Sunday, September 20, 2020

The Great Pause Week 27: The Agony and the Idiocy

"If there is no one left alive there is no need for an economy."

 


As the costs of uncontrolled pandemic and uncontrollable wildfires, storms, droughts and floods spread through insurance and mortgage markets, pension funds and other institutions, some in government and finance are coming slowly around to the realization that being battered by such frequent and devastating shocks cannot be sustained forever. The usual band-aid approaches aren’t going to work much longer. 

Mr. Biden’s climate policy proposals are the most ambitious and expensive ever embraced by a presidential candidate, and most of them would meet resistance in Congress. 

 — The New York Times, 8 Sep 2020

‘Transition risks’ of a green economy could be just as disruptive to our financial system as the possible physical manifestations of climate change, and moving too fast, too soon could be just as disorderly as doing too little, too late. 

 — Heath Tarbert, Republican Chairman of the Commodity Futures Trading Commission 

Bob Woodward: But the virus and the economy are related…
The President: A little bit.

Some months ago the tradecraft journal Foreign Affairs reported:

In early May, a 29-year-old man visited several bars and nightclubs in the South Korean capital of Seoul and soon after tested positive for COVID-19, the disease caused by the novel coronavirus. South Korean health authorities promptly launched an enormous contact-tracing effort, tested 83,000 people, and identified and isolated nearly 250 newly infected cases. Their swift action prevented this “superspreading” event from reigniting a much wider outbreak. As of early June, there has not been a major uptick in cases in South Korea — new infections remain under 50 per day — and the country is carefully but safely returning to a semblance of normalcy.

Contrast that to when passengers on a cruise ship contracted Covid and one of them died. The announcement came as the ship approached San Francisco with 3,533 passengers aboard. The passengers were removed to an Air Force base. There, nearly two-thirds refused to be tested, with some stating that federal officials had discouraged them from doing so, and others admitting that they did not want to be tested because they wanted to be released from quarantine. They were.

From the early days of the pandemic, wags in politics and the media — those who make their livings as sculptors of public opinion — almost to the man or woman, regardless of party or religion, parroted the conventional wisdom separating epidemic control and economic prosperity. Such a dichotomy, as any fool can see, is absurd. An economy is no more than rules for the game of life, and if there is no one living, there is no need for an economy. Economies world-wide won’t stop being crippled as long as people keep getting sick and dying, and going back to business too soon or unprotected only makes the economic damage worse. 

In his latest campaign appearance, President Cobblepot said the US national strategy is now “herd mentality;” trying to get everyone sick so it will end. Put aside the lunacy of an approach that was briefly tried in England and Sweden and failed within weeks. Quick back-of-the-envelope calculation tells us that “herd mentality” would require (a) lasting immunity-conferring antigens (yet unknown); and (b) roughly 7 million deaths in the United States, assuming borders were hermetically sealed.

The lack of safety in a “herd mentality” approach could well keep all but the most diehard Cobblepot minions away from the polls in November and, with his already-telegraphed strategy of challenging the legality of mailed ballots, William “Butch” Barr, the president’s latest bag man, is now preparing to deliver a four year renewal of the Gotham follies unless derailed by write-ins for #Kanye2020 from a bored polity thirsting for less Sturm und Drang and more Kardashian. (Still, this crime family is more prepared than most. Supreme Court Justice Kushner can write the majority opinion to prevent any unexpected outcome.)

The economy/health dichotomy is trotted out every time there is a nuts-and-bolts discussion about where the money will come from to restore hurricane-thwarting coastal wetlands, earthquake-proof crumbling bridges and dams, provide universal health care and guaranteed minimum standard of living, or reverse climate change. 

No money for any of that, move along.

Getting back to Covid (is it still here?), many outside the US echo chamber recognized quickly that economy and ecology are paired in more ways than Greek word origins. South Korea, which had a memorably bad experience with SARS, knew all too well that any economic loss from Covid would be proportional to its willingness to spend — quickly, efficiently, and without reservation.

