Victor David Hanson – from his perch.
The world is changing at a pace not seen in years, and it is no time to become captives of fear despite the real and immediate dangers we face.
The coronavirus and the ensuing panic, at least for a few more weeks, have stagnated the economy and scared global financial markets, accompanied by both collateral, and independent and simultaneous, bad news. Rumor- and panic-mongers predominate; the rational and reasonable are written-off as naïve and out of it. Thousands may die, but millions who will not are terrified into anxieties and sleeplessness that they will.COVID-19 itself has raised fundamental questions about the merits of globalization in general, and in particular the wisdom of any sovereign nation outsourcing key industries like high-tech, pharmaceuticals, medical supplies, and food processing to an autocratic, non-transparent—and dangerous—nation like China.
The current oil glut and price crash—a result of a Saudi-Russian price war, in part directed at record U.S. production, in part due to the crumbling of OPEC, and less demand as a global public, frightened by the specter of the Wuhan virus, stays closer to home—are radically changing the relationship between oil sellers and buyers. In particular, vulnerable cash-hungry exporting countries like Iran, Russia, and Venezuela are losing clout. Interest rates are also dropping. The world at large may for a time experience historic de facto negative interest.
Trump Was Right About China
Ostensibly, all of this news should be terrible. And, of course, terrible is the reality that as I write over 6,000 people have died worldwide (out a global population nearing 8 billion) from the disease caused by the coronavirus. But that said, there will emerge winners and losers in every crisis, whether medical, economic, psychological, or political.
Donald Trump was ridiculed for taking on the Chinese juggernaut in 2017, even though he was not wrong that China was a serial world trade cheater—manipulating currencies, dumping products below the cost of production, appropriating technology, infringing on patents and copyrights, and running up huge asymmetrical trade surpluses.
The writ against his pushback on China was that it was hopeless to fight a 1.4-billion-person powerhouse, destined to surpass the United States in annual GDP in just a few years. Or Trump was deemed naïvely reckless, given that to achieve symmetry, legality, and fairness would incur too much pain and involve ossified and discredited concepts like tariffs.
But either by design or accident, the Trump standoff tore off the China scab. The exposed putrid wound beneath has terrified the world: lying, deceit, and subterfuge surrounded the mysterious COVID-19 contagion that emerged from Wuhan late last year and now has spread worldwide and panicked the globe. The coronavirus helped remind the world that the Hong Kong democracy protests, the creepy 1-million-person reeducation camps for Uyghur Muslims, and internal Chinese Orwellian surveillance were characteristic not aberrant.
In a reductionist sense, it is not surprising that a China, systematically lying to and cheating its trading partners, cannot be trusted to tell the world how a virus was born on its own soil, spread among its population, and hopped oceans into other nations.
When the virus peters out and the panic fades, China may be permanently rebranded and recalibrated by the world at large. Its trading partners will trust it far less to honor any commitments or to abide by any international agreements. Supply chains will be diversified. Tourism will be reduced in fears another such coronavirus will follow SARS and COVID-19—and be hushed up. Countries that had particular close commercial and cultural ties with China—Iran, South Korea, and Italy—were hurt most during the epidemic by Chinese silence and duplicity.
Some assembly plants will be shut down. Nations will be less trusting to outsource key industries to Chinese companies. Supply chains were changing before the epidemic and will redirect even more afterward.
In sum, China’s mercantile system will take a hit. The only country that can match and surpass its economic output, the United States, will be the long-term beneficiary as investors and businesses look away from Beijing to a more transparent partner.
More Bad News for Bad Actors
The United States, remember, is both the world’s largest energy and food producer. In that regard, such self-sufficiency once again will be appreciated by tens of millions of Americans as they sequester at home with ample food and power to allow the virus to sputter out. Isolated Americans worry not over whether they will starve or have enough heat in their homes, but whether their prescriptions will be filled, and safely so.
Crashing oil prices will also hurt the expansionary agendas of Vladimir Putin’s Russia, especially in places like Syria and Eastern Ukraine. Russia is already bleeding billions of dollars by propping up the murderous Assad dictatorship in Syria. Soon it will be doing so with far less apparent discretionary income.
Iran may be the biggest loser of the current chaos. U.S. sanctions already had cut Iranian oil revenue by about 90 percent. The remaining ten percent of sales, and in addition whatever income Iran received through smuggling and illicit sales, may be worth about half of what such reduced revenue garnered just a few months ago.
The theocracy has lost all credibility with the financially strapped Iranian people, 1,500 of whom it recently murdered in the streets. The mullahs lied to Iranians both about the shooting down of the Ukrainian jetliner and the extent of the COVID-19 infection sweeping through their country. The U.S. policy of “maximum pressure” replacing the flawed and appeasing Iran nuclear deal, will be seen as especially more effective each week.
Certainly, the regime is threatened with financial crises not seen since its war with Iraq in the 1980s, but this time of its own making and due largely to its own duplicity.
