Notes
- Lead image from NYT Coronavirus Map: Tracking the Spread of the Outbreak
- Johns Hopkins Live Updates
Current Confirmed Case From Live Updates
Mish Question
@michaelxpettis are you able to comment on the coronavirus?
Many would appreciate your take.
— Mike “Mish” Shedlock (@MishGEA) January 30, 2020
Pettis Nine Tweet Reply – Emphasis Mine
- I’m not sure there’s a whole lot I can say that is especially new, Mish. There’s a lot of fear everywhere, and Beijing streets and shops are almost empty. People still buy things online – for example my students and musician friends are overdosing on games and streaming, and…
- …one well-known musician told me last night that he did an online DJ set that attracted tens of thousands – but they buy very little that requires being near other people. What is worse, because factories will be closed, a lot of small business owners and workers, especially…
- ..at the bottom, will have sharply reduced income for the year, which of course means less consumption. It is hard to imagine that all of this won’t have a significant impact on consumption growth in the first and perhaps second quarters (depending on when it starts to…
- …subside). Some consumption might just be postponed, but some of it will be permanently lost, including much of what should have been spent during this very important holiday season (for example, this is the main time to release blockbuster movies, but all the theaters are…
- …closed). Also if workers are unable to earn wages for a few weeks longer than expected, that’s also permanently lost consumption. The more interesting question to me is whether all this will have much impact ultimately on the 2020 growth target of “around 6%”, which will…
- …be formally announced in early March. I suspect it won’t, at most driving it closer to 5.6% than 6.0%. If that’s the case, the economic impact of the coronavirus will be to increase debt even more than expected, as Beijing accelerates later in the year to make up for the…
- …decline in the first and second quarters. It had already decided in Q4 2019 to push forward any and every infrastructure project it could think of, but now it will simply have to find more projects. The point is that while the coronavirus will certainly have an adverse…
- …impact on “real” economic growth, it will probably have very little impact on aggregate economic activity for the year, which is just one more reason to reject an input measure as measuring anything useful. The main place to see evidence of the coronavirus impact is in the…
- …lower consumption share of GDP and the higher credit growth. Finally there are also likely to be interesting political implications, but obviously that’s not easy to write about.
To follow his insights, please see China Financial Markets
Most of what I know about trade and trade impacts I learned from Michael.
Thanks Michael!
Mike “Mish” Shedlock
I’m suspecting this will be the current cycle’s black swan
By the end of Febr, untold millions in China will be sick. The malls will be empty, factorys empty– if this goes on into April or May, how will people and companies pay their rent and bills ? You might have a breakdown of the supply chain, hamstringing production in large industries. This could be really, really bad for China
So what does this do to all the promised Chinese purchases promised by Trump in the new trade deal. If demand drops, all those billions in sales may not happen and farmers could be unhappy.
Those billions were not happening anyway
“The more interesting question to me is whether all this will have much impact ultimately on the 2020 growth target of “around 6%”, which will…”
I had a chuckle. The 6% is cast in stone, just like the 2% officially approved inflation. You don’t allow a Yellowstone eruption disrupt the plan.
Hope I’m wrong, but I have this growing sense that nobody in government outside China is taking this seriously.
The public trough, here and Europe, is full of successful rent seekers now diverting over $100 Billion annually into the AGW boondoggle, yet we still don’t have basic, simple tools like infrared face scanners at international airport boarding gates to determine if people boarding flights have a fever.
The Chinese government’s crisis management skills are not the only problem here. I’d frankly rather take my chances with their system of meritocracy promotion in government than one producing the likes of Bernie Sanders when it comes to crisis management.
There are no votes in it, resulting in no political will to deal with it before people are falling dead in the street in numbers too big to ignore, in Wuhan this time.
Uh, from whence comes the: Meritocracy Promotion?
Oh they’re worried they just don’t know what to do. Shut everything down and watch everything flush down the drain resulting in who knows what kind of situation ‘or’ rolling the dice and hoping this virus peters out and back on track with nwo bs.
Temperature readings at airports will catch a few sick people, not all with coronavirus, but they are worse than useless for catching people who have it and are infectious. The time between catching it and getting a fever means that you can be spreading it for days before you know you are sick. Those pictures of people being scanned are clickbate and nothing more. They may lend a false sense of security for a while, but they will do pretty much nothing at all to slow the spread of the disease.
I’m well aware of the fact that this particular bug seems better adapted than most to avoid easy, early detection with one simple tool, but for decades now, I’ve watched people boarding planes hacking and sneezing and wondered why airlines don’t make cheap N95 masks available at check in for those that want them, or REQUIRE those running an obvious fever to wear them before exposing me to hours of whatever they’re carrying onto the confined aluminum tube with me.
