The Real Bird Flu

The Daily Reckoning PRESENTS: Worried about the H5N1 bird flu virus causing a pandemic? To go by the media, you should be. But study the scientific evidence and you can only conclude that the media scare is mostly hype. Mark Tier explores…


The Spanish flu pandemic of 1918 killed 25 to 50 million people – 2.5% and 5% of the world’s population. If you believe fear-mongers writing for the world’s media, the supposedly virulent H5N1 bird flu virus will cause another pandemic any day now. If it’s as bad as 1918, 125 to 300 million will die. With 747s, instead of the more leisurely steamships of 1918, any pandemic will spread a lot faster today so the death toll could possibly reach a billion people.

A terrifying prospect, isn’t it?

But major differences – aside from 747s – between 1918 and now mean that the real chance of another 1918-style bird flu pandemic, while not zero, is pretty close. To start with, in 1918 scientists didn’t even know what a virus was. They knew that the Spanish flu was caused by something smaller than bacteria – but until the 1940s no one could see or isolate a virus, let alone analyze one.

Today not only do we know what viruses are, we have developed some protection against them; and scientists can decode their genetic sequence. Secondly, the Spanish flu came out of the blue, so to speak. There was no warning – nor did anybody expect it. By the time people realized it was a pandemic, it had already spread worldwide.

Today, in contrast, everybody expects a pandemic to begin any day, and health authorities everywhere are already planning what to do. (Let’s just hope their preparations will be more effective that their planning for catastrophes like hurricane Katrina!)

But remember SARS? It appeared from nowhere in 2002. And who expected something like it? Not a soul. Yet, just days after it was first identified as a new and unknown disease, sufferers and their contacts were quarantined; travelers were screened – and so many people decided to stay at home that airlines like Hong Kong’s Cathay Pacific suffered dramatic declines in passengers – and profits.

Within just a few weeks, SARS had been identified as a corona-virus, and soon thereafter its source was traced to civet cats in China’s Guangdong province. SARS, while not as contagious as influenza, was pretty nasty just the same. Almost 10% of the people who caught it died. Ironically, though, so effective were the measures taken to isolate sufferers that over 20% of the people infected were doctors, nurses and other hospital staff – who caught it from patients!

This totally new, virulent but unknown and unexpected disease – spread around the world almost instantly by 747s – killed a total of 774 people. Thousands more people die from diseases like malaria and dengue fever every year.

Unlike SARS and the Spanish flu, the world now expects a disastrous, world-wide influenza pandemic to happen any day. So everybody’s watching for it. The moment someone catches the H5N1 virus from a bird, they’re isolated. Birds carrying the virus are being culled in the millions – further reducing the chances of it mutating into something that can jump from human to human.

However, as the British Medical Journal put it in its October 29 issue:

“The lack of sustained human-to-human transmission suggested that this H5N1 virus does not currently have the capacity to cause a human pandemic,” adding that the warnings are entirely a theoretical speculation.

Is there any evidence for this conclusion? To judge from the press, this H5N1 avian flu virus is something new. Maybe it isn’t. What is certainly new is that every time someone catches it, it’s on the front pages of the newspapers.

Dr. Jeffery Taubenberger – a molecular pathologist with the Armed Forces Institute of Technology in Washington, D.C. – led the research team that recently decoded the 1918 Spanish flu virus.

What they discovered: it was not H5N1 – or any other known avian flu virus. What’s more, though definitely bird flu, it didn’t originate in chickens, ducks or geese. In fact, nobody knows at the moment what bird it came from. As part of their research, Taubenberger and his team analyzed tissue samples from 25 preserved waterfowl, vintage around 1918, stored at the National Museum of Natural History in Washington.

They discovered that avian flu viruses those birds carried were identical to same variants found in birds today. In nearly a century, these viruses have hardly changed or evolved at all.

To people used to taking a flu shot every year – because last year’s flu shot won’t protect you against this year’s flu – this may seem a surprising discovery. But human influenzas are continually evolving – as the virus gains resistance to each new medication. As birds don’t take antibiotics, get flu shots or other medical cocktails, the viruses they carry don’t need to change.

