Ebola: Economic Context and Horrific Projections

Reader Notes: 

1.  Under more Normal circumstances, this depth of material would be for our Peoplenomics.com subscribers only.  But, because of the urgent and general nature of this material, it is being shared “in the open,”  If you share, please send a link to this page rather than copy-pasting so that we benefit in some small way.

2.  The Peoplenomics report for this weekend will be based on the follow descriptive narrative and will attempt to plot a reasonable expectation set for both corporate strategic planners and regular people through what’s shaping up as a possible “shit storm to come.”


In our forward contingency planning, we have expected for several weeks now that the Stock Market would be feeling serious impacts of the outbreak, particularly when an “in the wild” case shows up in the United States; which is now has.

What made the Ebola coverage Wednesday so interesting was it caught up to the headline I posted September 22 “When Will Ebola “Infect” the Markets?”

We now know that Wednesday, October 1, was the correct answer.  Airline stocks were down almost 3% and it’s this  that causes us to look further into the rolling impacts of the Ebola event because from a long wave economics perspective, this comes at a terribly inopportune time.

It’s inopportune because in the 48-64 economic long wave we usually see a deep bottoming out of interest rates that mark the bottom being in.  From there, the usual course of events is for a trough war to occur, such as World War Two that really ended the Great Depression. 

A study of history shows how clear this relationship between peak and trough wars is.  Most Americans don’t think much about the length of Great Depressions, though, because they are generally treated as one-off events as though of minimal persistence.

The Great Depression, like its precedents, however, was not a single-year event.  What most remember from school (if anything) was the Crash of 1929 and that’s that.  Yet a closer study of the data suggests that the initial bottoming period didn’t occur until 1932-34.  More significant is that after a period of a few years of “recovery” the Nation slipped into a further Depression.  This was the secondary depression of 1937 that persisted until war spending cranked up in preparation for the Second World War.

With such a clear history available, therefore, we can look back at the Great Depression and as an intriguing question:  “What would the Great Depression” have been like if, following the Crash and partial recovery into, oh 1936, or so, have been like if a pandemic had (rather inconveniently) arrived at that moment?

It’s not a trivial question, for sure.  But we do know the secondary depression was real.  And we can model how society would have behaved had the US been in the grips of a pandemic at a time when (as luck would have it) we had tons of raw materials, an under utilized workforce, and a will to fight.

Given that a new Depression likely has begun to unfold with the collapse of the Housing bubble, a fact not-yet recognized widely because of normalcy expectations and the failure of the financial community to resolve the twin issues of excess debt and malinvestment, the country has experienced a remarkable recovery – at least on paper.

In reality, however, while we saw the large pullback in 2008-2009, there has been no fundamental resolution of the excess debt issue.  In fact, in the most recent report on derivative operations, the Office of the Comptroller of the Currency’s office reports we’re in about the same net credit exposure position as we were leading up to the Housing collapse:

Credit exposure from derivatives decreased in the first quarter. Net current credit exposure (NCCE) fell 6%, or $19 billion, to $279 billion, the lowest level since the third quarter of 2007.”

Since the system of continuous settlement, the workaround for counterparty risk causing global lockup, as nearly happened with the Herstatt Event, worked well (all things considered), prior to the Ebola arrival we might have expected a series of “bumping along” until another collapse came along circa 2016-2017 as the underlying problems haven’t been addressed.

Ebola may change that.

In order to really recover from an economic setback, at some level you have to spread the wealth out from the One Percent back to the 99’ers.  The reason is obvious:  The One Percent simply cannot consume enough goods and services to drive recovery.

Working people need to have dreams and aspirations.

Unfortunately, these were already fading going into Ebola and it was on the verge of swinging the economic pendulum back to the right which might have, all else being equal, given the GOP a chance to regain the Senate.

