Sunday, August 2, 2020

Tech Trends Driving Applied Innovation with Ettienne Reinecke

Profile photo of Ettienne Reinecke

Tech Trends Driving Applied Innovation with Ettienne Reinecke


In this episode we welcome Mr. Ettienne Reinecke who discusses various technology trends driving applied innovation, touching on topics such as how data is becoming the center of the universe, the role of edge networking & computing, merging of the virtual and physical worlds and tech adoption during the COVID - 19 era. Our discussion can be listened to using the following links, hope you enjoy!



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Thursday, April 16, 2020

Coronavirus Economic Crisis (Pt. 2): Unemployment, Health and Singapore

Coronavirus Economic Crisis (Pt. 2): Unemployment, Health and Singapore


Are we going… YES. Recession is already here. Entire industries have come to a halt, unemployment rates are skyrocketing, countries are enforcing stricter and stricter lockdown laws, and Coronavirus cases are on the rise globally. The question isn’t anymore if we are going into recession, or when we are going into recession, the question to ask now is, how bad will it be? The following article will analyze the U.S. and global economic situation through the lens of unemployment and a coordinated health response, while explaining the unique importance of Singapore.


United States Unemployment Impact


One of the first major weekly indicators showing the overall impact of the Coronavirus has been and will continue to be the rise in unemployment benefit filings. Every Thursday, the Bureau of Labor Statistics in the United States releases the number of individuals who had filed for unemployment in the previous week, and the numbers are rapidly rising. Over the past three weeks, unemployment records have been broken. On March 12th the BLS reported that approximately 30,000 people in the United States had filed for unemployment. One week later, on March 19th, this number rose 33% in 7 days to 281,000. 


The previous highest U.S. weekly increase in unemployment filings was approximately 695,000 back in 1982. This was shattered as on March 26th, as jobless claims exceeded Goldman Sachs and JP Morgan estimates, with the week’s official number being 3.25 million filings. One week later, on April 2nd, an additional 6.87 million individuals in the U.S. filed for unemployment, and just last week, the pattern continued on April 9th as another 6.61 million individuals filed jobless claims. In just 21 days, the number of people filing for unemployment has skyrocketed from 211,000 to two consecutive weeks above 6 million, which is a 3100% increase weekly, never before seen in U.S. history. The weekly jobless claims trend can be seen in figure 1 above tracing back to 1967, and the chilling spike of the last three weeks seem to statistically mirror the grueling Mt. Everest in the face the U.S. economy’s last fifty-year history. The facts are these, in three weeks 16.8 million people have filed for unemployment, which is 10% of the current U.S. labor force. That brings the estimated overall unemployment rate to around 14.4% but due to lags in the economic data releases as official statistics, the true overall unemployment is unknown.  According to William Rodgers, former chief economist at the U.S. Department of Labor, the U.S. unemployment rate has risen from 3.5% to 17% in just three weeks. The exact figure will be unknown for a while, but the reality is this: The U.S. economy has surpassed the level of unemployment experienced at the peak of the Great Recession in less than 21 days. This is completely unprecedented. The unemployment at the height of the Great Recession was 10% in October 2009, and this took 18 – 24 months to develop.

It is important to put these numbers in perspective to truly understand the scope and desolation embedded within these numbers. Imagine in week one, every single teacher in the entire country loses their job in both public and private schools. In week two, every single person involved in any type of transport industry is laid off. No trains, no subways, no planes, no ferries, no buses, no transportation. Now you have a situation where you have no teachers in any schools and no transportation workers. To top it off in week 3, every financial institution shuts down and lays off every single worker. Local, state, and national banks countrywide close, brokers, credit agencies, investment companies, securities contractors, insurance providers, and wealth management firms all closed, everybody is told to go home. Imagine your daily life in this world where you have no teachers, no transportation, and no finances services. This is what has happened in the last 21 days. There are approximately 3.5 million teachers in America in public and private schools, the transportation industry employs around 5.2 million individuals and the financial services, and insurance industries employs approximately 6.5 million people, all totaling around 15.5 million jobs. This is still under the number of jobless claims experienced in the last three weeks, which was approximately 16.8 million jobs.  If you want to paint this picture from a global perspective, envision the entire Australian and New Zealand workforce being laid off in just 21 days, 15.6 million people without a job, and two economies decimated.