The H5N1 avian flu virus is known to have been around since the late 1950’s. For all we know, it’s been infecting people for hundreds – if not thousands – of years. And in all that time, it has not caused a human pandemic. But only in 1997 did scientists actually discover it had infected humans. As a result, today every person this virus infects is religiously reported instead of being ignored – which turns it into a scare, but not a pandemic.

Not everyone agrees, as we’ll see in a moment. But here’s something else that’s suggestive: until very recently, only severe cases of H5N1 infection have been studied by doctors and scientists: the people who end up in hospital at death’s door, where nearly half of them die.

So we’re given the impression – fostered by the scare-mongering media and scientists desperate for bigger government grants – that this is an incredibly deadly virus; one far worse than the Spanish flu.

A study published on January 9th in the Archives of Internal Medicine casts serious doubt on this conclusion. In a province near Hanoi, Vietnam, where 80% of residents keep chickens and H5N1 is rampant, 45,476 were randomly selected for a survey – 8,149 of them, or 17.9% – reported having had flu-like symptoms with a fever and a cough. And nearly two-thirds of them had direct contact with sick or dying birds.

While blood-testing needs to be done to confirm the hypothesis, it seems highly probable that the H5N1 strain of avian flu is very similar to the other viruses birds carry: capable of infecting humans but with very mild effects – indistinguishable from the common cold – when it does. Only a tiny percent of people infected react so badly they have to go to hospital. Until now, they were the only cases ever reported, so creating the unwarranted fear that H5N1 was exceptionally virulent.

Unfortunately, there is a very different bird flu danger. The H5 strain of viruses is just one of sixteen different virus groups birds carry around – rather like a flying “virus soup.” As birds’ immune systems are adapted to these viruses, they rarely get sick.

This is about to change.

Countries like China and Vietnam, which are among those killing millions of birds carrying this virus, are inoculating them as well. So the H5N1 virus – not to mention all the other viruses birds carry around with them – will soon gain resistance to current treatments (like Tamiflu).

Indeed, the New Scientist recently postulated that the H5N1virus could well be the result of past inoculations of domestic fowl. While the latest evidence suggests they were wrong, there is no doubt that thanks to these inoculations H5N1 could easily evolve into an entirely new strain, already resistant to all known treatments.

If that happens, even if it doesn’t jump to humans it could easily decimate the world’s bird population. That said, it is possible that the H5N1 virus – or one of the other many such viruses birds carry with them – could jump to humans. After all, that’s how both the “Asian flu” (1957-58) and “Hong Kong flu” (1968-69) got started. If that happens, what’s the best protection?

The Spanish flu pandemic gives us the answer (and it’s not Tamiflu).

One of the countries least affected by the Spanish flu was a country that has long had exceptionally strict quarantine laws: Australia, but not as strict as American Samoa. As telegrams carried the news faster than steamships, American Samoa knew about the Spanish flu long before it arrived there. They simply closed their doors, and did not let any ships dock except under strict quarantine conditions. The number of deaths from Spanish flu in American Samoa: zero.

But the Spanish flu did hit Western Samoa, just a few miles away, where there was no quarantine: some 20% of the population died.

That SARS didn’t turn into a pandemic is further proof of the effectiveness of quarantine in stopping a highly contagious disease in its tracks. So, provided any new strain of bird flu is spotted early – virtually certain given the current vigilance of the world’s health authorities – it will be contained long before it can turn into a pandemic. Chances are, that’s never going to happen. But even so, you can be sure that bird flu scares will be a staple of the world’s press for many years to come.

Why? It’s simple. Last year, the George W. Bush announced an “emergency” $7.1 billion program to combat the bird flu scare. Other governments around the world are setting up similar programs, though on a smaller scale. This means we have an entirely new scientific establishment funded by inexhaustible government money whose sole reason for existence is to find something that hasn’t happened yet – and may never happen.

To justify their existence and to get more of that lovely government green stuff, you can be sure that this new “government program” will do everything in its power to keep the bird flu scare alive. One way, is adopting the political techniques of “spin.” For example, in an article published in Thursday’s (23 March 2006) issue of Nature, Yoshihiro Kawaoka, a researcher at the Universities of Tokyo and Wisconsin, wrote that one reason why the H5N1 virus hasn’t spread from human to human is that it infects the bottom area of the lungs.

