COVID-19 and the Economy

Coronavirus isn't new. We've experienced a number of flavors of this virus through the years. But the virus that is ravaging populations around the world is being called COVID-19 (for the year it appeared) or novel coronavirus. "Novel" because no human body has seen this virus until now, and thus no one in the world has immunity.

Scientists believe it jumped to humans in a market in Wuhan China, probably when some kind of wild animal being sold for food was bitten and infected by a bat. The infection spread to humans and quickly adapted to achieve human-to-human transmission. From the perspective of the virus -- nirvana. A new target with zero built-in immunity.

Although specialists in infectious diseases started to express concern, most of us hoped (assumed) it was a flare-up in a few places -- first China, then Korea, and then Italy. We thought it could be contained, like Ebola and SARS. But about two weeks ago, it became obvious to people all over the world that the window of opportunity for containment was closed.  So now, we are all focused on suppression -- flattening the curve -- so that our medical systems don't get completely overwhelmed while we are developing treatments and a vaccine and building herd immunity.

Just two weeks ago, life was still fairly normal,and then suddenly, it wasn't. As we watched the number of cases rise exponentially and traverse the globe, governments around the world began to take drastic action. Italy, still the worst-hit place, went into lock down -- confining everyone to their homes except for necessary excursions for buying groceries and medicine. A hard-hit area northwest of NYC did the same. Countries began instituting 14-day self-quarantine for all arriving foreigners, with many ultimately closing their borders. 

In the US, the focus initially was on eliminating events where large numbers congregate. The NCAA canceled March Madness. When an NBA player tested positive, the league chose to cancel the rest of the season. Openings for baseball and soccer were postponed indefinitely. Soon, the focus moved to smaller events -- live theater and concerts. All this happened in just a few days -- the advice changing from "no groups greater than 250 people" to "no groups greater than 10 people." Then, about a week ago, many states closed schools and ordered restaurants, bars, movie theaters, and gyms to close. In the hardest-hit states (New York and California), they have basically gone into "shelter in place." All retail is closed except grocery stores and pharmacies. 

Our consumer-driven economy hit a brick wall or drove off a cliff -- pick your image. We went from 60 to 0 in the course of two weeks. The travel industry is virtually shut down. Most retail has closed its doors. And while many knowledge-workers can telecommute, that isn't an option for the vast service industry. Unemployment is expected to reach 20% in the next few weeks.

Right now, we're in a waiting game. Most people have been self-isolating for 10 days or so. It will be at least several weeks before we start to get an indication about whether it is working and we are flattening the curve. In the US, the situation is complicated by the lack of adequate ability to test. That makes it hard to measure how big the problem is and to know when and if we have turned a corner.

We all know the market hates uncertainty.  Economists are in agreement that this is both terrible and unprecedented. Basically, large segments of the economy have suddenly come to a complete standstill. And no one knows how long self-isolation will last. Optimistic predictions take us to the end of April before some easing. Others think the virus and its economic impact will ebb and flow for about 18 months. That's how long it will take to build some kind of herd immunity through the combination of exposure and vaccines. And no one really knows what a recovery will look like. We are all in uncertain times, both for our health and our pocketbooks.

Governments around the world are exploring options for shoring up their economies and preventing collapse. In many ways, this crisis, like a war, will test what we are made it. Do we try to protect businesses and the nest eggs of their investors? Or do we focus on ensuring that we provide a safety net for the "everyday people" who will be hit hardest by this economic catastrophe? I hope I can look back a year from now with the knowledge that we did the latter.