Now, what are the longer unemployment projections for possibly the next three months and onward? In a worst-case scenario, in just the next three months, the U.S. federal reserve of St. Louis has forecasted that just the second quarter (April – June) will see 47 million layoffs. This translates to an unemployment rate of 32.1% by the end of June. During the Great Depression, unemployment peaked at 24.9% in 1933, more than three years after the original stock market crash in October of 1929. Expert forecasting suggests that: the U.S. economy will far surpass the Great Depression levels of unemployment and reach a standing rate of 32.1% in just three months. The St. Louis Fed has explicitly said that "These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years.” These are unprecedented and frightening times, as uncertainty seems to be prevailing, but a full – rounded and full informed scope is important to remember.

Crucially these estimates did not account for the impact of the $2 trillion stimulus package recently released by the U.S. government or any future packages they may release. This means that while the stimulus package released by the United States will slightly reduce the impact of the unemployment rate and the negative impact on the economy, but it is not a magic solution. To evaluate its potential effectiveness would take another five pages. Still, I do intend in the next few weeks to analyze the U.S. stimulus package or hopefully packages, in tandem with the actions taken by other governments. But the important thing to understand at this moment in time is that it will have a positive impact, but the stimulus package will not be a cure. For companies and individuals suffering, the stimulus is designed to keep them afloat during this time of crisis until recovery starts. Acting as a bridge while they receive no income or investment. Similar to a lifeboat designed to keep you alive until you reach land or are rescued.

Global Unemployment Impact


Globally there has also been a massive impact on unemployment, “currently, more than 4 out of 5 people (81%) in the global workforce of 3.3 billion are affected by full or partial workplace closures because of COVID-19” according to the International Labor Organization. The report estimated that internationally there are 1.25 billion currently employed individuals working in sectors identified as being at high risk of “drastic and devastating” increases in layoffs and reductions in wages and working hours.[1]

Australian Treasurer Josh Frydenberg said more than 800,000 businesses have already applied for the so-called job keeper program, a program part of Australia’s stimulus packages aiding small businesses. “There’s definitely going to be an uptick in unemployment and a significant reduction in growth,” according to Frydenberg, with experts believing that unemployment could grow to 10.1%.[2] The United Kingdom, according to Oxford University, on par with the United States face the expected probability of reaching a 30% unemployment rate.[3]

In Spain, in March 833,979 lost their jobs, a record number in terms of jobless claims for the country, accounting approximately for 3.5% of the Spanish labor force in just four weeks. This is on top of their already record-high 14% unemployment rate, which is among the highest in the developed world.[4] Austria’s unemployment rate has jumped to 12%, the highest since the aftermath of World War 2. IN Germany, 470,000 companies applied for wage support in March, suggesting that a near 5th of the German workforce will experience reduced hours.[5]

Across the other side of the world in Asia, Thailand has seen 23 million people (one – third) of its workforce, apply for government cash handouts, the program is expected only to be able to cover 9 million. In China, despite statistics releasing an unemployment number of 6.4%, raging debates have erupted on the credibility and accuracy of these numbers.[6] According to Liu Chenjie, chief economist at fund manager Upright Asset, a privet asset management firm in Hong Kong, 205 million workers have been driven into "frictional unemployment," where individuals want to work but cannot or are unable to return to work. If this were true, this would represent more than 25% of China's 775 million-strong labor force. Based on Lieu’s calculation, the Chinese services sector has been hit the hardest with 180 million jobs disappearing, mainly because of “consumers’ willingness and ability to spend.”, which has been sharply curtailed by the pandemic.[7]

From these numbers, it seems that the United States and China have been the hardest hit, but it is evident that the impacts are being felt throughout global economies. Worse times are most likely still to come as the pandemic is still in its early stages, but it is essential to ask and understand, what does the current situation mean for the long term and the recovery? When will we reach land, or be rescued and start to see a restoration of the U.S. and global economy? This heavily ways on the health response. [8]

Importance of the Health Response


The reality of the matter is that the world is facing a global health crisis, which is causing an economic crisis. It is because of this reality that it is crucial to understand that to reduce the long term economic and health consequences of the COVID – 19 pandemic, a fully enabled global public health response is needed to reduce the severity of the long term financial impact. While this does not mean that in the short term, we won't experience suffering or pain across various global industries, it does mean that if the appropriate and severe short term action falls short of what is desperately needed, the extended consequences could be worse than ever imagined.What do I mean by this? It is the health response that matters for us to get out the other side of this pandemic, financially and medically. According to a new study by world-class doctors and researchers at the University of Sydney, in Sydney Australia, eighty to ninety percent of the country's population needs to strictly follow and practice social distancing.  If only seventy percent of the population follows the social distancing policies, as seen in figure 2, the curve will not flatten. Infection rates will still spike, and the virus will still keeping running rampant. Furthermore, if these policies are followed, the modeling says that the virus infections can be brought under control within a minimum of three to four months.

