“For the first time in history we can save the human race just by lying in front of the tv & doing nothing. Let’s not screw this up.”
By Peter Andrews
Economics is the study of choices, and never more so than now. It’s now clear that, with the coronavirus pandemic causing widespread chaos that economists believe will cause a prolonged economic depression, the choices that each person makes have the power to affect their country’s and the world’s economy over the coming weeks and months. With the caveat that much depends on those individual choices and the actions of governments, here is our current assessment of which places are likely to be worst-hit economically, as well as a few that might come out rosier than most.
Singapore might be the perfect recipe for coronavirus containment. A rich city-state with a world class universal healthcare system, a pandemic response plan in place ever since they were badly hit by the SARS virus in 2003, and healthy lashings of state-enforced social control mean they quickly knew exactly how and where 100 of their first 112 confirmed cases became infected. Astonishingly, their non-oil exports grew in February, owing mostly to an increase in shipments of pharmaceuticals and various manufactured goods to America, Japan and the EU. Their regional trade with China and the rest of Southeast Asia will suffer, though, and their economy is a trade-based one. Therefore, they are likely to enter a recession this year, along with the rest of the world. But the early signs suggest they may be better off than a lot of places, though.
Sometimes, it pays to be a totalitarian state. And to go first. China’s stifling of the contagion that started the trail of devastation has been miraculous, albeit achieved through the sort of state enforcement other countries would find difficult to enact. For the most populous country on Earth to go into a state of universal lockdown, with meetings or gatherings of any kind forbidden and essentially no individual movement outside of one’s own home permitted, requires a strong level of police enforcement, and the end of all but the most rudimentary personal freedoms. But it sure is working. China has been seeing the number of new cases decline, with none being home-grown — all their new infections — it reported 39 today — are from people returning home from abroad.
In the early days of the pandemic, economists were predicting a sharp decline in China’s economy followed by a sharp bounce back, a so-called V-shaped curve. But as the crisis has worsened experts are now forecasting a longer, deeper downturn, one that will take longer to escape from. But, having been the first to suffer, they will be the first to emerge from it. After the Communist Party has held the entire population of the country in its grip for the duration of this lockdown, without any major public unrest, they will come out the other side poorer, but arguably with even more political control than before. Which Beijing will use to help make a swift economic recovery, using its technological and manufacturing muscle.
Donald Trump has spent much of his presidency tweeting and boasting about how strong the US economy has been… and he’s been right. The economy has been steadily growing ever since the last global crisis in 2009, and in 2019 the period became the longest global expansion on record. But that expansion will become yet another victim of coronavirus before the summer is out. And there appears not to really be a reference for how bad things could get. Bill Ackman, the CEO of Pershing Square Capital Management, has begged President Trump on CNBC to beg to shut down the American economy for 30 days and put the country in a nationwide lockdown. “America will end as we know it unless we take this option”, he said. When hedge fund managers are praying for the economy to be SHUT DOWN in order to protect it, you know things are bad.
Comparisons to the Great Depression of the 1930s are common, with the majority consensus leaning towards the Covid-19 Depression of the 2020s being worse. JP Morgan is predicting a 14% slash in the US economy this quarter (alongside an eye-watering 22% in the Eurozone) while another forecast yesterday warned US unemployment could rise to 30% and overall GDP could decline by a staggering 50% in the second quarter. Depending on how quickly the Federal Reserve can pump money out to businesses at the same time as stemming the contagion as much as they can, then this could be anything between a gigantic global recession for at least six months, to the worst economic crisis in history, with depths as yet unplumbed. America, as the centre of the Western world’s economy, is going to feel the pain most.
No prizes for predicting that Italy will have suffered more than most when the dust settles on this crisis. A middle-sized country with a small economy, they find themselves overtaking patient zero China in numbers of active cases and dead. Italy has everything working against it. An elderly population more susceptible to the disease. An economy heavily reliant on tourism which will be decimated. And huge debts.
They were already a heavily indebted country that had suffered possibly more than any other European country through their membership of the Eurozone. And they were hardly a united cohesive society either, with the poorer south harboring ancient resentments against the richer north, which has experienced the centre of the outbreak. Footage of Italians singing from their balconies has been inspiring, and perhaps this crisis will bring them closer together as a country, as only tragedy can. But any other silver linings are hard to see for The Boot of Europe.
