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Global Economics & the Corona Virus

Have you heard of the butterfly effect? It is kind of like when a sick person in China sneezes and you end up paying more for bananas in Cape Town (huh?).

You may be wondering how the Corona Virus (Covid 19) is affecting the global markets? After all don’t we have many scary diseases and virus around all the time?


We all fear dying. We take many steps every day, big and small, to avoid death. We brush our teeth, look both ways when crossing the road and eat all sorts of interesting diets to stay healthy. Fear of death is a natural fear.

When an epidemic breaks out we tend to hear and focus on all the people who get sick and die. We seldom read headlines like: ‘1000 people recover from Corona virus in China’. It is more likely that we will read about the ‘First Death in Africa’. That headline sends chemicals to the parts of our brains that focus on self preservation and we get scared that we might become person number 2 in Africa.

‘It is very sad that so many have died due to this illness’

It is very sad that so many have died due to this illness. It is, of course, equally sad that many others have died this month due to traffic accidents, cancers, malaria and TB along with other forms of flu etc. It is tragic.

At the moment, it is hard to avoid being swept along by the tide of negative and scare tactic press out there. They want us glued to the screen and they are doing well at the moment. We are hooked. All this negative news makes us feel scared and that makes people hesitate to go out and spend money.

You may soon start to notice it in your business (unless you sell hand sanitizer, then you are making good money). People who are afraid change their spending habits. This is often why economists and politicians will try to urge calm. They do not want people to panic and stop spending money.

A Global Village

Now, more than ever, all countries do business with one another. We head down to our local stores and buy everyday items that are made on the other side of the world. What this means is that what happens in other countries will affect what you see at the shop or what you can order from suppliers.

China Has Cut Production

Due to fear and quarantines, many big factories in China are not running at full speed. Some have even closed their doors for a while. They supply to people around the world. More than that, many companies now only carry small amounts of stock at any given time and rather rely on new stock being quickly shipped in from places like China.

With the recent drop in Chinese manufacturing output, this means many shops are bound to end up being unable to sell more stock. They can run out of stock quicker. This, in turn, means they are unable to supply the companies and individuals coming in the door. In turn, those people cannot resell or use these items in their business. It has a giant domino effect.

The Domino Effect

What then happens is that those people cannot make their usual income due to these interruptions. They, in turn, cannot spend money they do not have. They struggle to pay their suppliers and even just buy their usuals household items.

Round and round it goes. This places a lot of strain on local businesses due to something that started half the world away. And when the virus rears its head locally it also causes people to stay away from their usual shops.  Who wants to go work out in a gym where sick people sweat all over the exercise equipment? Who wants to go to a mall with hundreds of other people who might be sick? So, people change how they spend their time and money.

The reasons why people do this do not have to be logical. They are often a gut reaction to a possible danger that is top of mind at the moment.

This is how a virus that is only slightly more virulent than most affects the worldwide economy.

Is Your Business Feeling the Pinch?

If you are already feeling financially strained and your business is struggling then you should approach a local Debt Counsellor (or one online if you wish to avoid person to person contact) for advice. Things are about to get a lot tougher as people cut their spending.





image: <a href=””>Background photo created by mindandi –</a>