While this model has been specifically modeled on the Australian population using approximately 24 million software agents, let us see how this model and its predictions compare to what we have seen so far from around the world.
Epicenter: Wuhan, China: The original epicenter of the outbreak, experienced its first cases in December 2019, before identifying the outbreak and going into lockdown quarantine on January 23rd. Having a history of social control over its citizens, China enforced its strictest policies on the citizens of Wuhan. Apartment compounds allowed people to go in and out through one gate, each household could only send one person out once every three days to purchase groceries, and everyone's temperature is checked upon entrance.” But despite these substantial measures, numbers continued to rise, and therefore the government increased its restrictive policies. “Hubei government ordered community officials to began enforcing "the strictest, around-the-clock, closed management" of all residential complexes, banning the private use of cars, forbidding residents from leaving their apartments without permission and requiring purchasers of cold medicine to disclose their temperature, address and identification number at the pharmacy.”[9] After 77 days or 11 weeks of complete lockdown, Chinese officials lifted partial restrictions in Wuhan on April 8th, allowing Wuhan residents to travel domestically and open some businesses. Small businesses and factories in Wuhan started opening last Thursday, March 30th, ten weeks after the shutdown. While its infection rate has reportedly dropped to near zero, only partial restrictions have been lifted as Chinese officials stay vigilant.[10]

Interesting Mention: South Korea: South Korea and the United States reported their first case on the same day, the stark difference, South Korea was ready, the U.S. wasn't. South Korea had a battle with Middle East Respiratory Syndrome (MERS) back in 2015, which led to mass testing, tracing, and quarantining of 17,000 people, which led to the country squashing the disease in 2 months. Still, MERS only infects one additional person; therefore, its infection rate is much lower than the Coronavirus. After MERS, the government very quickly realized testing alongside hospital prevention and control measures were extremely vital in responding to pandemics. Legislation was also passed promptly in the MERS aftermath strengthening the country’s ability to respond, such as authority given to the government to collect mobile phone, credit card, and other data from those who test positive to reconstruct their recent whereabouts. As a result of these changes, South Korea is very uniquely equipped and ready for the Coronavirus having widely available testing, prevention protocols, quarantine actions, and accurate tracing methods. These measures have enabled them to implement a swift and effective response resulting in only ten thousand cases and 186 deaths and sending the country only into partial lockdown closing schools, religious gatherings, outdoor rallies, daycare centers, and some businesses.[11]

Case to watch: Singapore. Singapore reported its first case on January 24th, 2020, one day before Australia and immediately took action. Similar to South Korea, Singapore learned many lessons from a previous pandemic, in their case, the SARS outbreak in 2002 and 2003. Within three days of its first case, Singapore had implemented thermal scanning of people arriving at Changi International Airport, and on February 1st barred all visitors who had visited China in the past 14 days. Just 16 days later, Singapore had 75 confirmed cases and issued a “stay at home” notice, which they track on citizen’s phones. Every few hours, citizens will receive an SMS and are required to click on a link revealing their location, the government even had people knocking on doors routinely preventing people from "gaming" the system and having a friend or family click the link from home if they leave. Like South Korea, Singapore had in place protocols, wide testing availability and were well prepared for COVID – 19, they currently only have six deaths and 1400 cases and have been praised for their initial response by the World Health Organization.