The Korean Republic is exerting a similarly strong defensive action to Singapore against the virus. They also have huge Big Data capabilities for mass testing and contact tracing, utilising citizens’ mobile phone and credit card data to decide who to test in the first place. They are no strangers to outbreaks either, as the 2015 MERS outbreak taught them lessons about how to minimize the impact on the health services. As for their economy, though, it was not in great shape leading up to this, and the damage to trade links within Asia will hurt them badly. The epicenter of their coronavirus outbreak is in the manufacturing region, and a Hyundai factory has already closed its doors there. But if it spreads to Seoul they will be in even bigger trouble, as that could shut down the business and finance sectors.
Australia is another country highly dependent on trade with China, and is predicted to be the hardest hit economy in the world outside of China itself and Hong Kong. China is also Australia’s biggest source of tourism revenue, and that twin-pronged attack on their economy is sure to do major lasting damage. This could not have come at a worse time for them either, straight off the back of a summer of rampant bushfires that did huge economic and reputational damage. Already, the Australian dollar is trading at very low values. Worrying times for Aussie people and politicians alike.
OK, Africa is obviously not a country, but there’s no point in trying to predict which of the already-fragile economies in that vast and troubled continent will be worst affected by coronavirus, when it does spread widely there. Africa has more than enough problems without yet another killer virus, but it has been largely ignored in discussions about global impacts of Covid-19 thus far. Frighteningly, most African countries are acutely vulnerable: many have fewer than 10 hospital beds per 10,000 people; they have many crowded, impoverished townships where there’s a lack of water to wash hands and little space to self-isolate; and few have any contingency plans or resources to cope with such an outbreak. According to NKC African Economics, Angola, Gabon, Ethiopia, Ghana, Tunisia, Zambia and Kenya are the African countries most at risk of debt distress in the likely event of a global recession. Slowdowns in the rest of the world pose a grave threat to African countries’ already precarious trade links to Europe and Asia.
Damage to a country’s economy is a direct product of steps taken to hinder the spread of the virus itself. If absolutely no measures were taken by a country, and companies remained open and everything was business as usual, their economy would be unaffected. With the exception, that is, of the untenable pressure that would soon be brought on the health services in that scenario. With a high peak in Covid-19 cases, the health services would quickly be overwhelmed, and people would start dying on the streets or at home without the slightest hope of even the most basic medical intervention. Clearly, this is not an acceptable state of affairs, which is why such drastic, possibly recession-triggering measures are being taken, all in an effort to save as many lives as possible.
Governments are doing what they can, which is essentially throwing huge, unprecedented sums of money to try to avert a prolonged crash and to keep their economies running. Most commentators cite wartime measures as the only comparable action. And the world is at war, against an enemy that, if left to run amok, will cripple the economy, ruin livelihoods and perhaps kill hundreds of thousands, perhaps millions, of people. How well we combat it will determine all of our futures.
Update (1320ET): As Italy’s worst outbreak spirals further and further out of control, Italy is reporting 5,986 new cases of coronavirus and 627 new deaths on Friday, raising the countrywide total to 47,021 cases and 4,032 dead, as the total number of cases in Europe surpasses the total ‘officially’ confirmed in China.
If you’re curious about how things are looking on the ground in Italy, this Channel 4 report is chilling.
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Update (1240ET): In an alarming video that shows just how huge demand is for COVID-19 tests, a drive-thru testing site in Bergen County has a line that’s “several thousand cars long”.
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Update (1220ET): As President Trump and the White House task force (with Dr. Fauci making an appearance today) update the country on the federal government’s efforts, Sec. of State Pompeo said that the US and Mexico had agreed to shut the southern border with Mexico..
In other news, drug company Novartis will donate up to 130 million doses of hydroxychloroquine to support the global virus response, according to a statement.
Trump also said that he probably won’t ever institute a national lockdown, feeling that decisions like that are better left up to the states. Across the Atlantic, the EU on Friday confirmed that it would expand its budget rules to open the floodgates to fiscal stimulus, as expected.
