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Generational Dynamics Web Log for 21-Feb-2020
21-Feb-20 World View -- Planning for Wuhan Coronavirus (Covid-19)

Web Log - February, 2020

21-Feb-20 World View -- Planning for Wuhan Coronavirus (Covid-19)

V-Shaped Recovery -- learning from the financial crisis

by John J. Xenakis

This morning's key headlines from

Planning for Wuhan Coronavirus (Covid-19)

Scientists at the Wuhan Virology Institute wear high-grade hazmat suits. On the institute's grounds is the Wuhan Biosafety Laboratory, which is designated to study the most dangerous pathogens, including viruses like Ebola and SARS.  There are denied rumors that Covid-19 was man made at the Wuhan lab.  (Daily Mail)
Scientists at the Wuhan Virology Institute wear high-grade hazmat suits. On the institute's grounds is the Wuhan Biosafety Laboratory, which is designated to study the most dangerous pathogens, including viruses like Ebola and SARS. There are denied rumors that Covid-19 was man made at the Wuhan lab. (Daily Mail)

There's a great deal of hope in the air of a "V-shaped" recovery, meaning that the virus is causing massive economic problems now, but this will be followed a huge recovery, as things return to "normal" in April or May. Other people, perhaps a lot more realistic, don't expect resolution until well into summe.

This article describes the main issues surrounding the coronavirus. The last section, "V-Shaped Recovery -- learning from the financial crisis," describes how the virus crisis was permanently change this generations behavior permanently.

The V-Shaped Recovery

China is claiming that the virus has now been contained because the number of new cases each day has gone down for a few days. In the West, the dream is of a "V-shaped recovery," where everybody will be hurt in Q1, but then all that lost business will be regained in Q2. In particular, the widespread hope is that the warmer weather in April would bring an end to coronavirus, at least until the Fall, and by then measures can be taken to prevent further spread. That's the hope.

However, many people believe that the Q2 V-shaped recovery scenario, while possible, is less likely than a scenario that extends well into summer.

In a television interview of 2/19, Dr. Anthony Fauci of the National Institutes of Health was asked how certain he was that the virus would be contained and not allowed to spread in the US. He said (my transcription):

"Given the situation the way it is today, we've successfully done that with the 15 cases that we have - 13 of which were travel from Wuhan, and two of which were spouses of the travelers. If we get a worldwide pandemic, where you have sustained transmission in multiple regions about the world, then it's gonna be very difficult to adequately contain it anywhere. I think we did do a reasonably good job, but it's not going to be absolute."

Fauci is a leading American expert. You can try to read between the lines and decide whether he's just being cautious or whether he's sending a signal that far worse is yet to come, but either way, a V-shaped recovery is very far from certain.

In particular, he makes it clear that one scenario is that we may be facing a massive worldwide pandemic, in which the world will be a very different place by summer.

Fauci described the virus as follows: "But clearly this is a highly transmissable virus that does have a disturbing level of mortality."

There are many conflicting reports about the spread of the virus in America and other countries, and unfortunately there's no reason to believe any of them.

Credibility of Chinese Communist Party (CCP)

Since the Chinese Communist Party (CCP) lies about pretty much everything, few people believe that China is telling the truth about the situation in China.

The Chinese were apparently aware of the virus as early as October, and heavily censored any information about it. In fact, a correspondent whose sister was a nurse working in Wuhan told me that the Chinese began building new hospitals in Wuhan in November, which is considerably earlier than they admitted to knowing about the virus. A Chinese scientist, Li Wenliang, warned his colleagues of a potential "SARS-like" disease in December 2019, but was harshly punished, and he later died of the disease. Other Chinese scientists have been jailed for describing what's happening.

This week, the CCP expelled three WSJ reporters from China, because of an opinion piece that appeared in the paper, criticizing Xi Jinping's handling of the coronavirus crisis, and referring to China as the "sick man of Asia." The three reporters had nothing to do with the opinion piece, but they were expelled anyway, and WSJ has now apologized to the CCP thugs for offending them. This is how the CCP extends its censorship around the world, since the WSJ will now have to refrain from publishing information or else suffer other retribution. The CCP imposes similar worldwide censorship about many other subjects, such as Taiwan, Hong Kong riots, the South China sea, or the Uighur genocide. Any publication anywhere in the world can be punished by the CCP for publishing information that the CCP doesn't like.

In January, as the size of the epidemic in Wuhan was becoming publicly known, the United States began placing travel restrictions on travelers from China. This infuriated the CCP, not only because they tend to whine about everything that America does, but also because the move gave cover to many other countries to do the same, and also to Central and Southeast Asian countries to close their borders to China.

The CDC and the bioweapon rumors

In January, the American CDC, which has the best and most experienced virologists in the world, offered to send people to Wuhan in January, as the size of the infection was becoming apparent.

China not only blocked the CDC scientists, but at same time the foreign ministry issued statements blaming the United States for not offering to help. This is a typical example of the Chinese talking out of both sides of their mouths.

There has been a World Health Organization (WHO) team that has been permitted to enter the country in the last couple of days, and that team contains a couple of CDC scientists. But according to reports on Wednesday, the WHO team is still being blocked from visiting Wuhan, and they're being confined to hotel rooms where they're being fed filtered data by the CCP.

Last week on Friday morning, US Health and Human Services (HHS) secretary Alex Azar was interviewed on CNBC, where he harshly criticized China for its lack of transparency with regard to the coronavirus emergency.

He was asked, "Do you know for a fact that this virus occurred naturally, and not in some kind of P4 bioweapons lab?" He evaded the question with this response: (my transcription):

"We need to be very careful not to engage in speculation here, until we have data and evidence. We need transparent access to all first generation genetic sequencing. And we gotta get on the ground and do what we always do -- work shoulder to shoulder with the Chinese scientific experts. To just look at raw data, and solve these questions."

Azar's point is that question won't be resolved until the CDC scientists, the best in the world, are able to go to Wuhan and examine the evidence. This was a message to the CCP that there will be more unpleasant rumors, and the Chinese have only themselves to blame for those rumors. If China continues to block the CDC, then they have no right to whine about rumors that begin.

Xi Jinping and 'Social Instability'

The CCP gives the need for "social stability" as the reason for the harsh censorship, and for expelling, jailing or torturing reporters. By "social stabilty" they mean that they fear that people will turn against Xi Jinping and the CCP.

Xi Jinping's own credibility is badly damaged. He said that everyone would be back to work by now, and everyone knows that's far from true. Furthermore, severe restrictions are still on in Wuhan, and regional authorities around the country are still imposing local restrictions on travel. China's entire economy is all but locked down, and tens of millions of migrant workers who went home for the Lunar New Year are unable to return to their jobs.

Many people have been out of work almost two months -- many of those will not be able to afford food, or pay rent. This could generate anti-CCP activism. Historically, this is exactly the kind of environment that leads to an anti-Chinese government rebellion.

There are already some signs of resistance and criticism of the CCP in Guangzho province, which is adjacent to Hong Kong, including the arrest of Xu Zhiyong, the leader of the New Citizens Movement, which is advocating greater freedoms.

This is highly significant. China's history is filled with hundreds of crisis wars in the form of massive internal rebellions (civil wars). The last two of these massive rebellions were the the Taiping Rebellion (1850-64) and Mao's Communist Revolution (1934-49) -- and both of these rebellions began in Guangzho province and spread north. China is overdue for a new massive civil war, and any sort of economic setback could be the trigger. The CCP leadership are very well aware of this history, and are extremely paranoid about it.

Developing a Vaccine

Most commentators agree that the coronavirus will remain an active threat until a vaccine is developed. Estimates are that some companies will begin testing a vaccine within a couple of months, but no vaccine will be ready for widespread use for at least 6-12 months, and possibly longer.

In the meantime, some existing drugs are being tested. For example, doctors in Thailand said they appeared to have some success in treating severe cases of the coronavirus by combining Tamiflu with anti-HIV drugs.

However, those who develop severe cases and survive often have damaged heart muscles, and many have developed heart attacks.

Singapore - a coronavirus bellwether

Singapore is a good place to watch as a bellwether of what path the coronavirus emergency is going to take for several reasons.

So, putting everything together, Singapore can provide an early warning for what will happen in the rest of the world.

Japan - another bellwether

Japan is a bellwether in another sense.

Japan has over 59 confirmed coronavirus cases -- not counting the 454 cases that were identified in the Diamond Princess cruise ship. New cases continue to emerge in prefectures around the country, and some analysts are expressing fear that the infections will not be controlled until infections are widespread.

So Japan is good country to watch to see how a developed Western country deals with a spreading coronavirus epidemic, and possibly a pandemic.

Japan has canceled a number of international events because of the virus. The Summer Olympics is scheduled to be in Tokyo, and if that event is canceled, it will cause long-range damage to Japan's economy.

Update: As this is being written, reports indicate a large outbreak in South Korea. This may also be a bellwether.

Coronavirus in Africa

Countries like Singapore and Japan are developed countries with sophisticated medical services infrastructure, capable of handling a coronavirus outbreak -- although that claim is currently being tested in both countries.

But there are many countries with no such infrastructure, including many African, Mideast and Asian countries.

Africa appears to be extremely safe, since there have been almost no reported cases there. But that's because no one is being tested. If you don't look for cases, then you won't find any cases. And in fact, Africa has a number of Chinese enclaves, thanks to the Belt and Road Initiative (BRI).