          Here is the interesting part about Singapore. Friday, April 3rd, prime minister Lee Hsien long announced new stricter lockdowns lasting until May 7th, closing schools for the first time and most non-essential businesses including gyms, museums, and workplaces while grocery stores, clinics, and banking services will stay open. Lee stated that “Looking at the trend, I am worried that unless we take further steps, things will gradually get worse or another big cluster may push things over the edge.” This has all been done in fear of a second wave, making Singapore as a country and a case study a very imminent leading indicator for the course that COVID – 19 takes in other countries.[12] If a country such as Singapore, whose initial response was among the best if not the best in the world can prevent a second wave with its preventive measures, this is excellent news for the rest of the world. It means that COVID -19 can be managed effectively once brought under control, but if a second wave breaks out, this could potentially be indicating even bigger disaster for the rest of the world. The last devastating global pandemic was the Spanish flu back in 1918, which, although was born in a time under very different circumstances, arrived in three different waves as the virus mutated, killing between twenty and fifty million people globally. Therefore, if Singapore experiences a second wave, this would mean that even if countries currently facing war like numbers such as Italy, Spain, the United States, and the United Kingdom, were to bring COVID – 19 under control in the following months, they could still be potentially vulnerable to a second or third wave, threatening to bring even more devastation.[13]

From a health perspective, the lesson is this, citizens and nations need to abide by strict social distancing laws for a minimum of three months and then reassess the situation before lifting restrictions. If these precautions are not taken and enforced, the devastation we have already seen in terms of infection and mortality rates will exponentially grow, spiraling the virus even further out of control. This will require more extended shutdown periods to contain the virus, meaning that instead of having a painful 3 to 4 months of total lockdown, opening the economy to early could completely reset the clock and erase the progress already made. Ultimately this could result in a six to twelve or in a worst-case scenario eighteen-month ongoing battle with the virus with constant opening and closing of the economy. This type of situation will result in health and economic devastation not only never experienced before in modern history but well beyond our wildest imagination. If this becomes a reality, the COVID – 19 recession will be much worse than the Great Depression, and generations will feel the effects for years to come. Moving forward, what do we do, and what do we look for to avoid devastation?

Takeaways for the Future:


Enforcing social distancing and lockdown laws, it's a crucial step in fighting COVID – 19 and reducing the medical and economic impacts. In terms of unemployment, the next three to five months will see significant increases in numbers in the U.S. and globally, but dependent on the health response, those numbers will hopefully slowly start to stabilize. For a best-case scenario, watch the development of Singapore. If Singapore fails, countries facing a crisis such as the U.S. and Italy, currently in their "first wave," need to be extremely vigilant and could see a fierce battle in the next twelve to eighteen months. As second and third waves could possibly be highly threatening, not only to unemployment and economic figures but to the survival rates of the globe’s 7.7 billion individuals. If Singapore can control and contain what fears to be a possible second wave of the virus in the next two to three months, this will be an incredibly positive sign for the rest of the world. This will mean that future waves can be averted, and the virus can be controlled in three to five months if the appropriate measures are enforced and followed.


Finishing on a positive note, it is understood that we are facing exceptionally challenging times as individuals, families, friends, countries, and economies. It is important to remember that the world has incredible doctors, brave nurses, intelligent researchers, courageous leaders, and, most importantly, strong and resilient individuals. I believe that we can, and we will make it to brighter days. The power of humanity and our ability to stand strong in the face of adversity, which has been underestimated many times before, will win. While we might not always see the light ahead, we will come together, fight together, and emerge on the other side of this global challenge united and stronger than ever before. 






[1] (HRM Asia, 2020)
[2] (Bloomberg, 2020)
[3] (Bloomberg, 2020)
[4] (The Local Es, 2020)
[5] (Japan Times, 2020)
[6] (Japan Times, 2020)
[7] (South Morning China Post, 2020)
[8] (St. Louis Federal Reserve, 2020)
[9] (NPR, 2020)
[10] (Bloomberg, 2020)
[11] (Science Magazine, 2020)
[12] (ABC News, 2020)
[13] (Forbes, 2020)


