Great dangers arise whenever human beings with strong conviction about the rightness of their cause are authorized to use instruments of evil to do good.—Vincent Ostrom
In this issue
The Coronavirus Pandemic: Who is Panicking? More From the Year of the Rat: Will History Rhyme?
-The Baggage from the Year of the Pig, The Year of the Rat: Will History Rhyme?
More Absurd Predictions?
-nCoV: a Rapidly Mutating Virus
-nCoV: Who is Panicking?
-nCoV’s Economic Impact to the World and the Philippines; Food Shortages Ahead?
The Coronavirus Pandemic: Who is Panicking? More From the Year of the Rat: Will History Rhyme?
The Baggage from the Year of the Pig, The Year of the Rat: Will History Rhyme?
Additional observations on the notorious year of the Rat-Pig tandem.
From the financial side, do you remember that 2019 opened with the Hanjin Heavy Industry’s debt default in January? Although this event was downplayed by the BSP and the banking system, it certainly contributed to the siphoning of the financial liquidity that the led to the inversion of the yield curve, and subsequently, the aggressive response of paring down 400 bps of RRR requirements in favor of banks, the 75 bps policy rate cuts and the BSP’s record QE.
From the real economy side, do you recall the emergence of the NCR’s water crisis and the power shortages in the first semester last year?
How about the deluge of national health issues, such as the spike in the dengue cases, which led the National Government to declare the “national dengue epidemic”, the polio outbreak, the HIV outbreak, the measles, and the African Swine Fever (AFS) outbreak?
While some concerns, such as water, and power shortage, may have subsided, the year of the RAT continues to carryover dengue (though at diminishing rate), polio, HIV, measles, and AFS.
Because earthquakes are natural calamities, let us put them aside.
Figure 1
Circling back to the financial sphere, the stock market’s heavily distorted headline index, the PhiSYx broke its 2018 uptrend in December 2019, and which had been confirmed in mid-January of 2020 before the Chinese New Year.
From an 11-year perspective, the fourth critical trend line, having been established in late 2018, was violated anew last week.
For the chart observers, the slope of the trend lines continues to downshift, signaling the dominance of entropic force, in spite of the massive rigging of the index.
Reflecting the zodiac cycle, the Philippine has now lagged the Asian region based on Year to date performance in 2020, in the wake of this week’s remarkable plunge of the headline index.
History never repeats itself, said American writer Mark Twain, but it does often rhymes.
More Absurd Predictions?
Immediately after the announcement of the first case of the Novel Coronavirus (nCoV) in the Philippines, the spin machines went to work.
From the Inquirer: (January 30) The Philippine economy will be shielded by robust domestic demand from any global or regional economic impact from the deadly nCoV virus but Philippine Offshore Gaming Operators (Pogo) face downsizing when China keeps its citizens from traveling to prevent the virus’ spread, Malaysian financial giant Maybank said. Just like the SARS outbreak in 2002-2003, the Philippines and Indonesia “will likely see the least impact, given that they are more domestic-oriented economies and less reliant on tourism receipts,” said Maybank Kim Eng in a Jan. 29 report titled “Wuhan Virus: Anatomy of an Outbreak.”
From the Inquirer: (January 30) The Duterte administration’s economic team sees a “short-term” impact on the Philippine tourism industry of the spread of the novel coronavirus (nCoV) and expects economic growth to be stronger in 2020. After the Economic Development Cluster (EDC) meeting, wherein economic managers mapped their strategies to achieve the higher gross domestic product (GDP) growth goal of 6.5-7.5 percent in 2020, Finance Secretary Carlos G. Dominguez III said besides infrastructure spending, planners expected the country’s more aggressive tourism push to “rev up the economy this year.”
Do they know something that even the medical field doesn’t?
nCoV: a Rapidly Mutating Virus
As a layman of the emerging pandemic, quotes from experts will be used to illustrate the risk conditions from the nCoV.
What do we know about the Coronavirus?