The Toll—and Eventual Upside—at Home
Ostensibly, the panic-driven shutdown of the U.S. economy could plunge us into recession or worse, with dire consequences for the 2020 campaign. Some on the Left see COVID-19 in unapologetically political terms, as the magic solution to ending the Trump presidency and his supporters in a way that all the past hopes and dreams of doing so—from subverting the Electoral College after the November 2016 election to Mueller and impeachment, and all in between—utterly failed.
Whatever the ultimate human and economic toll from the coronavirus, there is no doubt that Trump, as president, will be blamed for the economic slowdown of spring and perhaps even early summer. The media despises the president as does entertainment, academia, and the media, ensuring in popular culture and the news that he will be demonized in a way Obama was not, despite reacting far more slowly, to the swine flu threat of 2009.
But here are some caveats. Warmer weather and spring, global quarantines, travel bans, more testing and increased knowledge of the virus may all eventually conspire to slow its spread. And when its relative non-lethality is fully digested (perhaps 98 or 99 percent of those in the general population below 65 in previously good health who are infected recover), and the cases begin dropping off, the economy will not just recover but take off.
That more positives come back from far more testing does not necessarily mean a pandemic in the tens of millions of cases is certain, but perhaps reflects that the continuing ripples of the initial outbreak. In the two to three months when China did not apprise the world of the outbreaks and 10,000 and more a day were flying into American airports from China, lots of Americans were exposed and became carriers, and either had no symptoms or attributed their illnesses to the flu or bad colds as still more were infected. After all, it is hard not to concede that hundreds were not coronavirus positive of the million or so Chinese visitors who arrived in the United States during that critical time frame between November and January.
As is always the case at the beginning of an economic recovery, the end of a war, or the relief that follows from the departure of a plague, the public rejoices and then spends and splurges. Reason will eventually replace panic as Americans conclude that COVID-19, while more lethal to vulnerable age groups and those with chronic illnesses, may not be quite as pandemic in the manner of historic influenzas such as those in 1918 (500,000 plus US deaths) or even 1957 (70,000 deaths).
That ensuing economic uptick will be multiplied by crashed oil prices that are likely to help U.S. consumers while not permanently hurting U.S. frackers, much less the U.S. economy, which is both the world’s largest consumer and producer of oil and natural gas. More likely, it will do more damage to the oil-producing Middle East and Russia. American consumers will receive a huge stimulus of reduced prices at the gas pump, just as summer driving approaches.
Near-zero interest rates may be bad for the long-term economy. They punish thriftiness and (especially elderly) Americans who will lose real dollars on their savings accounts while rewarding the indebted. But in the short term, the cheaper borrowing will spur home and car sales and major consumer purchases.
Who would wish to game the election-year politics of these chaotic times, especially the more macabre calculations of the electoral beneficiaries of the media-driven hysteria over the COVID-19? Nonetheless, Vegas handicappers might envision the speculation not to whether Trump will be hurt in the late spring polls by the global panic and growing number of U.S. COVID cases (he already is), but whether he will be hurt enough to matter when the economy inevitably picks up again by later spring and summer.
One key will be how well each day Trump talks sense to the nation, explains all the measures the government currently is taking, and reassures the panicked public that whatever downturn the United States might experience over fears of a viral epidemic will be eventually mitigated by the facts of the outbreak, despite the greater dangers to those of us over 65.
Most of the data suggest that about 99 of every 100 infected under 65 will recover, the great majority without complications from the infection, allowing us to focus on those most vulnerable and most in need of medical intervention. The government is currently hellbent on ensuring that the virus slows. Facilities will treat the sick. Vaccinations are on the way in 2021. And prior travel bans, border security, and crackdowns on China’s trade cheating were wise and can be expanded.
All That Can Be Done
So the public could look forward to a rebounding late summer economy to come fueled by cheap gas, low interest, relief that COVID-19 is manageable, key preparations of pharmaceutical industries to return to the United States and realize that an already robust America can recover quickly from the virus and its associated panic.
Again, the key is not to damn the panic over the virus, but to understand and accept it—while reassuring Americans that all that can be done is being done, and what downturns they now experience will soon be overshadowed by even more jobs and greater economic expansion and wealth creation to come.
We sometimes forget, in legitimate fears of the coronavirus, that every action prompts a reaction and the massive curtailments of the U.S. economy can have as many health consequences as the virus itself—if millions lose income and jobs, become depressed in self-isolation, increase smoking, and drug and alcohol use, and postpone out of fear necessary buying and visits to doctors and hospitals for chronic and serious medical conditions unrelated to the virus.
In addition, it is not wrong to remind the public that current but once caricatured policies of secure borders, targeted travel bans, demands for transparency and symmetry from major U.S. trading partners, recalibration with China, and a return of manufacturing and assembly of key U.S. industries, from high-technology to pharmaceuticals, was long overdue—and must continue to ensure U.S. security and the long-term health of its people.
Let us relearn that at times of crisis our country is singularly resilient and self-sufficient, and we have only ourselves to save ourselves, or as FDR said in 1932 at the height of the Great Depression, “the only thing we have to fear is fear itself.”
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