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DW. (2020, March). Economic advisers: Coronavirus may see German GDP dip by over 5%. Retrieved from https://www.dw.com/en/economic-advisers-coronavirus-may-see-german-gdp-dip-by-over-5/a-52952713
Financial Review. (2020, April 6th). COVID-19 data improves but Italy has other numbers to worry about now. Retrieved from https://www.afr.com/world/europe/covid-19-data-improves-but-italy-has-other-numbers-to-worry-about-now-20200404-p54h0a
Fitch Ratings. (2020, April 2nd). Deep Global Recession in 2020 as Coronavirus Crisis Escalates. Retrieved from https://www.fitchratings.com/research/sovereigns/deep-global-recession-in-2020-as-coronavirus-crisis-escalates-02-04-2020
Forbes. (2020, March 20th). Bank Of America: Three Million People May File For Unemployment Benefits. Retrieved from https://www.forbes.com/sites/jackkelly/2020/03/20/bank-of-america-three-million-people-may-file-for-unemployment-benefits/#5e41859c6373
Forbes. (2020, March 31st). How Bad Will Unemployment Get? Here’s What The Experts Predict. Retrieved from https://www.forbes.com/sites/sergeiklebnikov/2020/03/31/how-bad-will-unemployment-get-heres-what-the-experts-predict/#470220114f16
Forbes. (2020, March 20th). https://www.forbes.com/sites/jeremybogaisky/2020/03/20/boeing-suspends-dividend-top-execs-give-up-pay-as-they-wait-for-bailout/#23a139d527ad. Retrieved from https://www.forbes.com/sites/jeremybogaisky/2020/03/20/boeing-suspends-dividend-top-execs-give-up-pay-as-they-wait-for-bailout/#23a139d527ad
Forbes. (2020, March 16th). Market Crashes Compared: -28% Coronavirus Crash vs. 4 Historic Market Crashes. Retrieved from https://www.forbes.com/sites/greatspeculations/2020/03/16/market-crashes-compared28-coronavirus-crash-vs-4-historic-market-crashes/#47e4cd2c3fa4
Forbes. (2020, April 3rd). Singapore, Praised For Its Initial Coronavirus Response, Closes Schools And Offices To Prevent Second Wave Of Infections. Retrieved from https://www.forbes.com/sites/isabeltogoh/2020/04/03/singapore-praised-for-its-initial-coronavirus-response-closes-schools-and-offices-to-prevent-second-wave-of-infections/#2e0f84ff73f0
Forbes. (2020, March 19th). The Coronavirus Effect: Here Are The Jobs That Will Be Added And Lost. Retrieved from https://www.forbes.com/sites/jackkelly/2020/03/19/the-coronavirus-effect-here-are-the-jobs-that-will-be-added-and-lost/#3afa6f192a1c
HRM Asia. (2020, 04 9th). 125 million workers in Asia-Pacific at risk of unemployment. Retrieved from https://hrmasia.com/125-million-workers-in-asia-pacific-at-risk-of-unemployment/
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Markets Insider. (2020, March 22). These 4 stunning charts show just how quickly the coronavirus outbreak decimated key US industries - and pushed the economy to the brink of recession. Retrieved from https://markets.businessinsider.com/news/stocks/coronavirus-economic-outlook-airline-travel-hotel-restaurant-cruise-industries-charts-2020-3-1029020327#restaurant-bookings-bottom-out2
New York Times. (2020, March 23). ‘Our Industry Will Fail’: Retail Leaders Ask for Emergency Aid. Retrieved from https://www.nytimes.com/2020/03/23/style/coronavirus-retail-bailout.html
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Science Magazine. (2020, March). Coronavirus cases have dropped sharply in South Korea. What’s the secret to its success? Retrieved from https://www.sciencemag.org/news/2020/03/coronavirus-cases-have-dropped-sharply-south-korea-whats-secret-its-success#
South Morning China Post. (2020, April 3rd). Coronavirus: China’s unemployment crisis mounts, but nobody knows true number of jobless. Retrieved from https://www.scmp.com/economy/china-economy/article/3078251/coronavirus-chinas-unemployment-crisis-mounts-nobody-knows
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The Local Es. (2020, April 2nd). Coronavirus crisis: Spain’s unemployment spike breaks all records. Retrieved from https://www.thelocal.es/20200402/coronavirus-crisis-spains-unemployment-breaks-all-records


Sunday, March 15, 2020

Coronavirus Economic Crisis (Pt.1): Volatile Markets and Supply Chain Disruptions


Coronavirus Economic Crisis (Pt.1):

