Protecting the economy from infection

COMMENT | As bad as the effects of the Covid-19 pandemic have been on China, the American response was: Hold my Corona.

Donald Trump will do anything to ensure his re-election in November, and the greatest looming threat is a stock market free-fall and an economic recession. So, in one manic week, we’ve seen the Fed cut rates to zero and quantitative easing 3.0.

Cast your mind back to 2008 for the consequences of the last coupling of low rates and excess liquidity. The ill-fated offspring was the global financial crisis. How real is the threat of a global recession right now?

Global consulting powerhouse McKinsey anticipates a best-case result of "a fall in China’s GDP from nearly six percent growth to about 4.7 percent; a one-percentage-point drop in GDP growth for East Asia; and drops of up to 0.5 percentage points for other large economies around the world".

The worse case scenarios anticipate bigger hits to GDP in the large economies and longer recovery periods. So the situation is bad, and can rapidly deteriorate now that American mass media has made this a minute by minute assault on the hive mind so that rationality is fast being overcome by hysteria.

By contrast, Malaysians have shown great empathy and maturity in our societal response to this threat. Though the restricted movement measures come into effect tomorrow, we must do our part in the interests of both our own public safety as well as our responsibilities towards neighbours and visitors.

I will leave it to the experts to propose the appropriate medical precautions...