The New Economic Reality emerging is that there will be little to no real recovery in terms of the crucial working people (Middle Class) for a multiplicity of reasons:

  • There is a well-documented  decline in the number of jobs available because of factory automation.  This keeps worker wages low and drives people into the Service Industry.  For this reason, Gross Domestic Product calculations are likely to be further jiggered in order to count more service jobs.  This results in increased circularity (shop-keeper economy) risk and places greater reliance on the public mood.
  • Further, the coming (marginally “legal”) Executive Amnesty program that will foallow the elections this fall shows a terrible lack of economic sophistication by the Washington Cartel.  Simply: The more low-paid illegal foreign workers we have in America, the slower the economic recovery of the Middle Class wage earners.  In other words, Immigration Reform really means lower-cost workers bidding for jobs and that doesn’t spread out wealth or raise prevailing general wage levels.  Scarcity builds price while excess supplies always kills pricing power.  Ugly as it is to allege, the likely impact of mass amnesty will be to continue the trend toward concentration of wealth.  Thus, it benefits the corporate ownership class (the One Percent) but not working people as purported in by the 6CorpPress.
  • Then we have the rolling “topping” of debt, as mentioned above.  Lenders have yet to feel any real “pain and suffering” yet the Middle Class has plenty and is willing to share.
  • And these contexts are against the backdrop of cyclical (trough) warfare that we forecast  in the 2017-2025 period without any stretch>  This is because by then the bankruptcy of this whole fracking business will be passing, leaving in its wake the problems of a society that has become overly dependent on cheap energy.  The major powers are still in the ramp-up of the Manufacturer’s Resource Wars.  If you like how global devolution has been rolling here lately, you ain’t seen nothing yet.

This was our playing field before Ebola shows up as a multispectral trend accelerant.  Let’s consider what Ebola does: 

Over the course of the roughly three or four years the disease is likely to run, we will probably see a death toll globally that could run in the 600-million range, plus or minus 200 million.

This figure in imprecise because of the variability in re-infection rates (RO) and these will in turn drift around because of how policy works.

Put your worst visions of the Black Plague and Great Depression in a blender and press the start button:  That’s the reasonable 3-year planning model.

My tax attorney/CPA/consigliore has been incredibly details in his forecasting effort and he’s been generous enough to share his detail work:

“George,

I did an analysis of the potential for Ebola infection and  deaths.  This analysis had two huge assumptions, neither of which may happen:

1)  The outbreaks reaches Lagos Nigeria and begins to run badly there – if it does that it WILL spread worldwide

2)  That physical containments on it’s spread, via Trade Restrictions and Travel Restrictions are reasonably effective at slowing it’s spread and also assist in bring down the RO.

This is NOT a worst case scenario.  This is a REASONABLE scenario IF it breaks out of it’s current “Hot Zone” into the greater populous of heavily populated 3rd world areas (particularly the mega slums).
————————————————————————
EBOLA Infection and Timing  (Revised Sept 23, 2014)
For “Informational Purposes” I am going to roll forward my Ebola Projections using the following assumptions:
(this is more sophisticated than a straight line calculation and is to be adjusted as needed as actual information becomes available):

Assumptions
All RO’s are per infection cycle which is stipulated as 21 days. In () will be the approximate monthly rate.  Additionally the RO’s are calculated off of those LIVING vs. both those living and dead for the simple reason the dead can’t infect people anymore (at least if proper burial practices are observed)
Using the latest CDC projections of September 22 which centers around the number of potentially 1,000,000 (past and current cases) at the end of January as a base number the following other assumptions are made. 

*an initial RO of 2.0 per 21 day period FOR THOSE STILL LIVING (which rounds to about 3.0 per 31 day month) up until about 6+- million infected,

*After 6+- million infected declining to an RO of about 1.5 FOR THOSE STILL LIVING,  (2.25/mo for living infected )

*After 50+- million infected declining to an RO of about 1.1 FOR THOSE STILL LIVING  (1.65/mo for living infected)

*After 200+- million infected declining to and RO of about .7 FOR THOSE STILL LIVING (1.05/mo for living infected)
(as new potential hosts in heavily infected areas become rarer and the worlds worst city slums are cleared out)

*After 500+- million infected declining to an RO of about .4  (.6/mo for living infected). 
*Finally as the disease spreads Travel Bans and Isolations attempts will be made so as to slow the disease. 