Volatile Markets and Supply Chain Disruptions




Volatile Markets

Markets have been rough. Last week started with the circuit breakers on Wall Street halting trading just 35 minutes after markets opened on Monday, the first time the circuit breakers have tripped since 1997. After trading resumed, we saw the most significant single-day drop in the U.S. stock market since the crash of 1987, with the Dow Jones dropping 7.79%, the S&P 500 7.6%, and the NASDAQ 7.3%.[1] The day also ended with a very near end to the 11-year bull market, but the week saw more to come. On the back of an announcement on Wednesday by President Donald Trump to ban all travel to European countries except for the U.K. for 30 days, Thursday March 12th saw the circuit breakers kick in for the second time in 3 days leading to significant losses and officially pushing the U.S. into a Bear market. A Bear market is defined as a decline of at least 20% from a recent peak, and as of Thursday, March 12th Data showed that since the Dow Jones peak on February 12th it had dropped 29%, and since their peaks on February 19th the NASDAQ and S&P 500 had dropped 27%.[2] This is the second quickest return to a Bear market at 19 days with Great Recession in 1929, the only one shorter at 15 days, but don't be alarmed. Stock markets are designed to be volatile. While this has been an extreme case of market panic, in time the market will bounce back and regain value. Stock markets are not a reflection of how the economy is operating at this current moment in time but are instead a forward-looking system. Markets look into the future and attempt to predict the future based upon available knowledge surrounding known levels of risk.  It is essential to understand why this is happening and why the markets have reacted in such a manner. The bottom line is extreme uncertainty. The Coronavirus is currently unpredictable, and the truth is no one truly knows the extent to what is currently happening and what will happen in the weeks and months to come. Therefore, any level of prior foreseen certainty has been completely eradicated. Now for a system such as the stock market, which tries to predict the future, when there are no reasonable means of doing this, it will fail and grip on to any piece information which might be able to provide the slightest sign of stability. A prime example occurred this week when, despite the stock market's most substantial losses in decades, it also experienced its most significant single-day increase since 2008. The Dow Jones and NASDAQ increased an average of 5.7% Friday morning and by the end of day Friday the S&P 500 had surged 9%, after the U.S. and numerous governments proposed fiscal stimuli to aid their economies, and Trump declared a national emergency.[3] If you include other novel events such as crashing bond yields, the oil price war, varying government responses, and supply shocks combined with irrationality, people’s expectations are constantly changing, leaving markets dangerously vulnerable and volatile. While the markets will most likely continue to be extremely sensitive and volatile until a proper response it implemented globally, the disease is contained, and current fear levels fall, regaining a certain level of future certainty, it is more important to consider the economic impacts. The long and short terms effects of supply-side shocks caused by the Coronavirus could have much more detrimental effects on our global economy.
             

