An argument someone put to me today which makes a lot of sense. In the GFC markets collapsed not just because there was too much risk in the system – though there was – but because it was hidden. With the various bits of sub-prime debt sliced and diced into teensy pieces many of which had different risk characteristics anyway, it was impossible for many people on the hook to know their position. And so they couldn’t participate any longer in the market – because people wouldn’t accept them as a counterparty. And so one part of the market seized up after another.
One can distinguish between two approaches to the coronavirus crisis – high information and low information. In low information countries which can’t locate the risk the trade-off between economic and health policy is very extreme. One needs to lock down the population to get the rate of spread down. These countries include China (early on), most countries in Europe and the US – though people are saying the Germans have better information – and are doing better.
Australia has done a lot of testing but it doesn’t seem to be very well targeted, though no doubt it’s getting better. Meanwhile, Singapore, Taiwan and South Korea have proceeded with much lower disruption to their economies, much less need to lock their population down, because they can track the virus with testing and strong case management of those who test positive.
I’ve previously noted my amazement at the official Australian policy of simply assuming that this will go on for six months because it seemed to me we weren’t given good reasons to believe that it was impossible to get the virus under control and then get rid of it with a short sharp shock of 4 to 8 weeks as New Zealand are trying to do. I now add this point. We were assured again today that we’re in this for six months.
If we can’t transition to a quick exterminate the virus strategy, why can’t we transition to the proven East Asian Strategy in the space of four to eight weeks? I also wonder why we’re not using normal tech much more. If you attend school in Nanjing now, they take your temperature on the way in. If it’s elevated you’re not welcome in the building. With over 80 per cent of coronavirus cases having elevated temperature, it’s a very efficient test.