Yes, It's Everywhere

As I argued Friday, Covid-19 is everywhere. There are likely hundreds, potentially thousands of people walking around with the virus.  Maybe they're sick, maybe they aren't. The inability to test for the virus means that as more tests are available, more people will be found to have the virus. Those tests will not mean the spread, necessarily, of the virus.  It simply means we know more people who have it.

This is where poor public health policy and the lack of expert control from Washington begins to have an impact. We should have been mass producing test kits since January.  The shortage of those test kits is a massive problem and doesn't bode well for future response times. 

What's more, this will mean that March will see a massive explosion in numbers.  We've seen this in Italy and Iran.  If you look at any country with cases, you will see a mass explosion in cases.  This is as much a testing issue as a transmission issue. Covid 19 has an R-naught of 2.28, which means someone with the virus will usually infect 2.28 people.  That's a geometric, as opposed to algebraic, expansion, and similar to the flu. Because there is no vaccine, there is no stopping or reducing that R-naught. 

The highly contagious nature of the disease combined with its long incubation period means that it's currently spreading beyond the ability of medical professionals to track it.

This explosion in cases will likely accelerate the market crash, since markets are as jittery as a long tailed cat in a rocking chair showroom. The broader question is what effect this will have on actual supply chains. Chinese trade is already collapsing under dual pressures from the virus and the trade war. It seems highly unlikely that stores will run out of food or we will see large scale economic disruptions.  Robert Samuelson lays out the scenario where uncertainty in markets creates a downward spiral. As he notes, interest rates are already very low (a problem that should have been apparent to anyone concerned about a future economic or fiscal crisis) so the policy tools available to the government is pretty low.  If consumer spending collapses in combination with supply chain disruptions, then we will be looking at a significant recession.  Unlike 2008, though, this does not feel like a problem that will drag out for years.

Relying on Trump to make good decisions is a terrible bet however.