#168. Polly and the sandwich-man


By their very nature, events like the Wuhan virus epidemic (or whatever the history-books end up calling it) polarise opinions, some of which become ever more extreme as the crisis unfolds.

At one end of the spectrum, those who claimed that the coronavirus was just some kind of minor variant on ‘normal’ seasonal ailments are being taught a harsh lesson in reality.

At the other extreme, though, many continue to insist that this is an ‘existential’ event, from which neither the economy nor the financial system (or anything else that we hitherto took for granted) is going to emerge, at least in any recognizable form.

If you believed either of these things, you probably wouldn’t bother trying to plan, or, as is the case here, to try to ‘scope’ the course that economic and financial trends might take.

Generally, though, extremes, whether of optimism or of pessimism, usually turn out to be wrong. Neither the Pollyanna nor the Sandwich-Board Man approach is going to help. Whistling a cheerful tune isn’t going to give us greater visibility on the post-crisis situation, but neither is walking around wearing a placard proclaiming that “The End is Nigh”.

The rational and practical response is to reason from what we do know to what we need to know. This is why, in economics and finance, we do need to try to scope this crisis.

To do this effectively, it makes sense to adopt two working principles.

One of these is that we bring new thinking to bear, so that we’re not just playing new tunes on the broken fiddle of ‘conventional’ economics.

The other is that we’re clear about the limitations imposed by the uncertainties implicit in the situation.

This is where ‘scoping’ differs from prediction. What follows doesn’t try to forecast what will happen, just to set some parameters on what might.

From troubled skies

Though the epidemic itself couldn’t have been anticipated, many of us have long recognised that trends and conditions pointing towards “GFC II” – a different and more extreme sequel to the 2008 global financial crisis (GFC) – were already in place.

A condensed version of this narrative is that the authorities responded to the “secular stagnation” of the late 1990s, first with ‘credit adventurism’, and latterly with ‘monetary adventurism’ as well. Where the former put the credit (banking) system at risk, the latter called into question the viability of the entire fiat monetary structure. Beyond buying some time (at a very hefty price), neither expedient has achieved anything worthwhile, but has inflicted an enormous amount of damage along the way.

It is, indeed, reasonable to conclude that we’ve spent more than two decades packing dynamite into the foundations of the financial structure.

Signs that economic reality might have started to break through had become apparent well before the current crisis erupted. Sales of everything from cars and smartphones to chips and components had already turned down, world trade in goods was already shrinking, and severe financial stresses were already emerging, particularly in China, and in some of the more irrational parts of the global ‘cheap money’ economy.

This is why, rather than having hit us out of blue skies, this crisis is really a bolt from the grey. Whether people had noticed these gathering dark clouds largely depended on whether they were looking at the situation from a point of view founded in reality, or were still persuaded by the ‘conventional’ tarradiddle that there was nothing too abnormal in the situation (or, at any rate, nothing so abnormal that it couldn’t be handled by our omnipotent, omniscient central bankers).

The energy perspective

These past exercises in ‘adventurism’ have had a shared assumption, which has resulted from a fundamental misconception about how the economy really works.

In order to believe that we can boost the performance of the economy by financial gimmickry – whether by pouring cheap credit into the system, or by flooding it with even cheaper liquidity – you’d have to start by assuming that the economy is a wholly financial system. If this assumption was correct, you could conclude that fiscal and monetary policy are the effective levers of control.

In reality, of course, these assumptions are mistaken. An economy that exists wholly in the realm of the human artefact of money – and is unrelated to the physical world in which we live – is a fiction.

As regular readers will know, my approach is based on the understanding that the economy is not a financial system, but an energy dynamic.

Briefly stated, the surplus energy interpretation of the economy has three central tenets.

The first is that nothing of any economic utility whatsoever can be produced without the use of energy.

The second is that, whenever energy is accessed for our use, some of that energy is always consumed in the access process (with the consumed-during-access component known here as the Energy Cost of Energy, or ECoE).