Other flu viruses prosper in the top of the lungs, so they’re easily spread when people cough, and even breathe out. H5N1 doesn’t have that “advantage.” Nevertheless, he concludes that his findings suggest that we “may have more time to prepare for an eventual pandemic.”

The three flu epidemics of the 20th century were caused by the H1, H2 and H3 series of bird flu viruses. All scientists agree that the H5N1 virus must go through many mutations before it can be spread by human-to-human contact. Not only does it infect the lowest part of the lungs, but it appears that the only way a human can get it from chickens is by close contact with lots of infected birds; the kind of thing that can happen when you sleep with them.

So here we have a virus, which: has never, as far as we know, spread from one human to another; is hard to get in the first place; if someone does have it, is not released easily by the lungs and to the extent it is, in tiny quantities compared with sleeping in a chicken coop; and has to go through a large number of unlikely mutations first in order to become a pandemic in humans. One of those mutations, presumably, will be to transfer its preference to the top of the lungs from the bottom, probably the least likely of all.

Given all these obstacles, is it science to conclude that it is only “a matter of time” before this virus causes a human pandemic? Or is this the sort of “prediction” you’d expect from government-funded politicized science where the prime imperative is not Truth but staying plugged-in to the government-drip machine?

And to stay plugged-in, to get the next government grant, you’ve got to follow the party line, which is: a bird flu pandemic is inevitable. As entrenched government programs are almost never axed, I expect to go on reading that “prediction” until the day I die…of natural causes.


Mark Tier
for The Daily Reckoning
March 30, 2006

The absence of history is the absence of adversity. Nothing goes wrong. No need for puts. No need for savings. No need for insurance. We quote the Great Mogamb “Ha, ha, ha, ha…”

Ad-ver-si-ty. Our guess is that it is under-priced and under-appreciated. This morning, we pause briefly to laugh at Gilder and Fukayama and Bernanke and Bush. We thank the whole team of dreamers and schemers, world improvers and mountebanks who make our job so entertaining.

First, we turn to Paul Ford, of Harper’s Weekly, on how the triumph of democracy has transformed Mesopotamia:

“Thirty beheaded corpses were found in Baquba, Iraq, and 10 more bodies were found in Baghdad, where the homicide rate had reached 33 per day. Shiites were abducting Sunnis in bright daylight on crowded streets. ‘If the Americans leave,’ said one Sunni man (whose brother had recently been executed after being tortured with power tools), ‘we are finished. We may be finished already.’ In Miqdadiya, near Baquba, militants attacked a prison, killed 20 people, and freed 30 prisoners. A doctor in Baghdad admitted to killing 35 policemen and soldiers who were being treated at his hospital. American and Iraqi forces said they had killed 17 Shiite militiamen at a mosque in Baghdad; Iraqi television showed corpses in a prayer room.”

We guessed that the campaign in Iraq would be a mess. If we were a better man, perhaps, we would take no perverse, schadenfreude in being right. But we’re only human, and like all humans, we slip into sin and error as eagerly as we put on a new sweater. That is why the dollar is doomed – the war on terror, and the empire too, dear reader. We may drive a Mercedes and watch cable TV, but we are still heirs to the same slimy beasts that crawled out of the warm sea – with hearts so feeble, they were expelled from Eden.

Meanwhile, on the money front, we return to George Gilder’s preposterous notion that record debt levels don’t matter – because our houses are worth more. It is true that debt would be no problem if history really had stopped. But, the trouble with debt is that it can’t stand adversity.

The Economist published the following figures for money supply growth in various countries over the last 12 months: Australia +9.1%, Britain +11.7%, Canada +7.7%, Denmark +14.7%, U.S. +8.1%, the Euro area +7.3%.

