Reading the entrails

First the Bush Administration belatedly starts to take bird flu seriously, now the investment bankers (Keith Bradsear, New York Times). That's how you know you can start to worry for real.

HONG KONG, April 4 - Investment banks are starting to issue warnings on the risks that avian influenza poses to the economies and financial markets of East Asia, even as health experts struggle to assess whether the disease has the potential to cause a pandemic at all.

With Asia, and particularly China, now the main area of global economic growth along with the United States, economists across the region are considering any factors that could derail the region's expansion. Many such risks are familiar ones - an earthquake in Japan, a banking crisis, civil unrest in China or a conflict in the Taiwan Strait.

What is striking in the last two months, though, is the prominence with which avian flu, often called bird flu, is being mentioned as a risk as well. Discussion of the disease has increased in tandem with public anxiety, as seen by controversy here in the last few days over whether the municipal stadium might be used to treat overflow patients from hospitals in the event the disease spread.

In a report issued on Monday, the Asian investment banking arm of Crédit Agricole of France put a price tag of $8 to $12 billion dollars so far from damage to the Asian poultry industry. But if bird flu becomes pandemic, all bets are off on the cost, costs so far not figured into stock and asset prices but the source of significant uncertainty in the markets.

"It would be a regional panic and potentially a global panic," [the bank's equity strategist] said, adding, "There's no way markets can discount this."

[snip]

Among corporate pessimists, Citigroup has issued increasingly dire warnings, saying that bird flu could become much worse than SARS. Unlike SARS, influenza probably could not be stopped through quarantines or fever-recognition scanners at airports, because influenza victims become infectious up to a full day before they start exhibiting symptoms.

Don Hanna, Citigroup's chief Asian economist and one of the gloomiest voices in Asia about bird flu, said that while SARS caused a brief dip in demand as people stopped going to restaurants and shops, a widespread influenza outbreak among humans could hurt the supply and demand for goods during the course of the disease and for years afterward.

If a pandemic started suddenly in a particular region, I think it is a given that trade and travel would be quickly curtailed. It is easy to see, based solely on the SARS experience, how this could tip us into a worldwide economic recession.

So even if you aren't too sick or too dead to go to work, it isn't clear there will be work to go to for everyone. Something else to look forward to.

But then, George W. is keeping us safe. Except that he forgot to connect the dots again.