Coronavirus Is ‘Probably Nothing’, But “It’s Possibly Everything” For Global Markets
In 1349, when Black Death was ravaging Europe, many of the day’s best and brightest banded together in pursuit of a common cure. They had little choice. Black Death was rapidly spreading across the continent. Nothing could stop it.
Boils were lanced with precision. Blood was let with vigor. But there was no escape from the plague’s instant death. It was efficient. It was relentless. People would go to bed at night perfectly healthy; by morning, they’d wake up perfectly dead.
Then, at the exact moment of maximum death and despair, flagellants came to the rescue. Processions marched to and fro, seeking relief through forcefully whipping themselves in public displays of self-mutilation. According to the History Channel:
“Some upper-class men joined processions of flagellants that traveled from town to town and engaged in public displays of penance and punishment: They would beat themselves and one another with heavy leather straps studded with sharp pieces of metal while the townspeople looked on.
“For 33 1/2 days, the flagellants repeated this ritual three times a day. Then they would move on to the next town and begin the process over again.”
This may seem strange, weird, and, quite frankly, a bit nuts. But something miraculous happened. The Black Death epidemic soon exhausted itself. The flagellants saved Europe from the mid-14th century onslaught of Black Death.
Or did they?
Probably Nothing, Possibly Everything
To be clear, flagellants had no influence on the eventual relenting of Black Death. Remember, correlation does not imply causation. Post hoc ergo propter hoc – “after this, therefore because of this” – or simply the post hoc fallacy, recognizes that just because one event happened to follow another, doesn’t mean the initial event caused the later event to occur.
The example of flagellants stopping the plague is absurd. Still, we present it to underscore several points:
(1) Humans are often irrational, especially during times of crisis, and
(2) Mis-assigning causation is a common appeal to ignorance, especially when it comes to modern day economics analysis.
One popular tactic of central planners, for example, is to point to an economic statistic – like low unemployment – and self-adulate for maneuvering it down. Does pumping fake money into credit markets somehow create jobs? Does pumping fake money into credit markets somehow create wealth and prosperity?
Similarly, when the yield curve inverts and the economy stalls, central planners always scratch for a convenient culprit. Last fall, when the economy slipped, the trade war with China was to blame. Now it’s the Chinese coronavirus. Jeffrey P. Snider, at Alhambra Investments, offers the following insight:
“The mainstream needs to blame something and given how convenient the timing between ‘protectionism’ and the ‘unexpected’ appearance of this globally synchronized downturn should the latter flame back up again, having never really been extinguished, China easily provides the next scapegoat (wouldn’t it be ironic if the virus was found to have jumped from goats to humans?)”
At this point, it’s still too early to tell. China’s coronavirus, like past outbreaks of the bird flu or SARS, is probably nothing. But it’s possibly everything.