I am inserting 2 of those bans utilizing a “skipped month” as a way to calculate a temporary slowdown in the RO rates before they pick back up again as infections in new areas spread.  I am also inserting a 3rd “skipped month” as World Trade Collapses. (3 total skips).  For each of these 3 “slowdown” calculation I am holding all numbers steady and rolling forward to the next month. 

*It is hard to know exactly when those travel and trade restrictions will occur but for all intents and purposes they will reduce the effective RO on a temporary basis until the disease takes hold in the newly infected country, which will occur simultaneously with the disease burning out and thus not affecting many new people, in the most heavily affected countries. 

End of month projected numbers  (all numbers rounded)

*January 2015:  1,000,000  (US  CDC projection on 9/22/14 of potential cases) 
*February 2015:  2,500,000 total cases,  1,500,000 new cases, 1,275,000 infectious people at end of month

*March 2015:  6,000,000 total cases, 3,500,000 new cases, 3,000,000 infectious cases at end of month

*RO drop (to 1.5/21 day infection cycle)

*April 2015:  12,750,000 total cases, 6,750,000 new cases, 5,750,000 infectious cases at end of month

*May 2015:  25,600,000 total cases, 12,850,000 new cases, 11,000,000 infectious cases at end of month

*June 2015:  First Travel/Trade Ban
*July 2015:  50,000,000 total cases, 25,000,000 new cases, 21,000 infectious cases at end of month

*RO drop (to 1.1/21 day infection cycle)

*August 2015:   85,000,000 total cases, 35,000,000 new cases, 30,000,000 infectious cases at end of month

*September 2015:  Second Travel Trade Ban
*October 2015:  135,000,000 total cases, 50,000,000 new cases, 43,000,000 infectious  cases at end of month

*November 2015:  205,000,000 total cases, 70,000,000 new cases, 60,000,000 infectuous cases at end of month

*RO drop (to .7/21 day infection cycle)

*December 2015: 270,000,000 total cases, 65,000,000 new cases, 55,000,000 infectious cases at end of month

*January 2016 Trade Ceases, New travel bans

*February 2016: 325,000,000, total cases 55,000,000 new cases, 50,000,000 infectious cases at end of month 

*March 2016:  375,000,000 total cases, 50,000,000 new cases, 45,000,000 infectious cases at end of month

*April 2016:  420,000,000 total cases,  45,000,000 new cases, 40,000,000 infectious cases at end of month

*May 2016: 460,000,000 total cases, 40,000,000 new cases, 35,000,000 infectious cases at end of month

*June 2016:  500,000,000 total cases, 40,000,000 new cases, 35,000 infectious cases at end of month

*Drop RO (to .4/21 day infection cycle)

*July 2016: 520,000,000 total cases, 20,000,000 new cases, 17,000,000 infectious cases at end of month

*August 2016: 530,000,000 total cases, 10,000,000 new cases, 6,000,000 infectious cases at end of month

*September 2016: 535,000,000 total cases, 5,000,000 new cases, 4,000,000 infectious cases at end of month

*October 2016:  537,500,000 total cases, 2,500,000 new cases, 2,000,000 infectuous cases at end of month

*November 2016:  538,700,000 total cases, 1,200,000 new cases, 1,000,000 infectious cases at end of month

*December 2016: 538,300,000 total cases, 600,000 new cases, 500,000 infectious cases at end of month

*January 2017: 538,600,000 total cases, 300,000 new cases, 250,000 infectious cases at end of month

*February 2017:  538,750,000 total cases, 150,000 new cases, 130,000 infectious cases at end of month

*March 2017: 538,830,000 total cases, 80,000 new cases, 70,000 infectious cases at end of month

*April 2017: 538,870,000 total cases, 40,000 new cases, 35,000 infectious cases at end of month

*May 2017: 538,890,000 total cases, 20,000 new cases, 17,000 infectious cases at end of month

*June 2017 and forward – continuing steep declines in cases as the RO is no longer high enough for the disease to be self supporting

Total projected infection cases under the above assumptions is about 550,000,000
80% of all cases will probably occur in the 3rd world (could be as high as 90% depending upon travel and trade restrictions). 

