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Wednesday, February 5, 2020

Brief Comment On The Chinese Coronavirus

The financial press is reporting that Chinese oil demand has fallen by 3 million barrels per day, or a whopping 20%, over the last month. Please see:

If Chinese oil demand continues to be depressed by 20%, or slips even more, that will be a major shock to world commerce. The drop in oil demand is a fair proxy measure for declining Chinese industrial and economic productivity. China is the global factory.  If Chinese production fails for an extended period, then that will adversely affect other countries that rely on Chinese exports. Just for one example, China manufactures auto parts for export to manufacturers in other countries. If Chinese auto parts exports fail, then production lines in other countries will have to shut down, for want of parts.

If the Coronavirus crisis in China  continues, it will be a very heavy body blow to the world economy. Here in Ecuador, where I live, the stores, show rooms and markets are full of Chinese merchandise and products of every description: shoes, children's toys,  silverware, knives, hand tools, car parts, automobiles, trucks, plastic squeeze bottles for mustard and ketchup, coffee cups, glasses and plates, green tea,  and on and on, everything from A to Z.  Take 20% of that away, or more, and commerce in Ecuador will take a huge hit, with major implications for the national economy, employment, and business viability. Given the huge role that China plays in global commerce Ecuador would surely not be the only country to be adversely affected.

It all depends on the duration of the crisis in China. If everything suddenly gets much better tomorrow, then things can soon be back to normal. However, if the crisis persists for months, with major cities shut down and under quarantine, and Chinese industrial production and economic activity severely hampered, as is the case today, then the global effects will be wide ranging. The world will be rocked. 

I don't know exactly what is going on in China. But I am not among those who are saying that this virus outbreak is nothing worse than an influenza epidemic. It is clearly a very grave matter, judging by the extreme reaction of the Chinese government.

Please see the following Twitter report:

Look at the spraying being done in the street in Wuhan by the crew in Moon suits.  It looks serious to me. 

For all we know, this crisis is just beginning. 

For those who have wondered what The Event Horizon (the topic of this blog) would look like,  the initial phase is starting to come into partial focus, and it ain't pretty.

It is beginning with a terrible plague. If the plague worsens there will be numerous secondary, tertiary, quaternary, quinary and senary effects, all over the world, quite apart from the plague itself, which is more than bad enough.


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