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Jay Currie

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6/10/2005

Avian flu advances...

While it is fun to discuss the implications of the SCC health insurance decision, a real problem is looming:

The regional director for the World Health Organization, Dr. Shigeru Omi, told reporters in Beijing yesterday that the two recent outbreaks in remote areas in which hundreds of birds died were worrisome because they involved migratory waterfowl and domestic geese, birds that until now had been fairly resistant to the disease.
nyt
There is some chance that avian flu will remain locked into the bird population. But, and critically, it has spread to humans in Cambodia, Viet Nam and Thailand. With fatal results.

The death toll from a flu pandemic is difficult to estimate or imagine. If we are lucky the transition of the flu to human hosts will reduce its lethality; but there is not the slightest reason to think this likely. Vaccines against this strain will take about six months from the time of first identified air borne human transmission. So, for those six months, we will have to rely on general anti-virals. (Which, happily, Canada has been stockpiling for some time.

The human consequences of a flu pandemic are likely to be horrific. In the West we are not used to people dying from infectious diseases. The reaction of the medical and public health world to SARS - which was a relatively issolated, if deadly, agent - demonstrates that while we can bring a lot of very clever and high tech medicine to bear, we are not very good at the basics of quarantine and infectious disease control.

For Toronto in particular and Canada in general, SARS was a wake up call and we seemed to have learned a few things. In particular we saw how quickly our high tech medical system can be overwhelmed by 50 or 100 cases of a deadly infectious disease. In Toronto, if avian flu hits, the number of case will likely be in the hundreds of thousands unless very strict quarantine measures are put into effect instantly. The same is true across the country.

However, and here is where the brittleness of the West and its economic and social structures kicks in. Assuming for the moment that Canada, because of the planning which resulted from the SARS scare and the decision to stock up on anti-virals gets off relatively lightly. Say 100,000 cases and 20,000 deaths - because we live in an interdependent world our good luck will not protect us from the economic consequences of an epidemic.

The worst case projections are that up to a quarter of a given population will be infected and, of those infected, 10-20% will die. So, to take our neighbour to the south, that would be 75 million cases and 7.5 million to 15 million deaths.

The harsh economic fact is that while those deaths will be concentrated in groups of already compromised people, children and the elderly, the already ill and, of course, the poor, enough highly productive people will be killed for there to be a real effect on the economy. An effect which a robust economy could absorb fairly easily over a couple of years; but an economy which is in budget and trade deficit and facing increasing competition for energy supplies? Much more difficult.

Worse, the loss of several million people is not without consequence for the booming housing markets which, in their turn, are underwriting the stacks of private debt Americans have been racking up. When five people on your cul de sac all die in the same week and that pattern is repeated throughout your suburb it is a pretty good bet that housing prices are going to fall - fast.

Even the usually ebulient Alan Greenspan is more than a little concerned about the overheated housing market:
Federal Reserve Chairman Alan Greenspan this week added to a chorus of worry about the growth of home loans seen as far riskier than the 30-year mortgage that has been U.S. housing's bedrock for decades.

Those alternatives, called "exotic" by the Fed chief on Thursday, have played a big role in sustaining the four-year housing boom by making homes more affordable, which in turn stoked demand and drove prices higher and higher.
reuters
It is a leverage which could work dramatically in reverse. Dead people don't make payments nor do they buy houses that other dead people's families are desperately trying to sell. A correction can easily become a crash and that crash can ripple out into the non-housing economy.

Ripples which will look like tsumnamis to a very dependent Canadian economy...