The Economic Implications Of A Potential Ebola Pandemic In The United States

Fear Of Ebola - Public DomainFor the moment, our top public health officials are quite adamant that there absolutely will not be a major Ebola outbreak in the United States.  But what if they are wrong?  Or what would happen if terrorists released a form of weaponized Ebola or weaponized smallpox in one of our major cities?  What would such an event do to our economy?  I think that we can get some clues by looking at the economic collapses that are taking place in Liberia, Guinea and Sierra Leone right now.  When an extremely deadly virus like Ebola starts spreading like wildfire, the fear that it creates can be even worse for a society than the disease.  All of a sudden people don’t want to go to work, people don’t want to go to school and people definitely don’t want to go shopping.  There are very few things that can shut down the economy of a nation faster.  Considering the fact that our big banks are being more reckless than ever, we better hope that we don’t see a “black swan event” such as a major Ebola outbreak come along and upset the apple cart.  Because if that does happen, our Ponzi scheme of an economy could implode really quick.

Right now there is just one confirmed case of Ebola in Texas.  If they isolated him before he infected anyone else, we might be okay for the moment.  But already we are being told that there may be “a possible second Ebola patient” in Dallas…

Health officials are closely monitoring a possible second Ebola patient who had close contact with the first person to be diagnosed in the U.S., the director of Dallas County’s health department said Wednesday.

All who have been in close contact with the man officially diagnosed are being monitored as a precaution, Zachary Thompson, director of Dallas County Health and Human Services, said in a morning interview with WFAA-TV, Dallas-Fort Worth.

“Let me be real frank to the Dallas County residents: The fact that we have one confirmed case, there may be another case that is a close associate with this particular patient,” he said. “So this is real. There should be a concern, but it’s contained to the specific family members and close friends at this moment.”

We have learned the name of the man that is confirmed to have Ebola.  His name is Thomas Eric Duncan and when he went to Texas Health Presbyterian Hospital last Friday, he told them that he was feeling quite ill and that he was from Liberia.  You would have thought that should have set off major alarm bells.  But instead, he got sent back home

The first Ebola patient diagnosed in the U.S. initially went to a Dallas emergency room last week but was sent home, despite telling a nurse that he had been in disease-ravaged West Africa, the hospital acknowledged Wednesday.

The decision by Texas Health Presbyterian Hospital to release him could have put many others at risk of exposure to the disease before he went back to the ER two days later, after his condition worsened.

Thomas Eric Duncan explained to a nurse Friday that he was visiting the U.S. from Liberia, but that information was not widely shared, said Dr. Mark Lester, who works for the hospital’s parent company.

So a fully contagious Duncan had the opportunity to spread the virus around for another 48 hours before he was finally admitted to the hospital for treatment.

And it wasn’t just adults that he potentially exposed to the disease.  It is being reported that he had “close contact” with five students that attend four different Dallas schools.  Local media is reporting that the names of those schools are Tasby Middle School, Hotchkiss Elementary School, Dan D. Rogers Elementary and Conrad High School.

Predictably, many parents are already pulling their kids out of school in the Dallas area.

It shall be very interesting to see how many kids actually show up for school tomorrow morning.

But this is what happens to a society when the fear of Ebola takes hold.  People almost immediately start shutting down their activities and staying home.

Over in West Africa, months of Ebola fear is starting to take a major toll on the economy.  For example, the president of Guinea says that his economy is on the verge of complete collapse

Guinea has been more successful in containing the Ebola epidemic than its immediate neighbors in West Africa, but the loss of revenue caused by the crisis has left the country in dire financial straits, President Alpha Condé said after concluding a round of meetings at the United Nations General Assembly.

Mr. Condé said Guinea would need about $100 million until December to cover its budget gap, which will grow if Ebola is not tackled by the end of the year.

“The slowing down of our economies due to Ebola requires that most of our countries get some budgetary support … it’s going to be crucial that we get that support so our economies don’t completely collapse,” he said.

