I had just finished posting an article named A Black Swan Named Swine Flu when I came across an insightful article by James Howard Kunsler that adds his always interesting view on the swine flu issue.
As James and I both point out no one at this stage knows how the Swine Flu outbreak will develop. It may turn out to be a fairly minor public health concern, especially in Mexico, and then fade away, or it may turn into a world wide pandemic with terrifying consequences for all. With any viral outbreak the potential is there for it to become as serious as the 1918 flu pandemic that killed somewhere between 30 million to 100 people. That was out of a world population that at the time was about 1.7 billion.
Of course, we now have medicines and medical facilities that were non existent in 1918. But we also have about 6.5 billion people on this planet, many of them living in densely packed urban mega centers, like Mexico City. A viral infection spreading among a densely packed population could growth at an alarming rate. Especially if the virus is a new strain, as the swine flu virus is, and there are no vaccines really for immediate use.
Another danger in our modern highly mobile world is that international travel is frequent and fast. Airlines can transport you to just about any other spot on the planet within 30 hours. Air travel is a vital part of the world’s transportation system and huge numbers of people are moved about every day. If there is one infected person on an airplane there is a good chance that at least a few fellow passengers will become ill shortly after completing the flight.
About ten years ago I flew to the Philippines on vacation and became seriously ill about two days after checking into the hotel in Cebu. I recovered just in time to catch my return flight two weeks later. What a vacation that was. Almost all of it was spent in bed at the hotel wondering if I would live or die. I’m sure that I was exposed to the flu on the aircraft during the 13 hour leg of the flight to Manila. If this swine flu thing becomes pandemic you do not want to fly anywhere.
It is still too early to know how the swine flu is going to impact us and the world economy. For sure, airline and travel related stocks, like hotels, are already taking a beating. If it becomes apparent that the swine flu will become widespread and is a deadly killer then all hope of an early recovery in the world economy and stock markets will be crushed.
Here is what James Howard Kunsler has to say.
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Things come out of the woodwork. All of a sudden it’s a mutant H1N1 swine flu, with bird and human DNA accessories. We don’t know where this is taking us. It could be a media blowover, like SARS, or it could be a big deal, shutting down travel and assemblies of humans. It would be a very big deal if it killed, proportionately, as much of the population as the 1918 flu event — the worldwide toll then was roughly 30 -100-million out of a global population around 1.7 billion. Now the world population is over 6.5 billion. The only thing anyone can predict at the moment is that there will be a lot of very worried health officials and politicians out there in the days ahead.
This flu epidemic comes just as global economy itself lies comatose in the economic intensive care unit, with IV lines of dollars, euros, yen, and renminbis transfusing its hollowed-out carcass. It’s an odd time for attention to be diverted from that awful spectacle. The cash transfusions have sent the Cable TV gang into raptures of “optimism” — meaning they expect debt securitization to resume as before, along with Yuletide-level credit card shopping sprees in the malls, a mass splurging on new cars, and a renewed frenzy of house-building in the Florida buzzard flats. Those “green shoots” and sprouting “mustard seeds” they report seeing may themselves be a flu-like symptom. I don’t know what the so-called Mexican swine flu will lead to, but the global economy as we’ve known it is a goner.
Even if the Mexican swine flu turns out to be something of a false alarm, it will require billions of dollars in unexpected new outlays for prevention operations here in the USA — reinforcing the false idea that the nation has bottomless resources (the same idea that has been driving the bail-out fiesta). My guess is that the fear emanating from the story will be a potent generator of paranoia in the meantime, leading to widespread closures of things, canceling of events, restrictions on travel (official or otherwise), and a sell off in the financial markets. And that’s if the flu turns out not to amount to anything.
If the flu is the real deal, it will surely drive a stake through the faintly-beating heart of that invalid global economy, and possibly even continental-scaled economies like the US, the Euro-zone, and China — any place where things and people have to move long distances to keep life going. The US, obviously, suffers in this instance from its proximity to Mexico, and the fact that so much of our food comes from places that employ casual Mexican labor. A serious flu outbreak would be a short path to food shortages in the US, with our three-day supermarket inventories and just-in-time shipping methods. It would not be such a bad idea now to lay in supplies of beans, brown rice, cooking oil, onions, and toilet paper.
The big story at the end of last week was New York Attorney General Andrew Cuomo’s pursuit of former Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke in the matter of Bank of America’s gobbling of Merrill Lynch last fall. It is alleged that the dynamic duo importuned BOA chief Ken Lewis to avoid disclosing some important particulars to the BOA shareholders, as required by law. The outstanding stage-whisper coming from all this was the word “indictable” in reference to messers Paulson and Bernanke. It goes to show how swiftly events can move beyond “unthinkable” in extraordinary times. Now, former Merrill Lynch chief John Thain — of thousand-dollar trash-basket infamy — has come back out of the woodwork to backbite BOA’s Ken Lewis over who-said-what in regard to a treasure chest of bonuses divvied up during the blur of TARP payouts last fall. Thain complains of being unemployed since then — though one wonders why he doesn’t just shut the fuck up, buy half of Nantucket with his untold millions of booty, and learn to play the oboe or something. This giant CEO cat fight was just getting interesting when the Mexican flu pulled the news-plug on it.
Of high interest to those confused and perplexed over President Obama’s actions so far in the banking fiasco, I commend a great piece by fellow blogger-on-the-margins Charles Hugh Smith: Obama’s Secret Plan. This analysis is low on the paranoia and high on the Machiavellian maneuvering insight. The basic idea is that Mr. Obama has gone along with all the TARPing and PPIPing because it was tactically the only way that he could give the Wall Street plutocrats enough rope to hang themselves — and that this was the only reality-based strategy that could get public opinion in the mood for real change. It explains a lot, if it’s true. Alternately, it would be very sad to learn that Mr. Obama really believes he can rev back up a securitized-debt-and-consumption fiesta by turning the Federal Reserve into an ATM.
In any case, the banking-and-investments sector has been on auto-pilot for a few weeks. Lesser banks are crashing around the country (Idaho, Florida, California last week), but the remaining Big Boyz are still lurching through the landscape like so many Frankenbanks, jazzed up on electric surges of digital cash. There are ever more hints of a peasant uprising against the castle of privilege, but no sign just yet of the flaming brands and shaking fists from the village below. This flu thing will put the schnitz on their distempers for a while.
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There is no doubt that the swine flu could become a classic Black Swan event. We had all be very alert not only with our investments but with our lives as this event develops.
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