vienna, Austria, backing an additional 1.5 million barrels per day (bpd). However, it has failed to bring Russia on board. OPEC wants non-OPEC to contribute 500,000 bpd to the overall cut. The new deal would mean OPEC+ would cut a total of 3.6 million bpd, a move that would hopefully lead to a rebalancing in the global oil market in the second half of the year. On Russain disappointment, Brent crude futures dropped to its lowest level since July 2017, trading at $47.70 a barrel, or down 4.5% on Friday morning.
Another source, this time with Bloomberg, said that Russia wants OPEC+ to sustain current output cuts until June. It would then be at that time where more data about market imbalances could be assessed and corrected, the person added.
With Russia taking a “tough stance” on the proposed additional cuts, Commerzbank says Brent futures could extend declines to $40 per barrel. However, if Russia agrees to further cuts, Brent futures would jump to $60 in weeks.
Goldman Sachs maintained its Brent price forecast of $45 per barrel in April.
“Ultimately, a rebound in demand, not supply cuts, will be the necessary catalyst for a sustainable rebound in prices,” Goldman said.
…click on the above link to read the rest of the article…
How The Pandemic Crisis Will Probably Develop Over The Next Year
How The Pandemic Crisis Will Probably Develop Over The Next Year
For a while now I have been hearing it said that Americans are “in a panic” over the coronavirus outbreak in the US, and that mainstream media outlets are “feeding the fear”. This is an odd conclusion to come to and something worth noting, because the truth is mostly the opposite. For the past couple of months the WHO, the CDC and even Donald Trump have been dismissing Covid 19 as nothing much to worry about. The WHO actually still refuses to call it a pandemic even though the virus meets all of their own criteria.
Until recently the mainstream media was also been pumping out article after article on why Covid 19 is “no more dangerous than the flu”. With the official death rate at 2.3% to 3% (changing by the week), the virus already has higher mortality than the average flu. If we take into account the fact that multiple medical professionals within China have revealed (despite threats of punishment) that the Chinese government is hiding the true (and much higher) death and infection statistics, then the official data goes out the window. We can’t even trust the infection numbers from the CDC in the US, because they been refusing to test most people unless they have recently traveled to China.
Because of government lies we have to assume that the crisis is more pervasive than we know. And so far the average American is oblivious to it.
While we do see a handful of videos of crowds stockpiling supplies at Costco or Walmart, there simple is not enough of them. Frankly, I would prefer to see a nationwide rush to stock up on necessities; at least then we would know that a large number of people will not starve immediately following a supply chain disruption. The more people that have supplies, the less desperation and potential crime there will be.
…click on the above link to read the rest of the article…
WHO: Coronavirus is More Deadly Than Originally Thought
WHO: CORONAVIRUS IS MORE DEADLY THAN ORIGINALLY THOUGHT
The World Health Organization has announced that the death rate for those who contract the coronavirus is higher than originally thought. Even though getting the coronavirus only comes with a 3.4% mortality rate, the virus’ rapid spread could bump that number even higher.
Originally, WHO assumed the death rate from those who get infected with the COVID-19 virus, was only 2%. That has been revised upwards to 3.4%. “Globally, about 3.4% of reported COVID-19 cases have died,” WHO Director-General Tedros Adhanom Ghebreyesus said during a press briefing at the agency’s headquarters in Geneva. In comparison, the seasonal flu generally kills far fewer than 1% of those infected, he said.
Again, it’s not like this is a huge jump considering the number of people who have been infected, yet as this virus lingers, it has the unintended consequence of killing more than previously thought.
Additionally, a Harvard scientist claimed that the coronavirus could infect 70% of the population. That means 5.3 billion people could catch it and if the mortality rate is now 3.4%, almost 180 million people globally could die. That’s more than Joe Biden claims were killed by guns in the U.S. since 2007.
