24 August 2005

'Dismal science' just got a lot gloomier

National Post columnist Jacqueline Thorpe explores possible effects an outbreak of Avian Flu would have on the world's economy. SARS will be nothing compared to Avian Flu if it becomes a pandemic, according to BMO chief economist Sherry Cooper. Experts say worldwide deaths could reach or exceed 50 million if the disease were as vicious as the influenza pandemic of 1918, even if a successful vaccine could be developed and distributed. We're talking quarantines, officials denying landing rights to planes and ships from countries where the disease is spreading, banning concerts, parades, public gatherings. Global trade would probably grind to a halt, leading to empty shelves and shortages of medicine and food. Oil prices would also plunge. Canadian markets and the loonie would be particularly vulnerable. Income and profitability of businesses of all kinds would suffer. Financial institutions would be under enormous pressure to sustain their services, due to employee absenteeism and chaotic financial markets. Staying indoors might boost e-commerce, assuming the postal and delivery services were still operating, but don't buy technology stocks because they are heavily integrated into East Asian economies and are highly volatile at the best of times. Soaring death rates would puncture the housing bubble and create vast oversupply, leading to default for many. Life insurance policies might not cover pandemics. Cooper says the traditional safe havens of gold, the US dollar and US treasuries would benefit, at least until big Asian buyers brought their money home to fight the disease. Central banks would chop interest rates to spur demand, but deflation would probably take root anyway as economic activity and world credit demand plummeted. But BMO financial strategist Donald Coxe says it would likely be a while before financial markets cottoned on to the full implications, giving the prepared investor opportunity to act. Adds Cooper: "[Those] who could protect their assets and hoard cash would ultimately benefit by buying real estate, farms, businesses and stocks at extraordinary bargains. This sounds rather callous, because the death toll could be so high, but those with liquid assets in the lead-up to the Depression were able to scoop up the property of those who were heavily indebted." Bottom line, especially for those investors immersed in the great Canadian oil and commodity play, is be prepared to go liquid quickly -- that is, if there's anyone left standing.
(National Post 050824)

8 comments:

Jeff said...

Again,

This post is not making me feel happy about myself. Did you not read AnalCag's site? It is all about me today Reid ME!! Not you, not world problems but ME....Moi. The one and ONLY!

Jeff said...

Besides Sherry Cooper and Don Coxe are a bit on the pot smoking side. I used to listen to them every week when I worked at BMO. I'm sure Natasha will agree with me when I say, their perception is somewhat altered.

The Experience said...

[ drunken trombone sound effect, as camera zooms in on Reid's comic distraught face ]

Stop being such a Debbie Downer Reid!

Reid Dalgleish said...

BMO is not the only financial institution commenting on this. The fact they are is significant enough, even if Cooper and Coxe are kooks.

Ryan says the strain outbreaking in Vietnam right now has a 93% mortality rate compared to the Spanish Flu outbreak of 1918, which had some ridiculously low number, like 3% mortality rate. Jeez!!!

[ drunken trombone sound effect, as camera zooms in on Reid's tearing eyes as he cries for the plight of humanity ]

Reid Dalgleish said...

I'm just kidding of course...I didn't cry. :-) But we are f**ked one way or another.

Reid Dalgleish said...

Transformation in our lifetime....got a good ring to it! Here's hoping that what comes after is better than what occurred before it.

Jeff said...

As long as we can still shop and party, and cute boys to play with, i'll be fine.

Kirsti said...

Hey I just noticed you linked to me, thank you so much :) I'll return the favour once i get around after my little shelling in my own chaos of emotions (so deep.. so deep)