The third part of this “trilogy of the blindingly obvious” is that money has no intrinsic worth, and commands value only as a ‘claim’ on the output of the ‘real’ (energy) economy.

The credit connection

From this understanding, we can start with the observation that financial ‘claims’ have grown far more rapidly than the ‘real’ economy on which such claims can be honoured. Comparing data for 2018 with the numbers from 2008 reveals that each $1 of reported “growth” in the global economy over that decade was accompanied by $3 of net new borrowing.

The crucial interconnectedness in this situation is that pouring money and credit into the system doesn’t just increase the aggregate of financial claims, but also inflates the apparent size of the economy itself.

The ways in which this happens can be re-visited at a later date, but what we need to know now is that it happens.

The chart below illustrates this relationship. The vertical axis shows percentage growth in GDP during the years since the 2008 global financial crisis (GFC), whilst the horizontal shows annual borrowing, as a percentage of GDP, over the same period.

The clear outlier here is China, whose annual growth has been around 7%, but whose annual rate of borrowing has been about 25% of GDP. This is why slightly more than doubling Chinese GDP (+115%) required a near-quadrupling of debt (+290%), and why borrowing has exceeded growth in the ratio 3.6:1.

The numbers for India look a lot better (though they’ve been worsening for some time), because the country has achieved strong growth without a dramatic recourse to borrowing. Both France and Japan are on the negative side of the trend-line, borrowing a lot, but getting precious little growth in return.

Fig. 1

#167 Value Destruction 01B

Individual economies aside, though, the critical observation which emerges from this is that ‘the more you borrow, the more apparent growth you can report’.

Most of the countries shown on the chart – and the world and regional aggregates, too – are at, or close to, a trend-line which connects the extent of borrowing with the quantity of GDP growth that has been reported.

What this means, as it applies to current circumstances, is that the numerator of debt (and, for that matter, of broader commitments), and the denominator of GDP, are not discrete, but are linked together.

Upwards tendencies in debt have had an inflationary effect on apparent GDP. This means that a straightforward ratio which compares debt with GDP is extremely misleading because, when you increase the one, you simultaneously increase the other.

This in turn means that debt/GDP ratios operate in ways which tend towards complacency.

The prosperity benchmark

Energy-based calibration of prosperity, as undertaken by the SEEDS model, is designed to provide a measure of economic output which, as well as taking ECoE into account, is distinct from this ‘credit pull’.

The result is to revise the interpretation of economic trends, indicating that, rather than ‘an economy of $87tn, growing at 3% annually’, we entered this crisis with ‘an economy of $53tn, that is hardly growing at all’.

Taking non-government debt as an example, let’s examine the implications of this approach.

During 2009, nominal world GDP was $60tn, whilst private debt was $85tn, for a debt/GDP ratio of 141%. Since then, both debt and GDP are supposed to have grown by just over 20% in real terms, which means that the ratio between them (shown in blue in fig. 2) seems hardly to have changed at all.

When we shift the basis of calibration from GDP to prosperity, though, the resulting calculus is both very different, and a great deal more cautionary.

Compared with a real increase of 23% in private debt, aggregate world prosperity hasn’t actually grown at all since the GFC. One reason why this is so different from the narrative of “growth” is that most of the headline increases in GDP have been the simple consequence of spending borrowed money.

The other is that ECoEs have risen relentlessly, long since passing levels at which prior growth in Western prosperity goes into reverse, and, more recently, entering a band where the same thing starts to happen to the EM (emerging market) economies as well.

This means that the ratio which expresses GDP as a percentage of prosperity (shown in red) has expanded markedly, from 183% in 2009 (and 125% back in 2000) to a current level of just over 230%.

A reasonable inference from this is that the debt-to-prosperity ratio has moved a long way out of equilibrium, leaving it poised to fall back to a prior, much lower level.

Departure from debt equilibrium is, of course, exactly what you would expect to have happened after more than a decade in which people have been paid to borrow. But quirks in the calculations which use GDP as a measure of debt exposure have served to disguise this critical trend.