All joking aside, this could end up being a pretty serious debacle. Prepping supplies are selling out, face masks that will actually help are selling out, and people are panicking over the stock market. Unless you’ve prepared in advance, you are also likely feeling some anxiety.
World “authorities” admit they don’t know much about this virus, yet are hopeful it can be contained. Dr. Mike Ryan, executive director of WHO’s health emergencies program, said Monday that the coronavirus isn’t transmitting the same exact way as the flu and health officials have been given a “glimmer, a chink of light” that the virus could be contained.
…click on the above link to read the rest of the article…
Lies, Damn Lies and Coronavirus Statistics
LIES, DAMN LIES AND CORONAVIRUS STATISTICS
“Never believe anything in politics until it has been officially denied.” – Otto von Bismarck
‘When it becomes serious, you have to lie.’ – Jean-Claude Juncker, former President of the European Commission from 2014 to 2019
We all lie. Of this there is no doubt. And anyone who tells us otherwise is lying. While there are a billion and one reasons to lie, there is only one purpose…to gain advantage, leverage or to maintain, consolidate or increase power over our children or spouses, other family members, friends or unrelated individuals, groups large and small and even entire nations.
At its most innocuous, a lie may be considered small, kind, even considerate. Often, we tell little ‘white’ lies designed to sooth or placate a loved one or close friend. At its worst, a lie is designed to kill or injure physically, financially, socially or emotionally.
Ultimately, no matter how harmless or devastating it is, a lie is at its root a power play, information warfare employed to disarm, confuse, convince, steal, disable or destroy. We tend to treat lies, especially lies told to others that have an effect far removed from ourselves and our interests, with benign disinterest or even mild amusement. It’s only when the proximity is close or we feel we are targeted do we become righteously indignant and demand justice and restitution.
The dirty little secret is that for far too many of us, we welcome, even beg to be lied to. Not all lies, of course, just those lies and half-truths that enable us to remain safely cocooned within our own inner narrative, our customized worldview or belief system that neatly packages everything into a more easily digestible and comforting ‘reality’.
…click on the above link to read the rest of the article…
Who or What Started the Wuhan Coronavirus Epidemic?
Who or What Started the Wuhan Coronavirus Epidemic?
On the Condemnation of “Conspiracy Theories” as a Device for Protecting Officialdom’s Lies, Disinformation, and Obfuscation.
The Wuhan Coronavirus epidemic of 2019-20 is moving many markers where life merges into death, where truth merges into lies. At age 34, Dr. Li Wenliang drew attention in Wuhan to these moving markers. The disease Dr. Li sought to warn against ended up taking his life as the epidemic gained fatal traction.
Before going down himself in the line of duty, Dr. Li faced a harsh reprimand from representatives of the Chinese Communist Party. Dr. Li was accused of spreading rumors and illegally threatening the social order with his tweets and posts and personal interventions. Nevertheless, Dr. Li was soon vindicated in calling attention to the coming plague.
It did not take long before the appalling force of the illness demonstrated that Dr. Li was anything but a wayward conspiracy theorist. Instead, the evidence proved him right even as it proved his powerful detractors were both wrong and negligent in the face of a genuine menace.
Dr. Li Wenliang is a martyr. It remains to be seen, however, how far the shadow of Dr. Li’s martyrdom will be cast.
The Novel Coronavirus, COVID-19, is cutting a broad and deep swath though epidemiological history with uncertain impact on the viability of many families, communities, institutions, economies, and even countries starting with the most heavily populated nation on earth. Many fates are hanging in the balance, not the least of which is that of the communist government that has ruled China since the Maoist Revolution brought it to power in 1949.
…click on the above link to read the rest of the article…
Did Covid-19 Just Pop All the Global Financial Bubbles
Did Covid-19 Just Pop All the Global Financial Bubbles?
Once confidence and certainty are lost, the willingness to expand debt and leverage collapses.