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Update (1120ET): The morning after California laid out the most restrictive measures to combat the virus in the US, NY Gov. Andrew Cuomo on Friday laid out new measures for New York State to combat the coronavirus outbreak, imposing new restrictions like ordering “100% of the workforce” to stay home.
During this time, Cuomo is order all businesses in the state that aren’t deemed “essential” to close, and added that though public transit will remain open for people who need it to travel to their ‘essential’ jobs, and to get to places like hospitals and doctors offices and grocery stores and pharmacies, he urged New Yorkers to only take the trains if absolutely necessary. Cuomo also clarified that bank ATMs are an ‘essential’ service.
All non-essential businesses must close, Cuomo and NYC Mayor de Blasio have said that the state will find better ways to accommodate essential employees who need childcare or other things. But Cuomo threatened to fine businesses and individuals caught breaking the rules.
“These are not helpful hints…they will be enforced. There will be a civil fine and mandatory closure for any business that is not in compliance. Again, your actions can affect my health, that’s where we are. There is a social compact that we have…we must make society safe for everyone,” Cuomo said about the executive action that he’s preparing to sign.
New York reported 2,950 new cases on Friday, bringing the state-wide total to 7,102 cases, with 4,408 cases in NYC.
As he chided the public for not taking the outbreak seriously enough, Cuomo declared that young people saying they can’t get the virus is “simply wrong,” claiming that 25% of cases are people ages 20-44.
When it comes to exercise, though gyms will be closed, Cuomo said New Yorkers can engage in ‘solitary’ activities like jogging, but said games of pickup basketball and team sports like that won’t be permitted.
During the press conference, Cuomo confirmed that the state had reached the capacity to test 10,000 New Yorkers a day, becoming perhaps the only state in the country to overshoot on its daily testing target of 6k tests. Along with these new ‘dramatic actions’, Cuomo announced more confirmed cases and deaths.
Cuomo told a story about how the city governments of St. Louis and Philadelphia during the Spanish Flu epidemic dramatically impacted the outcomes for their local populations, and that Cuomo was trying to follow the better example, before bringing up the issue of mental health and the fact that his daughter was forced to isolate for 2 weeks.
At any rate, looking at the case curve, the number of cases expected could triple the state’s capacity of beds and ventilators needed to save the lives of the sickest of patients.
The governor, who urged New Yorkers to “blame me” if things go badly with these measures, claiming that this decision was his after careful consideration and consultation with experts. “I did everything we could do…this is about saving lives…if everything we do saves just one life, I’ll be happy,” Cuomo said.
Moving on, Cuomo declared that he was banning evictions during the crisis, building on measures prohibiting banks from engaging in foreclosure, another unprecedented step.
In keeping with Cuomo’s coordination with the governors of New Jersey and Connecticut, Cuomo said he would be speaking with Phil Murphy and Ned Lamont, the governors of NJ & CT, later in the day to discuss his measures and whatever can be done to continue coordinating their states’ responses. Rumors have circulated in recent days that a similar lockdown might be declared in CT.
Asked by reporters how long to expect these circumstances to remain in place, Cuomo declared that “this could go on for months”, one day after saying researchers projected that the outbreak would peak in 45 days.
Watch the rest of the press conference here:
From the sound of it, Cuomo’s actions are still being well-received by New Yorkers and the country.
Elsewhere, in Switzerland, public health officials barred all gatherings of more than 5, possibly the most strict gathering ban instituted anywhere around the world.
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Update (1055ET): Meanwhile, in London…
Boris Johnson‘s government has continued to deny reports about an impending ‘lockdown’ of London. But with 10k troops on standby, we suspect that Italy might soon have some company in the ‘martial law’ department.
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Update (1015ET): The Treasury has officially moved back ‘Tax Day’, by postponing both the payment deadline (which it announced earlier) and the filing deadline (which it just announced Friday morning).
In other news, an NBC News employee has died from COVID-19.
As an update: Confirmed cases in the US passed 14,000 Friday morning, while the number of confirmed deaths hit 160.