Others who set a scale on the table and weighed externalities like the stock market, GDP, tax revenues, protests, or elections in the balance, can now measure those results.

For the US, the worst quarterly economic drop during the Great Depression was about 26%. In the 2008–9 financial crisis it was “only” 8.4%. In 2020, so far, it’s 32.9% 

This year Covid has cost the US, in taxpayer dollars, more than the nation spent to pay for all of the U.S. wars going back to the American Revolution. Comparable down payments have been made by the European Central Bank, the Bank of Japan, and the Peoples Bank of China. It is safe to say that the whole world is now in a financial pickle it’s never been in before. There is no one left to bail out any of the others.

Pumping that much new currency into global circulation is certain to cause inflation, the classic remedy for which is raising interest rates to slow lending, but this week the Fed announced it had no plans to do that. Interest rates, for now, will hover close to zero. After all, the pandemic is getting over, right? There’s a vaccine, right? Why rush to address a new problem when you can just wait?

Unemployment metrics are so corrupted one doesn’t dare venture to guess the true numbers of the newly destitute. A better gauge might be the length of breadlines at soup kitchens.

Wildfire and hurricane evacuations can be superspreader events. There are a range of ways those can be handled. Going back to a different cruise ship example, a single 80-year-old gentleman boarding a Princess ship in Japan on January 10, developing a cough on January 19, and disembarking in Hong Kong on January 25, where he was diagnosed, alerted Taiwanese officials who placed the ship in quarantine. Over 700 people out of 3,711 passengers had become infected by that gentleman and 14 later died. In Taiwan, tracers used mobile phone geolocation to identify 627,386 people at risk after coming in contact with passengers in various ports. 

Think about that as you look at the next row of cots to yours on that high school basketball court. Welcome to herd mentality.

As for the stock market, its near-term recovery should be more concerning than reassuring. The market fell 48% after the 1929 crash. It then rebounded 48% in an up move lasting five months. But, in 1930, the market collapsed 86%, not to recover for a decade. Compared to the deep wounds inflicted in 2020, and deepening on into 2021 and likely 2022, the 1929–39 example was just a hiccup.

In 1932, the US tossed out its Grand Old Party idiocracy, elected Franklin Roosevelt, and embarked upon a long road to recovery. That might have continued through the Post-War period, had Roosevelt’s key theoretician and 1940 vice president, Henry A. Wallace, become president, but old-line Democrats threw Wallace under the bus in 1944 for the pusillanimous Harry S. Truman.

Wallace had championed conciliatory policies towards the Soviet Union, a Good Neighbor policy towards Latin America, desegregation of public schools, racial and gender equality, free trade, and a national health insurance program. It was probably the race thing that sent him under the bus. Wallace, in 1942, said “peace must mean a better standard of living for the common man, not merely in the United States and England, but also in India, Russia, China, and Latin America. Not merely in the United Nations, but also in Germany and Italy and Japan.” Truman dropped the atomic bomb and started the Cold War arms race. Although he integrated the army, racism remained alive and well at the Democratic Party base.

Return with us now to those glorious days of FDR. As we face an unchecked climate threat that will render millions more jobless, homeless, deathly sick, and hopeless, Roosevelt and Wallace provided all the illumination we need to light our way out. We need a new Civilian Conservation Corps driving tank battalions of Tigercat Carbonator-500s, transforming tinder-dry and burnt-over woody wastes into biochar for forest soils; Wallace’s “ever-normal granary;” a new Soil Conservation and Domestic Allotment Act; Urban Victory Gardens; fair rationing of essential commodities; intelligent use of the Defense Production Act; guaranteed family income and healthy housing; and open access to life-long learning for all.

Placing economic growth and public protection at loggerheads is a fool’s move. The problem with each is the solution for the other. In my more optimistic moments I imagine that these 3 imposed years of death, mourning, and penitent introspection might help to replace the sentimental drivel, disregard for nuance, and governance by superstition that has visited upon us such calamity. I can only hope for a massive pivot to reason and science. 

That may be too much to expect. #Kanye2020.


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