Even though the first-order effects of the Covid-19 pandemic are still impossible to predict, it’s already possible to ask: did the pandemic pop all the global financial bubbles? The reason we can ask this question is the entire bull mania of the 21st century has been based on a permanently high rate of expansion of leverage and debt.
The lesson of the 2008-09 Global Financial meltdown was clear: any decline in the rate of debt/leverage expansion is enough to threaten financial bubbles, and any absolute decline in debt and leverage will unleash a cascade that collapses all the speculative bubbles in stocks, real estate, collectibles, etc.
What’s the connection between Covid-19 and the rate of debt/leverage expansion? Confidence and certainty: people will make bets on future growth and take on additional debt and leverage when they feel confident and have a high degree of certainty that the trends are running their way.
Over the past 20 years, the certainty that central banks would support markets has been high, as central banks stepped in at every wobble. Today’s 50 basis-points cut by the Fed sustains that certainty.
What’s now broken is the certainty that central bank interventions will lift risk assets and the real-world economy. Given the uncertainties of the eventual consequences of the pandemic globally, confidence in future trends has been either dented or destroyed, depending on your perspective and timeline.
Certainty that central bank interventions will push markets and real-world economies higher has also been dented. What happens if the market tanks after every 50 basis-points cut by the Fed?
We wouldn’t be in such a precariously brittle state if the global economy hadn’t been ruthlessly financialized to the point that market dependence on central bank intervention is now essentially 100%.
…click on the above link to read the rest of the article…
FEMA is Preparing For Coronavirus “Emergency Declaration”
FEMA IS PREPARING FOR CORONAVIRUS “EMERGENCY DECLARATION”
As Americans scramble to prepare themselves for the possibility that the coronavirus outbreak becomes a pandemic, FEMA (Federal Emergency Management Agency) is also preparing. FEMA is “aware of the gravity of the situation” and ready to assist in a coronavirus response.
FEMA officials are preparing for an “infectious disease emergency declaration” by the president that would allow the agency to provide disaster relief funding to state and local governments, as well as federal assistance to support the coronavirus response, according to agency planning documents reviewed by NBC News.
The Trump administration would have to use the 1988 Stafford Act to enable FEMA to provide such disaster assistance. Emergency declarations are most often used in the event of natural disasters but can be used to help manage disease outbreaks. “To me, this is another indication that the president and the White House are finally aware of the gravity of the situation,” said Michael Coen, who was FEMA chief of staff during the Obama administration. “They need to consider all tools available to them and have contingencies for action.”
HOW TO PREPARE YOUR HOME (QUARANTINE) FOR A PANDEMIC
“I actually find this reassuring,” said Tim Manning, who was a FEMA deputy administrator under President Barack Obama. “I hope this discussion has been happening continuously over the last couple of months.” An emergency declaration would allow FEMA to provide disaster medical assistance teams, mobile hospitals, and military transport, among other kinds of federal support, Manning said.
China Invokes HOLOCAUST HORRORS: 40 Mobile Incineration Ovens Deployed in Wuhan
But it isn’t immediately clear just what all of that could mean.
China Is Literally Dragging People Out Of Their Homes And Sending Them To “Mass Quarantine Camps”
Department of Defense: The Military Has MASS Quarantine Camps Set Up In The U.S.
…click on the above link to read the rest of the article…
Rabobank: What Level Of Interest Rates Will Incentivize You To Risk The Death Of Yourself And Your Family
Rabobank: What Level Of Interest Rates Will Incentivize You To Risk The Death Of Yourself And Your Family
“Tonight the super trouper lights are gonna find me
Shining like the sun (sup-p-per troup-p-per)
Smiling, having fun (sup-p-per troup-p-per)
Feeling like a number one…”
So sang markets yesterday in excitement as we enter what I am dubbing “Super Trouper Tuesday”. Indeed, the Dow Jones went up a whole baseball cap-and-a-bit to close at 26,703 even as the 10-year US remain at an unprecedented 1.12%. Not because the Fed mumbled something on Friday, but didn’t act, and not because the BOJ pumped all of USD4.6bn into markets yesterday, and not because the RBA cut rates 25bp to a new low of 0.50% earlier today, meaning that they now have one more cut left to go before it’s “Oz-QE, Oz-QE, Oz-QE” (Oi!Oi!Oi!) time. (Good timing not only due to Covid-19, as building approvals tumbled -15.3% m/m in January anyway.)