Indeed, when you take this enormous process of subsidised borrowing into account, any suggestion that proportionate indebtedness hasn’t increased becomes wholly counter-intuitive.

An understanding of this principle enables us to scroll back across the years of financial excess in search of ratios which might represent a sustainable equilibrium.

This same calculation, when expressed as debt aggregates in constant dollars (as in the right-hand chart), suggests that a sharp decrease in outstanding non-government debt might have become inescapable.

Unless we’re prepared to assume that dramatic inflationary effects will destroy the real value of debt (a ‘soft default’), the implication is that we may be facing a process of extensive default, for which the term used here is a default cascade.

Fig. 2

#167 Value Destruction 05

The bigger picture

Before we move on (in future discussions) to consider what a default cascade might look like in practice, it’s important to note that formal debt doesn’t, by any means, capture the full extent of financial exposure. A better way to look at this is to reference financial assets or, more specifically, the aggregate of such assets excluding those of the central banks.

Financial asset exposure, always important, has taken on renewed significance during the uncertainties of the epidemic, and a causal link can be identified between, for example, the extremity of British financial exposure and recent sharp falls in the value of Sterling. Private financial assets stand at 1100% of British GDP, whereas the ratio for the United States is only 460%, so a fall in the value of the pound against the dollar is a wholly logical response to extreme financial uncertainty.

At the global level, financial assets data for countries accounting for about 80% of the world economy is available, and this data puts private financial assets at 450% of GDP. This a number which, like the debt/GDP ratio, hasn’t worsened since 2009.

Expressed against prosperity, however, this metric has expanded, because real financial assets have grown (by about 15%) over a decade in which prosperity hasn’t increased at all.

If, as we did with debt, we track back across the years of excess in search of the equilibrium ratios towards which a return might seem likely, the inference is that, like debt, the broader class of financial assets may face a severe retrenchment and this, again, points to various forms of default.

Clear and present danger

In what is intended as a scoping exercise, attaching numbers to these interpretations requires the caveat that our conclusions must recognise the extremity of uncertainty implicit in current conditions.

Indications from SEEDS-based analysis suggest that we should not be too surprised if debt of $60tn, and broader financial assets of an additional $100tn, are at risk.

These, as stated earlier, are scoping numbers, not forecasts.

Even so – and given the sheer scale of what we know is happening to the economy – these numbers need not seem all that surprising. The Pollyannas out there might say that little or none of this is actually going to happen, whilst the words “Told you so!” might be added to the doomsters’ sandwich-boards. The strong likelihood is that, in finance at least, the sandwich-boarders are a lot nearer the reality than the ditty-whistlers.

On the basis of this scoping exercise, we can anticipate that the global financial system could be facing a hit of $160tn, which is 185% of GDP.

That might be something from which the economy itself could recover, albeit in a battered and bruised form.

But you’d have to be a long way towards the Pollyanna end of the axis of optimism to think that the financial system could survive without either severe inflationary effects or a systemically-dangerous process of default.



252 thoughts on “#168. Polly and the sandwich-man

  1. This gentleman claims that COVID-19 is a false crisis that was manufactured to let central off the hook for ruining the economy. It is also a perfect stalking horse for governments wishing to impose authoritarian controls over unwitting populations.

    Not sure what to believe. My wife and I have been sick this past week with an illness that has all of the official symptoms of COVID-19. It has not been pleasant, but neither of us are as Ill as we previously have been from seasonal flu. I suspect that the official response to this virus is over the top. But much of it has had public support, so it is difficult to know how much of the official response is a government roose and how much is simply government wanting to be seen to respond to public anxiety. The Johnson government original policy was to let this virus run its course. In hindsight, that may have been the more sensible recourse.

    • Everyone has to reach his or her own conclusions over this, but I, for one, am not persuaded by any of the conspiracy theories around the coronavirus crisis.

      The simplest explanation – which appears to be that the virus crossed the species barrier through the sale and consumption of infected pangolins in unsanitary and unregulated markets in Wuhan – seems to me far likelier than any malign intent.

