CFI.co Blog

In a bizarre paint by numbers exercise, the world map of the corona pandemic is constantly being redrawn as viral hotspots suddenly appear, and others slowly fade away. Until recently relatively immune to corona, Russia is reporting a jump in the infection rate whilst in the United States the virus is spreading quickly into rural areas.

Yesterday, The New York Times revealed its reporters had obtained internal documents from the Centers for Disease Control and Prevention that project a seven-fold increase in the daily number of reported new cases to 200,000 by early June. The number of corona deaths is set to rise as well, reaching 3,000 a day a few weeks from now.

Monitoring the progress of the pandemic as it sweeps the nation, the Institute for Health Metrics and Evaluation (IHME), part of the University of Washington, forecasts a total death toll of about 135,000 by early August though it concludes that the disease will peak in the first half of May. The Trump Administration prefers to take guidance from the more upbeat IHME predictions over the more sombre outlook presented by its own scientists.

President Donald Trump is anxious to get business going, and the economy growing, before the start of the campaign season. The self-proclaimed master of growth and greatness, President Trump has nothing to run on but an economic platform. With the country in the dumps, even the rather uninspiring Joe Biden can enjoy a field day. Mr Trump will need all his resourcefulness, and plenty of bluster as well, to find a silver lining to an otherwise dismal economic outlook.

Americans, given to impatience and always living in the here and now, seem no longer willing to postpone trips to the shopping mall. Restaurants are slowly filling up too and there is talk of reopening large sports venues. States are busy lifting restrictions, encouraged to do so by the federal government and by the news from New York, Chicago, and other hotspots that seem to have contained the outbreak and flattened the curve.

Yet any notion of the pandemic fading away is based on wishful thinking. For every hotspot that gets a grip on the disease, new ones pop up. The virus now appears in rural counties that until recently had not reported any known cases. The Centers for Disease Control and Prevention estimate that states lifting the lockdown restrictions will see a 20 percent or higher spike in the number of infections and hospital admissions.

On average, attempts to control the spread of the virus only yield results after five to six weeks. This is why calling ‘Mission Accomplished’ early, a well-known American habit, is so dangerous: it threatens to undo the sacrifices made by all to contain the virus and battle the disease. In the absence of a vaccine, plenty of patience is needed to ensure the desired outcome. It is a commodity in short supply.

It is time to revisit China. Of late, Xi Jinping, the country’s ruler, seems to be taking fashion advice from his elusive counterpart just across the border in North Korea, replacing his stylish suit and tie for the drab attire that marked the Maoist Era. With a somewhat disconcerting frequency, President Jinping seems to dress for the occasion – one that calls for strict state control of civil society and the ruthless repression of dissent.

China clearly wishes to exert full control over the corona narrative in order to seize the moment – and the global leadership position vacated by the United States. However, President Jinping’s power grab is meeting stiff resistance. The world, it would seem, is not quite ready yet for the Chinese Century. The country’s government has only its own incompetence to blame for being exposed as the tinpot-quality dictatorship it actually is.

What President Jinping has failed to realise is that his country’s phenomenal ascendency was built, almost exclusively, on privileged access to the juicy markets of North America and Europe. Those markets can be closed as well. In fact, that is likely to slowly happen in the wake of the pandemic.

Beijing’s increasingly arrogant posturing on the world stage does it no favours: calling Australia ‘gum stuck to the bottom of China’s shoe’ is no way make friends. The Australian government had provoked Chinese ire by suggesting an independent scientific inquiry be set up to determine the origins of the virus.

The Propaganda Department of the Chinese Communist Party next turned its anger to The Netherlands which had dared change the name of its liaison office in Taiwan without consulting with Beijing. The Dutch were promptly told that they could forget about receiving any additional medical aid from China which considers Taiwan a rebel province.

Next up Poland where President Andrzej Duda was pestered by Chinese diplomats for days on end to call up Mr Jinping and thank him profusely for a shipment of subpar facemasks that had been supplied. The Polish president finally placed the call which was then used by Chinese state media to illustrate the deep gratitude felt around the world for the generosity displayed by its visionary leader.