Everywhere you look, the money supply is going up twice or three times as fast as GDP. Where does all this money go? Liquidity, like rainwater, has got to go somewhere. What has been going up two to three times faster than GDP? House prices! In other words, the supposed extra “wealth” that Americans enjoy is not real wealth at all. It’s just inflated asset prices. Too bad monetary officials didn’t inflate at 20% per year, or 100%. Perhaps they might have taken a page from the Argentines in the ’80s or the Weimar central bankers of the ’20s; they might have just recalled all existing dollars and added three or four more zeros. Think how rich we’d be then!

No, dear reader, it is not that simple. You can’t get rich just by printing money, and you can’t get rich by going into debt. The deeper you are in debt, the more exposed you are to ad-ver-si-ty. Just a small tide of setbacks and you are underwater completely. Even a hedge fund run by Nobel Prize winners – Long Term Capital Management – was drowned like a kitten after its managers took on too much debt. All of their studies told them that Russian bonds would come back to a normal trading range – and they were right. The bonds did regress to the mean, but the poor geniuses at LTCM couldn’t wait. They had borrowed too much money.

Most households are not run by geniuses; ordinary people with a limited line of credit run them. The typical family spends what it earns – and then some. It is already up to its neck in debt.

On Tuesday, the Fed raised its key rate by 0.25%. The water is rising.

[Ed. Note: The authorities are getting nervous. They’re afraid of what could happen as these marginal buyers have to pay up. Regulators are stiffening lending rules and pressuring mortgage companies to be more careful with their money…and yet, the amount of defaults will still rock these lenders…and everyone in the United States will feel the aftershock.

More news from The Rude Awakening…


Eric Fry, reporting from downtown Manhattan:

“Twenty-two-year highs in silver; 24-year highs in sugar; 25-year highs in gold; 26-year highs in platinum; all-time highs in copper, crude oil and natural gas…Welcome to the commodity markets of 2005-06.”

Learn more about commodities and other news from Wall Street in The Rude Awakening.


Bill Bonner, with more thoughts, reflections, and ironic laughter…

*** “‘I’ve been coming to this conference for 15 years,’ a soave looking gentlemen whispered into a cell phone,” writes Addison, reporting from the Grant’s Spring Conference at the St. Regis Hotel in NYC. “We were on the 20th floor of the hotel overlooking Central Park, gazing at Tavern on the Green, the Dakota building looming in the distance.”

“‘Normally there are only about 100 people here,’ the gentleman continued, ‘but now you can hardly get a seat. There’s standing room only!’ He let out a generous guffaw. Perhaps they’re all here to see former Fed Chairman Paul Volcker take a poke at Ben Bernanke. Perhaps, Jim Grant’s tongue-in-cheek contrarianism is coming into vogue. In any case, there are a lot of well-healed iconoclasts – investment bankers, money managers, hedge fund guys – at this conference discussing some fairly aggressive strategies for making money in the world today.”

Addison had a chance to sit down with Paul Volcker for a chat after his keynote address. Our friend Nicolas Nassim Taleb was at the conference, too. We’ll have a chance to hear more from Addison later…

*** You can make a lot of money by watching what bankers are doing – just remember to do the opposite. In the 1980s, Texas banks poured money into the Houston oil economy. We remember reading stories of wildcat lenders drinking champagne from cowboy boots. Of course, then the price of oil collapsed and weeds grew up in the new housing developments. And who were the lenders to the Third World, just before the debt sold down to pennies on the dollar? Bankers only missed the Tech Bubble through no fault of their own. The scrappy young hustlers found that they could get even more money out of the gullible public and on easier terms – they didn’t even have to pay interest!

But at just the moment the Tech Bubble reached its zenith, Britain’s central bankers and its chancellor found a way to make up for lost time. All over the world, economies were in the middle of the biggest explosion of money and credit of all time. Central banks were greasing up their printing presses, trying to keep up with the stacks of dollars arriving in their vaults. And gold – that age-old antidote to financial trouble – had been going down for 20 years. Was there ever a worse time to sell it? We can’t think of one. Yet, the Brits unloaded much of their remaining stock of the yellow metal, getting about $6 billion in return. If they’d waited until yesterday, they would have gotten twice as much. But that is history. What about the future? What are the banks doing now? What can we learn that might be useful?