      This doesn’t mean that there won’t need to be ‘inquests’ after this crisis. Questions are bound to be asked about health issues such as the supply of medicines, ventilators and protective equipment, and the apparent slowness with which international air travel was suspended.

      Personally, I find it hard to believe that ‘let the epidemic run its course’ ever made much sense, or that this was ever really the UK government’s plan. Physical (usually wrongly labelled “social”) isolation seems a better approach, but needs to be accompanied by testing on a huge scale, carried out by medical staff equipped with the best possible personal protection.

      I’m sure that everyone here joins me in wishing you and your wife a full and speedy recovery.

    • Thanks for the Video TonyH.
      We need as much information as possible on what is going on, only then can we get close to the truth. There is so much disinformation going around.
      While I do not totally subscribe to the virus being manufactured and deliberately released, I do entertain the notion that Governments worldwide will jump upon this Excuse to shift the blame for our impending economic collapse.
      Here is another link ( from ZH ) that may be of interest to readers, It is a German specialist openly addressing Merkel’s response to this Covid-19 episode. Video is in German but with English subtitles. It is a very well balanced assessment in my view.

    • TonyH,
      say for a moment that the guy in your Video is onto the truth, and that the Virus episode is conveniently being used to cover for the about to implode world financial system.
      We here, the readers and contributors to Dr. Tim’s very informative Surplus Energy Economics, we already know that the world economy is going down. Through Dr. Tim’s analysis, actually putting numbers onto what out pocket-books have been intuitively telling us, we know that De-growth is in progress. We have discussed the de-layering of the economy. We know that the financial system is built upon lies and fraud, and we know that it must eventually collapse. We already know that BAU is no longer an option.
      So what can we do ?
      Every time I thought this through in my head, I always came to the conclusion that Martial Law was inevitable. In the UK and in Europe it will be imposed grudgingly, but in the USA it will be opposed violently. I had also always predicted a civil war erupting in the USA. This may well be the trigger for it.
      I always thought we had more time before this came upon us, Boy was I wrong !

    • I suspect that this video is false information. My wife is a clinical scientist who has spent much of her career studying infectious disease. In her opinion, much of the comparison between flu and COVID-19 is misleading. Flu is a serious illness and a huge amount of planning goes into producing and distributing vaccines each year for the most probable strains. There is also a herd immunity that tends to limit its reach and infectious rate. No such mitigation is available for COVID-19; it has caught the world off guard and hence the panicked efforts to control its spread through physical isolation.

      The idea that central banks and governments would deliberately engineer the crisis to draw attention away from failed monetary policies, is weak and far fetched in my opinion. The public are likely to punish them for the crisis regardless of how it started. It is difficult to see how COVID-19 gets them off the hook in any way.

      The infection that my wife and I are suffering from is certainly the worst viral infection either of us has had since contracting the flu ten years ago. I don’t think either of us are in mortal danger, but it will take weeks to recover from this. Of course I have no way of knowing for certain what it is we are infected with, as the only people to get tested are those admitted to hospital.

    • Thank you for your reply TonyH,
      and I too wish you and your wife a speedy and full recovery. I had a bad flu about 10yrs ago, and boy, it literally floored me – I was in bed – delirious, with a high fever for days. Flu is a serious illness – not something I ever want to get again !
      I can imagine what you are going through.
      Anyway, to be clear, I did not suggest that Authorities had deliberately instigated this pandemic to cover their failings, I was suggesting, that they know, just as we do, that the world is facing an economic collapse. We here know that the collapse is inevitable, but as Dr.Tim pointed out to me a while back, inevitable does not mean imminent. This virus has just popped along at a very convenient time for them, and providing them with a cover for the coming collapse by allowing them to make the inevitable – imminent. Their choosing of the timing and can therefore allow some control over ensuing events and absolve the true culprits of any blame.
      The number of deaths in Spain and in Italy show us that we are dealing with a deadly virus that should not be taken lightly. However, I see the shutting down of the whole economy for 6 months as being economic suicide. I do believe that preventative measures are necessary, but I do not see the need to kill the economy. Killing the economy itself will have very serious life-threatening consequences for many of us too. Just think about the anguish that many will suffer as a result of having to money and no job. I may well be proven wrong, but for now, based on the information available to me, I am very suspicious as to why such Draconian measures have been implemented.