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Update (0950ET): The market didn’t seem to care all that much, but Handelsblatt reported Friday that the German government is planning to pass a planned €200 billion budget to combat the crisis, as Berlin continues to facilitate mass testing and triaging that has kept its mortality rate among the lowest in Europe.
This comes after Germany car companies said they would close more factories.
Barely a day has gone by over the past two new weeks that there hasn’t been some report about Germany suspending its ‘debt brake’ due to the crisis and boost fiscal spending, as Christine Lagarde and the ECB have called on them to do. Even before the outbreak, reports about Germany passing a ‘shadow budget’ to boost tepid economic growth date back to at least the fall.
Germany’s outbreak began in the state of Bavaria, still its worst-hit region. And as governments around the world tighten restrictions on movement, Bavaria on Friday imposed new “fundamental restrictions” on public life to aid the fight against COVID-19, DW reports. The move, of course, comes less than 12 hours after the governor of California imposed similar measures.
“We’re shutting down public life almost completely,” Bavarian Minister President Markus Söder said.
People will only be allowed to leave their homes for necessary purposes, such as going to work or the doctor and buying groceries or medicine.
“It’s not easy to take these decisions,” Söder said. “We take these decisions according to the best of our knowledge and conscience. There will be a Bavaria after corona, but it will be a stronger one if we don’t look away.”
The measures will go into effect for two weeks starting Friday evening.
In other news, the German state of Saarland wants to shut down restaurants and restrict people from going out in public, moves that are similar, though somewhat less restrictive, than Bavaria. Saarland State Premier Tobias Hans will recommend the move to his cabinet this afternoon, the state chancellery confirmed.
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Update (0945ET): Six weeks ago, many branded us ‘alarmists’ for publishing warnings by credible epidemiologists and virologists about the infectious potential of the novel coronavirus.
If you still believe those warnings were ‘alarmist’, we wish you the best of luck during the coming weeks. You’re going to need it.
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Update (0928ET): The US military just confirmed that 35 American troops in Europe have tested positive.
Meanwhile, the FCA in the UK warned banks to ease up on repossessions and the like, issuing a statement claiming that “no responsible lender should be considering repossession as an ‘appropriate measure’ at this time. This comes after BoE Governor Bailey warned that banks should suspend foreclosures and repossessions.
Though it’s faded into the background, tensions over whether China would be able to keep up with its ‘Phase 1’ trade deal commitments have slackened somewhat now that Beijing has made its first expected purchase of US agricultural goods.
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Update (0850ET): Prime Minister Giuseppe Conte blamed the Italian people earlier this week when he said he would extend Italy’s nationwide lockdown until April 3, claiming that too many were still violating the lockdown despite stiff penalties.
As the country’s death toll passes the death toll from mainland China (or the ‘official’ death toll at least), whispers about even restrictive measures appear to have just been validated: Prime Minister Giuseppe Conte on Friday effectively declared martial law Friday morning in Italy’s worst-hit region of Lombardy, claiming that he will now be bringing in the Army to enforce the lockdown, something that the region’s governor swiftly confirmed.
As many members of the Italian public continue to act with no respect for protecting the public health and the massive effort underway to contain the outbreak, for the first time, many are about to learn the meaning of discipline.
According to media reports, Conte is considering extending the lockdown until at least early May.
Ultimately, whether the government decides to extend the lockdown will depend on factors like the continuing spread of the virus, as well as the public’s response, and whether Italians finally start taking this seriously.
At this point, many expect that schools will not reopen before the summer break, the that the further tightening may not only include a ban on outdoor, but might also prohibit Italians from the cherished “passeggiate,” leisurely strolls around town that allow one time to think and digest.
While the Italian outbreak still has no end in sight, over in the US, Dr. Anthony Fauci said Friday morning that social distancing in the US should continue for ‘several’ more weeks, as officials scramble to try and discern exactly how far the virus has penetrated, as hundreds of thousands of tests arrive at labs. Last night, during an appearance on Facebook live, Dr. Fauci confirmed that more tests are being shipped as private partnerships with firms like Thermo Fisher.
Reports claimed Friday that the Italian Treasury now expects the country’s economy to contract by 3% this year, largely because of the lockdown.