Supply Chain Disruptions

              Supply chain shocks - unexpected changes in the supply of a product or commodity – have severely crippled China over the past few months with effects to slowly ripple globally. Let’s start with China and from there analyze the global impact. China is the world’s manufacturing superpower, accounting for nearly 30% of global manufacturing output, combining with the United States (17%), Japan (7%), Germany (5.8%), who are collectively responsible for nearly 60% of total global manufacturing output.[4]
In terms of trade routes and how these products reach the rest of the world, 80% of the world’s trade passes through the South China Sea, with China home to seven of the ten busiest ports in the world. The troubling statistic stands at the reality that over the past three months, major Chinese ports have been operating at 20 – 50 % below standard capacity with storage facilities reportedly already more than 90% full, back in mid-February.[5] Additionally, there are approximately 200 container ships that cross the pacific between China and North America each month, and as of March 5th, Containership operators had already canceled more than 20% of all sailings across the Pacific for the entire first quarter, with many more to possibly come. This also means that there are fewer ships that can make the return trip from North America, and the movement of goods is stalled even further. This doesn’t include all the container ships forced to idle, which was approximately two million containers of shipping capacity, which, if the largest ships at sea can hold 20,000 containers, translates to a minimum of 100 ships not operating, waiting for their next destination. This is higher than the 1.5 million containers, or a minimum of 75 ships under the assumptions that were idle at the peak of the 2008 recession.[6] [7] Aplhaliner, a Paris maritime-based marine data provider, in February alone also reported that, "30 – 60% of weekly outbound capacity has been withdrawn from Asia – Europe and Transpacific trade as well as from intraregional routes." There have also been significant disruptions in the airways. Due to the severe restrictions on the seaways, air cargo pricing had reached abnormal highs and that U.S. – China cargo rates had risen 27% since March 3rd. The United States has steadily canceled incoming flights from China over the past month, contributing to the rise in prices and restrictions on the supply chain. Still, Donald Trump's new 30-day travel ban on all flights from Europe poses an even greater threat. While claims by governments state that specific air freighters will not be affected, 60% of trade between the two countries is delivered via airline passenger jets. With the United States being the E.U.’s largest export partner of E.U. goods (18%) and 2nd largest import partner of E.U. goods (12%),  totaling $1.3trillion in 2018, this is now a link in the supply chain that will be completely severed for the next month.[8]  According to the Institute for Supply Management (ISM) the oldest and largest supply chain association in the world, 75% of companies are seeing capacity disruptions in their supply chains as a direct result of Coronavirus related transportation restrictions. CEO of ISM, Thomas Derry, released a statement last week saying that " for majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight to move product to the United States—even if they can get order filled...companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak."[13] Thus, the economic implications of these supply chain restrictions could be extremely detrimental, as losses could increase exponentially as the shutdowns expand and closure times extend, sending shockwaves throughout global economies.[9]
              Regarding the supply chain, there are two more important factors to consider. Supply chains are frozen globally and stockpiles are depleting, in order for supply chains to be restored all distribution channels will need to be reopened. While China has lain dormant for most of February and March, some reports say activity has started to pick up, but this fact alone will have minimal impact. While the rest of the world, such as Italy, France, and the United states lockdown for at least the next 30 days, these distribution channels will still be closed regardless of whether China can produce or not. Therefore, while they may have a slightly increased ability to produce, the goods will have nowhere to go. The reality is that global supply chain restoration will only occur once countries have fully contained, controlled, and reopened their economies, but when will this be?  
Focusing on the United States, it is crucial to understand the role in which the supply chain plays in the medical response to the virus and how disruptions could lead to a potential spiral effect. To contain, treat and control the spread of COVID – 19, medical supplies are an essential weapon in each country’s defense. The director-general of the World Health Organization, Adhanom Ghebreyesus told reporters that, "the world is facing severe disruption in the market for personal protective equipment," and that backlogs have been reported for four to six months, with demand 100 times higher at prices 20 times higher than average. Already two weeks ago, the New York health department released a statement saying they are "aware that some hospitals, EMS agencies, and other providers are experiencing shortages of N95 respirators." In regards to rural areas, CEO of Western Wisconsin Health, Alison page, said, "we don't have stockpiles of anything." To make matters worse, she said they have also "heard from other hospitals that people are coming in the doors and stealing," medical supplies that the hospitals do have. According to Dr. Scot Lindquist of Washington State, a doctor on the frontlines fighting the Coronavirus, “The state desperately needs N95 masks, gowns, and gloves brought into the community.”[10] Problematically, according to National Geographic, China manufactures roughly 30% of the world's medical and pharmaceutical supplies, and the United States imports 8.3 trillion dollars from China, nearly three times more than the second-largest importer of pharmaceuticals and medical equipment from China. The most vital and scariest medical statistics are more likely the following: 97% of all antibiotics in the United States come from China, according to a study done by the Department of Commerce. While the Coronavirus has only recently witnessed a potential vaccine be developed in Canada, which still needs to undergo significant testing, the FDA announced two weeks ago on February 28th, the first drug shortage due to the Coronavirus. Furthermore, for nearly a month, the Center for Disease Control (CDC) has warned about the fragility of supply circuits for personal protective equipment, as manufacturers struggle to meet orders for face masks and N95 respirators. So much so that the United States has already tapped into the government’s secret Strategic National Stockpile (SNS) which according to the Department of Health and Human Services website is the “largest supply of potentially life-saving pharmaceuticals and medical supplies for use in a public health emergency severe enough to cause local supplies to run out,” and are kept at unknown locations. More analysis shows that based on a series of models built and published in papers by the CDC, the scenario being replicated, is very similar to the Coronavirus. According to Eric Toner, a senior scientist at the Johns Hopkins Center for Health Security, the CDC models provide "In terms of the amount of masks, gowns, gloves, [and] respirators..... a good way to estimate," the level of preparedness needed to combat an emerging respiratory pandemic. The scary reality is that based on these models, “U.S. health care workers would need two to seven billion respirators for the least- to most-severe possible scenarios. That’s up to 233 times more than what’s currently in the Strategic National Stockpile.”[11][12] While the sea lanes, airways and manufacturing continue to sit in lockdown, supply chain channels will only reopen when the virus is contained, but disruptions themselves will cripple the response possibly shutting down economies for longer and longer, intensifying the economic severity, consequentially leading to a downward spiral. Therefore, the supply chain shortages and economic consequences which could prevail even if contained, have the potential to cascade down to levels of economic and health devastation possibly never experienced before.

Stayed tuned for Coronavirus Economic Crisis Part 2 to be released next week addressing the chances of a global recession and asking, how bad will it be?