And things are even worse in Liberia.  The Washington Post says that Liberia is descending “into economic hell”…

Liberia, the West African nation hardest it by Ebola, has begun a frightening descent into economic hell.

That’s the import of three recent reports from international organizations that seem to bear out the worst-case scenarios of months ago: that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised.

If thousands of people start getting Ebola in major cities all over America, the same thing will happen here too.

A major Ebola pandemic in America would mean an almost total economic shutdown and basic essentials would start disappearing from the marketplace almost immediately.  Just check out what is happening in Liberia even as you read this…

The basic necessities of survival in Liberia — food, transportation, work, money, help from the government — are rapidly being depleted, according to recent reports by the United Nations Food and Agricultural Organization, the International Monetary Fund and the World Bank.

Even though economic demand would drop through the floor for most things, prices for food and other essential supplies tend to skyrocket during a major emergency.  The IMF says that the inflation rate will hit approximately 13 percent in Liberia by the end of the year even though economic activity has declined dramatically.  It is going to become extremely challenging for most families over there to feed themselves.

And as economic activity withers, tax revenues also dry up.  Liberia, Guinea and Sierra Leone are all facing massive revenue shortfalls, and they are asking for international assistance.

But if the same thing happened in the United States, do you think the rest of the world would send us lots of money to help us pay our bills?

I don’t think so.

Needless to say, an Ebola outbreak is not good for financial markets either.  News of the confirmed case of Ebola in Texas helped push down the Dow more than 238 points on Wednesday, and airline stocks in particular declined sharply.

If there are no more confirmed cases of Ebola in Texas, things will probably get back to normal for U.S. markets.

But if Ebola does start spreading and cases start popping up all over the country, that could be just the thing to burst our massive stock market bubble.

Let us hope that this is just a false alarm.

Let us hope that our public health authorities have everything under control.

Nobody should want to see thousands (or potentially millions) of fellow Americans get sick and die.

Unfortunately, scientists tell us that it is only a matter of time before another major pandemic of some sort ravages this nation.

When that happens, will our fragile economy be able to handle the shock?

What Will It Mean If The Potential Ebola Victim In New York City Actually Has The Virus?

Ebola In New York CityOn Monday, we learned that a “possible Ebola patient” was being treated at Mount Sinai Hospital in New York City.  We are being told that this individual recently returned from a country in Africa where there have been confirmed cases of Ebola.  So that would narrow it down to Sierra Leone, Guinea, Liberia and Nigeria.  The patient is being described as a male “with high fever and gastrointestinal symptoms“.  The hospital says that “necessary steps are being taken to ensure the safety of all patients, visitors and staff“.  But could you imagine the panic that is going to be created if there actually is a confirmed case of Ebola in the heart of New York City?  There is nothing in the post-World War II era that would even be comparable.  Certainly 9/11 created fear for a short period of time, but a full-blown Ebola outbreak would create a panic that could potentially last for months or even years.

And this comes on the heels of another Ebola scare in the United Kingdom.  According to a British news source, a seriously ill 72-year-old woman “collapsed and died” after getting off a plane from Sierra Leone at Gatwick Airport…

Airport staff tonight told of their fears of an Ebola outbreak after a passenger from Sierra Leone collapsed and died as she got off a plane at Gatwick.

Workers said they were terrified the virus could spread globally through the busy international hub from the West African country which is in the grip of the deadly epidemic.

The woman, said to be 72, became ill on the gangway after she left a Gambia Bird jet with 128 passengers on board. She died in hospital on Saturday.

Officials tell us that the plane was rapidly quarantined and that they were tracking down anyone that had been in contact with that woman.

I don’t know about you, but all of this is starting to remind me of some of the really bad Hollywood disaster movies that I have seen.

