The effects of the Wuhan coronavirus could end up being far more widespread than the illness itself. It is already affecting China’s economy, potentially to the tune of $60 billion.
Other predictions are even less optimistic, suggesting that if the outbreak isn’t rapidly contained, Chinese banks could face a $6 trillion disaster.
And the fallout won’t stop with China. The United States and China are intimately linked economically. The coronavirus outbreak could directly affect our economy, as well as the availability of many essential products that are made in China.
Zero Hedge reports that it has “all the hallmarks of a true Black Swan event.” If you’re not familiar with that term, it is a market-related term that describes a severe and unexpected event that cannot be predicted beforehand but could potentially cause catastrophic damage to the economy. (You can learn more about the term “black swan” here.)
A report on GnS suggests that it isn’t just the US and China that could suffer economically. Tuomas Malinen writes that this could trigger a global economic catastrophe.
The first shoe to drop outside China is likely to be the export-and China-dependent Eurozone. And, as we have warned on several occasions, many European banks will be unable to withstand a recession (see also Q-Review 3/2019 and Q-Review 4/2019).
When the European banking crisis, driven by the ensuing recession, resumes it will “go-global” fast as Europe holds the biggest concentration of globally systemically important banks, or G-SIBs.
It is also unlikely that hyper-valued U.S. stock markets will be able to endure the impact of a global recession. This is even more the case if the Fed tapers its term repo-operations in February, as planned.
Global recession, a European banking crisis and a crash in the U.S. capital markets will produce a global economic collapse which will almost certainly overwhelm any attempts—massive and coordinated as they may be—to turn the tide by over-stretched central banks and over-indebted governments.
This is, why the coronavirus outbreak should be treated for what it is: a potential harbinger of human and economic calamity. (source)
Currently, at least, global stocks are rising in optimism of a slowdown of the spread of the virus, but the Federal Reserve is monitoring the risk of economic disruption.
All this market stuff is a whole bunch of big numbers that don’t feel very personally relatable. But that doesn’t mean we won’t suffer financially as a result of the outbreak.
Getting down to nuts and bolts, how will this affect us here in the United States personally? There are a few different ways.
First of all, we import a crapton of stuff from China.
The cost of goods could go up as China attempts to recover from its own economic crisis.
The availability of goods could decrease since 400 million people are currently locked down in China. It’s a pretty safe guess that manufacturing is not ticking along as it has been in the past.
And it goes even deeper than that. Even products that are “made in China” have components that are made in the United States. A lot of the research and development is done in the states, and of course, the retail aspect also takes place here. In fact, 56% of what you pay for an item “made in China” goes to American workers and businesses.
And with the latest news that the virus can live up to 9 days on surfaces and that the actual incubation period is 24 days and not 14, well, bringing stuff in from China no longer seems like such a great idea now, does it?
So you can see how the ripple effect could cause a lot of problems on our side of the ocean.
Last April, the US and China were involved in a trade war that resulted in tariffs being added to products we were importing from China. At that time, my friend Marilyn Matthews compiled a very thorough list of the products that could see a price increase due to import tariffs.
That list is useful today in that we can use it to predict the products that could soon increase in price, be in short supply, or even be completely unavailable. You can use this list to foresee the things that could become a problem. Some things you could stock up on – like medications – but others are items you won’t know you need until you actually need them – like parts to repair your furnace.
And it isn’t just mechanical goods and electronics. A large number of medications and medical supplies will be affected:
That’s a whole lot of stuff – and much of it is incredibly vital, like medications, medical supplies, and essential components of things that we use every day.
It’s impossible to say whether the items in the list above will become unavailable, just like it’s impossible to truly predict how far and fast the Wuhan coronavirus will spread. Like the virus, we just don’t know enough yet and the situation is rapidly evolving.
If nothing else, your awareness of the possible economic and supply ramifications is a tool in your arsenal. Preparing for the economic fallout is just as important as preparing for the virus itself.
You won’t be caught totally by surprise like most of the other folks in this country. At this point, 2020 has certainly been full of surprises. It would be difficult not to wonder with a certain amount of dread, what’s next?
Article written by Daisy Luther for The Organic Prepper
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