All eyes on China

As the United Kingdom enters lockdown, China's Hubei province has announced that it will lift travel restrictions after two months of quarantine. The move is China's latest attempt to restore its economy to normalcy, with millions of its citizens expected to resume intra-provincial travel except in the city of Wuhan.

While the rest of the world seems to be bracing for the worst to come, all eyes are on China. The country that dealt with the destruction wrought by the coronavirus that causes Covid-19 for the last three months offers a glimpse of what to expect.

As of this writing, official figures in China show that 81,000 people nationwide have been infected by the novel coronavirus, with a mortality level of roughly 3,300. In a country with a population of around 1.4 billion (and, in Wuhan, a population greater than New York), this figure is staggering.

China's lockdown on January 23 drew international criticism, as pundits everywhere saw the draconian measure as indicative of the country's poor human-rights record. And now while the United States revels in its isolation, China, along with Cuba and Russia, is sending much-needed aid and medical supplies to hard-hit Italy (more than 5,000 fatalities) in a move of global cooperation.

As for economic activity, China took a big hit to its output in February, with an unprecedented slump across all economic indicators, including manufacturing, retail, and consumer services. This month, the

People's Bank of China (PBOC) reported that activity was beginning to kick back up, with major centers of production expecting around a 70-80% level of recovery and an unemployment rate of roughly 6.2%.

Now compare this with St Louis Federal Reserve president James Bullard's prediction of a 30% unemployment rate and a 50% drop in gross domestic product in the United States. Many commentators are skeptical about China's recovery amid growing fears of a second wave of the virus in parts of Asia. Although this recovery may be assured as yet, Beijing provides not only a timeline of expectations but also an example of how to keep the economy intact when everything suddenly shuts down.

While policymakers in the United States failed to reach an agreement on a muchanticipated stimulus package, President Donald Trump proved yet again that he is clueless. In Monday's White House briefing, he made clear his intention to reopen the economy prematurely, against the advice of medical experts, hinting that it could only be a matter of weeks (by Easter in mid-April) before the reopening takes place.

This, unfortunately, should be no surprise coming from the man who as late as January 30 called the "Chinese virus" a hoax, then haphazardly declared a war against this same "invisible enemy," and is now convinced that the cure may be worse than the illness.

Such a reckless decision could result in the situation really getting out of hand. Credible epidemic models project terrifying fatality rates if people go about their daily lives as usual. One report issued a dire prediction that up to 4 million Americans could die (and 90 million globally) without any proper suppression and quarantine measures. Incidentally, it was the same report that finally pushed the White House to take action against Covid-19 in the first place.

In what seems to be an effort to save his economy, his businesses, and his re-election, Trump may end the only thing preventing (if only temporarily) the widespread collapse of American institutions and whatever faith people still have in the health-care system and American social order at large.

The US Federal Reserve's unprecedented decision last week to buy unlimited quantities of debt securities and in effect lend directly to cashless corporations sent a signal to the market that can only be described as extraordinary. The foundation of the global financial system, built on years of drawing foreign capital into the United States through the petrodollar system, may finally meet its maker.

With Brent crude rounding out at around US$30 a barrel, a consequence of Russia's decision to increase production after the failed OPEC+ talks in early March, financial markets are bracing for the turbulence ahead. The banking system, for now, remains intact thanks to the operational-stress-test measures put in place after 2008. What's more, currency markets appear at this writing to be relatively stabilized. But the brewing storm has put all policymakers on high alert.

Corporations need liquidity in order to prevent mass layoffs. If the derivatives and securities markets collapse, these businesses will no longer be able to go to banks for credit. This is why the Fed is now underwriting unlimited debt issuance and why Trump is moving to end the lockdown fast.

The nation's new clothes could reveal that America is a place of lost hopes and terrifying reality, whispering to the barons of madness the lines from Allen Ginsberg's poem and calling for the beast of revolution.

While the global economic forecast remains cloudy, China's supposed recovery offers a glimmer of hope. People often laud the Chinese government for bringing millions of people out of poverty. But we must all recognize that it was also the Chinese people who brought themselves out of poverty.