You think the swine flu has Your Working Boy forgetting about the ongoing economic meltdown. Ha! Let's do a round-up, shall we?
First, Stratfor's morning e-mail discusses the possible economic and political consequences of a swine flu global pandemic, starting with how it could cause people to stay at home en masse to avoid infection:
That in turn could drive a stake into the heart of consumer spending, which is already more than a little weak. If the disease -- or popular perception of the disease -- were to reach pandemic proportions, consumers could begin to view an impulse trip to the mall as potentially a life-or-death choice. Discretionary spending would collide with discretion, as individuals started to forgo trips that would bring them into contact with large numbers of people -- not just at major sporting events and public rallies, but also movies and restaurants.Depending on the extent of the virus's spread, it could directly affect production: Offices and factories would shut down in areas where the flu was particularly rampant, amid efforts to control it. International travel and trade might well be affected, both voluntarily (as people avoided travel and refused to buy goods from countries heavily infected) and involuntarily (as states acted to protect their populations).
The greatest effect would be psychological. In a world where consumer confidence has already been deeply affected by the economic downturn, a pandemic would dramatically darken the mood of the international system, with potential impact on governments.
Ruh-roh! And even without the swine flu, Ambrose Evans-Pritchard forecasts that some capitalists countries are running pretty damn short of capital. Excerpt:
Great bankruptcies change the world. Spain's defaults under Philip II ruined the Catholic banking dynasties of Italy and south Germany, shifting the locus of financial power to Amsterdam. Anglo-Dutch forces were able to halt the Counter-Reformation, free northern Europe from absolutism, and break into North America.Who knows what revolution may come from this crisis if it ever reaches defaults. My hunch is that it would expose Europe's deep fatigue - brutally so - reducing the Old World to a backwater. Whether US hegemony remains intact is an open question. I would bet on US-China condominium for a quarter century, or just G2 for short.
The legendary investor Jim Rogers is betting on China emerging from this crisis on top of the world. Excerpt from an interview with Time:
The reason I focused on China is you've said that the 21st century is going to be the Chinese century; you're teaching your daughters Mandarin.Yes, well, we can pick on China, but remember, the largest creditor nations in the world are in Asia now -- it's China, it's Japan, South Korea, Taiwan, Hong Kong, Singapore -- all the money is here. Even if the Chinese continue to buy, somebody's going to stop buying that stuff. If I was the Chinese I wouldn't buy it. I'm waiting to sell it short at the right time.
Do you think this crisis is just going to solidify the advantages of China and these other Asian and Southeast Asian economies?
Well, again, throughout history, the center of the world has shifted to where the capital is, where the assets are. You don't see any period in history where things are shifting to the debtors, and America's the largest debtor nation in the history of the world. Unless something's different this time, unless the world's changed very very dramatically, the center of the influence, the center of power, the center of the earth, the center of the globe, is going to be shifting towards Asia, because that's where all the money is. Have you ever heard of anybody saying, "Let's go to where all of the debtors are"? It just doesn't happen that way.
Finally, Simon Johnson went to hear Larry Summers speak about the administration's economic crisis strategy on Friday, and came away doubleplus unimpressed. My advice to you: buy stock in Purell.
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Now the AP reports that ground zero for the swine flu outbreak could indeed be a factory farm.
If this does reach pandemic proportions, localism and localvores are going to look smarter all the time.
And now Smithfield's stock is getting hit hard. Methinks Wall Street already knows.
This swine flu "pandemic" is as much a load of bull as SARS was in '03. During the early stages of SARS, there were medical professionals on the net that were predicting that it would kill 10-15% of the human race. China's economy shut down (due to panic) for 3 months, then nothing happened. Everything was fine.
Likewise, there are 50 people in the U.S. with this flu. None of them have died. Most of them say that it is very "mild". This "plague" is as much a creation of sensationalistic media as SARS. The media makes its money by hyping everything to the hilt so that people will pay attention. It is no accident that MSM icons such as the New York Times are financially on the ropes. People are getting sick of their BS.
China's "dominance" isn't going to last very long, if it ever comes to pass at all. Remember the demographics; China's population is aging even faster than ours.
They also have other problems, to wit:
a) Their economy is maybe an eighth the size of ours, and their old-age/pension spending problem is going to go south in a hurry;
b) The sex differential of their population is going to increase the probability of civil unrest;
c) They are also in the middle of a massive urbanization transition. Millions of jobless peasants move to the cities each year, and their economy is simply not up to the task of providing gainful employment for all of them.
China is not going to be our problem. OUR problem is going to be maintaining social cohesion in the face of the following:
1) A government that will lose legitimacy as its debts mount and its ability to pay promised benefits declines. Look for a default on US government debt-payments sometime before 2015, as well as a nasty bout of nearer-term (2010-13) inflation as all of the current Administration's commitments come home to roost. "Weimar America" is a distinct possibility, on the order of at least one in three;
2) An increasingly older white population that will expect to be subsidized in its idleness--and, more importantly, its need for advanced medical care---by a more-minority working population. Astute racial demagogues--2012 versions of Al Sharpton---will find much support by fishing in these waters;
3) An increasing dominance of ethnic and race-based politics as the population demographics shift. There will be less emphasis on growing the pie (less than there already is, to be exact), and more emphasis on divvying it up, once the current generation of Democratic pols dies off. (You honestly don't think the GOP is going to stage a comeback any time soon, do you ??);
4) A health-care system that will be increasingly socialized as demand for care rises. Look for, first, an attempt at establishing a single-payer system (by 2012), and then, as demand intensifies, outright expropriation of the health-care system. By 2020, it will likely be illegal to provide medical care privately and doctors will likely have been forced to become civil servants.
And that's when the fun starts, when the central government loses its ability to keep its promises. Revolutions have occurred for less.
Stock up on popcorn and sodas, gang....the Really Big Show is coming to YOUR town soon. And a ROCKIN' good time WILL be had by all--guaranteed or double your bullets back.
Your servant,
Lord Karth
I'm not (yet) convinced of the inevitability of Chinese dominance. See here:
mpettis.com/2009/04/the-death-of-the-asian-development-model
As for the possible effects of a pandemic-induced shutdown of world trade upon China's export-driven economy...I leave this as an exercise for the reader.
As for China's much-ballyhooed reserves - I'd be interested to see how they might diversify out of the dollar w/o crashing the it (and thereby jacking up the prices of their exports for one of their largest trading partners).
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