It is a complex and dynamic virus subject to a high rate of mutation.
Figure 2
Dr. Eric Fiegl-Ding Harvard and John Hopkins Epidemologist in a series of tweets noted that “The new #coronavirus is an RNA virus—that is, viruses that have RNA as their genetic material rather than DNA—which have a “high mutation rate,” which allows it to “change properties very quickly” such that “RNA sequences of the #coronavirus isolated from 6 patients from the same household are different from each other (lancet), sign of the virus evolving. This may not be so good to the ear; it suggest the difficulty of containing this virus.” (bold mine)
Again Dr. Ding, One source or many sources? The mutation rate suggests the 2019-nCoV came from just one recent source in single jump (as opposed to several mutation sources). This doesn’t mean much other than it wasn’t several strains that started outbreak. Don’t over-interpret. Just FYI.
While sharing some relations to SARs and MERs, the nCoV is a different strain, again Dr. Ding, As you can see, the new nCOV is a branch off the bat coronavirus subgenus. It is too distant from SARS (79%) or MERS (only 50% related)
If Dr. Ding’s analysis is accurate, why should SARs be worth the comparison? (This observation is just from the perspective of the virus and not the economic climate)
Dr. Ding also remarked that the seafood market origins of the nCoV lacked scientific foundations: “First, I don’t like unsupported conspiracy theories, but it’s a lingering question. @sciencemagazine examined this based on the Lancet article. Nobody knows, but the seafood story isn’t whole story.”
With China’s biolab, the Wuhan National Biosafety Laboratory, located about 20 miles away from the Huanan Seafood market, researching some of the world’s most dangerous viruses, it’s hardly any doubt why some see a connection to this. The US warned reportedly warned that a virus could escape from the lab, according to UK’s Metro News.
nCoV Pandemic: Asymptomatic Disease, Lack of Logistics, Reporting Deficiencies, Suppression of Statistics and Non-Transparent Governments
On his blog, Mish Shedlock compiled a Series of Thirteen Tweets by physician (MD) and scientist (PhD) Dr. Dena Grayson. (bold added)
Dr. Dena Grayson: Having YEARS of experience developing an Ebola treatment, I was concerned about this Coronavirus Outbreak from the outset, because this coronavirus strain is very contagious, causes severe illness, and NO treatments or vaccines are available.
Dr. Dena Grayson: Unlike H5N1 "bird flu" (which does not spread easily between people) or SARS (which was spread by only a handful of "super spreaders"), this coronavirus DOES appear to spread easily between people, even after making the jump from an animal (this is not common).
Dr. Dena Grayson: In addition to being highly contagious, this novel coronavirus can cause a SEVERE infection that can kill even healthy people. It's rare to see BOTH of these (bad) attributes in the same novel virus. Usually, it's one or the other.
Dr. Dena Grayson: One way experts judge how deadly a pathogen (virus, bacteria, etc) is by the "case-fatality rate," which is the # of deaths / # infected people. It's WAY too early to know what this is, because it takes time for patients to succumb to the infection.
Dr. Dena Grayson: Thus far, the case-fatality rate appears to be ~4%...but its' WAY too early to know what it really is, due to spotty reporting (both of deaths and cases), and because patients are still sick and could die tomorrow, next week, etc., even if no new infections occur.
Dr. Dena Grayson: Per @CDCgov, "Early on, many of the patients in the outbreak in Wuhan, China reportedly had some link to a large seafood/animal market, suggesting animal-to-person spread." Now, many newly diagnosed patients have NO connection to the market, supporting human-human spread = BAD
Dr. Dena Grayson: @CDCgov I get asked: "How will I know if I have the coronavirus?" Answer: it's very hard to tell, because the symptoms are similar to having influenza – anywhere on the spectrum from a very bad cold to severe pneumonia with respiratory compromise.