    • After looking at financial exposure in this article, I’ll be looking at the economy itself in the next one, due within the next few days.

      To cut to the chase, this isn’t some kind of hiatus, after which normal service will be resumed. It looks a lot more like the start of de-growth. If it is, structural changes will be profound.

  2. PS – Forgot to add – I think that social isolation and distancing is sensible and should have been introduced earlier – but some compromise will have to be found to stop the economy being severely damaged affecting the health of many more in the future.


  3. Covid-19: Not Conspiracy, but Opportunism
    This will be a political theory of sorts. President Trump has abruptly swiveled from saying that everything is under control to a prediction that anywhere from 100,000 to 240,000 people will die in the US. He says keeping deaths under 100K will be a ‘good job’. He lobs threats at Ford and General Motors on the ventilator issue, endorses cures which may or may not work, expands lockdowns, and spends money like a drunken sailor. His poll numbers are rising, while Joe Biden seems irrelevant. Meanwhile, there is so much confusion in the media that many people just throw up their hands. But a very high percentage are at least claiming that they are following the ’social distancing’ rules. Many in the medical fraternity are incensed that they are not getting the protective gear they need. The economy is barely functioning.

    *I think Trump realized that his previous policy of downplaying the threat and essentially doing nothing to prepare for the virus was sub-optimal. Better to create the perception of a huge challenge with many bad actors…being fought courageously by a determined leader…namely, himself. So instead of delegating everything to the Vice President, he takes charge himself in daily meetings. Some of the professionals think he is disruptive, but keep quiet.
    *The actual process which was followed in Wuhan is now being discussed among the ‘doctor class’. For an interesting and informative discussion of the Wuhan effort, see this video…with a time saving transcript…by a Chinese-American doctor and pharmacist:
    It may be a little confusing in that Dr. Li bridges the world of Traditional Chinese Medicine and Western pharmacology and medicine. Most of what he knows about Wuhan is from visiting and talking with TCM doctors in Wuhan. TCM doctors have a kit bag, and due to the time constraints what they did was learn how to use the traditional elements in their bag to deal with the novel coronavirus. It was a joint effort by the local doctors and the central government agencies. The evidence is that it worked remarkably well. He does note that they had the advantage of testing, which is still largely unavailable in the US.
    *I will note that the process used in Wuhan may be effective, but it doesn’t provide the high political drama that sells well in the US.
    *Dr. Li demonstrates that it is ultimately the immune system which defeats, or falls victim to, the virus. Even a vaccination works by priming the immune system. Therefore, the TCM method works by intervening in the 4 phases of immune response. (Contrast with the ‘magic pill’ envisioned by most American citizens).
    *Dr. Li, a pharmacologist, is skeptical about immunization….I will add that the immunization for influenza this year was about 10 percent effective…according to a recent discussion I heard.

    So where does this leave us in terms of politics and the economy and financial systems?
    *Coronavirus is now loose in the world and will likely continue to recur periodically. If our response continues to be unpreparedness coupled with lockdown, the result will be painful indeed.
    *The evidence is that coronavirus 19 is highly contagious, but not especially deadly. A well-functioning immune system is the best defense.
    *Politicians can derive benefit by ’never letting a good crisis go to waste’.
    *The crisis needs guys in black hats that can be defeated…tilting at windmills is useful political theater.
    *Dr. Li describes the sort of reaction times needed: within 10 days the temporary hospitals in Wuhan were under construction.
    *While strong immune systems would be desirable, the enormous changes which would be required in US (and Chinese) lifestyles are daunting. Heart disease, which we know how to avoid with lifestyle, will kill far more people than a virus, yet we don’t change lifestyles…and neither do we shut down economies.
    *Dr. Li’s description of the recurrent epidemics in China over their long history tells us that viral and bacterial events have happened for a long time and will likely continue to happen. What he doesn’t say is that our ancient ancestors didn’t have to deal much with epidemics…we created epidemics when we domesticated animals. Turning that clock back would be a daunting challenge.

