When It Rains It Pours, China Edition

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The US has its share of problems right now (see One Crisis Is Manageable. Five Might Not Be).

But China is right up there in the “when it rains it pours” sweepstakes. As the apparent source of the covid-19 pandemic, it’s still battling new cases and may yet be blamed for not just spawning the virus but consciously designing and then releasing it. It’s also battling unrest in Hong Kong, saber-rattling with Taiwan, and navigating a complex trade war with the US.

But those things might pale next what’s happening with the massive Three Gorges dam. Rain has been falling almost non-stop for weeks in Southern China, and floods – much worse than usual for this time of year – have inundated cities and towns (including covid-19 epicenter Wuhan) along the Yangtze River. The New York Times  describes this combination of pandemic and flooding as “surreal and difficult”.

If that’s the end of the flooding story, then “difficult” might be as bad as it gets. But rumor has it that if the rain keeps falling, the dam itself is in trouble.

Meanwhile, those nightmarish Chinese pig farms may have spawned another  potential pandemic:

China researchers discover new swine flu with ‘pandemic potential’

(CNN) – Chinese researchers have discovered a new type of swine flu that can infect humans and has the potential to cause a future pandemic, according to a study released on Monday, though scientists have cautioned that the virus does not pose an immediate global health threat.

The disease, which researchers called the G4 virus, is genetically descended from the H1N1 swine flu that caused a pandemic in 2009. G4 now shows “all the essential hallmarks of a candidate pandemic virus,” said the study, published in the scientific journal Proceedings of the National Academy of Sciences (PNAS).

Tests showed that G4 can infect humans by binding to our cells and receptors, and it can replicate quickly inside our airway cells. And though G4 holds H1N1 genes, people who have received seasonal flu vaccines won’t have any immunity.

G4 already appears to have infected humans in China. In Hebei and Shandong provinces, both places with high pig numbers, more than 10% of swine workers on pig farms and 4.4% of the general population tested positive in a survey from 2016 to 2018.

It’s easy to forget that China, by spending trillions of borrowed dollars and newly created yuan on an epic infrastructure buildout, was instrumental in pulling the world out of the Great Recession. No one expects anything like that this time around, as rising defaults on China’s existing debts make massive additional borrowing a financial suicide mission.

So the reason for bringing up these new problems isn’t Schadenfreude, but a recognition that there may not be a cavalry riding to the global economy’s rescue this time. Which means today’s ultra-easy money is baked into the cake for as far as the eye can see, which in turn means that, should prices (of real things rather than stocks and bonds) start to rise, the world’s central banks will have exactly zero tools for putting the inflationary genie back in the bottle.