It’s also not due to more signs the virus spread is in “uncharted territory” according to the WHO (which means “pandemic” but is contractually obliged not to ever say it, it seems), with more deaths, and as UK police and army draw up lockdown plans and supermarkets plot their own contingency plans, for just one real-life example.
Rather it’s a reflection of the fact that the not-so-magnificent G-7, and G-7 central banks, have pledged that they will meet today to act jointly on the virus, and the IMF and World Bank are also prepared to help if needed; Covid-19, it seems, is a threat that requires immediate action in a way that the potential risk of the end of life on earth (if you are Green), or increasingly Victorian/Gilded Age levels of wealth inequality (if you are Piketty) are not. Then again we have to recall that stocks had just fallen by over 10% in a week, and that house prices risk following: Come on you cynical people, priorities, please!
…click on the above link to read the rest of the article…
We’re Close To Your Last Day To Prepare For The Coronavirus
We’re Close To Your Last Day To Prepare For The Coronavirus
As supplies fly from the shelves, you’ll have to deal using the preps you now have
A cases continue to grow exponentially in South Korea and Italy. yesterday the US recorded its first coronavirus death on the continent: a 50+ year-old man in Washington State.
Meanwhile, most hospital systems in the West are woefully unequipped for any large influx of serious respiratory patients.
After dragging its feet for seeming forever, the CDC finally “allows” states to begin testing on their own. Why this took so ridiculously long is inexplicable.
For over a month now, we’ve been consistently telling you that you need to prepare for a covid-19 in your area. Now it’s getting quite close to the “too late” stage. Already many communities are experiencing runs on basic items like food and water.
Any actions you take from here on out need to be done ultra-responsibly and not contribute to the growing panic and hoarding.
From here on out, it’s going to be about “mitigation” (not containment) and “non-pharmaceutical interventions” or NPIs. That’s a fancy way of saying no large gatherings, no school, and no unnecessary travel or contact.
Use this last bit of precious remaining time before supplies are gone to continue do what you can.
If you’re one of the many new readers here on Peak Prosperity, be sure you’re up-to-date on developments with the coronavirus. All of our latest covid-19 video updates, podcasts and articles can be accessed here for free.
And here’s a brief list of the more recent material that Chris and I have published for our premium subscribers, to give you a sense of what’s behind the paywall (free executive summary, enrollment required for full access)
- Why Your Family & Friends Aren’t Taking The Coronavirus Seriously Enough
- Why I’m Ramping Up My Coronavirus Preparations
- A Resilient Defense Against The Coronavirus
- How We’re Personally Preparing Against The Coronavirus
- Positioning For A Market Downturn
- Our Recommended Pandemic Preparations
- Chris and Adam answer PP reader Q&A:
Bill Fleckenstein: Coronavirus Will Cause A “Confidence Crisis” In The Fed
Bill Fleckenstein: Coronavirus Will Cause A “Confidence Crisis” In The Fed
Money manager and metals specialist Bill Fleckenstein appeared on the Quoth the Raven Podcast on Sunday to give his thoughts about gold, the market’s reaction to coronavirus and the Fed’s coming “confidence crisis”.
Gold
First, talking about last week’s move in gold, Fleckenstein says he doesn’t attribute the move to margin calls, as many had speculated. He instead says that gold likely just fell victim to “hot money”, which he noted often happens when gold spot rallies hard and the miners don’t follow – exactly what happened last week.