    It worries me that the governors of both Texas and Rhode Island have resorted to blockades to keep the residents of Louisiana and New York, respectively, out of their states. Yet that is the same thing that happened in China, and is perhaps an inevitable feature of the ‘lockdown’ strategy.

    I think the lockdown strategy is disastrous economically. With the exception, if you are an MMT fan, that it provides cover to do all sorts of New Deal type manipulations to the economy and money supply and financial system. Lockdowns are only effective in ‘flattening the curve’. They do not prevent recurrences of local epidemics. So lockdowns are an extraordinarily expensive way of dealing with the problems.

    Don Stewart

    • I can’t believe that Trump us allowing bidding wars between states for vital virus related equipment to go on while also allowing this equipment to be exported.

      It’s his own people – especially medical staff – who are suffering.

    • @ewaf88
      No comment. The thought police are everywhere…not to be paranoid (LOL).
      Don Stewart

    • Unfortunately, the general populace is so dumbed down that many are semi-literate and totally innumerate. The top 25% probably grasp this, but most of them aren’t his supporters. He is likely playing for large $ contributions from the manufacturers, although I suspect Kudlow and others are guiding him.

    • Don and Steven – truly shocking -putting money before lives.

      An article in ‘ The Week ‘ by Ryan Cooper neatly sums him up.

    • ‘While strong immune systems would be desirable, the enormous changes which would be required in US (and Chinese) lifestyles are daunting. Heart disease, which we know how to avoid with lifestyle, will kill far more people than a virus, yet we don’t change lifestyles…and neither do we shut down economies.’

      Interesting. Human beings generally, appear to be truly terrible at judging and responding proportionally to risks. This year, some 3 million people will die globally due to the effects of air pollution. Next year, about the same number again and so on, for as long as we burn fossil fuels. That is several hundred times more fatalities in one year than all the pollution deaths due to Chernobyl, and 60 times more than can be attributed to the virus so far (50,000), which is already ’10 Chernobyls’.

      Where are the lock downs and the public outrage to protect us from air pollution? Why would one risk provoke such an extreme response, whilst a much greater one passes without notice? In fact, simply by shutting down a large part of our energy production, reduced air pollution deaths may already have balanced any increase due to COVID-19. Of course, people are also ignoring the dangers presented by the approaching debt-energy depression, which will plunge millions into poverty and hardship. How many will die from this secondary effect? How many more will have their lives ruined?

    • Reports suggest that at least 70,000 lives have been saved in China by the reduction in pollution since the Chinese shutdown began. Satellite images show air clarity over northern Italy at levels unmatched in the history of such images. Air pollution in London, which has been monitored since 2002, is at levels so low that technicians thought the measuring equipment had malfunctioned (it hadn’t).

      Environmental campaigners are gaining a wealth of new ammunition during this crisis.

  4. Paul Gilding


    “To experience a crisis is to inhabit a world that is temporarily up for grabs.”

    My argument is that Trump understands that sentence very well. He destroyed his Republican opponents, and he is in the process of destroying any Democrats who run against him. I agree with Matt Taibbi that most everyone underestimates his political instincts. The Democrats, according to Taibbi, continue to think that putting together a coalition of minorities can win elections. I remember Walter Mondale was proud of ticking off his coalition members in a lost campaign years ago. Events might go against Trump (events brought down Napoleon), but I wouldn’t bet against him at this point.

    Who in Washington, or elsewhere, sees this crisis as a world up for grabs which we can reformulate into a healthier economic, social, and financial system? Certainly not the Federal Reserve, which seems to be focused on making sure that David Geffen can continue to ‘shelter in place’ on his 540 million dollar super-yacht, and Mrs. Trump continue to teach her children to wash their hands using 37 dollar a bar soap (thanks to an acerbic article in the Guardian). Donald Trump grasps that he can form the world in the image he wants. And he is sitting in the right chair to do it.