Soldiers have already been deployed in some places to help enforce the lockdown and help with the crisis response.
New York’s MTA on Thursday announced that 23 workers have tested positive for the virus, this is up from just 1 worker as of early Thursday. The workers didn’t display symptoms at work and were described as being of low risk to riders.
In other central bank news, the SNB has announced more measures, while Sweden has expanded a loan guarantee program.
Meanwhile, as Boris Johnson’s government facilitates a policy u-turn to fight the virus, his former Chancellor is chiding the public on twitter.
At this point, it’s almost like the more you yell at them to stop, the more panicked they become.
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When historians look back at this time, we suspect that California Gov. Gavin Newsom’s landmark decision to order more than 40 million Californians to remain at home on Thursday night will be remembered as an important demarcation point – the beginning of a more heavy handed response as it becomes increasingly clear that too many Americans are simply ignoring the government.
So far, NY Gov. Andrew Cuomo and President Trump have insisted that they have no plans to issue lockdown orders. But with the number of confirmed cases expected to soar in the coming days and over the weekend, the situation is certainly evolving rapidly, and rumors about other states considering preemptive lockdowns (remember, the whole point is to stay “ahead of the curve”) continue to circulate.
Over the past week, central bankers around the world have slashed rates, stepped up bond buying programs, promised to expand their back-stopping of credit markets and – most importantly – urged the politicians in charge to do their part and pass massive fiscal stimulus. Late last night, the Senate unveiled a $1 trillion package that will feature direct transfers to many Americans.
In the US, futures are pointing higher amid mounting hopes for a second straight close in the green. The improved sentiment is ostensibly due to the latest wave of central bank interventions. But that didn’t stop a team of economists at Bank of America from releasing a new note calling for a global recession, with GDP growth dropping to 0% for the year in 2020. Explaining the shift in their thinking, the team wrote: “Our first piece on the virus shock was titled ‘Bad or worse’; now we amend that to ‘Really bad or much worse.'”
The World breathed a sigh of relief Thursday night when China reported no new domestically-transmitted cases of the coronavirus for a second straight day. Meanwhile, Reuters just reported that the foreign ministers of South Korea, China and Japan have held a video conference on Friday to discuss cooperation on the coronavirus pandemic as concerns grow about the number of infected people arriving in their countries from overseas, threatening to set off a second wave of infection. The State Department is doing its part: It issued a ‘Level 4’ travel warning last night advising Americans not to travel abroad, and for any Americans still outside of the country to either come home, or ‘shelter in place’.
In the UK, Prime Minister Boris Johnson said last night that the UK could quash the virus in 12 weeks if Britons simply cooperate with the government’s new efforts.
Unfortunately, it appears the dreaded ‘second wave’ of infections is already looming over Hong Kong.
After reporting 14 new cases in a single day earlier this week, a surprisingly large jump for a city that was widely praised for its swift and heavy handed response to the outbreak (proving that the city had retained the hard-learned lessons of SARS), Hong Kong on Friday reported a record jump in new cases as the city-state braces for a wave of new illnesses, many involving travelers from abroad and the HK residents they’ve infected.
Friday’s surge of 48 cases is the largest daily jump since the outbreak began; it’s equivalent to roughly a quarter of all cases confirmed in the city previously, according to the SCMP.
Even as the virus swept through parts of China and elsewhere in the region, Hong Kong managed to largely control its outbreak. Now, as life in the financial center had begun to return somewhat to normal, the wave of new cases is worrying experts who say it could lead to widespread community transmission. The city now has more than 250 confirmed infections.
The new confirmed cases take the city’s total number to 256, and a top microbiologist said Hong Kong might be on the edge of an all-out “war” against an explosion in infections.
The Centre for Health Protection said 36 of the latest round of infected people, aged between four and 69, had a travel history. One of the local cases is a taxi driver who had picked up passengers from the airport.
When asked whether the government should ban non-locals from entering the city, Dr Chuang Shuk-kwan, head of the centre’s communicable disease branch, said all the fresh infections were residents, except one – an Australian who had been to the United States and Portugal. He was transiting at the airport and sent to hospital after feeling unwell.