Almost all Chinese ambassadors to EU member states have now run into trouble with their hosts. A backlash is building up quickly. European governments are particularly sensitive to the early prowling by state-backed Chinese companies of their pandemic-stricken economies. A number of businesses in Germany, Denmark, and The Netherlands have reported takeover attempts by Chinese companies, proxies for the state, eager to buy their way into advanced technology.

China will not become the world’s pre-eminent superpower as envisioned by its supremo. The country remains a dictatorship that locks up millions and is singularly unable to set an example for anyone not inclined to monopolise political power. China must bide its time, improve its morals, and stop behaving like a teenager when challenged. President Jinping may also want to stick to a more conventional dress code.

If imitation is the highest form of flattery, then President Jair Bolsonaro of Brazil takes the prize. Mr Bolsonaro not only mimics the behaviour of his US counterpart Donald Trump, whom he considers a good friend and model leader, but takes the art of indifference to an entirely new level.

President Bolsonaro doesn’t seem to care that more than 6,000 Brazilians succumbed to covid-19. Questioned if he had anything to say about the matter, he merely shrugged his shoulders and asked in turn what the reporter thought he should do about ‘it’. Compared to Mr Bolsonaro, President Trump positively acts and sounds like a fount of carefully weighed and considered wisdom.

Moves are now afoot in the Brazilian congress to impeach the hapless president, albeit over another impropriety. A few commentators have also detected unease in military ranks and raised the possibility of a coup d’état, albeit one carried out with the tacit approval of a congressional majority. Almost all Brazilians agree that Mr Bolsonaro is quite unfit for office and singularly incapable of leading the country.

At every twist and turn of recent events, the Brazilian president has downplayed the corona outbreak. The surreal nature of his televised appearances surpasses by far any of President Trump’s more remarkable moments. Whilst even his most vociferous critics agree that President Trump is guided by some vague policy values and notions, President Bolsonaro’s cabinet appears to get by without any such broad principles. In fact, the predatory nature of the Brazilian government, led by a clique mostly intend on furthering their own private interests, prompted its only well-respected minister to resign. He went with a bang.

Justice Minister Sérgio Moro, who as a federal judge gained the respect of the nation for ruthlessly tackling corruption, could no longer accept the pork barrel politics and the trafficking of raw power he was confronted with in Brasília. His departure dealt a severe blow to President Bolsonaro who just days before had sent his public health minister packing for daring to oppose his own peculiar ideas about the pandemic.

Brazil has suffered more than most countries from corrupt, power-hungry, and inept presidents. In fact, one has to go back to the early 1960s to find the last demonstrably incorruptible president. That was Jânio Quadros (1917-1992) who caused consternation by abandoning the capital and the presidency mid-term without giving notice or an explanation. It is, however, widely suspected that Mr Quadros was so disgusted by what he saw and experienced whilst in power that he refused to serve the nation. His sudden departure resulted in a political crisis that ended in 1964 with the generals taking power – to popular acclaim – and clinging to it for the next 18 years. A lesson in history: Be careful what you wish for.

Deplatforming is alive and kicking, and apparently not affected by the pandemic. Controversial US filmmaker Michael Moore was loudly booed after the release of his latest documentary in which he questions the dogmas surrounding climate change. The film was met with cries of shame and calls to outlaw its showing.

Planet of the Humans, available for free on YouTube, wants to showcase the hypocrisy of the green movement and dispel its myths. If the documentary succeeds in doing so or not is rather beside the point as one would rather leave that judgment to viewers.

Much more telling is the almost hysterical fanaticism displayed by those who proclaim to worry about our orb’s future. In what amounts to mob rule, Mr Moore is being silenced not with argued reason but by a large posse demanding he just shut up. Whilst calling for his blood, figuratively one hopes, those offended by the documentary seem to have missed the point Mr Moore is trying to make, namely that the environmental movement has sold its soul to big business.