    Don Stewart

  5. Max Keiser on the Nationalization of the Bond Market
    In the same show as the interview with Matt Taibbi, Max says that the Fed has ‘nationalized the bond market’ with QE Infinity. He then remarks that it has been nationalized in the very peculiar American way that preserves much of the private superstructure…but the market is now guaranteed by the Fed. Think about the pensions which are dependent on bonds…whether private or public. If one is drawing a pension, then one may be reassured that their pension is secure (sort of).

    Why ‘sort of’…because the Fed cannot make stuff out of thin air. If our bottleneck is production, not fiat money, then the Fed will not succeed in producing the kind of luxurious Florida retirement that a lot of people are expecting. But if Trump’s goal is making sure that the baby boomers support him, he has taken a step in that direction.

    Similarly, corporations who have levered up to increase executive compensation are allowed to continue their previously illegal ways into the indefinite future. I’m still persuaded that the Dow rise of a thousand points had something to do with the sudden realization on Wall Street that stock buybacks were not ACTUALLY on the chopping block.

    Don Stewart

  6. Talk of a post-virus (economic) exit strategy, seems to be trending at the moment. Some MP’s, journalists, etc. are starting to sound critical of government for not having one. I’m sure we would all like to know how things will pan out when it’s all over, but would briefing out any kind of exit strategy make sense right now? We are still probably in the early stages of this (dual) crisis, and no doubt there will be many twists and turns still to unfold. How can you plan anything much when whole sectors of the economy could be wiped out? Such uncertainty is a key driver that’s made financial markets so volatile. Markets hate uncertainty, and right now uncertainty abounds.

    Also there’s the geopolitical scene to think about. There could be major ruptures in the existing geopolitical fault lines. Look what’s happened so far in the energy complex, resulting from Russia and the Saudi’s having a spat. If you are going to plan an economic exit, you need to have some idea as to whether you will be dealing with oil at $10 a barrel or $50 a barrel. At the moment it looks to have the potential to swing either way, depending as much upon geopolitics as anything else.
    Then there’s big question over USA – China relations. Before the crash began, relationships were hardly cordial. If there’s even an element of truth in a report I’ve seen, that says “COVID-19” originated from The Wuhan centre for disease control and prevention, (which is close to the animal market where it “officially” started), then all bets are off. The implication being that “COVID-19” is man-made in a Chinese lab. The key point is that Trump would only have to believe that to be case, as opposed to having indisputable truth, for the consequences to be severe. Is that why he clumsily referred to the “Chinese Virus” a week or so ago? Planning an economic exit strategy through all of that? Good luck!!
    Maybe a better approach right now is – stay tuned in, try to be quick and nimble, plan short-term, and preserve capital.

  7. Here is a good interview about the virus, Thomas Friedman’s plea for the economy, the various incoherent statements from public officials, and what we really need to do to prevent such stuff in the future:

    I’ve hit on many of these topics, including the bat/ confined animal feeding connection.

    By the way, ZeroHedge reported today that the owner of the New England Patriots, whose son heads the Massachusetts General Hospital, was talking with his son about the critical shortage of N95 face masks. The father arranged to fly the company jet to Shenzen and pick up 2 million masks. They were presented to the Governor of Massachusetts.

    A couple of days ago Xi called Trump and offered help. I guess it takes private jets to actuate the offer. I wonder if we could not muster the fleet which flies to Davos to go over the China and pick up enough masks for everyone.

    Don Stewart
    PS. Rip Esselstyne is the son of the cardiac doctor who showed how diet could reverse heart disease at the Cleveland Clinic. Rip was a fireman in Austin, TX, and persuaded the fire crew to change what they ate to help a fellow fireman who had heart disease. He wrote about his results in Engine 2.

  8. Off Topic but Brief
    I was watching Akira Kurosawa’s movie from 1950: Rashomon. All we know for sure is that a man died. Around that fact a variety of people spin stories, the stories revolving around their own interests.

    Sounds a little like the virus, to me.

    Don Stewart

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