You’ve no doubt seen the headlines on CNN and Bloomberg.
“Coronavirus Pandemic Could Spark a Global Depression.”
“Will China Virus Trigger New Great Depression?”
There’s plenty of concern that the coronavirus outbreak is pushing us toward a crash. And after the market’s recent dive, the panic is only growing.
Regular readers know Casey Research founder Doug Casey sees the next depression around the corner. But as he explains below, “government coercion” planted the seeds for a downturn long before the coronavirus appeared.
And Doug’s predicting this “Greater Depression” will break records…
Just because society experiences turmoil doesn’t mean your personal life has to. And a depression doesn’t have to be depressing. Most of the real wealth in the world will still exist – it will just change ownership.
What is a depression?
We’re now at the tail end of a very long, but in many ways a very weak and artificial, economic expansion. At the same time, we’ve had one of the strongest securities bull markets in history. Both are the result of trillions of new dollars created over the last decade. Right now, very few people are willing to consider the possibility of tough times – let alone The Greater Depression.
But, perverse though it may seem, this is the very best time to think about it. The U.S. economy is a house of cards, built on quicksand, with a tsunami on the way. I urge everyone to read up on the topic. For now, I’ll only briefly touch on the nature of depressions. There are at least three good definitions of the term:
A period of time when most people’s standard of living drops significantly.
A period of time when distortions and misallocations of capital are liquidated.
A period of time when the business cycle climaxes.
Using the first definition, any natural disaster can cause a depression. So can living above your means for long enough. But the worst kind of depression has not just economic effects, but economic causes. That’s where definitions two and three come in.
What can cause distortions in the way the market operates, causing people to do things they’d otherwise consider unreasonable or uneconomic? Only government action, i.e., coercion. This takes the form of regulation, taxes, and currency inflation.
Always under noble pretexts, government is constantly directly and indirectly inducing people to buy and sell things they otherwise wouldn’t, to do things they’d prefer not to, and to invest in things that make no sense.
These misallocations of capital subtly reduce a society’s general standard of living, but the serious trouble happens when such misallocations build up to an unsustainable degree and reality forces them into liquidation. The result is bankrupted companies, defaulted debt, and unemployed workers.
The business cycle is caused mainly by currency inflation, which is accomplished today by the monetization of government debt through the banking system; essentially, when the government runs a deficit, the Federal Reserve buys its debt, and credits the government’s account at a commercial bank with dollars. Using the printing press to create new money is largely passé in today’s electronic world.
Either way, inflation sends false signals to businessmen (especially those who get the money early on, as it filters through the economy), making them overestimate demand for their products. That causes them to hire more workers and make capital investments – often with borrowed money. This is called “stimulating the economy.”
Inflating the currency can actually drive down interest rates for a while, because the price of money (interest) is lowered by the increased supply of money. This causes people to save less and borrow more, just as Americans have been doing for years. A lot of that newly created money goes into the stock market, driving it higher.
It all looks pretty good, until retail prices start rising as a delayed consequence of the increased money supply, and interest rates skyrocket to reflect the depreciation of the currency.
That’s when businesses start failing. Stocks fall. Bond prices collapse. Large numbers of workers lose employment.
Rather than let the market adjust itself, government typically starts the process all over again with a new and larger “stimulus package.” The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression.
This is why I predict the Greater Depression will be… well… greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.
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As Doug said, the Greater Depression is on the horizon. Smart investors should start preparing now… and gold offers one of the best ways to protect your portfolio. That’s why you need to watch this short video, where Doug lays out exactly what’s happening in the gold market right now. And a shocking new rule – the first of its kind in 45 years – that’s putting gold back in international headlines. It’s already setting off a buying frenzy… a “gold panic” unlike anything we’ve seen since the early 1970s. Go here for the full story… including details on the five explosive gold stocks that are the best way to play this boom.
“More Violent, More Persistent”: Market Fear Worse Now Than In 2008, Man Who Inspired VIX Says
The academic best known for coming up with the idea of the VIX – also know as Wall Street’s fear gauge – says that the fear looming over the markets now is far greater than the fear we faced in 2008.
Dan Galai, a professor at the Hebrew University of Jerusalem told Bloomberg:
“The level of uncertainty is even beyond what we saw in 2008 immediately after Lehman Brothers collapsed.”
Galai continued:
“If you look at 2008, it spiked and then within a day or two, it was going down very fast. Here, it’s been steadily going up instead of going down. It’s more violent, and it’s more persistent.”
The VIX is an indicator of expected near-term swings in the S&P 500 and has closed above 45 for four days in a row, which is the longest streak of this kind since 2009. It closed on Friday at 63, despite stocks spiking during the last half hour of trading. The VIX spiked up to 76 on Thursday, as stocks experienced the largest one day drop since October 1987.
Galai notes that monetary response likely won’t do much to stave off the problem.
“I don’t think interest rates have any effect right now. Monetary steps, in my view, are completely redundant,” he said.
Galai had proposed using gauges to measure volatility in 1989 and his proposal led to the CBOE VIX. Galai likens strategies that short volatility – including one that buried a Credit Suisse short-volatility note in 2018, as a “substitute for Las Vegas”.
We have learned historically that if we can isolate sick people, we can often keep a communicable disease from spreading.
Unfortunately, the situation with the new coronavirus causing COVID-19 is different: We can’t reliability determine which people are spreading the disease. Furthermore, the disease seems to transmit in many different ways simultaneously.
Politicians and health organizations like to show that they are “doing something.” Because of the strange nature of COVID-19, however, doing something is mostly a time-shifting exercise: With quarantines and other containment efforts, there will be fewer cases now, but this will be mostly or entirely offset by more cases later. Whether time-shifting reduces deaths and eases hospital care depends upon whether medical advances are sufficiently great during the time gained to improve outcomes.
We tend to lose sight of the fact that an economy cannot simply be shut down for a period and then start up again at close to its former level of production. China seems to have seriously overdone its use of quarantines. It seems likely that its economy can never fully recover. The permanent loss of a significant part of China’s productive output seems likely to send the world economy into a tailspin, regardless of what other economies do.
Before undertaking containment efforts of any kind, decision-makers need to look carefully at several issues:
Laying-off workers, even for a short time, severely adversely affects the economy.
The expected length of delay in cases made possible by quarantines is likely to be very short, sometimes lasting not much longer than the quarantines themselves.
We seem to need a very rapid improvement in our ability to treat COVID-19 cases for containment efforts to make sense, if we cannot stamp out the disease completely.
Because of these issues, it is very easy to overdo quarantines and other containment efforts.
In the sections below, I explain some parts of this problem.
[1] The aim of coronavirus quarantines is mostly to slow down the spread of the virus, not to stop its spread.
As a practical matter, it is virtually impossible to stop the spread of the new coronavirus.
In order to completely stop its spread, we would need to separate each person from every other person, as well as from possible animal carriers, for something like a month. In this way, people who are carriers for the disease or actually have the disease would hopefully have time to get over their illnesses. Perhaps airborne viruses would dissipate and viruses on solid surfaces would have time to deteriorate.
This clearly could not work. People would need to be separated from their children and pets. All businesses, including food sales, would have to stop. Electricity would likely stop, especially in areas where storms bring down power lines. No fuel would be available for vehicles of any kind. If a home catches fire, the fire would need to burn until a lack of material to burn stops it. If a baby needs to be delivered, there would be no midwife or hospital services available. If a person happened to have an appendicitis, it would simply need to resolve itself at home, however that worked out.
Bigger groups could in theory be quarantined together, but then the length of time for the quarantine would need to be greatly lengthened, to account for the possibility that one person might catch the disease from someone else in the group. The bigger the group; the longer the chain might continue. A group might be a single family sharing a home; it could also be a group of people in an apartment building that shares a common ventilating system.
[2] An economy is in many ways like a human being or other animal. Its operation cannot be stopped for a month or more, without bringing the economy to an end.
I sometimes write about the economy being a self-organizing networked system that is powered by energy. In physics terms, the name for such a system is a dissipative structure. Human beings are dissipative structures, as are hurricanes and stars, such as the sun.
Human beings cannot stop eating and breathing for a month. They cannot have sleep apnea for an hour at a time, and function afterward.
Economies cannot stop functioning for a month and afterward resume operations at their previous level. Too many people will have lost their jobs; too many businesses will have failed in the meantime. If the closures continue for two or three months, the problem becomes very serious. We are probably kidding ourselves if we think that China can come back to the same level that it was at before the new coronavirus hit.
In a way, keeping an economy operating is as important as preventing deaths from COVID-19. Without food, water and wage-producing jobs (which allow people to buy necessary goods and services), the deaths from the loss of the economy would be far greater than the direct deaths from the coronavirus.
[3] A reasonable guess is that nearly all of us will face multiple exposures to the new coronavirus.
Many people are hoping that this wave of the coronavirus will be stopped by warmer weather, perhaps in May or June. We don’t know whether this will happen or not. If the coronavirus does stop, there is a good chance the same virus, or a close variation of it, will be back again this fall. It is likely to come back in waves later, for at least one more year. In fact, if no vaccine is found, it is possible that it could come back, in various variations, indefinitely. There are many things we simply don’t know with certainty at this time.
Epidemiologists talk about the spread of a virus being stopped at the community immunity level. Harvard epidemiologist Marc Lipsitch originally estimated that 40% to 70% of the world’s population would come down with COVID-19 within the first year. He has revised this and now states that it is plausible that 20% to 60% of the world’s population will catch the disease in that timeframe. He also indicates that if the virus cannot be contained, the only way to get it under control is for 50% of the world’s population to become immune to it.
The big issue with containing the coronavirus is that we cannot really tell who has it and who does not. The tests available for COVID-19 are expensive, so giving the test to everyone, frequently, makes no sense. The tests tend to give a many false negatives, so even when they are given, they don’t necessarily detect people with the disease. There are also many people who seem to spread the disease without symptoms. Without testing everyone, these people will never be found.
We hear limited statements such as “The United States surgeon general said Sunday that he thinks the coronavirus outbreak is being contained in certain areas of the country as cases of the virus rise across the United States.” Unfortunately, containment of the virus in a few parts of the world does not solve the general problem. There are lots and lots of uncontained cases around the world. These uncontained cases will continue to spread, regardless of the steps taken elsewhere.
Furthermore, even when we think the virus is contained, there are likely to be missed cases, especially among people who seem to be well, but who really are carriers. Getting rid of the virus is likely to be a major challenge.
[4] There is an advantage to delaying citizens from catching COVID-19. The delay allows doctors to learn which existing medications can be used to help treat the symptoms of the disease.
There seem to be multiple drugs and multiple therapies that work to some limited extent.
For example, plasma containing antibodies from a person who has already had the illness can be injected into a person with the disease, helping to fight the disease. It is not clear, however, whether such a treatment will protect against future attacks of the virus since the patient is being cured without his own immune system producing adequate antibodies.
Some HIV drugs are being examined to see whether they work well enough for it to make sense to ramp up production of them. The antiviral drug remdesivir by Gilead Sciences also seems to have promise. For these drugs to be useful in fighting COVID-19, production would need to be ramped up greatly.
In theory, there is also a possibility that a vaccine can be brought to market that will get rid of the virus. Our past experience with vaccine-making has not been very good, however. Out of 200+ virus-caused diseases that affect humans, only about 20 have vaccines. These vaccines generally need to be updated frequently, because viruses tend to mutate over time.
With some viruses, such as Dengue Fever, people don’t ever build up adequate immunity to the many disease variations that exist. Instead a person who catches Dengue Fever a second time is likely to be sicker than the first time. Finding a vaccine for such diseases seems to be almost impossible.
Even if we can actually succeed in making a vaccine that works, the expectation seems to be that this will take at least 12 to 18 months. By this time, the world may have experienced multiple waves of COVID-19.
[5] There are multiple questions regarding how well European Countries, Japan and the United States will really be able to treat coronavirus.
There are several issues involved:
(a) Even if medicines are identified, can they be ramped up adequately in the short time available?
(b) China’s exports have dropped significantly. Required medical goods that we normally import from China may not be available. The missing items could be as simple as rubbing alcohol, masks and other protective wear. The missing items could also be antibiotics, antidepressants, and blood pressure medications that are needed for both COVID-19 patients and other patients.
(c) Based on my calculations, the number of hospital beds and ICU beds needed will likely exceed those available (without kicking out other patients) by at least a factor of 10, if the size of the epidemic grows. There will also be a need for more medical staff. Medical staff may be fewer, rather than more, because many of them will be out sick with the virus. Because of these issues, the amount of hospital-based care that can actually be provided to COVID-19 patients is likely to be fairly limited.
(d) One reason for time-shifting of illnesses has been to try to better match illnesses with medical care available. The main benefit I can see is the fact that many health care workers will have contracted the illness in the first wave of the disease, so will be more available to give care in later waves of the disease. Apart from this difference, the system will be badly overwhelmed, regardless of when COVID-19 cases occur.
[6] A major issue, both with COVID-19 illnesses and with quarantines arising out of fear of illness, is wage loss.
If schools and day care centers are closed because of COVID-19 fears, many of the parents will have to take off time from work to care for the children. These parent will likely lose wages.
Wage loss will also be a problem if quarantines are required for people returning from an area that might be affected. For example, immigrant workers in China wanting to return to work in major cities after the New Year’s holiday have been quarantined for 14 days after they return.
Clearly, expenses (such as rent, food and auto payments) will continue, both for the mother of the child who is at home because a child’s school is closed and for the migrant worker who wants to return to a job in the city. Their lack of wages will mean that these people will make fewer discretionary purchases, such as visiting restaurants and making trips to visit relatives. In fact, migrant workers, when faced with a 14 day quarantine, may decide to stay in the countryside. If they don’t earn very much in the best of times, and they are required to go 14 days without pay after they return, there may not be much incentive to return to work.
If I am correct that the illness COVID-19 will strike in several waves, these same people participating in quarantines will have another “opportunity” for wage loss when they actually contract the disease, during one of these later rounds. Unless there is a real reduction in the number of people who ultimately get COVID-19 because of quarantines, a person would expect that the total wage loss would be greater with quarantines than without, because the wage loss occurs twice instead of once.
Furthermore, businesses will suffer financially when their workers are out. With fewer working employees, businesses will likely be able to produce fewer finished goods and services than in the past. At the same time, their fixed expenses (such as mortgage payments, insurance payments, and the cost of heating buildings) will continue. This mismatch is likely to lead to lower profits at two different times: (a) when workers are out because of quarantines and (b) when they are out because they are ill.
[7] We likely can expect a great deal more COVID-19 around the world, including in China and in Italy, in the next two years.
The number of reported COVID-19 cases to date is tiny, compared to the number that is expected based on estimates by epidemiologists. China reports about 81,000 COVID-19 cases to date, while its population is roughly 1.4 billion. If epidemiologists tell us to expect 20% to 60% of a country’s population to be affected by the end of the first year of the epidemic, this would correspond to a range of 280 million to 840 million cases. The difference between reported cases and expected cases is huge. Reported cases to date are less than 0.01% of the population.
We know that China’s reported number of cases is an optimistically low number, but we don’t know how low. Many, many more cases are expected in the year ahead if workers go back to work. In fact, there have been recent reports of a COVID-19 outbreak in Shenzhen and Guangzhou, near Hong Kong. Such an outbreak would adversely affect China’s manufactured exports.
Italy has a similar situation. It is currently reported to have somewhat more than 10,000 cases. Its total population is about 60 million. Thus, its number of cases amounts to about 0.02% of the population. If Epidemiologist Lipsitch is correct regarding the percentage of the population that is ultimately likely to be affected, the number of cases in Italy, too, can be expected to be much higher within the next year. Twenty percent of a population of 60 million would amount to 12 million cases; 60% of the population would amount to 36 million cases.
[8] When decisions about quarantines are made, the expected wage loss when workers lose their jobs needs to be considered as well.
Let’s calculate the amount of wage loss from actually having COVID-19. If workers generally work for 50 weeks a year and are out sick for an average of 2 weeks because of COVID-19, the average worker would lose 4% (=2/50) of his annual wages. If workers are out sick for an average of three weeks, this would increase the loss to 6% (3/50) of the worker’s annual wages.
Of course, not all workers will be affected by the new coronavirus. If we are expecting 20% to 60% of the workers to be out sick during the first year of the that the epidemic cycles through the economy, the expected overall wage loss for the population as a whole would amount to 0.8% (=20% times 4%) to 3.6% (=60% times 6%) of total wages.
Let’s now calculate the wage loss from a quarantine. A week of wage loss during a quarantine of the entire population, while nearly everyone is well, would lead to a wage loss equal to 2% of the population’s total wages. Two weeks of wage loss during quarantine would lead to wage loss equal to 4% of the population’s total wages.
Is it possible to reduce overall wage loss and deaths by using quarantines? This approach works for diseases which can actually be stopped through isolating sick members, but I don’t think it works well at all for COVID-19. Mostly, it provides a time-shifting feature. There are fewer illnesses earlier, but to a very significant extent, this is offset by more illnesses later. This time-shifting feature might be helpful if there really is a substantial improvement in prevention or treatment that is quickly available. For example, if a vaccine that really works can be found quickly, such a vaccine might help prevent some of the illnesses and deaths in 2021 and following years.
If there really isn’t an improvement in preventing the disease, then we get back to the situation where the virus needs to be stopped based on community immunity. According to Lipsitch, to stop the virus based on community immunity, at least 50% of the population would need to become immune. This implies that somewhat more than 50% of the population would need to catch the new coronavirus, because some people would catch the new virus and die, either of COVID-19 or of another diseases.
Let’s suppose that 55% would need to catch the COVID-19 to allow the population immunity to rise to 50%. The virus would likely need to keep cycling around until at least this percentage of the population has caught the disease. This is not much of a decrease from the upper limit of 60% during the first year. This suggests that moving illnesses to a later year may not help much at all with respect to the expected number of illnesses and deaths. Hospitals will be practically equally overwhelmed regardless, unless we can somehow change the typical seasonality of viruses and move some of the winter illnesses to summertime.
If there is no improvement in COVID-19 prevention/treatment during the time-shift of cases created by the quarantine, any quarantine wage loss can be thought of as being simply in addition to wage loss from having the virus itself. Thus, a country that opts for a two week quarantine of all workers (costing 4% of workers’ wages) may be more than doubling the direct wage loss from COVID-19 (equivalent to 0.8% to 3.6% of workers’ wages).
[9] China’s shutdown in response to COVID-19 doesn’t seem to make much rational sense.
It is hard to understand exactly how much China has shut down, but the shutdown has gone on for about six weeks. At this point, it is not clear that China can ever come back to the level it was at previously. Clearly, the combination of wage loss for individuals and profit loss for companies is very high. The long shutdown is likely to lead to widespread debt defaults. With less wages, there is likely to be less demand for goods such as cars and cell phones during 2020.
China was having difficulty before the new coronavirus was discovered to be a problem. Its energy production has slowed greatly, starting about 2012-2013, making it necessary for China to start shifting from a goods-producing nation to a country that is more of a services-producer (Figure 1).
Figure 1. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.
For example, China’s workers now put together iPhones using parts made in other countries, rather than making iPhones from start to finish. This part of the production chain requires relatively little fuel, so it is in some sense more like a service than the manufacturing of parts for the phone.
The rest of the world has been depending upon China to be a major supplier within its supply lines. Perhaps many of these supply lines will be broken indefinitely. Instead of China helping pull the world economy along faster, we may be faced with a situation in which China’s reduced output leads to worldwide economic contraction rather than economic growth.
Without medicines from China, our ability to fight COVID-19 may get worse over time, rather than better. In such a case, it would be better to get the illness now, rather than later.
[10] We need to be examining proposed solutions closely, in the light of the particulars of the new coronavirus, rather than simply assuming that fighting COVID-19 to the death is appropriate.
The instructions we hear today seem to suggest using disinfectants everywhere, to try to prevent COVID-19. This is yet another way to try to push off infections caused by the coronavirus into the future. We know, however, that there are good microbes as well as bad ones. The ecosystem requires a balance of microbes. Dumping disinfectants everywhere has its downside, as well as the possibility of an upside of killing the current round of coronaviruses. In fact, to the extent that the virus is airborne, the disinfectants may not really be very helpful in wiping out COVID-19.
It is very easy to believe that if some diseases can be subdued by quarantines, the same approach will work everywhere. This really isn’t true. We need to be examining the current situation closely, based on whatever information is available, before decisions are made regarding how to deal with the COVID-19 outbreak. Perhaps any quarantines used need to be small and targeted.
We also need to be looking for new approaches for fighting COVID-19. One approach that is not being used significantly to date is trying to strengthen people’s own immune systems. Such an approach might help people’s own immune system to fight off the disease, thereby lowering death rates. Nutrition experts recommend supplementing diets with Vitamins A, C, E, antioxidants and selenium. Other experts say zinc, Vitamin D and elderberry may be helpful. Staying away from cold temperatures also seems to be important. Drinking plenty of water after coming down with the disease may be beneficial as well. If we can help people’s own bodies fight the disease, the burden on the medical system will be lower.
Brawls Erupt As Americans Panic Hoard Supplies Amid Pandemic
So, this week, panic hoarding at Costco stores and other big-box retailers got a little more serious when it started on Thursday. Mostly because confirmed Covid-19 cases and deaths are surging across the country, as many fear, increasing coronavirus test kits made available to the public would reveal the true extent of the outbreak. Mass gatherings in many states are starting to be limited, education systems are closing down, and the federal government is now starting to enforce social distancing policies for all citizens, this all suggests, that an Italy-style lockdown could be on the horizon.
Anxieties are increasing this week as brawls have been reported at several big-box retailers. It was unclear what customers were fighting about.
Here’s footage on Thursday of a fight between two customers at a Brooklyn Costco.
Local police at a Costco in Lynnwood, Washington, were keeping order on Saturday as hundreds of customers wrapped around the building, due to new social distancing policies that only allowed a certain amount of people in the store at one given time.
Went to my local @Costco in Lynnwood, WA and saw this. Local police are present and crowd control policies in place. Long line of people and limiting entry to make sure social distancing is followed. Apparently yesterday was a nightmare. pic.twitter.com/D44ZpChdQy
This is not like a hurricane in a 3rd world country where delivery routes are cut off for months.
The longest you’d be quarantined would be 2 weeks — you don’t need to buy out Walmart & Costco to survive in your home for two weeks pic.twitter.com/6AEizbJYhC
Covid-19 Impacting US Defense Readiness As Pentagon Announces “Minimal Staffing”
The Pentagon on Saturday afternoon said it has moved toward “minimal staffing” over coronavirus fears a day after President Trump formally declared a national emergency. CBS national security correspondent Cami McCormick broke the news, describing:
Defense Dept. officials have raised alert level at the Pentagon to Bravo. There will now be “minimal staffing” at the Pentagon due to coronavirus.
Crucially this alert level refers tostaffing levels and virus precautionary measures only and is not a reference to DEFCON, which is the national defense readiness condition used to gauge military threats.
AFP via Getty
However, as we reported earlier there’s growing concern that the Covid-19 pandemic could significantly impact US defense readiness.
Indeed it appears this is already occurring. Pentagon correspondent for Al Monitor Jack Detsch reports there’s growing confirmed cases among the military and DoD ranks:
JUST IN – 10 service members have tested positive for Coronavirus as of this morning, per sr defense officials, including 1 who has been hospitalized.
1 civilian, 8 DoD dependents, 2 DoD contractors have also tested positive for COVID-19.
CBS’ McCormick additionally reported based on Pentagon officials that “in the next couple of days, the Pentagon may limit the exposure to take out food…tables, buffet lines, etc. inside the Pentagon” over virus outbreak fears.
Approximately 23,000 military and civilian DoD employees work at the Pentagon daily, which includes offices of the top generals among combined branches and the Secretary of Defense. The building famously has five ring corridors per floor which make for a total of 17.5 miles of hallways with endless offices lining each side.
How the Corona virus is going to effect military readiness:
▪️Not enough beds, not enough mil hospitals
▪️Good news, ave soldier is young and in good health
▪️Virus could hit us multiple times like Spanish flu
▪️Could knock units out of commission for wkshttps://t.co/U6Q8NBIHWo
This comes on the heels of late Friday the Department of Defense restricting all US troop movement in the United States to the “local area” of their assigned bases effective Monday.
“This restriction will halt all domestic travel, including Permanent Change of Station, and Temporary Duty,” said a press statement released with the memo as reported by Defense One. “Additionally, service members will be authorized local leave only.”
The new directives come among broader national efforts to slow the spread of Covid-19 which included Trump’s national ‘State of Emergency’ declared Friday, but at a moment of concern that the virus could devastate densely-packed military barracks and severely impact US defense readiness.
The novel virus “could knock units out of commission for weeks,” writes Army Special Forces veteran and national security journalist Jack Murphy. However, he also adds: “The military is unlikely to be hit by COVID-19 as hard as the general population because the virus particularly affects the sick and elderly according to the Center for Disease Control.”
Currently, some National Guard units have begun deploying in ‘hot zones’ like a community in New Rochelle, in order to assist with quarantines and food and medical supplies delivery.
“No State Is Prepared” – Mapping Where Hospitals Will Run Out Of Beds First If Virus Cases Spike
A USA Today analysis of American Hospital Association (AHA) hospital bed data shows that if confirmed Covid-19 cases and deaths follow similar growth curves as in China, Italy, and Iran, there could be six patients for every existing hospital bed. This means that no hospital system in the US is prepared for a pandemic.
“Unless we are able to implement dramatic isolation measures like some places in China, we’ll be presented with overwhelming numbers of coronavirus patients – two to 10 times as we see at peak influenza times,” said Dr. James Lawler, an infectious disease researcher at the University of Nebraska Medical Center.
Lawler warned that “no hospital has the current capacity to absorb” a massive surge of Covid-19 infections.
USA Today estimates that 23.8 million Americans could be infected. That number is based on an infection rate of 7.4%, similar to the common flu. Some experts say the infection rate could be much higher.
The Johns Hopkins Center for Health Security says infections could hit 38 million, including 9.6 million who will need to be hospitalized, and about 33% of whom would need ICU-level care.
With an infection rate unclear, USA Today’s analysis used that of a mild flu season. It said if everyone in the US who gets infected is hospitalized, that would be 4.7 million patients, which is about 6 per every hospital bed.
The fast-spreading virus could overwhelm the US’ healthcare system if confirmed cases and deaths surge in a 2-3-week period, as it did in China, Italy, and Iran. Currently, Italy’s health care system has been crippled with the lack of hospital beds and respirators. The result of not providing ICU-level treatment to the most critical patients has resulted in the country’s extraordinarily high 6.8% mortality rate.
The doomsday scenario that could play out in the US is an overburden healthcare system, where the most vulnerable cannot get ICU-level treatment, leading to a mortality rate comparable to Italy.
“When hospitals become much more crowded, literally stretched beyond capacity, if I have a heart attack, will I be able to get care? If I have an auto accident, will I get care? How do we triage that?” said Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. “We can’t approach this like I approach a game of checkers with my 10-year-old grandson,” he added. “We have to approach this like a chess master thinking 10 to 15 moves down the board.”
Many hospital systems across the US aren’t designed to handle a mass influx of patients from a viral outbreak, indicating that no state is ready for a pandemic.
During the next outbreak, USA Today notes that many West Coast states would experience 20-24 seriously ill patients per available hospital bed. The odds of getting a bed are significantly higher in Rocky Mountain and Plains states. As for the East Coast, sick patients in Maryland and Connecticut would have the most difficulty in obtaining a bed.
When it comes to the rest of the world, the US ranks very low in the number of hospital beds per 1000.
As for ICU beds per 100,000, the US ranks the highest among the global community.
USA Today’s analysis assumes confirmed cases would happen over time, but if observing data from China, Italy, and Iran, Covid-19 outbreaks tend to strike hard and quick. Considering confirmed cases in the US are a little over 2,500 on Saturday afternoon, containment measures for all major metro areas have been missed by over a month. It’s only now preventive strategies to mitigate community spreading are being implemented, and even then, most people are ignoring the warnings to conduct social distancing, which all means cases are likely to increase in the coming weeks.
“Whenever you have an outbreak that you can start seeing community spread … when you have enough of that, then it becomes a situation where you’re not going to be able to effectively and efficiently contain it,” Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told a House committee Wednesday. “Bottom line, it’s going to get worse,” Fauci said.
How much worse is the billion-dollar question. As far as what we can see, the peak crisis has yet to arrive. Containment windows have been missed across major metros, implying that hospital systems could begin experiencing an influx of cases in the weeks ahead. If hospitals get overwhelmed, the US could be the next Italy with high mortality rates.
A global pandemic of the coronavirus is hitting nations the world over, and facing a challenge unprecedented in recent history, officials are falling back on wartime tactics, and particularly rhetoric, with promises of grand emergency measures to try to keep things under control.
Emergency measures are mostly in the form of travel control, banning flights to and from certain places. There have been talks of mobilizing militaries, in practice efforts are centered on enforcing quarantines that were already declared. Deeper measures as yet don’t seem to be happening.
Via ABC News
France’s President Macron typified the rhetoric of the hour, saying that national greatness meant “women and men able to put the collective interest above all,” while encouraging solidarity and fraternity.
Today, National Guard soldiers deployed inside New Rochelle’s coronavirus containment zone will receive their operations order, issuing further instructors on how to proceed in the coming days.
Currently, National Guard Military Police and other support units are inside the containment zone providing food and assisting with cleaning public areas inside the zone.
On Tuesday Gov. Andrew Cuomo of New York announced a one-mile containment zone around the Young Israel of New Rochelle synagogue in New Rochelle where there has been a cluster of COVID-19 cases. — Connecting Vets
Those operations, a multinational exercise, was meant to be the biggest US involvement there in decades. Officials are now citing “health protection” as a reason to dial back involvement.
For the US, the military isn’t exactly in a position to lead by example. In Afghanistan, the Pentagon is conceding that there are US troops with symptoms, but none have been tested. The reason why is simple: the Pentagon doesn’t have tests to administer.
In light of the World Health Organization (WHO) finally designating the Covid-19 outbreak seen in 113 countries and territories around the world as a pandemic, the debate this week of “social distancing” has erupted across social media and on Western mainstream media outlets..
The idea is that by canceling schools and large public gatherings, coupled with workers working online from home, there will be a reduction of coronavirus community spread, reducing the peak in the number of cases and put less stress on the limited resources of the medical community. This is illustrated by the figures below. You notice the number of cases doesn’t change (the area under the curve).
But, it has another issue: it greatly extends the period in which society is affected by the disease.
However, NSA whistleblower Edward Snowden tweeted Wednesday that “Social distancing is underrated,” as it appears this life-saving measure could be implemented across the US as confirmed virus cases and deaths soar.
Experts at the Centers for Disease Control and Prevention (CDC) have suggested social distancing could be a very effective way to limit exposure to the fast-spreading virus.
The CDC’s recommendation for what social distancing involves is to avoid mass gatherings, stay out of heavily-trafficked areas, and maintain a safe distance from one another to limit transmission. This is different than quarantine or isolation that completely bans people from public places. Social distancing is more of a behavioral practice to limit transmission probabilities while out in public, rather than a location constraint seen under a quarantine.
“Social distancing is a very general term, so there are a bunch of different types of measures that can fall under it,” Dr. Susy Hota, an Infectious Diseases Specialist and Hospital Epidemiologist at the University of Toronto’s research hospital University Health Network told the Time.
Hota said people choosing to work at home instead of the office would be considered social distancing. “All of these measures are trying to achieve the same thing… but [with] slightly different tactics and slightly different nuances.”
She said social distancing does have its problems, including when traveling on public transportation, accessing public services like post offices, going to the grocery store, and even attending worship service. Though even then, if social distancing and good hygiene practices are implemented, they can easily cut down their probabilities of contracting the airborne virus without too much disruption in life.
“Those are behaviors we all have to start practicing now in parts [of the world] where we don’t have to enact additional measures,” she said.
As government officials urge Americans this week to exercise social distancing measures to mitigate virus spread. The search interest on the internet for “social distancing” has erupted:
Max Brooks, the author of a zombie apocalypse book, argued in The New York Times that the “best way to prevent ‘community spread’ is to spread out the community. That means keeping people apart.”
In Opinion
Max Brooks writes, “The best way to prevent ‘community spread’ is to spread out the community. That means keeping people apart.”https://t.co/wsOyrCLniC
KING 5 News Seattle’s Michelle Li tweeted that the best way to avoid spreading is to keep the distance from everyone.
Introverts are finally getting their moment. It’s called #socialdistancing … and here’s what it is in a nutshell.
– Reduce face-to-face contact
– Wave instead of shake hands
– Give 6 feet of space from others
– Don’t go out in public
– Avoid medical settings pic.twitter.com/GlwdiDy39s
Snowden’s support for social distancing is strongly supported by evidence from the Spanish Flu Epidemic. A little over one hundred years ago, during the Spanish flu, Philadelphia held a massive parade across the city – ignoring warnings from health officials of a virus outbreak. Three days later, thousands were infected, and in a few short days, 4,500 were dead. It was a different story in St. Louis, just 900 miles away, where local officials listened to health experts and told people to keep their distance from one another and avoid public places.
Which looks eerily similar to the current virus spread with China limited (full social distancing) vs the Rest of the World (which has been slow to enact such authoritarian measures).
However, there’s a problem developing with today’s coronavirus outbreak in the US – as per Dr. Michael Osterholm, the director of the Center for Infectious Disease Research and Policy (CIDRAP) at the University of Minnesota, who warned on CNBC earlier this week, that the window of suppressing the virus in hardest-hit areas, such as King County, Washington; Santa Clara, California; Los Angeles; and the Tri-state area, has likely passed, suggesting that maybe social distancing isn’t going to be enough – but rather lockdowns are imminent.
We just witnessed a global collapse in asset prices the likes we haven’t seen before. Not even in 2008 or 2000. All these prior beginnings of bear markets happened over time, relatively slowly at first, then accelerating to the downside.
This collapse here has come from some of the historically most stretched valuations ever setting the stage for the biggest bull trap ever. The coronavirus that no one could have predicted is brutally punishing investors that complacently bought into the multiple expansion story that was sold to them by Wall Street. Technical signals that outlined trouble way in advance were ignored while the Big Short 2 was already calling for a massive explosion in $VIX way before anybody ever heard of corona virus.
Worse, there is zero visibility going forward as nobody knows how to price in collapsing revenues and earnings amid entire countries shutting down virtually all public gatherings and activities. Denmark just shut down all of its borders on Friday, flight cancellations everywhere, the planet is literally shutting down in unprecedented fashion.
“We have to get used to the fact that we are going into a global recession. Hopefully it will be short lived, but I can’t see how we will avoid a global recession,” says @elerianm. pic.twitter.com/O1rttbx331
The damage is not theoretical, it’s real as we just saw the fasted collapse in asset prices in history:
And it’s global, deep and pervasive.
$FTSE collapse to lows from 8 years ago:
$DAX collapsed from all time highs to the lows from 2016:
The US broader $NYSE dropped to below the US election lows of 2016:
Absolute carnage to investor portfolios who can only be assumed to have caught by total surprise by the severity of the 2020 market crash. The buy the dip mentality so pervasive over the last 11 years have come to a sudden end: Death by impact.
The damage is pervasive and structurally impacting. Trapped longs looking for rescue and salvation with confidence taking a major hit. And the only hope now are technically massive oversold readings, a Fed desperate trying to regain control and a desperate search for signs that the coronavirus situation can be brought under control.
Central bank efforts over the past 2 weeks have been a miserable failure and emergency rate cuts have not been able to stem the tide of system selling and liquidations. Until Friday that is perhaps. The Fed resorted to unprecedented and some may say pathetically desperate efforts to stem the bleeding by announcing $500B repos including a $1 trillion repo on Friday.
To put these numbers in perspective:
Today’s Fed liquidity injections: The same size as the annual US military budget.
Tomorrow’s Fed liquidity injections: The same size as the annual US military budget.
There is no precedence for the situation we are facing now. An epic battle of humanity trying to combat a new virus for which there is no cure and still no all clear signal, a global asset price collapse at the end of an aging and highly indebted business cycle and central banks with limited ammunition desperately trying to regain and maintain control.
And this week the Fed is on tap to prove it can still reassert control. Already now expected to cut rates to zero large scale asset purchases and a relaunch of full QE is perhaps only a question of when and not if. Given the current state of markets perhaps the Fed can’t afford to wait. So this coming week is key for markets and a Fed whose credibility is already on the ropes.
It’s a very difficult environment for investors and traders as the action is whipsawing more intensely than we’ve ever seen before.
But technicals help us to guide us through the challenge. Even Friday’s record bounce rally was in the technical picture.
What are the risks of a major bear market yet to come and what are the rally opportunities?
For our analysis please see this weekend’s market review video:
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Man Walks Out Of ‘Quarantine Motel’ & Goes Shopping, Hops On Public Bus
The pattern in many major cities hard-hit by coronavirus has been to utilize hotels as quarantine centers as local health facilities become overwhelmed. And yet in some instances especially in the West, there’s ambiguity surrounding quarantine of confirmed or suspected cases as legally ‘mandatory’ or merely ‘urged’ and strongly suggested.
Though nearly unprecedented in recent American history, ‘motel quarantine’ is fast becoming a thing in places like Washington State and California, the latter witnessing Gov. Gavin Newsom issuing an executive order Thursdayallowing some city authorities to take over hotels and motels for medical use, including in places like Sacramento and the San Francisco area. Such methods are being used especially for returning cruise ship passengers with potential exposure.
But in an explosive and unusual story which is likely to become a more common occurrence as ‘motel quarantine’ grows and as the line between civil liberties vs. health authorities’ mandate remains blurred, Bloomberg details that a man walked straight out of coronavirus quarantine near the hardest hit area near Seattle and onto a public bus.
Security guard walks in front of the former EconoLodge in Kent. Image source: Seattle Times
“In an incident sure to stir debate around the Seattle-area’s motel for isolating people who might have the coronavirus, one of its first tenants walked out, despite a security guard’s attempts to stop him,” the Bloomberg report begins.
“The man arrived Thursday while awaiting test results, according to a statement from King County, which recently bought the site in a suburb south of Seattle to ease the burden on local hospitals.”
The following morning the man was seen crossing the street to browse a local convenience store where he allegedly shoplifted.
Security camera screengrab provided from local police of quarantined man exiting the hotel premises, via The Seattle Times.
He then boarded a public bus, which was immediately after taken out of service when authorities learned of the situation.
According to The Seattle Times, the man’s test later came back negative, but not before causing a local panic:
By Friday evening, the person’s test results had come back negative, but not before raising questions about how the county planned to address staffing and security at quarantine facilities as more people become sick.
The person had been experiencing homelessness and was placed at the motel Thursday night.
The incident underscored what will be a staggering challenge ahead of public officials as the virus continues to spread: how to quarantine “hundreds or thousands” of people who become sick in coming months and aren’t able to stay in their own homes, or don’t have homes in which to stay.
The Econo Lodge-turned-coronavirus-quarantine site on Central Avenue North in Kent, near Seattle:
Via Kent Reporter
The bizarre episode took place at an 85-room Econo Lodge in Kent, located within the sprawling Seattle–Tacoma metropolitan area.
“The fears that we have stated and the concerns we had from the beginning when we knew this facility was going to be put in Kent at that motel have all come true,” said Kent Mayor Dana Ralph. “The things we predicted would happen have happened.”
The motel had recently been purchased by the county and repurposed as a quarantine site – a deeply controversial moved which has drawn the ire of local residents, who fear more such “breaches” involving quarantined and possibly infected individuals.