Dr. Dena Grayson: @CDCgov Although there are no specific treatments (medicines to combat the coronavirus) or vaccines, excellent supportive care, such as IV fluids, intubation (on a "breathing machine"), can help support patients while their immune system battles (and hopefully, defeats) the infection.
Dr. Dena Grayson: @CDCgov In an "outbreak," local hospitals can get overwhelmed, and there aren't enough hospital beds, staff, ventilators (breathing machines). This appears to be the case in Wuhan, where authorities are working to build a 1000-bed (mobile) hospital in JUST 10 DAYS. This is ALARMING.
Dr. Dena Grayson: @CDCgov China has a history of not accurately reporting outbreaks, so it's hard to know exactly what is happening, especially with no free press, internet, etc. China's massive response is VERY telling and strongly suggests that the Coronavirus Outbreak is VERY bad, especially in Wuhan
Dr. Dena Grayson: @CDCgov How can you protect yourself and others? 1: Avoid contact with people who are visibly ill (even loved ones) 2: Stay home if YOU are sick 3: Cover your nose/mouth with a tissue (not hand) when coughing/sneezing 4: Don't touch your face (difficult) 5: Wash your hands frequently
Dr. Dena Grayson: @CDCgov Right now, the risk appears low in the US, with only a few isolated cases. Unfortunately, I expect that this will change, as more cases arise here, especially with global travel and how readily this coronavirus appears to spread (via droplets in the air).
Dr. Dena Grayson: @CDCgov I will continue to provide commentary about the emerging Coronavirus as news emerges over time. In this Tweet link , you will find links to excellent @who and @CDCgov
In her recent tweets, Dr. Dena Grayson emphasized the understatement of the official rates and the reasons for these.
Dr Grayson: The ACTUAL number of #coronavirus cases is MUCH higher than reported: “#Wuhan residents widely report a severe shortage of testing kits…authorities announced hospitals would only give tests to those who showed severe symptoms
Dr. Grayson: There are credible reports that #China didn’t perform testing on some people who died from #coronavirus, so the underreporting could affect both total cases and deaths. There is apparently a huge backlog of #2019nCoV tests to be performed.
Dr. Grayson: A major challenge is that the ability of #2019nCoV to spread (R0) and the mortality rate (% inflected who die) are not confirmed, because it’s highly likely that there are FAR MORE cases of #coronavirus than reported. Some don’t see a doctor, lack of testing, poor reporting…
Dr. Grayson: Although seasonal #influenza causes far more deaths than the new #coronavirus has (thus far), #2019nCoV appears to spread more readily from person-to-person + appears to be more deadly (higher mortality rate in those infected) =VERY bad.
The fact that China has been the chief source of medical supply, the disruptions from the virus only exacerbates the risks of nCoV spreading.
Former Food and Drug Commissioner Scott Gottlieb’s tweet, “China seeing shortage of protective body suits. Since much of supply chain for masks, gowns, gloves is through China; we should prepare for potential of stretched supply chains and increased demand here in U.S. in event of outbreaks or epidemic spread in America”
Along with Dr. Grayson, Dr. Gottleib charged that the Chinese Government has been non-transparent, “Add to the long list of China’s infractions against world health: They refused to share viral samples or process for synthesizing it; they only admitted there was human to human spread Jan 20 the same day they disclosed 14 healthcare workers were infected.”
Aside from suppressing actual statistical numbers, some Western media outfits have alleged that the Chinese government has been “cremating bodies in secret to hide the true extent of the death toll”.
And because the virus can be asymptomatic, it is hard to detect.
Nevertheless, Dr. Eric Ding, Dr. Dana Grayson, and Dr. Benhur Lee think that the pandemic will continue to spread. (Figure 2)
Despite the race to develop a vaccine against the nCoV, this may yet take time. So unless the outbreak stops by its own similar to SARs, the chances for it to spread may only continue.
Figure 3
nCoV: Who is Panicking?
Given China’s population of 1+B, why then have many been panicking when current numbers have been a fraction of these?
One possible answer, because of enhanced risks of ruin.
