Health is wealth.
In a way, health is kind of similar to money.
Health is also a resource that indirectly contributes to the economy. Your workforce needs to be healthy first in order for it to be productive. Money is the financial means for businesses to grow and operate. The economy needs money for it to function normally as well.
Health also buys you more time, at least more time on earth. The healthier you are the longer you may live. Money also kinds of buy you some time. We generally trade our time for money. And if we have enough money, we can use it to buy more ‘free time’. That is why there is a financial independence movement – people want to accumulate enough money so that they can spend more time doing the things they want to do.
Health also buys you a better quality of life. Health gives you the physical capacity to enjoy doing stuff. When you have less health complications, you have less physical limitations, less pain or discomfort which enables you to enjoy life better. Money is also kind of similar, you can use more money to buy better products, better services and better experiences.
The Flip Side
Health is the means for you to achieve something. Health gives you the physical capacity to achieve goals while money gives you the financial capacity to achieve your goals.
Having health is the basic requirement for you achieving your goals. But without health, you life will be miserable. It is just like money. The lack of money will cause you much more problems.
Poor health has an adverse impact at the individual level. But what about poor health at the community level? Like a health crisis?
What is the economic value of good health or the lack of it?
Perhaps COVID-19 might give us some clues to its detrimental effects. It has so far claimed thousands of lives globally and has wrecked havoc on our health, economy and society.
#1 Uncertainty, Ambiguity and Instability
Other than the obvious fact of COVID-19 claiming lives and causing suffering among many people, one of the main side effects is that COVID-19 brings about a ton of ambiguity and uncertainty. That brings about instability.
It seems unprecedented. Never before had we seen such a quick drop in the market. Never before had we experienced so many bazookas fired by central banks and helicopter money from governments only to see the markets dropped further. Never before had we seen so many people confined within their homes.
Everyone is unsure what to expect. Will the pandemic spread further? Will the damage be deeper? Should they work and risk getting infected? Should they stay at home and risk losing their source of income? Will monetary and fiscal stimulus be able to help debt-laden businesses?
Market prices are a reflection of investors expectation. And when investors do not know what to expect, we start to see huge volatility.
Everyone is on edge, eagerly devouring every bit of new information to try to understand the rapidly evolving situation – grasping the air for some sense of certainty.
It is no wonder we see investors flip flopping to every decision made by the central banks and every economic indicator reports.
We had often taken good health for granted. A healthy workforce brings about stability. Businesses will be able to plan, invest and grow because they know that growing population means growing demand.
But if we add the element of uncertainty, businesses will pull back expansion plans and adopt a wait and see if the situation stabilizes approach. Additionally, if the impact is severe, business will turn into survival mode and do what it takes to survive.
#2 Disruption Of Day To Day Living
A health crisis is disruptive.
We got a glimpse of the disruption earlier when China place several of its cities in lockdown. The global supply chain was severely affected.
The bustling cities were reduced to ghost towns overnight and overall activity drastically decreased – that is a definition of recession – overall decrease in economic activity.
Fast forward a few more weeks, we now see the more devastating consequences of daily disruption – drastic drop in demand for travel, retail and events. This time, it is happening globally and a much larger scale.
When you restrict people to their homes and cut them off from other people, the overall activity is going to fall as a direct consequence.
A lot of businesses that depend on consumer consumption for their source of revenue will see huge loss in earnings. Loss in earnings might cause them to default on their debts and obligations.
This is the potential killer blow to all small and medium businesses globally.
Disruptions can break supply chains, inhibit demands and cause all sorts of problems for businesses and individuals.
#3 Less Control And High Stakes
Our central banks and financial systems had learnt a lot from past crashes and developed various tools to lessen the impact of crashes and aid recovery of the economy.
We have seen various quantitative easing, repo market liquidity injection and even distribution of cash directly to consumers (helicopter money).
In a sense, we have developed some tools to give the authorities more control in dealing with financial crisis.
But for a health crisis, we have less control. In fact, some countries are inadequately prepared to respond to it.
Just like a doctor, we could continuously prescribe medicine to treat the symptoms of the recession or financial crisis. However, there is little we can do to treat the root cause which is eliminating the virus.
All we could do is more aggressive testing, tracking of cases and social isolation to slow down further spread of the virus. We will have to wait for a vaccine or cure which is not a guaranteed solution.
The stakes are high as well if the containment is not handled properly. There is very little margin of error and any mistake could result in many more infections and deaths.
As seen in Italy, US, Iran and the rest of EU, the situation can escalate further and overwhelm their healthcare system.
The consequences can also have a long lasting effect. One could also argue that it is permanent. After all what can be more permanent that the finality of death.
Unfortunately, there are so many factors out of our control and we only have the option to wait and pray for the pandemic to be over soon.
All Is Not Lost
In a financial crisis, central banks have a lot of power in solving the problem as we seen in the quantitative easing and huge corporate bailouts in the 2008 financial crisis.
Our current situation may seem dire but we are not as helpless as the central banks in dealing with the COVID crisis. In fact, I would argue that we have more power to turn the situation around and recover from it.
Instead of defying lockdowns and staging corona parties, we should choose to be socially responsible and do our part to contain the outbreak.
Distance yourself. Wash your hands and practice good hygiene. Follow the travel advisories and stay at home.
Do not overwhelm your public health system. For small illnesses just stay at home and rest and recover.
Seek help immediately when your situation is serious and cooperate with quarantine requests.
Hopefully, when we do our part, the pandemic will recover and we could look forward to healthier days ahead.
Health brings economic stability
Fatty's Finance 