Planet of the Humans also tries to engage with the proverbial 800-pound gorilla that stalks the planet but remains ignored by most: global overpopulation. The filmmaker argues that the transition from carbon-based energy sources to renewables merely tries to lessen the environmental impact of an economic model that can only exist be the grace of perpetual growth. The smaller ecological footprint so obtained may then free up room for yet more growth and larger populations. Mr Moore doesn’t think this way of life is sustainable and advocates for more profound change.

The exceptionally strong backlash against a heretic trying to question established truths shows the worrisome nature of the global environmental movement which has come to resemble a religion in the way it supresses dissent. Whilst nobody seriously disputes the gravity of the earth’s predicament, not even Mr Moore, the banning of free thought sets the ecologically self-righteous on an unholy path to hell – a reportedly very hot place.

Idle hands are the devil’s workshop and so is an idle mind. Being cooped up at home is an open invitation to bodily harm and unhinges the mental balance as well. The wielding of potentially lethal tools to craft do-it-yourself hobby objects that usually offend any lingering sense of aesthetics is bad enough, but the proliferation of idle time is even worse and leads to spooked minds ready to believe just about anything.

Some people eager to identify and eliminate a culprit have taken to setting transmission towers alight in the belief, both sincere and pathetic, that 5G signals somehow cause a potent virus to emerge out of the aether. In an ironic touch, most torched towers had no 5G transmitters installed. The only thing the arsonists manage to accomplish were localised outages of the 4G mobile network, hampering the work of emergency responders.

Earlier this week another bit of fake news went viral when it transpired that the novel corona virus had supposedly escaped, or was released on purpose, from the den of evil scientists in China. That nugget of misinformation was attributed to Professor Tasuku Honjo, a Japanese immunologist who in 2018 received the Nobel Prize for Physiology or Medicine in recognition of his discovery of the programmed cell death protein (PD-1). Prof Honjo, it was said, had studied the corona virus whilst working in China. His conclusion: the virus is man-made.

None of it was true. Anyone bothered enough to google the professor’s name would have been able to dismiss the story in a heartbeat.

However, millions of believers couldn’t be bothered the check the facts but did manage to find the time to retweet or share the story. When faced with the truth, many instantly detected a cover-up and expanded on their conspiracy theory.

There is nothing strange in people searching for explanations to strange phenomena that transcend their understanding of the world. Every major event, from the assassination of JFK and the death of Elvis to 9/11 and now the pandemic, births a number of wild theories that seems inversely proportional to the impact and importance of the occurrence.

Though there is nothing new in this, the internet does speed up the dissemination of fake news and widens its reach considerably. The velocity and ferocity with which alt-truths propagate undermine the confidence in both science and politics – the two pillars that must provide guidance and comfort to societies cowed by the pandemic. Once the trust in authority is gone – and it is slowly going – only cacophony remains whilst people are cast adrift rudderless and clueless. Fake news going viral represents, in fact, a danger greater than any real virus.

Disconcerting new from Germany. The corona reproduction rate (R) has crept back up from 0.7 to 1, meaning that every person carrying the virus, knowingly or otherwise, on average infects one other person. The news, not entirely unexpected after last week’s easing of the lockdown restrictions, prompted Dr Lothar Wieler of the Robert Koch Institute to call on Germans to stay at home ‘as much as possible’. The federal research institute is charged with disease control and prevention.

Dr Wieler also revealed that the mortality rate of German covid-19 patients has been rising steadily and now stands at 3.8 percent, higher than the global average estimated by the World Health Organisation (3.4%), but well below the rates reported by neighbouring France and Belgium. The discrepancy can be attributed, in part, to differences in the way corona deaths are tabulated. In its tally, Belgium includes deaths recorded in care homes of patients who had not been tested for the virus. Many other countries, including Germany, only include deceased hospital patients diagnosed with covid-19.