As mathematician, philosopher, and author, Nassim Taleb, described the precautionary principle. (bold mine)
The general (non-naïve) precautionary principle delineates conditions where actions must be taken to reduce risk of ruin, and traditional cost-benefit analyses must be not be used. These are ruin problems where, over time, exposure to tail events leads to a certain eventual extinction. While there is a very high probability for humanity surviving a single such event, over time, there is eventually zero probability of surviving repeated exposures to such events. While repeated risks can be taken by individuals with a limited life expectancy, ruin exposures must never be taken at the systemic and collective level. In technical terms, the precautionary principle applies when traditional statistical averages are invalid because risks are not ergodic.
Figure 4
There seem to be three phases of nCoV’s dispersion; first, the epicenter, Wuhan, the capital of the Hubei province, second, the rest of China, and last, the world.
By the looks of the current statistics, nCoV has reached phase two or has spread to the rest of China, where local outbreaks could be morphing into secondary Wuhans. Phase three translates to the localized transmission of the virus around the world. nCoV’s transmission may mean adaption to local habitat given its trait to rapidly mutate.
Dr. Ding reacted to a study by Joseph T Wu*, Kathy Leung*, Gabriel M Leung: Whoa-the rate of increase ***outside of China***is steeper than inside of China or Wuhan! Figure 1A. From: @TheLancet “Nowcasting and forecasting the potential domestic and international spread of 2019-nCov bit.ly/2GF6gZP”
The study’s findings: Given that 2019-nCoV is no longer contained within Wuhan, other major Chinese cities are probably sustaining localised outbreaks. Large cities overseas with close transport links to China could also become outbreak epicentres, unless substantial public health interventions at both the population and personal levels are implemented immediately. Independent self-sustaining outbreaks in major cities globally could become inevitable because of substantial exportation of presymptomatic cases and in the absence of large-scale public health interventions. Preparedness plans and mitigation interventions should be readied for quick deployment globally. (figure 3)
In other words, at the current rate of infection, which comes at random, millions of lives are at risk from a full-blown epidemic. While not to take on superstitions, major pandemics have occurred every 100 years (Great Plague of Marseille 1720, Cholera Pandemic 1817-24 and the Spanish flu 1918-20).
The Philippines government reported not only its second nCoV case today, but this was the first death registered outside China.
Just a thought experiment: what could happen if just one of the nCoV finds its way to the high density, population packed, depressed area in the NCR?
Besides, who has been panicking?
Who has been forcing quarantines of people from many cities affecting some 60 million of its population? Who has been closing borders in response to the expanding pandemic? Who has declared a state of emergency in reaction to the surfacing of 2 cases of nCoV?
Have they not been the governments?
After the announcement of the 2n nCoV case, the Philippine government joined the bandwagon of erecting travel walls against the Chinese.
And China’s government has been pushing back.
From RT.com (February 1) [bold italics and italics original, underline mine]: Beijing has lashed out at countries fanning fears of the novel coronavirus — which so far claimed 259 lives — insisting that its response against the deadly disease goes far beyond standards accepted worldwide. "We have adopted the most comprehensive and strictest prevention and control measures, and many of them go far beyond the requirements of the International Health Regulations," Foreign Minister Wang Yi assured while speaking with his Indian counterpart Subrahmanyam Jaishankar on Saturday. China's efforts are [aimed at] not only protecting the health of its own people, but also safeguarding the health of people worldwide. Governments and the World Health Organization have given full recognition to this. The death toll from the previously unknown virus has risen to 259 overnight — all registered in China — with almost 12,000 confirmed cases elsewhere in the world. Beijing "does not agree with the approach adopted by individual countries to create tension or even panic," the minister pointed out, reminding that the World Health Organization (WHO) "did not approve of travel or trade restrictions on China." Nevertheless, countries around the world rush to contain the spread of the new coronavirus outbreak, including closing borders, introducing stricter screening of those returning from China, or suspending direct flights to and from Chinese cities. Others have dramatically escalated travel advisories for the world's most populous country.