As SCMP explained, 1,000s of people returned to the city this week, with new asymptomatic spreaders evading checks and spreading the virus inside the city. The spike in new cases prompted the city’s government to announce new quarantine measures requiring anyone arriving from abroad to self-isolate for 14 days, measures that have also been implemented by China. Also in China, the People’s Daily reports that catering halls and shopping malls are reopening in Beijing.
Whether you trust the Chinese numbers or not, there’s no question that the CCP leadership has reason to be cautious, now that it appears President Xi has evaded a historic embarrassment. According to Johns Hopkins, the number of confirmed cases ROW is now 2x the number from mainland China. Mandatory quarantines and outright bans for foreigners probably aren’t bad ideas.
Meanwhile, Spanish authorities announced Friday morning that the death toll in the country has broken above 1,000 as citizens near the end of their first full week under an enforced lockdown.
The country reported 1,903 new cases, and 169 new deaths, raising its total to 19,980 cases and 1,002 dead.
Meanwhile, on social media, snippets of video have circulated offering glimpses into the life on lockdown in Madrid and elsewhere around Spain.
Since the first case of COVID-19 was confirmed in the US, there has been no shortage of bitterly ironic headlines during this outbreak (remember when Rudy Gobert licked all those microphones?). But overnight, Altria Group – one of the largest tobacco companies in the world (it was better known as Phillip Morris before it rebranded a few years back) – said Howard A. Willard III, its Chairman and CEO, has tested positive for COVID-19.
Let’s hope he’s not a smoker.
By Peter Andrews – 3/4/2020
Initial reports of a possible canine case of coronavirus began to emerge from Hong Kong last week, and at that point it was announced that the dog in question would be quarantined for a fortnight. Swab tests from the pet’s oral and nasal cavities were tested and turned up a “weak positive” for coronavirus. Thankfully, almost a week after first testing positive, the dog is reported as not yet having any symptoms.
Why the pooch was tested in the first place was not clear, although it was doubtful part of a routine medical check-up. It could be that some clinics are making sure to test all household pets of infected people so as to ensure the virus has as little mechanism to move about as possible. Alternatively, it could be that this dog is the first pet to be tested, and were others to be subjected to the same scrutiny it could transpire that more pets of infected people are also carriers of the disease.
Much of the early reportage on the outbreak focused on the seafood and wildlife market in Wuhan, which Chinese officials had declared was the likeliest source of the outbreak. That seemed to imply that the virus had an animal origin, as live poultry, fish and other critters were reportedly present at the market.
As such, the initial panicked response to the outbreak was to obsess over the potential source of the virus. Exactly what kind of animals were at this market, and were they alive and kicking, or dead to be sold as meat?
Animals as a source seemed, and still seems, a plausible view. Sars is one other virus, and closely related to 2019-nCoV, to have previously resided in beasts before making the leap to humans, and it was eventually traced back to a horseshoe bat colony in China.
And bats, of course, became the most inculpated source for the new disease. Who could forget those now-viral images and videos from Wuhan of people tucking into soup that looked like something from an HP Lovecraft novel? While it later emerged that the images were a few years old, it set people’s minds to feverishly imagining what lethal zoological combo could have spawned the plague that has now infected tens of thousands of people worldwide.
Quite early on, Chinese scientists published a genetic study claiming that snakes were the most likely animal ‘reservoir’ for Covid-19. Pangolins were also mentioned, although traditional Chinese medicine’s unique relationship with wildlife meant that, for some, practically everything was on the table.
It is important to remember that the dog in the case mentioned received the virus from its owner, and not the other way around. Commenting on the case, Hong Kong’s Agriculture, Fisheries and Conservation Department (AFCD) pointed out that it does not currently have conclusive evidence that pets can be infected “or can be a source of infection to people.”
Therefore, animal health experts say that there is absolutely no reason to hide from your pet, or to keep it indoors. You’re probably much more likely to contract the virus from another person – no matter where in the world you are.
While the dog remains under investigation, and it is not definite whether or not it has the coronavirus, it – like its owner – has been quarantined. Hopefully the dog, and its owner, make a full recovery, and the virus does not spread to more animals. But the prospect of the virus crossing the species barrier does not bode well for anyone.