A much more telling set of data is being supplied by national statistics institutes that crunch vast volumes of historical data to extract a specific and remarkably precise ‘normal’ number of deaths for each week of the year. Using this data, an excess number of fatalities can easily be obtained and expressed in absolute and relative terms. The numbers also serve to reveal ‘hidden deaths’: suspected corona deaths who passed away without having been formally diagnosed.

Statistical data show that between 11 March and 25 April, the number of deaths recorded in New York City was 309 percent higher than what might have been expected in normal times. The discrepancy between the ‘excess deaths’ and the reported number of covid-19 deaths amounts to about 4,000.

Over roughly the same period, Spain experienced a mortality 67 percent higher than the statistical normal with 9,100 excess deaths not officially accounted for. In Belgium those numbers are 34 percent and 600 respectively. Much criticised for its apparently relaxed attitude to the pandemic, Sweden records a relatively low 18% peak in the number of excess deaths. However, the country’s actual corona mortality rate is amongst the highest in Europe.

This is perhaps a good time to remember Mark Twain and his timeless observation that ‘there are lies, damn lies, and statistics’. The numbers are, for the most, incomparable and only hint at a trend. Used to compare the performance of national authorities in their battle against the virus, statistics are of limited use and may even promote alt-truths. For now, there is no magical bullet and each country fights the pandemic as best it can.

However, it is still slightly disconcerting that as lockdowns are eased, the virus’ reproduction rate promptly creeps up. Though that may have been expected, it also stresses already frayed nerves.

The global cost of the corona pandemic now approaches the $10 trillion mark. This is the price of the handouts, tax deferrals, and loan guarantees extended by governments trying to nurse their societies back to health. Only a fraction of that money may, in the fulness of time, be recouped. Since the depth of the recession that the virus thrust upon the world is still an unknown quantity, nobody knows for sure who and what is able to survive the pandemic. In Europe, most governments guesstimate that only about 65 percent of the deferred taxes will get paid. Up to 20 percent of the loan guarantees extended may be invoked at some point.

Budget deficits are quickly rising to levels not seen outside times of war. Debt burdens keep pace, limiting the financial wiggle room of states as preparations are made to slowly resuscitate economies. Though most economists agree that states had no choice but to act decisively, some begin to wonder who is going to pay for the enforced largesse.

Absent a global debt jubilee, the piper must be paid – eventually and presumably. This crisis has no winners, apart from a few billionaires who somehow managed to add to their fortune whilst sipping drinks aboard mega yachts anchored within swimming distance of a welcoming tax haven. Earlier recessions were local or regional in nature and could count on strong growth elsewhere to find a way up.

Not so this time around. China sputters and nears its own day of post-corona reckoning with a regime increasingly lashing out at any and all forms of dissent in a rather sorry display of gutted self-confidence. To paraphrase Karl Marx, China’s current posturing at home and abroad masks the inherent weakness of its system. Despite the unbelievable antics of its president, the United States will be fine. The country still holds the master key to the global financial system. As always, the US dollar rules supreme in a troubled world. Not even President Trump can scare investors away from the mighty dollar – and that’s saying something.

Europe is not nearly so lucky and will be hard-pressed to come up with novel solutions to remain an economic power of note. Were it not for the almost pig-headed refusal of the Frugal Four to engage in acts of creative bookkeeping, solutions could be found such as the Spanish suggestion to issue consols – perpetual bonds that pay interest but are redeemed at the issuer’s convenience. Consols are an interesting tool to kick the proverbial can not just down the road, but into interstellar space.

The idea that the debts incurred by the pandemic must be paid, and the vast volumes of credit injected into the Eurozone economy since 2015 must be taken out (i.e. the money destroyed) seems ludicrous. Such a rigorous approach to financial management will most likely result in a very long period of lacklustre growth, high unemployment, and political turmoil. Deflation also remains a distinct possibility. Business as usual is probably not on offer for the foreseeable future. To navigate the post-corona era without creating another politically volatile lost generation, out-of-the-box thinking is needed. That’s not something to expect from Europe’s Frugal Four.