Billionaire Investor Says Coronavirus Outbreak Could Destroy Whole Economies

We’re seeing a minor recession as shipments from China and other nations that have been hit hard by the Coronavirus have all but stopped. President Donald Trump has assigned VP Mike Pence to the job of handling the issue, which Pence is more than competent to do. Of course, Trump has been accused of not taking the outbreak seriously as a result. But Trump remains confident that the economy will recover as soon as the outbreak comes to its natural conclusion- as most epidemiologists predict it soon will.

But economists and investors are not as optimistic about the spread of COVID-19. Hedge fund manager, billionaire investor, and founder of Bridgewater Associates, Ray Dalio, wrote that the global pandemic may have disastrous long-term effects.

Admitting that he is not a qualified virologist, Dalio noted that people with 401(k)s and similar retirement packages are inadequately protected against major market corrections triggered by responses to the virus.

He writes, “[t]here are three different things going on that are related yet are different and shouldn’t be confused: 1) the virus, 2) the economic impact of reactions to the virus, and 3) the market action. They all will be affected by emotional reactions. Individually and lend themselves to a giant whipsaw with big mispricings, with the off chance that it will trigger the downturn I have been worried would happen with both the big wealth/political gap and the end of the big debt cycle (when debts are high and central banks are impotent in trying to stimulate).”

He says there’s no getting around the need to assess the situation and come to a conclusion on how to fix it.

One sign that we’ve found disturbing is that people are stocking up on toilet paper and little else. We’ve seen emptied shelves for toilet paper all across the country, and videos of women fighting in the middle of supermarkets for the last package of rolls. But people are not stocking up on food and medical supplies at anywhere near the same rate that they are buying up all the T.P.

It’s as if people are slavishly obeying the warnings of a possible toilet paper shortage. That alone is a frightening testament to the kind of irrationality that can be sparked by fear of a global pandemic. Irrationality is a key driver or both economic pain and economic health.

So far, with the exception of roughly 3,000 deaths globally, the most severe impact of the outbreak has been empty shipping yards where goods from China are normally held for distribution. Citizen journalists working at the shipping docks have shown vast, empty lot yards that are normally full of shipping containers.

Dalio concludes, “While I don’t think this will have a longer-term economic impact, I can’t say that it won’t. A large wealth/political gap and rising powers challenging the existing world establishment.”

Undoubtedly, if the economic impact of the Coronavirus gets much worse, Trump’s political opponents will use it as an opportunity to undermine his ability to help the nation weather the storm.


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