Viruses are borderless.
And given international economic integration, so are oil and equity markets, both of which were routed worldwide on Monday.
Two separate yet interrelated events occurred: Saudi Arabia announced a big oil production increase after Russia refused to take part in an OPEC accord meant to cut supply. The result was a 24% plunge in oil prices, which were already dropping due to deteriorating economic conditions related to the intensifying coronavirus crisis roiling the world.
The quick price collapse — which will impact already beleaguered countries such as Venezuela and Iran, the latter of which is an epicenter of the coronavirus outbreak — rolled right into global equity markets. European stocks were down 7% and have now entered a bear market, and Asian equities were hit hard too, led by a 5% decline in Japan.
The price action also spread to Wall Street. Although trading was halted to prevent a panicked sell-off, the Dow was down nearly 8%, as was the broader S&P 500 index. The declines were due in part to the energy sector meltdown, to be sure. But more broadly they reflected the fear, if not likelihood, of a global economic contraction that could rival the Great Recession.
Policymakers have hopefully learned lessons from that panic. And in fact the Federal Reserve moved Monday to boost short-term lending, and the New York Fed said it would follow suit to mitigate strain on the banking system.
Much more will be needed, and indeed more flares from the financial sector about liquidity concerns were sent up on Monday. The Fed, led by professionals who generally eschew the amateurish rhetoric coming from other quarters in Washington, will likely respond responsibly.
But because this is a global health, economic and — increasingly — governance crisis, more than a national response is needed. International institutions, widely derided in this populist era, need to work cohesively to mitigate the current and coming disruptions to keep the crisis from becoming a panic.
Under both Republican and Democratic administrations, the U.S. has traditionally led such responses. These are not traditional times, though, and President Donald Trump's performance has been anything but reassuring.
Instead, he took to Twitter Monday to pronounce the oil-sector collapse as "Good for the consumer, gasoline prices are coming down!" Never mind that it will hit energy workers hard and that it has also been caused by the imploding global travel industry. Trump also tweeted that "Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News is the reason for the market drop!"
The news — including reporting on the administration's botched response in the initial phase of the coronavirus outbreak — is real. Trump's pledge to pursue payroll tax cuts, assistance for hourly wage earners, and help for travel-related industries is a tacit acknowledgment of the seriousness of the situation.
The president should quit his misinformation campaign and, backed by bipartisan consensus in Congress, urge that world leaders work together on a coordinated crisis response.