Paul Kasriel, at Northern Trust, tells us the obvious: that U.S. commercial banks have record exposure to mortgage debt. In 1985, the mortgage market represented only 30% of their assets. Now, it is 62%. Not only that, much of their other lending is indirectly linked to mortgages. They lend to hedge funds, for example, that use the money to buy mortgages. If push comes to shove, says Kasriel, the banks will lose in two ways – their mortgages will go bad and the hedge funds will default.

The median new buyer in 2005 put down only 2%. More than 40% put down nothing at all. How will these people respond to adversity? Will they not just walk away? Most defaults occur in the third or fourth year of a mortgage, we learned today. Half of all outstanding mortgages are in their third or fourth year now. The default rate is rising.

The bankers, in other words, stand in the same deep pool of debt as their customers.Everywhere, the water is rising…to their chins.

We, dear reader, want to make sure that we are on solid ground – on the bank…with a picnic lunch and a bottle of wine.

*** The bodies pile up with the ironies. You’ll recall the chatter after 9/11. “Irony is dead,” said the numbskulls. Then the situation was crystal clear – at least to them. The good guys wore white hats. And then, the good guys announced a very peculiar “War on Terror,” which is to say, a war against nobody in particular. They put on their combat helmets and attacked Iraq, which was nobody in particular, and had no truck with terrorism at all.

After subduing the country, the Iraqis went to the polls, held up their purple fingers, and then began killing each other. According to today’s International Herald Tribune, the people doing most of the killing – the biggest terrorists in Iraq – are the Shiite militias, sponsored, supported, or condoned by America’s own puppet government. That is the source of the trouble between the U.S. Empire and its new vassal state. The U.S. Empire’s much advertised “War on Terror” puts it at odds with its equally advertised “Democracy For Mesopotamia” project. We don’t know God’s Own Plan. We don’t know how it will turn out, but “not well” is probably the best way to bet.

*** “Not well” is probably also the best way to bet on the outcome of the France’s current troubles. There too, we are witnessing history aroused from her slumber and ready to kick butt.

What we are seeing is an illustration of what happens to institutions – even modern democracy. In theory, democracy is end of history. People can vote for needed reforms. They can “throw the bums out.” So, there is no longer the need for revolutions to topple unyielding, self-serving governments.

But, that’s not the way it works. As an institution ages, more and more people find a way to take advantage of it – to game the system. These people have no interest in disturbing the status quo. Indeed, they put themselves in positions of power and find ways to prevent change: by controlling the media, the election process, gerrymandering districts, and so forth. When you read the newspaper, for example, you are not reading “what really happened.” You are seeing what happened as interpreted by a particular class of people, with a particular background, and a particular dog in the race. Practically every headline and every editorial reflects the unconscious bias of the existing institution and its supporters.

Just as it is almost impossible to defeat a member of Congress, so is it almost impossible to reform a system in which so many people have an active interest. That is what the French are discovering. They’ve made life cushy for the controlling classes, and paid off the lower classes with bribes. Young, aggressive, entrepreneurial French people often leave the country; there are more than 100,000 of them in London alone. What is left – people who don’t want to change the system; they want to be a part of it. A poll reported yesterday, shows that three out of four young French people want to work for the government.

Everything decays, degrades, degenerates, and ultimately dies, dear reader – even modern democracy and modern capitalism. We are sorry to have to tell you, but what kind of world would it be if they didn’t?

*** Yes, it was inevitable. Globalization is beginning to take small bites out of industries previously thought inedible. We’re talking about education and health care. People go to Rio or Mexico for cosmetic surgery, we are told. They may even go to India for a heart operation. The English slip across the English Channel to take advantage of free medical care – of high quality, too – in France. And now comes news, in London’s Sunday Times, that the English are sending their children to private schools abroad in order to save money. We have friends who send their son to Winchester School in Britain. The tuition, they tell us, is about $40,000 per year. The average British boarding school, according to the Times, now costs about $30,000 a year. The International School in Bangalore, by contrast, only costs about $15,000 per year. Hilton College in South Africa charges about $17,000.

The Daily Reckoning