Can the world economy deal with the true-or-false conclusion it is trying to reach on the conspiracy theory regarding the origin of the corona virus?

The theory that the source of the corona virus was a laboratory in the city of Wuhan and the virus leaked from it accidentally or intentionally has made headlines in recent days, with President Joe Biden instructing US intelligence agencies to look into the possibility.

The bigger question, at least as regards the global economy, is: What does it mean if this theory is correct?

if the theory is deemed to be true, it will deliver the hardest blow to the global economy in centuries. Because governments will have no choice but to respond with sanctions and demands for full compensation.

Chinese products may be suddenly removed from the global market, creating a vicious cycle and an inflationary eruption. World trade will collapse. Chinese markets will crash when Chinese money is withdrawn from them. Confidence in China will collapse. All of this will do more damage than the corona virus itself - so this issue is the biggest danger right now for world economic stability.

Conspiracy theories are always circulating in the air. The damage they do is usually limited to some slight disorder caused by their obsessive-compulsive proponents and do not cause real harm.

But now the Wuhan lab-leak theory is starting to move to the center of the discourse.

President Biden, as much as he wants to avoid his predecessor's more absurd ideas, is at least willing to consider the possibility. Intelligence agencies are collecting evidence. The World Health Organization is showing interest.

Furthermore, there's another possible twist to this tale, which would be supremely ironic if it were not so deadly serious. Without going into the details I have - as I am not sure about their credibility - I can only hint that, if the investigation leads to the conclusion that the virus leaked from a lab in Wuhan, China will at any time be able to admit to the theft of the virus from a research lab on the other side of the globe.

Of course, there may be no basis for the Wuhan lab-leak theory anyway. But we love to blame China whenever it doesn’t sound good to blame Russia ... for whatever goes wrong.

But if it turns out to be the truth, or even if the claim is not fully proven, it will not just be a huge political event. It will be a catastrophic economic blow, which the markets have not even begun to think about.

Think for a moment about the possibility that the virus did not originate in a bat in the Wuhan food market, but actually in the research laboratory in that city. There is no doubt that the world will have to respond in some way.

What’s even worse, it will mean that China whitewashed the truth for a year and a half, while 3.5 million people were dying and all countries were enforcing devastating closures of one kind or another. This is not something that can be swept under the rug. The minimum response will be sanctions and a claim for compensation. Anything less than that will be considered unacceptable weakness.

China accounts for 15% of world trade, with sales of $ 3 trillion annually. It is the main supplier of everyday consumer products, as well as advanced electronic products. Any kind of sanctions that restricted the flow of goods would suffocate manufacturers, create bottlenecks, shut down factories and leave empty shelves in stores worldwide. It would take years to build a similar production capacity outside of China, and in the meantime there would be a massive surge in inflation when the supply of almost everything dried up.

Then, inevitably, a huge financial crisis will happen. China owns $ 1.1 trillion in US government bonds, the largest foreign holding. If these are sold or frozen, the Federal Reserve will have no choice but to purchase them itself and thus greatly increase the supply of money. Chinese money will disappear from the banks and they will need emergency assistance. The equity market will go into chaos, as China holds $ 1.5 trillion of it in the U.S. alone.

It could be argued that the global repercussions would be too dangerous for the world to proceed with punitive sanctions. But even if most of the world decided against full-scale sanctions, there would still be dire consequences. There would be obvious reluctance to continue to trade with a country that has shown such contempt for the consequences of its actions on the world.

And if it was a leak from the lab, then the incompetence of the staff and the amorality of China's cover-up are on an epic scale. It would make the Chernobyl disaster and the Chernobyl Soviet cover-up look like a minor incident. As for now, the leak from the lab is currently just a theory. In the coming months we will find out if there really is any truth to it.

But if it is true, it will cause an economic earthquake of unprecedented proportions - several times worse than the one from the pandemic, which is already the worst in modern history.

The above can be summarized briefly, in a statement that the search for the full facts that led to the creation of the virus is extremely important medically, and may turn out to be extremely destructive from an economic point of view. And on the question of whether it is better to be poor with better chances of being healthy or rich with greater chances of being sick everyone will have to answer for themselves.