In my article yesterday, I included the following chart which shows how this Ebola outbreak is beginning to grow at an exponential pace…

Ebola Outbreak - Photo by Leopoldo Martin R

Well, today the World Health Organization says that the total number of cases has risen to 1,663 and the total number of deaths has risen to 887.  So just imagine what that chart would look like now.  Yes, it is definitely not an exaggeration to use the word “exponential” to describe what is happening.

If Ebola does start spreading inside the United States, it would be incredibly disruptive to our way of life.

In areas where there were confirmed cases of Ebola, it is inevitable that schools would be shut down and large gatherings of people such as concerts and sporting events would be cancelled.  In addition, due to fear of catching the virus, foot traffic at grocery stores and shopping malls would drop off dramatically.  If the panic lasted for multiple months, our economy would essentially grind to a halt.  Most economic activity still involves face to face interaction, and if people are afraid that if they go out in public they might catch a disease that will kill them, it would create an economic disaster of unprecedented proportions.

And what happens if strict travel restrictions (to prevent the spread of the disease) or plain old fear cause massive interruptions in our transportation system?  Almost all economic activity involves moving something from one location to another, and if we are not able to move stuff around because of an Ebola pandemic, that would create nightmarish problems almost immediately.  For example, the following is an excerpt from a report released by the American Trucker Associations that I discussed in a previous article

*****

A Timeline Showing the Deterioration of Major Industries Following a Truck Stoppage

The first 24 hours

• Delivery of medical supplies to the affected area will cease.
• Hospitals will run out of basic supplies such as syringes and catheters within hours. Radiopharmaceuticals will deteriorate and become unusable.
• Service stations will begin to run out of fuel.
• Manufacturers using just-in-time manufacturing will develop component shortages.
• U.S. mail and other package delivery will cease.

Within one day

• Food shortages will begin to develop.
• Automobile fuel availability and delivery will dwindle, leading to skyrocketing prices and long lines at the gas pumps.
• Without manufacturing components and trucks for product delivery,
assembly lines will shut down, putting thousands out of work.

Within two to three days

• Food shortages will escalate, especially in the face of hoarding and consumer panic.
• Supplies of essentials—such as bottled water, powdered milk, and
canned meat—at major retailers will disappear.
• ATMs will run out of cash and banks will be unable to process
transactions.
• Service stations will completely run out of fuel for autos and trucks.
• Garbage will start piling up in urban and suburban areas.
• Container ships will sit idle in ports and rail transport will be disrupted, eventually coming to a standstill.

Within a week

• Automobile travel will cease due to the lack of fuel. Without autos and busses, many people will not be able to get to work, shop for groceries, or access medical care.
• Hospitals will begin to exhaust oxygen supplies.

Within two weeks

• The nation’s clean water supply will begin to run dry.

Within four weeks

• The nation will exhaust its clean water supply and water will be safe for drinking only after boiling. As a result gastrointestinal illnesses will increase, further taxing an already weakened health care system.

This timeline presents only the primary effects of a freeze on truck travel. Secondary effects must be considered as well, such as inability to maintain telecommunications service, reduced law enforcement, increased crime, increased illness and injury, higher death rates, and likely, civil unrest.

*****

Are you starting to get the picture?

A major transportation disruption would not just result in an economic downturn.  Many Americans would start running out of food and basic supplies very rapidly.  Without the ability to constantly resupply at the grocery store, a lot of people would start giving in to panic in just a matter of days.

And needless to say, a full-blown Ebola outbreak would wreak havoc on our financial system.  The stock market would almost certainly collapse and we would witness a credit crunch that would be absolutely unprecedented.  Nobody would want to lend to anybody in the midst of an Ebola pandemic.  The flow of money through our system would come to a screeching halt, and we would be facing an economic nightmare that would make 2008 look like a Sunday picnic.

So let us hope and pray that this crisis goes away and that Ebola does not start spreading across the country.

Because if it does, it could potentially kill millions of people, destroy our economy and plunge this nation into utter madness.

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