The implicit mobility walls being built to isolate China have resulted in intensifying strains, instead of cooperation, of the geopolitical climate. Will the Chinese retaliate? If so, how?
And yes, it would be better to panic ahead and prepare than panic when it is late and join the stampede.
nCoV’s Economic Impact on the World and the Philippines; Food Shortages Ahead?
All actions have consequences.
Political walls against the public's movements will not only fuel social tensions such as emerging racism here and abroad, but it will also have economic repercussions as well.
Because the war on people translates to the disruption to the global division of labor, shocks to the demand and supply chains will occur.
Aside from city and province lockdowns, many US, global and Chinese companies suspended work or closed shop in China. Apple temporarily closed all its stores.
On the demand side, prolonged suspension of trade and work would lead to diminished, if not loss of income, thereby curtailing expenditures and amplifying the risks of debt delinquency.
So for cities experiencing sustained draconian lockdowns, unless amply provided by the Government, the citizenry would either suffer from nCoV or starvation.
On the supply side, prolonged suspension of trade translates to the discoordination in the allocation of resources, revenue shortfalls, reduction of savings, capital losses and depletion, a rise in credit delinquencies, and most importantly, reduced output.
From the Financial Times (January 31), The Wuhan coronavirus is wreaking havoc within the global technology supply chain, as many Chinese provinces extend the new year holiday in an effort to contain the spread of the deadly disease. Underlining the concerns for the tech industry, Taiwan’s Hon Hai Precision Industry, which is also known as Foxconn and makes the majority of the world’s iPhones, suffered its biggest share price fall in almost 20 years on Thursday. Elsewhere, shares of Japanese electronics parts makers and other tech groups with exposure to China were hit hard, with Murata Manufacturing, Tokyo Electron and Sharp all suffering dips of more than 3 per cent as a result of anxieties about disruption to supply chains. The wobbles came after the governments of six Chinese provinces, including manufacturing hubs crucial for the global technology industry such as Shanghai, Jiangsu, Guangdong and Chongqing, mandated that the return to work after the Lunar New Year be delayed by a week to February 10 for all but essential industries.
From the Wall Street Journal (January 31) “As the spread of the new coronavirus in China causes more factory shutdowns, the effect on global industrial supply chains could linger for years. China now makes up more than twice the share of global merchandise exports it did in 2003, when the SARS virus hit. Guangdong province alone exported more in 2018 than China did as a whole 17 years ago. Manufacturers already gripe about the effect of the Lunar New Year holiday… on their business as Chinese factories shutter. But the public health response to the virus this year effectively means extending the holiday. China’s industrial output could be running at a similarly low level for a much longer period.”
The longer the growth of the nCoV pandemic, the greater the damage to China and the global economy.
The nCoV is likely to trigger an economic shock, considering China’s present conditions of soaring debt levels in the face of falling GDP.
With the sudden emergence of the H5N1 bird flu virus close to the epicenter of the coronavirus, in Hunan beside Hubei, and with the Asian Swine Flu still affecting China’s pork supply, the Chinese government has been expanding its meat imports.
According to YuanTalk: China’s commerce ministry urged to actively expand meat imports amid the coronavirus outbreak. Imports of meat products totaled 310,000 tonnes in the first half of January, up 275% y/y. Imports are expected to rise 190% y/y to 640,000 tonnes in Jan, it said.
China’s government may continue to import to cover the dislocations on China’s supply chain because the global chain remains intact. For now. But what if the third phase of the nCoV dispersion reaches a critical mass to impact the food supply chain everywhere or globally? Will such incite a food crisis?
How can these be positive for the Philippines?
And nCoV is just one of the many other adverse factors affecting the domestic economy.
Though I think that this virus may eventually exhaust itself naturally, or by the development of a vaccine, it does seem that the global government’s response may do more harm than the virus itself.
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