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The Cascading Economic Collapse From Coronavirus May Have Started

by John Galt
20.02.20 21:30 ET

The nightmare of the n-Cov19 coronavirus outbreak has just illustrated how globalization has weakened and indeed exposed the dangers of the programs initiated by the world’s elites over the last three decades.

The World Health Organization is stumbling and bumbling over its words to do everything but declare the new virus outbreak a pandemic, knowing full well the economic panic that press release will initiate. Central bankers around the world are quietly warning large banks and corporations to prepare for the worse but reassuring an increasingly panicked public that they are ready for such an event.

In the interim, governments like the Communist Chinese are probably fudging or manipulating the data to indicate the crises is easing when in fact that’s the furthest thing from the truth. The nice thing about the smart money however, is that the lie is often exposed and today was a prime demonstration of how a recovery in equity prices from the lows is only the tip of a very large iceberg which may have already ripped a whole in the side of the global Titanic economy.

  1. Another Inversion of the U.S. yield curve

This snapshot of the U.S. bond market should be terrifying to most sane souls:

Courtesy of Investing.com

The smart money is always right and the price action since the recent market new highs seems to indicate that the threat of a global pandemic has terrified said smart money. Usually this is an indicator of an economic disruption or recession six to ten months out, but that was already flagged over six months ago with the last inversion. Watch the 3 month/10 year spread carefully and God help us if the 30 year drops below the 3 month yield.

2. Spot reporting of U.S. Coronavirus Cases Will Increase

Tonight a positive case was reported in an unusual location, Humbolt County, CA:

From the Humbolt County, CA Health and Human Services Press release:

First case of COVID-19 confirmed in Humboldt County

The Humboldt County Department of Health & Human Services Public Health Branch has received confirmation from the California Department of Public Health and the U.S. Centers for Disease Control and Prevention (CDC) of one case of COVID-19 in a Humboldt County resident. A close contact who has symptoms is being tested as well.

This marks the first confirmed case of the novel coronavirus in Humboldt County. Presently, the ill individuals are doing well and self-isolating at home, while being monitored for symptoms by the Public Health Communicable Disease Surveillance and Control Unit. Close contacts of these individuals will also be quarantined at home and monitored for symptoms by Public Health staff. With the amount of foreign travel by county residents, including travel to China, it is not surprising that a case has emerged locally. Additional cases may occur either in returning travelers or their close contacts.

“It’s important to remember that the risk to the general public remains low at this time,” said Humboldt County Health Officer Dr. Teresa Frankovich. “Despite the fact that Humboldt County now has a confirmed case of COVID-19, there is no evidence to suggest that novel coronavirus is circulating in the community at large.”Frankovich added that transmission in the U.S. to date has been among close contacts and not among the general public.

This news is only the tip of the proverbial tiger tail. From NBC News, the story that over 5,400 are under “self-quarantine” in California, among other states, should be a red flag that the outbreak inside the U.S. is just beginning:

Overall, 575 people in New York have been identified as being at “medium risk” because of recent travel to mainland China, according to the state Health Department.

It’s one of many states monitoring travelers from China who have agreed to lie low for a few weeks out of an abundance of caution.

The California Public Health Department said there are more than 5,400 such people in the state. In Washington state, 745 people have been asked to self-quarantine. Georgia health officials identified about 200 travelers.

The Michigan Department of Health and Human Services said more than 300 people were referred for monitoring.

In Virginia, 138 residents are being monitored. “They were asked to remain at home and practice social distancing,” said Dr. Lilian Peake, the state epidemiologist. She said social distancing means avoiding public transportation (including taxis and ride-sharing) and large public gatherings and staying about 6 feet away from others.

A total of 27 people are under voluntary self-quarantine in Iowa. North Dakota has 10.

The problem is that even though these individuals have “self-quarantined” in place, how many have violated their isolation and conducted normal business such as going to the post office, grocery store, bank, etc. while possibly being in an asymptomatic state as other “super-spreaders” overseas were. A great deal of faith in personal responsibility is being assigned to a group of people in a nation where personal responsibility is an anathema.

The additional news that the test kits are not providing consistently accurate results and the same problems that China is encountering could easily occur here.

3. South Korea and Japan are seeing Exponentially More Cases

Breaking on Yonhap News from South Korea tonight:

S. Korea reports 52 more cases of new coronavirus, total now at 156

And even more bad news:

South Korea city deserted after coronavirus ‘super-spreads’ at church

The impact has already been pronounced as this chart by CargoMetrics via an article in AmericanShipper.com is a major red flag that supply chain issues are around the corner:

Add in the number of confirmed cases topping 70 in Japan (excluding the cruise ship) plus the impact warnings from manufacturers throughout the region, and it is only a matter of time before the trickle down effect hits the Asian economy and then those of Europe and America.

4. Gold and the U.S. Dollar Rising in Tandem

This is the real oddity of what the markets are witnessing at this time. As the common US DXY approaches 100, gold is breaking out of its technical trading range of the past 6 months and started to explode towards its old highs:

Courtesy of Investing.com
Courtesy of Investing.com

With the move alongside the US Treasury market, the German 10 year Bund collapsing back below a -.40% yield again, and Palladium hitting record highs, the only confirmation is that the proverbial “smart” money is preparing for a storm, much like they did in late 2007 to early 2008.

My theory is that the day we see over 1,000 cases confirmed inside the U.S. the equity markets will implode collapsing by over 30% in just a matter of days.

What does this all mean for the long term? If there is no cure for this disease within 180 days, odds are the global economy will collapse into a one to two year economic depression in most nations while some countries will just experience a severe recession. Central banks and legislators will have to past temporary UBI (Universal Basic Income) laws, suspend foreclosures and collections, and reimburse landlords, banks and other creditors if individuals live within quarantine zones. The economic disruption will spell the end of shopping malls as we have known them, many restaurant chains will disappear, and even some sports leagues and venues will fall into bankruptcy also.

Let us hope that the government is not lying to us again, but the political consequences of their failing to protect the public will result in massive changes on a global scale. If this continues on its current pace, it will impact not only the U.S. elections in November, but the European Union, Middle East, and the third world causing a revolutionary phase in some places, and a nationalistic fervor in others throughout the globe. Prepare for these changes because they are coming based on the information available at this moment.

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