Bill said:
“Gold has gone up, but the mining stocks really didn’t participate. That concerned me because when the mining stock sputter and gold keeps going, then gold gets hit,” he says.
He continued:
“When gold was spiking on the coronavirus news, it didn’t quite act right in conjunction with other things, and I was a little nervous. Then, of course, it got destroyed on Friday. I suspect there was a lot of trend following money in gold. A lot of hot money. Hot money because it’s going up.“
The Market’s Volatility
The rally late last week was because people thought the “Fed was going to save them”. Fleckenstein says he doesn’t believe it to be the case that the Fed is going to give the market a rate cut anytime soon. He thinks the market will have to crash further before central banks intervene.
He also doesn’t think we’ve seen real panic in the equity markets yet.
“When I look at the personalities of some of the absolute crap, like Tesla, they’re still valued like a total joke. I don’t think we saw a hell of a lot of panic,” he says.
“This was not about illiquidity”.
The Fed’s Coming Crisis
…click on the above link to read the rest of the article…
‘This will not be contained’: Experts cast doubt that spread of COVID-19 can be stopped
‘This will not be contained’: Experts cast doubt that spread of COVID-19 can be stopped
Outside China, there have been more than 7,000 cases in 60 countries and more than 100 deaths
While the World Health Organization has said the risk of COVID-19 spreading worldwide is now “very high”, officials have suggested that efforts to combat the coronavirus are still in the containment phase.
But some medical experts believe that the containment stage has long since passed, that the spread of the COVID-19 is inevitable, and that living with the coronavirus could become a reality. COVID-19 is the respiratory illness caused by the new coronavirus.
“This will not be contained, this has not been contained,” said Isaac Bogoch, an infectious disease physician at Toronto General Hospital.
Massive public health efforts have been helpful in slowing down the spread of the infection and reducing the pace and frequency of exported cases from China to the rest of the world, but containment has not worked, Bogoch said.
‘Will continue to spread’
“This is spreading throughout the world and it will continue to spread throughout the world,” he said.
On Friday, WHO director-general Tedros Adhanom Ghebreyesus told a news conference that the Geneva-based health agency has “increased our assessment of the risk of spread and the risk of impact of COVID-19 to very high at a global level.”
China has seen more than 80,000 confirmed cases and almost 3,000 deaths. Outside China, there have been more than 7,000 cases in 60 countries, with more than 100 deaths.
…click on the above link to read the rest of the article…
The Good, Bad, & Ugly Of Virus Response: El-Erian Admits Govts & Central Banks Can Only Do So Much
The Good, Bad, & Ugly Of Virus Response: El-Erian Admits Govts & Central Banks Can Only Do So Much
Look for this week to be full of news about governments and central banks signaling their “whatever it takes” willingness to take additional policy measures to fight the contractionary impact of the coronavirus on virtually every economy around the world. Already, the Federal Reserve signaled on Friday readiness to loosen monetary conditions in the United States while Italy announced on Sunday a “shock therapy” of fiscal measures.
As more announcements materialize during the week, it will be crystal clear that the question will not be about the willingness to act but about the effectiveness of those actions. For the most part, the answer will be only partly satisfactory in the short term until two underlying health conditions change. Less obvious will be the need to weigh immediate benefits — partial and as necessary as they are — against the possibility of longer-term unintended consequences associated with the inevitable use of ill-suited policy tools for the task at hand. Those include more borrowing of growth from the future and even greater reliance on activities bolstered by central bank liquidity injections.
An increasing number of sectors and countries are experiencing sudden-stop dynamics as the economic effects of the coronavirus spread more widely around the world. Both demand and supply are being hit hard and in multiple ways. For example, News Corp., the owner of the Wall Street Journal, banned nonessential travel for its employees this weekend; more conferences are being cancelled around the world; airlines are reducing flights; and companies are asking employees to work from home.
…click on the above link to read the rest of the article…
