Site Overlay

The Coronavirus And The Economy: Which Will Win?

Post may contain affiliate links more information is provided in this link.
Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.

I swear, 95% of the news is talking about the Coronavirus and the economy. So now I feel like I need to talk about this. However, I was having a problem finding a way to make the post evergreen until recently. One of my favorite financial gurus talked about how if everyone spent $3 less a day, the market would enter a recession. But it got me thinking. Are we honestly that close to a recession where if we bought one fewer small cup of coffee each day, we would enter a recession? Is it really that simple?

How Recessions Happen

Recessions occur almost exclusively because people decrease their spending. Just to be clear, I am not talking about spending on a fancy car or on champagne at the clubs (or at least not exclusively), but when it comes to investing too. Investing allows cash flow into businesses. Cash flow ultimately produces progress. However, there are going to be times where people feel like spending less or even try to pull out their investments. When this happens, many businesses have less money to progress and could regress.

And there are “businesses” in which do not provide much when it comes to product nor services. These are called scams. When a recession happens and a business scam does not have the money to provide to people who suddenly want their cash, well, many investors would be livid. Some may sue and the business may be charged with fraud. But what about their money? Oh that’s gone. You probably will never see it again. That is why Warren Buffett said that “you only find out who is swimming naked when the tides go out.” The effect of the Coronavirus on the economy may reveal the scammers of the world.

Inevitably, there will be fewer things to invest in.

We Are Already In A Bear Market

As of 3/12/2020, the stock market has dropped over 20% from the highest peak. This is commonly called a bear market. Almost no one will argue about this being the end of the longest bull market in the world. It is still questionable if the Coronavirus will force the economy into a recession. As of yet, the Coronavirus has not put the economy in a recession.

Regardless, investors are more hesitant in their purchases. In addition, current investors are slowing down on large purchases such as a house or business ventures. The assets they were planning on liquidating for this purchase are now lower valued, so now they must plan around that. This will likely further impact the economy. Oh, did I mention the US is in a state of emergency? Many states have shut down everything that is considered non-essential including my state of PA. This will further affect the economy.

Will The Coronavirus Bring Down The Economy?

In my opinion, things are likely to get worse in the economic world before it gets much better. Regardless of how much we should fear the Coronavirus, I highly doubt these fears will dissipate within a week. However, I do expect them to lessen a little, will it be enough to prevent a recession? I don’t know.

But the Coronavirus will not bring down the economy. How do I know this? Because the economy does not directly respond to epidemics, or disasters. It is our fears that may bring down the economy. The economy responds to fears. Think about it, the economy is entirely our creation. Everything bad that happens to it, is entirely on us.

Many Things Are A Bit Out Of Control

Unfortunately, much of what is going on right now is out of your control. For instance, with the potential quarantines it is possible (maybe even probable) you will not be working for a while. Depending on your job, you may not have sick leave for your work and even some legislation will not guarantee sick leave for everyone. To everyone who is in this situation, I will not lie, this is tough and unfair for you. But this is where you will find out if you have made yourself recession proof. It does not matter how legit the scare of the Coronavirus, the whole scare will blow over sometime in the near future. If you have sufficient savings and manageable debt, you will be fine over the next few months.

What If You Do Not Have An Income Nor Savings?

You must find some income. This is easier said than done, of course, but believe it or not, there are jobs out there. I have seen many places putting up hiring signs for temporary work. I do not know if this is business as usual, or if they need someone to fill a role while they stay home, but jobs exist. Just do not expect much hiring through normal channels such as online applications to work very well. Many places need to find out what to do with the workers they hired who cannot work, not hire new people. The most likely place you can find work is with gigs including TaskRabbit, Uber, etc. As far as I can see these are still open for people to use.

Do Not Waste Any Time

The worst thing you could do if you are not working is to waste time. If you are not working during the Coronavirus, you need to find some productive use of your time. You can perform personal research into your work, sharpen your skills, or look into a business idea you had. This would be the perfect time to start something online. Of course an online blogger is telling you that, but my word still must hold up something. Furthermore, if you have an idea for a book, well there’s no outside distractions, you pretty much have no excuse.