Deaths in the 3rd world will probably be on the order of 70% and in the developed world on the order of 20%.

This equates to 310,000,000 dead directly due to Ebola in the 3rd world and 20,000,000 in the developed world  (developed world = Europe, US, Japan/Korea and the rest of already developed Asia).

The above is ONY a projection based upon the stated assumptions, though at this point in time with it’s current rate of spread and the current potential for it leaping into 3rd world mega cities those appear to be reasonable assumptions. 

*”IF” the disease can be kept contained in it’s current “HOT ZONE” then those are far too gloomy assumptions. 

*”IF” the disease leaps into multiple 3rd world mega cities  then those assumptions may be too conservative.

IN ADDITION the total death count in the 3rd world will probably be 65% more to 100% more than the above when one adds in Famine and other related problems that arise because of the Ebola epidemic. (many places in the world are NOT food self supporting and in addition many places that are will lose much of their agricultural production)
In the 1st world secondary effects will probably kill an amount equal to 50% of the actual Ebola deaths.

Adding everything together using the assumptions above one can extrapolate out to a projected TOTAL death toll (Ebola AND related secondary effects such as famine) of 600,000,000 +- 200,000,000

While these numbers seem to be exceptionally high this death rate is in line with what was experienced with the Spanish Flu Pandemic of 1917-1919 which reportedly killed 8-10%+- of the world’s then current population.  (current world population is about 7 billion people)”


Yes, we know many of the 1917 pandemic deaths were caused by aspirin overdose. But we might experience a financial analog to that, this time around.  A massive failure of capital markets could trigger that Worst of Depression and Black Plague at once.

None of which sounds like a very happy planet.  So this weekend in Peoplenomics, we’ll work on the specific items that strategic planners as well as regular people can do to prepare for this kind of multispectral affront to Life as We Knew It.

There is one social change you may wish to implement (not to offend every counselor and social worker on the planet but…_)

Has it occurred to anyone but me that the reason some Asian cultures bow is that it can be done from a distance and thus, is much less likely to spread contact disease than hugs or handshakes?

Many of these cultural habits have histories evolved from thousands of years of trial and error – so be on the lookout for many such changes to come.  They will be subtle, perhaps, but humans respond to survive…so keep your eyes open.

We will keep the tally going as a kind of “pro forma versus actual” exercise, but it’s not too early to take that “Seven Major Systems” of Life approach that I’ve written about extensively on the subscriber side, and begin to sketch out potential impacts of these rates of global disease transmission on their continued viability.

The Seven Major Systems of Life are:

  • Food and Water
  • Shelter
  • Transportation
  • Communications
  • Environment (including healthcare)
  • Energy
  • and…our specialty Finance

This is prepping of the most genuine sort.  Begin thinking now about your “long-lead time items” and then set some trigger thresholds for acquisition, depending on how well the projected numbers above translate into actual numbers going forward.

As always, we don’t advocate panic or hoarding.  But reasonable response to evolving data – front-running the herd a bit – is worth the effort.  Life is a ‘must be present to win” sort of game.

Good Luck as we roll toward the backside of globalism; just ahead possibly, as a most precarious future.  If these projections are anywhere near correct, what happens to the global economic system (and its dependent debt burdens) when there could be 10% fewer people to rule and tax, while 10% fewer people are making goods…

It has been postulated by some in the woo-woo set that “Earth has a consciousness – Gaia – and it will “get us back” for despoiling her.”  Ebola would certainly seem to fit that bill as well as the First Horseman role, as well.  But we shall see how well science does while hedging our bets appropriately. .

George   george@ure.net

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