The great peril facing humanity right now is not climate change, nor the trade war and the rise of nationalism, but the novel coronavirus, COVID-19. Despite having a fatality rate of 2.3%, it varies tremendously by age and whether one has some pre-existing illness or not. This data comes from a paper by the Chinese CCDC released on February 17.
In addition, this virus has an R0 (average number of new infections by an infected person) of 1.4 to 4.08. It seems that the experts have "settled" at around 2.2. Comparing to the common influenza (death rate of 0.1% and R0 of 1.28), this virus presents a much bigger threat. Accordingly, for the youthful and healthy there is not much to worry about. However, in order to save the lives of those more immunosupressed, everyone must make a sacrifice and temporarily change their behaviour, and cancel or postpone some activities. As I am writing this, the total infection cases is 134,684 and the fatalities amount to 4,973 in 127 countries. Obviously, the overwhelming majority of deaths have been among the people who have surpassed the average life expectancy or had critical pre-existing conditions, or both. Although all these deaths are a tragedy, there is a particular victim that only a few have noticed, and even fewer are aware of the repercussions such a tragedy will bring about. You may have guessed by reading the title: the bull market. This should have come to no surprise since this market had gone far past the average lifetime of an economic expansion, as well as having some critical pre-existing conditions - chronic liquidity disease and debt addiction. Like I said above, this virus is forcing people to delay or cancel their plans and companies to halt production due to disruptions on the supply chain and workers staying at home. Hence, economic activity, which was already waning since last year, is deteriorating rather rapidly. Consequently, several implications arise for the various economic agents.
Tomorrow I will develop on the options that the governments and central banks have to deal with the financial debacle. Moreover, how the option likely to be followed will impact the consumers, businesses and investors, both domestic and foreign, and finally what is the end game for the current monetary and financial system.
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AuthorDaniel Gomes Luís Archives
March 2024
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