Juggling Dynamite

Travelling in Spain over Christmas, I came down with terrible flu: head and body aches, fever, violent dry cough, exhaustion. I was on the couch for a few days and coughing for a couple of weeks.  I did not pass it on to my family, amazingly, and I think this suggests it was not a coronavirus.  But knowing now that COVID-19 was spreading from at least mid-November, many people are wondering about virus symptoms they had last fall.

Mid-November in Wuhan, China, and cases of a strange new flu start surfacing. In a sprawling city of 11 million people, the coronavirus, our invisible brutal enemy was born – festering at least a month and a half before the world was told. In January President Xi Jinping made a decision that would ultimately condemn the world: allowing 5 million people to leave the epicentre of the virus without being screened.  Here is a direct video link.

Today as the Bank of Canada follows other G7 nations in slashing its policy rate to the .25% low of the 2008 financial crisis, it also expanded its bond-buying programs to include the recently frozen commercial paper market.  Borrowing costs for corporations at record indebtedness have spiked just as revenues are vaporizing–this is not a good combo.  See the Bank of Canada press release here.

For those who were encouraged by yesterday’s bounce in markets and thinking that bottoms are in and a V recovery is in the works, you might also wish to plan for other possibilities.  The financial challenges at hand are structural/secular and go far beyond containing a virus.  See Nouriel Roubini’s latest Project Syndicate article, here’s a snippet:

While most self-serving commentators have been anticipating a V-shaped downturn – with output falling sharply for one quarter and then rapidly recovering the next – it should now be clear that the COVID-19 crisis is something else entirely. The contraction that is now underway is looking to be neither V- nor U- nor L-shaped (a sharp downturn followed by stagnation). Rather, it looks like an I: a vertical line representing financial markets and the real economy plummeting.

…Unfortunately for the best-case scenario, the public-health response in advanced economies has fallen far short of what is needed to contain the pandemic, and the fiscal-policy package currently being debated is neither large nor rapid enough to create the conditions for a timely recovery.

As President Trump talks about opening up parts of the country for Easter, appreciation of where we are in the battle against this pandemic is key to managing our behaviour, risks and expectations. This article from The Atlantic is a must-read, see: How the pandemic will end.

The U.S. may end up with the worst COVID-19 outbreak in the industrialized world. This is how it’s going to play out.

You can hear the author Ed Yong discuss his research and article on an episode of Social Distance, The Atlantic’s podcast about living through a pandemic: