Why is the Wuhan Virus Such a Threat?

'A friend's family is in Wuhan, they are all at home 4/5 people in the family are sick, just the kid is not sick and they believe one family member is on a deathbed (45-year-old male) the rest just have bad flu symptoms. These people are definitely not in the official statistics and are undocumented cases so I imagine the numbers are much much higher.'

UPDATE: Two Thirds of Migrant Workers Have Not Returned to Work

Meanwhile, the SCMP reports that over 200 million migrant workers are unable to return to work

The government 'expects' 120 million workers to be back on the job by the end of February and that the remainder will return 'in March' when the virus 'is brought under control'

2. Entire cities in China are in total lockdown with almost nobody on the streets. Videos are circulating showing authorities with weapons enforcing the quarantine.

3. There is panic buying in the shops in China (and to some extent Hong Kong).

4. Official numbers indicate 75,000 infections with 14,000 recovered. The hospitals obviously still have no space.

5. The actual number of infections is surely many times higher than the official count. Scientists at the World Health Organization have suggested we are seeing 'only the tip of the iceberg'

6. SARS did not abate for over 6 months and it was never out of control in China.

It's easy to say (as the Chinese government is) that the workers will report to the factories soon. The virus will magically go away. And of course, these workers need money so they are going to return and start making widgets.

But hold on a second. Bloomberg reported yesterday that thousands of expats are either fleeing Hong Kong or have shipped the kids out of the city. Hong Kong doesn't even have 100 infections. And Hong Kong is not in complete lockdown with armed guards controlling our movements.

Yet panic and fear are in the air....

Put yourselves in the shoes of a migrant factory employee in China. Let's say you work in the auto industry in Wuhan ('the Detroit of China') at a semi-skilled job making components for Land Rover. You left for your village to spend Chinese New Year with your family and friends.

Then you read about this terrible virus that is devastating Wuhan. How would you feel? What would you do?

Struggling with that? Just imagine that you returned to your 'village' for Chinese New Year.

You flew to London, or New York, or Toronto, to spend a week or two with your family and friends. Now substitute Hong Kong with Wuhan. You work in Wuhan.

How would you feel? What would you do?

If the Chinese government assured you that it was safe to return to your office even though there are hundreds of other workers there and one might show up asymptomatic and infect you (would you not be thinking 'Diamond Princess... 621 infections’).

Would you be willing to return to a city that is in complete lockdown? Where you can go to and from the factory and the grocery store, but otherwise are confined to your apartment?

Yes, you need that salary (and that bonus), but is it worth risking your life for?

Now we are in the shoes of a migrant worker in China.

Clearly hundreds of millions of them are doing exactly what you or I would do. They are frightened of this virus and they are unwilling to return to their places of work.

They know that if they return to their factories, and contract the virus, that the hospitals are full. They are unlikely to receive medical care.

They have no interest in putting their lives at risk to produce widgets for the world.

Land Rover's CEO in the UK says his assembly plants will stop production in two weeks’ time due to a shortage of components. If it gets to this Land Rover will lose many millions every single day. Think about all the other industries that will be in the same boat.

We read about this and sanguinely conclude, nothing to worry about, this is too important. The workers will ride to the rescue and the supply chain will flow again.

Stepping back into that Wuhan workers shoes.

Do you think he gives a rat's ass about Land Rover?

If you worked as an executive for Land Rover in Wuhan, would you be thinking 'yep gotta rush back to that hell hole where I might get infected and die, because Land Rover needs those bloody door handles or the assembly lines in the UK stop'

Or might you decide to hold tight, wait for this virus to abate, and then return to the Land Rover office.

This appears to be what the Wuhan and 200 million other factory workers are doing. They are remaining in their villages with their families and waiting.

And meanwhile, the Land Rover CEO is watching the inventory numbers on his computer screen each day as they head towards zero.

“Reading about it in the news, I knew it was going to be bad, but we deal with the flu every year so I was thinking: Well, it’s probably not that much worse than the flu. But seeing patients with COVID-19 completely changed my perspective, and it’s a lot more frightening.”

“I have patients in their early 40s and, yeah, I was kind of shocked. I’m seeing people who look relatively healthy with a minimal health history, and they are completely wiped out, like they’ve been hit by a truck. This is knocking out what should be perfectly fit, healthy people. Patients will be on minimal support, on a little bit of oxygen, and then all of a sudden, they go into complete respiratory arrest, shut down and can’t breathe at all.”

On Thursday, the Ruby Princess cruise ship docked in Sydney with dozens of undiagnosed coronavirus cases onboard.

Almost 2,700 passengers - some coughing and spluttering - were allowed to leave the ship at Sydney Harbour, catching trains, buses and even overseas flights to get home.

More than 130 people from the cruise have now tested positive, making it the biggest single source of infections in Australia. One passenger died in hospital on Tuesday.

California age range for coronavirus patients:

• Age 0-17: 45 cases
• Age 18-49: 1,906 cases
• Age 50-64: 967 cases
• Age 65 and older: 847 cases
• Unknown: 36 cases

• 700+ NJ police officers test positive 
• Total COVID-19 cases tops 700k
• US death toll passes 2k
• Global death toll tops 660k
• Ireland death toll hits 46
• UK deputy chief medical officer warns life won't be normal for 6 months
• Italy reports 2nd day of declines
• Texas, RI, Florida & others bar people traveling from NY and surrounding area
• France reports another 300 deaths
• Medical evacuation flight to Tokyo crashes in Manila
• Dutch reject Chinese made masks
• Spanish politicians criticized for traveling to vacation villas
• Navarro suggests Chinese may have exposed US officials to virus
• Modi asks for "forgiveness" from India's poor
• Syria, Jordan report first deaths
• Louisiana needs more federal help or it will be quickly overrun
• Russia closes borders to foreigners Monday
• Does China control the WHO? Video

“With their populations at risk, their public finances stretched, and financial markets in turmoil, many emerging market states and developing countries face a huge challenge. Will they have the resources to ride out the challenge? And if not, where will they look for outside assistance in an increasingly divided and multipolar world in which the United States, the European Union, and China have all been through an unprecedented shutdown?

“At the head of the list of vulnerable countries is South Africa… In Brazil… the currency was reeling even before Bolsonaro decided to discard any strategic approach to the virus. Chile, Thailand and Turkey have all been knocked back. Argentina’s much-needed debt restructuring has been blown off course.

“India’s share market is plunging, its exchange rate has slumped and its banks are under pressure.

“The shock has delivered a blow not just to sharemarkets and government bonds but also to commodities… Think of desperately poor Nigeria; think of fragile Algeria, where oil and gas account for 85 per cent of export revenue.”

You say ‘we don’t know a lot about masks’   We are not talking about what’s on the back side of Uranus. This is not high exactly rocket science.  Yet ‘we don’t know????”

Oooooh the masks are so mysterious --- we think they might me magical..... but we are not sure….. they are made of this thing called... cloth..... and they fit around your face.... and we are not sure what they do but bank robbers wear masks so they must serve some purpose....

We are studying that phenomenon alongside the magic masks.... for now though we have not determined if masks are of any use against viruses --- we are not even sure they would help if you wanted to rob the 711 --- but we are working on it’

Misguided lockdowns have destroyed the global economy and the impact is likely to last for years. The fallacy of the “lives or the economy” argument is evident now that we see that countries like Taiwan, South Korea, Austria, Sweden or Holland have been able to preserve the business fabric and the economy while doing a much better job managing the pandemic than countries with severe lockdowns.

One of the most alarming facts about this crisis is the pace at which bankruptcies are rising. Despite an $11 trillion liquidity injection and government aid in 2020, stocks and bonds at all-time highs and sovereign as well as corporate yields at all-time lows, companies are going bust at the fastest pace since the Great Depression.

Trillions of liquidity are giving investors and governments a false sense of security because yields are low and valuations are high, but it is a mirage driven by central bank purchases that cannot disguise how quickly companies are entering into long-term solvency issues.

Liquidity only disguises risk, it does not resolve solvency issues driven by collapsing cash flows while costs remain elevated.

According to the FT, large US corporate bankruptcy filings are now running at a record pace and are set to surpass levels reached during the financial crisis in 2009. As of August 17, a record 45 companies each with assets of more than $1bn have filed for Chapter 11 bankruptcy.

How could this happen? Since the 2008 crisis all policy actions have been aimed at keeping sovereign bond yields low, bailing out bloated government spending and deficits and the massive liquidity injections have benefitted the large quoted companies that have used the money to shield their valuations through buy-backs and cheap debt.

Cheap money and massive bailouts have planted the seeds of a solvency crisis that was triggered by the irresponsible decision of some governments of shutting down entire economies.

Bailing out zombie firms will only make things worse, and new lockdowns could be lethal. The solution is what no government wants to do because it does not grab large headlines or give the impression that politicians are saving the world:

More demand-side policies, pointless stimulus plans driven at building anything at any cost, and more liquidity injections will only make things worse and drive the economy to a stagflation crisis where the next problem will be to enter into a financial crisis as bankruptcies soar and banks’ asset valuations fall as non-performing loans balloon despite massive central bank action.

Governments will prefer to go down the Japan route: More debt, more bailouts and massive government spending. However, that will only lead to stagnation and perpetuating imbalances that cannot be hidden when the mistakes of Japan are implemented by the eurozone, China and the United States.

To end the zombie firm problem and the risk of even more bailouts we need more open market, less red tape, and more flexible re-structuring mechanisms. Anything else will simply deliver stagnation.