Will The Coronavirus Get Worse?

It is worth mentioning that I am not an expert on the Coronavirus. That being said I have a PhD in biochemistry with a focus on RNA virology (SARS-CoV-2, the novel coronavirus, is an RNA virus), so I can give some expertise on how RNA viruses work. RNA viruses have the largest frequency of mutations in their genome among all living and non-living biochemical based entities. This forces them to adapt and change rapidly so they can obtain new characteristics. This is very concerning because if an effective treatment or vaccine is developed, there could be multiple different strains that could bypass these medicines.

That being said, some of these mutations can easily negate the effectiveness of the Coronavirus. For instance, the genomes of viruses have sequences called conserved sequences that do not have many observed mutations. The reason why is because these regions encode essential biochemical elements such as enzymes responsible for replication and infection or genetic elements that reprogram the host cell to replicate the virus.

Mutations do occur in these regions, but only certain mutations will either have no effect on the mechanisms, or even improve these mechanisms. Many will make the mechanisms non-functional. Many of the mutations will not make the virus more effective, but will make them less effective or even non-functional (essentially an inert dust particle). That is why mutations of these conserved regions are not frequently observed. They occur, but when they do the virus has difficulty replicating. Therefore there are not many functioning viruses with these mutations and some cannot even replicate and are not considered viruses.

The More A Virus Can Spread, The Less Lethal It Becomes

The most crucial thing to remember about a virus is that for it to make an effective epidemic or pandemic, a virus must be able to replicate. In fact, the most effective strain of the virus will be the one that replicates the most effectively. Generally speaking, the more effective a virus kills its host, the less effective the virus replicates. If the host dies quickly, the virus has less time to utilize host mechanisms to replicate. That is why there are more recorded cases of COVID-19 after only a few months of its know existence than total Ebola cases in the entire 2014-2016 epidemic even after Ebola was known about for a long time.

In other words, the deadlier the virus, the less likely it will spread and cause an epidemic. SARS-CoV-2 may be a scary new virus that can very quickly mutate. But it is far more likely to mutate into a virus that can replicate and survive better than to mutate to kill us more efficiently. The virus will likely adapt to survive better, not to increase its lethal rate. There are exceptions, but the general rule is, the more lethal the virus, the less likely the virus will survive. The SARS-CoV-2 will change (the mutation rate for RNA viruses is too high for it not to), but it all but certainly will not become more lethal than it currently is. In fact, it is all but guaranteed to become less lethal so it may replicate more efficiently.

Final Thoughts

The Coronavirus and the economy will still be around in the future, but the fears of where both are headed will end one way or the other. Either it will be all fine and only history will remember these events, or aliens will one day come to Earth to find the ruins of our civilization (I believe the former will happen over the later). My expertise in RNA virology says that the virus itself will not get worse, or at least not much worse. But my expertise is not in public health nor epidemiology, so I cannot say what the virus will do to the public nor how far this pandemic will go. However, it is not likely COVID-19 will end the world, but our fears may bring the economy to its knees, assuming it has not already. Ultimately, it is up to us where the economy will go, we can let fear crush it or let hope for tomorrow raise it up.

Author: Papa Foxtrot

Most of my life I was careful with money and learned where I should invest it. I was very lucky to have parents who taught me financial literacy when I was young. Unfortunately, I am very lucky because many people lack the financial literacy I know. The purpose of Forge Your Wealth is to teach people who are just starting out in life how to obtain their wealth or anyone who just realized they may need to learn more to handle their finances. I currently have a PhD in biochemistry, just started a job in industry (will not disclose where exactly for personal and professional reasons) and am currently married to the love of my life. I am one of the lucky few people in America who graduated with no student debts, my wife was not. Over the series of a little over 3 years we paid for our wedding with no debt and paid off her federal student loans.

Leave a Reply

error: Content is protected !!