Contact: Feel free to leave a comment or if you have a questions reach out to emergingeconomics@gmail.com. 

References


ABC News. (2020, March 13th). Medical providers, fearing equipment shortages, tap into secret national supply network. Retrieved from https://abcnews.go.com/US/medical-providers-fearing-equipment-shortages-tap-secret-national/story?id=69583927
CNBC. (2020, March 12th). ‘Circuit breaker’ triggered again to keep stocks from falling through floor. What you need to know. Retrieved from https://www.cnbc.com/2020/03/12/stock-futures-hit-a-limit-down-trading-halt-for-a-second-time-this-week-heres-what-that-means.html
CNN. (2020, March 29th). Health care braces for shortages of supplies due to coronavirus. Retrieved from https://www.cnn.com/2020/02/29/health/fda-medical-device-mask-hospital-shortage/index.html
Eurostat. (2020, March 14th). International trade in goods by mode of transport. Retrieved from https://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_goods_by_mode_of_transport
Financial Times. (2020, March 13th). Global shipping market reels from coronavirus. Retrieved from https://www.ft.com/content/9f543f48-4d96-11ea-95a0-43d18ec715f5
Fortune. (2020, March 11th). 75% of companies report coronavirus has disrupted their supply chains. Retrieved from https://fortune.com/2020/03/11/75-of-companies-report-coronavirus-has-disrupted-their-supply-chains/
MarketWatch. (2020, March 12th). The Dow just tumbled into a bear market — here’s how long those downturns last on average. Retrieved from https://www.marketwatch.com/story/the-dow-just-tumbled-into-a-bear-market-ending-the-longest-bull-market-run-in-historyheres-how-those-downturns-last-on-average-2020-03-11
Max Roser, H. R.-O. (2020). Our World In Data. Retrieved from University of Oxford: https://ourworldindata.org/coronavirus
National Geographic. (2020, March 3rd). U.S. has only a fraction of the medical supplies it needs to combat coronavirus. Retrieved from https://www.nationalgeographic.com/science/2020/03/us-america-has-fraction-medical-supplies-it-needs-to-combat-coronavirus/#close
New York Times. (2020). How bad will the Coronavirus get? Retrieved from https://www.nytimes.com/interactive/2020/world/asia/china-coronavirus-contain.html
Statistica. (2020, Feb 18th). China Is the World's Manufacturing Superpower. Retrieved from https://www.statista.com/chart/20858/top-10-countries-by-share-of-global-manufacturing-output/
TechCrunch. (2020, March 13th). Stocks sharply rebound as markets rally on expectations of government bailout, testing. Retrieved from https://techcrunch.com/
The Real Deal (New York Real Estate News). (2020, March 12th). Backorders and low supplies: Contractors look for workarounds to supply-chain issues. Retrieved from https://therealdeal.com/2020/03/12/backorders-and-low-supplies-contractors-look-for-workarounds-to-supply-chain-issues/
TIME. (2020). The WHO Estimated COVID-19 Mortality at 3.4%. That Doesn't Tell the Whole Story. Retrieved from https://time.com/5798168/coronavirus-mortality-rate/
WSJ. (2020, March 5th). Coronavirus Snarls Trans-Pacific Shipping and Ripples Through U.S. Business. Retrieved from https://www.wsj.com/articles/coronavirus-snarls-trans-pacific-shipping-and-ripples-through-u-s-business-11583432172
WSJ. (2020, February 27th). Shipping’s Smaller Operators Are Most Susceptible to the Coronavirus Financial Impact. Retrieved from https://www.wsj.com/articles/shippings-smaller-operators-are-most-susceptible-to-the-coronavirus-financial-impact-11582799403?mod=article_inline
WSJ. (2020, March 12th). U.S. Travel Ban Is Expected to Snarl Trans-Atlantic Airfreight. Retrieved from https://www.wsj.com/articles/u-s-travel-ban-is-expected-to-snarl-trans-atlantic-airfreight-11584040963





[1] (CNBC, 2020)
[2] (MarketWatch, 2020)
[3] (TechCrunch, 2020)
[4] (Statistica, 2020)
[5] (Financial Times, 2020)
[6] (WSJ, 2020)
[7] (WSJ, 2020)
[8] (WSJ, 2020)
[9] (Eurostat, 2020)
[10] (ABC News, 2020)
[11] (National Geographic, 2020)
[12] (ABC News, 2020)
[13] (Fortune, 2020)

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