As of Feb 11, Africa does not have any confirmed cases, but suspected patients have been quarantined in Ethiopia, Kenya, Côte d'Ivoire, and Botswana.

The World Health Organization is providing support to Africa, and is providing prioritized report to 13 countries with Chinese enclaves, since there is frequent travel between these countries and China. The 13 countries area: Algeria, Angola, Côte d'Ivoire, the Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Kenya, Mauritius, Nigeria, South Africa, Tanzania, Uganda, and Zambia.

There's still an ongoing Ebola crisis in eastern DRC, in the middle of a continuing ethnic war. International NGOs have been successful in preventing the further spread of Ebola by standard techniques such as contact tracing and quarantining people with symptoms, and aggressive use of newly developed vaccines.

African officials are saying that the same techniques will be used to control coronavirus outbreaks. However, there are significant differences. Coronavirus spreads much more easily than Ebola, and there's no coronavirus vaccine. Few people believe that a coronavirus outbreak will be contained.

War zones - Africa and Mideast

There are several ongoing wars in Africa and the Mideast -- DRC, Central African Republic, Mali, Cameroon, Yemen, Syria. There are smaller ongoing clashes in other countries.

Sooner or later, there will be a coronavirus outbreak in one of these war zones.

The explosive situation in Idlib, Syria

I want to call particular attention to war in the Idlib province in northwestern Syria. I've been writing about this situation for several years on the Generational Dynamics web site and forum.

This started as the Syria civil war in 2011, and it's evolved to a final explosive confrontation in Idlib. There are four million people, mostly women and children, packed into Idlib.

On Monday, Syria's sociopathic monster president Bashar al-Assad, the worst war criminal so far this century, announced that his army will mop up the rest of Idlib soon.

On Wednesday, Turkey's president Recep Tayyip Erdogan gave a speech threatening both Syria's president al-Assad and his ally, Russia's president Putin. In the meantime, al-Assad's army is pushing a million people, mostly women and children, towards to the border with Turkey.

It has just emerged that there's a cluster of coronavirus cases in Qoms, Iran, with two deaths. It won't be long before these cases spread into Iraq and Syria, and could start spreading among those million people in Idlib.

And then either Turkey and Syria will be at war, or else Turkey will open the border and allow those million refugees with coronavirus to flow into Europe.

There are hard deadlines and hard positions here. It seems unlikely that anyone will back down, and so this situation is expected to explode by March 1.

The Future of Coronavirus

The coronavirus is spreading around the globe, and it is not known today whether most countries will be able to control their local outbreaks, or whether there will be a global pandemic. These questions can't be answered today, so as I wrote in the past, it's best to wait until early March to make new business decisions.

Economic activity has almost come to a standstill in China, as the virus has affected global tourism, trade, manufacturing and export/import. With many Chinese businesses shut down, supply chains have been disrupted. Companies and countries with a high dependency on Chinese components and parts will continue to suffer.

V-Shaped Recovery -- learning from the financial crisis

Politicians, analysts and economists who are hoping for a "V-Shaped Recovery" are making the same mistake that they made after the 2008 financial crisis.

Once worst of the 2008 financial crisis ended, everyone assumed that things would return to "normal." Economists would look at their 1980s vintage economics models, and conclude that there would be an extremely quick economic recovery.

What they overlooked is that people in the 1980s, during a generational Unraveling era, behavr very differently than people in the 2000s, during a generational Crisis era.

That particular difference in behavior can be measured by the "Velocity of Money." This measures how quickly ordinary people spend money they've received, versus saving the money in the bank. I haven't updated this graph since 2017, but it shows the Velocity of Money since 1919:

Velocity of money, 1919 to 2017 (St. Louis Fed Fred Graph #366117)
Velocity of money, 1919 to 2017 (St. Louis Fed Fred Graph #366117)

As you can see from this graph, the velocity started falling in 2000, when the Nasdaq stock market crash occurred, and then started falling very sharply since the 2008 financial crisis, and hasn't stopped falling.

This indicates that the Nasdaq crash and the financial crisis were events that permanently changed the behavior of the current generations of people. They are permanently reluctant to spend money. So the 1980s economic models are completely, totally wrong.

So I believe that we can apply this same lesson to the coronavirus crisis. The assumption behind the "V-Shaped Recovery" is that as soon as the virus is more or less contained, businesses will quickly return to their pre-virus levels of activity. That may happen if the virus is contained quickly over the summer.

But if there's a larger and longer-lasting crisis, or a pandemic, then I believe that most people will be extremely reluctant to behave as they did before the virus spread, and I believe that the economic impact could be far more serious.


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