A Denver friend was hit hard this week by the coronavirus. He didn’t catch the virus directly, thank goodness. It was the second order effects that got him. And his experience should set off alarm bells for those who feel insulated from the damage the pandemic will cause
Outside the crazy gyrations of the stock market, the virus is a news event. It’s a curiosity. An infotainment side-show to the three ring circus that is political season. It’s not something that is having a real-world impact on most of our lives. Not yet.
The coronavirus will hit you directly.
The fast-spreading virus will wreak havoc in ways difficult to imagine. The first order risks relate to health, of course. Some estimate that 60-70% of the global population will contract COVID-19 eventually.
The second and third-order risks include economic and social consequences. These risks, shockingly, are MORE DIRE than the virus itself.
Most of the products we consume are made in china or are constructed of materials derived from China through our interconnected global supply chain. This supply chain is broken as China locked down its population (and factories) to contain the virus.
For some period of time products that were cheap and plentiful will be scarce and expensive.
Supply chain disruptions will cause major challenges for businesses, individuals, and the broader economy.
And it’s damage to the economy that the authorities they seem most interested in avoiding. That explains why they spend more time urging calm and encouraging central bank intervention in the financial system then testing for the virus.
Second-Order Pain in Denver
The American Physical Society (APS) canceled one of the biggest physics conferences of the year due to coronavirus fears with just a day and a half notice. Physicists from all over the world come to this event to share research and network. Many had already arrived in Denver by the time APS pulled the plug on the event.
This was a wake-up call for my friend who owns hotels, restaurants, and other businesses locally.
His hotel went from fully booked for the week to virtually empty overnight.
In the blink of an eye a good month turns bad.
When I spoke with him he expressed shock.
“I’d heard about the coronavirus, but I didn’t think it’d come to Denver!”
Now he’s rethinking his future plans from cancelling an upcoming vacation to putting new investments on hold. He survived the financial crisis. And he’s making moves to ensure he and his businesses can survive this one.
My friend is one of many waking up to the fact that the threat is real and that they need to take action to protect themselves, as best they can, from what’s coming.