Water Cooler Observations, March 25, 2020

Hiemstra_FHFA_02052009By Stephen W. Hiemstra

Those of you who know me know that in my first career, I was a financial engineer and economist with various federal agencies, as the photo to the right shows.

Starting Wednesday, March 25, 2020, I am going to lean into my background as a recovering economist to offer observations on our distracting world here on T2Pneuma.net. Let me know your questions if this piques your interest.

Corona Virus

During the past week, I was asked by a pastor friend to report on international corona virus statistics. The European Centre for Disease Prevention and Control,An agency of the European Union, reports daily case and deaths statistics for 166 nations around the world.

These statistics show that mortality rates different significantly by country and region. These differences reflected differing levels of testing, differences in the local spread of the virus, and differing intervention capabilities.

Corona Virus Cases, Deaths, and Mortality Rates by Region, March 24, 2020
Countries Region Cases Deaths Mortality Rates
Count Change Count Change
Western Europe 186,347 13.9% 10,108 16.5% 5.4%
Eastern Europe 5,374 14.9% 40 25.0% 0.7%
Africa 1,689 31.0% 52 23.8% 3.1%
Middle East 28,696 8.6% 1,881 7.9% 6.6%
Asia 96,397 0.8% 3,443 0.7% 3.6%
Australia and New Zealand 1,965 8.5% 7 0.0% 0.4%
Pacific 3,143 41.7% 134 14.5% 4.3%
Atlantic 13 0.0% 0 #DIV/0! 0.0%
North America 48,105 31.3% 614 25.6% 1.3%
Central America 927 13.9% 13 62.5% 1.4%
Caribbean 405 16.4% 5 0.0% 1.2%
Latin America 4,980 18.6% 68 28.3% 1.4%
World 378,041 11.7% 16,365 12.1% 4.3%
Source: European Centre for Disease Prevention and Control

Mortality rate hot spots include Italy (9.5 %), Indonesia (8.5 %), Iran (7.9 %),  Spain (6.6 %), UK (5.0 %), Netherlands (4.5 %), France (4.3 %), and China (4 %). This list changes daily. By contrast, the U.S. rate is 1.3 percent. Other countries with high rates do not report enough cases to have confidence in the figures.

This crisis will not end until the daily changes in the number of cases begins to decline and mortality rates begin to fall. Currently, worldwide the number of cases increased over yesterday by 11.7 percent and the average mortality rates for reported cases  was 4.3 percent.

Testing Implications

While most testing today is on patients with obvious symptoms, I look forward to a wider field of testing. South Korean data that I saw earlier in the week showed a significant number of young people testing positive who perhaps were asymptomatic.

Several aspects of this asymptomatic phenomena are important. While most commentators have focused on the potential for these people to spread the virus, we need to know who has effectively been inoculated. Before anyone talked about the corona virus in January, my wife was horribly sick with similar symptoms–she never previously took any sick leave. Afterwards, I had a head cold have self-quarantined the past two weeks. If either or both of us are now immune from getting corona virus, then we both need to be out helping others.

The punchline in this discussion is the question: when and how do we stand down safely as a nation from the quarantines? Politicians have begun to talk about this issue. Those who have recovered from the virus presumably have immunity and can safely return to work after some point, but we need to know from physicians when it is safe to do so.

Financial Implications

As a former financial regulator, I worry about the financial system with so many people out of work. Bank regulators normally are required by law and regulation to write off non-performing loans from capital after 90 days. By June, many institutions will be hitting that trigger. While regulators can waive these requirements temporarily, the longer this crisis lingers the more pressing the concern will be.

Insolvent banks are unlikely to make new loans and foreclosures will hit young workers and minorities harder than other groups whose employment is more secure. For those already strapped with student debt, the bind will grow even faster. This outcome could change election outcomes and permanently change people’s attitudes about credit and investing. My grandfather nearly lost the farm in the Great Depression of the 1930s and the experience forever changed his attitude about banking.

Regulators worry about insolvent banks because they have the perverse incentive to take risky bets. If you are going to fail anyway, why not bet the farm, so to speak? Changing accounting rules does not completely negate this effect because then bankers are investing someone else’s money, not their own.

Gethsemane Moment

When you are in pain or afraid, where do you turn? When Jesus was facing death in the Garden of Gethsemane, he turned to God instead of his pain and fear.

 Then Jesus went with them to a place called Gethsemane, and he said to his disciples, “Sit here, while I go over there and pray.” And taking with him Peter and the two sons of Zebedee, he began to be sorrowful and troubled. Then he said to them, “My soul is very sorrowful, even to death; remain here, and watch with me.” And going a little farther he fell on his face and prayed, saying, “My Father, if it be possible, let this cup pass from me; nevertheless, not as I will, but as you will.” (Matt. 26:36-39 ESV)

We face a Gethsemane Moment today worldwide. Where will you turn?

Water Cooler Observations, March 25, 2020

Also see:

Believer’s Prayer

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Author site: http://www.StephenWHiemstra.net

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