There is no Chinese government; it is merely a façade for the CCP. Also incorrect on Chinese Communist Party being a meritocracy. Xi Jinping was the son of a powerful and well connected father who became even more powerful after the rise of Deng Xiaoping. If you start at the bottom of the CCP, then you will remain there unless you are totally ruthless and completely devoted to the CCP and its elite.
Virus is rapidly spreading, they have to killed,shot to the brain or through the heart,that’s to only way to stop them once they turn.
If that’s true, I hope I get the chance to survive and stake a few people that I won’t mention.
Items 6 and 7 are exactly the same fyi
That explains why I counted 9 and came up with 10 – Thanks
This could be a crisis in line with the 1919 influenza that killed more than 50 million and people are concerned about the economic impact? Sums up the morals of our society perfectly.
Exactly my thoughts. People are dying and will die, and all I seem to hear is how it will affect economies and stock markets. Terrible.
Well, this is a blog that purports to discuss global economics. Also, stocks are at all time highs. People are nervous they will become sick and broke. (I mean this comment seriously. My use of italics earlier seemed to obscure the point I was trying to make. This is a clarification for anyone who might have thought I was being sarcastic.)
Yesterday’s headlines were actually suggesting the Fed “inoculate” the market through monetary policy. That idea seems pretty misguided to me, but no sooner would I say that then the Fed would announce they are directly buying all assets with newly created money, regardless of the prospects for economic activity while people recover from what might be a pandemic, so what do I know? (Again, I mean this comment seriously. I have trouble predicting what the Fed may do to keep asset prices rising, and in the event of serious adverse economic consequences from a pandemic, I would not be entirely shocked if they announced some sort of “asset price stabilization” money printing program if a pandemic looked like it would threaten the banks.)
Obviously, I want the people who are sick to recover and I do not want my own family to get sick. Those are my primary concerns during this time. (Here I am making the point that Carl_R made below, which is that I think the economic impacts of this outbreak are very important and I am also focused on people’s health and well-being.)
Yes, this is an economics site, so it’s to be expected that the discussion is about the economic impact of events, both good and bad. That’s doesn’t mean that we don’t take the pandemic seriously. I did, for example, buy a box of n95 masks, just in case, and I already have gloves. I even bought some elderberry syrup, though I’m skeptical that it will help. Other than that, what is there to do but watch and be aware?
Note also that watching the economics also tells us about the risk. The market is the embodiment of all information about world events. The gap down reflected concern. The subsequent rise indicated that the market wasn’t overly concerned. The resumption of the negative trend tells us of growing worldwide concern. In the future, the market will continue to tell us how serious the pandemic is.
So yes, on an economics site, we view world events with an eye to how the events will affect the economy, but also, what the markets are telling us about the events. The time will come, in the future, when those not affected can do things to help those who are affected, but we aren’t there yet. What you won’t find is anyone rooting for the crisis to worsen. We watch and try to be aware of the events.
“That’s doesn’t mean that we don’t take the pandemic seriously.”
I am not sure what I wrote that gave you the idea I think people on this blog do not take the pandemic seriously. Au contraire, I think Mish and many of the comments on this site have a reasonable point of view.
*EDIT:@Carl_R – I edited my post above to hopefully make the meaning of it more clear. Thanks for pointing out that my intention was being misread.
Eh…now it appears somehow original comment was deleted. Oh well.*
My post was in response to you because I was supporting what you said. As for the OP of this comment, I wonder what he would like to see discussed here?
“The market is the embodiment of all information about world events.”
How quaint.
I’d like to see a reasoned argument, for how a game; 1) effectively limited to the small percentage of the population who is collecting welfare, 2) concerned with handicapping the size of these guys’ next welfare check; can somehow ever be “the embodiment of all information about world events.”
Progressive fascination with Newspeak notwithstanding; arbitrarily labeling something “a market”, does not, magically by itself, make it so, in any economically meaningful sense.
Yes, because Arbeit Macht Frei.
Folks want home prices to rise, exacerbating homelessness.
people are abundant….the economy not so …
For a comparison; in 1919, noone had an idea what caused the pandemic. Viruses were only discovered about ten years later. Noone had an idea what a DNA was. OTOH, human population growth was similar to that of the viruses.
Just the 1st and 2nd quarter. LOL. Puts things into perspective of how ridiculous it all is.
You guys are whistling past the graveyard. Even if this crisis is short-lived the impact will be greater than outlined. The world is drowning in debt at precisely the time this crisis has hit. At some point global unemployment is going to ramp.