Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Month: March 2020 Page 2 of 4

How to Save the Economy and Not Kill Millions

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On March 24, 2020

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So, Trump and others, including New York Governor Cuomo and Thomas Friedman (possibly the most overrated public intellectual alive today), are musing about restarting the economy to “save” it.

The Lieutenant Governor of Texas put this more clearly, if inaccurately:

“No one reached out to me and said, ‘as a senior citizen, are you willing to take a chance on your survival in exchange for keeping the America that all America loves for your children and grandchildren?’” Patrick said. “And if that’s the exchange, I’m all in.”

First, people younger than 60 or so do die from the Coronavirus, especially if they have any health problems. Viral load also matters: The more of the virus you have the more likely you are to die, and this can kill people even in their twenties. The morbidity charts we have are based on China, where after some initial fumbling, they went hard into isolation.

If you send people back to work too soon in the US you will kill millions, and they will not all be old, not that Americans are necessarily willing to kill their parents and grandparents.

Second, as I noted yesterday, this misunderstands the economy.

The economy is the people in the economy, not the numbers in ledgers. It is people who make and consume every single service and product. Capital goods and real-estate are not killed by the coronavirus.

If you want to protect the economy what you do is protect the people. If the people are still there at the end of the pandemic you can have the economy back, if they aren’t, to that extent, you lose the parts of the economy which relied upon them as consumers and producers.

The ledger numbers are easy to manage. You simply freeze all normal payments: mortgages, loans, rent, interest, etc., until the end of the crisis. Give a UBI to people sufficient for them to pay non-payment expenses. The Federal Reserve or other central banks can keep other markets going as necessary, and a few targeted bailouts can be offered.

I want to talk a bit more about what is actually happening to the economy, and what it is going to mean in the future, but I’ll leave that for a later article, perhaps tomorrow.

For now: People, land, and capital goods (what we use to produce goods and services) ARE the economy. The coronavirus will not kill capital goods or land (mortages, leases, rent) unless we decide to let the ledgers run when we don’t have to. It will, however, kill people if we send them back to work in a misguided attempt to “save” an economy which will actually be killed by people dying.

This sort of category confusion is constant: Money is a fiction. We made it up. It’s a convenient fantasy used to keep track of the economic “game.” We can change how we use money any time we want to, in any way we want, for as long as we want. (Yeah, there are some consequences to the changes, but the fundamental precept remains true.)

Right now we should be halting a large chunk of the money game, then giving people the money they need so they can isolate and not get dead.

Money exists only to serve the needs and promote the welfare of humans. We already die for it far more than necessary, but sacrificing ourselves to a pandemic to “preserve” it is insanity. Money is a fiction, humans are real. Save the humans.

(I know this is in part a repeat of yesterday’s post and I apologize, but as this “save the economy by killing millions” idea gets traction I felt the fact it’s stupid and does the exact of opposite needs re-emphasis.)

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Protect People, Not Financial Ledgers

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On March 23, 2020

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Or, as the original title said, “The Real Economy vs. The Fictional Economy.”

You may have heard that the Federal Reserve intends to create a trillion dollars a day for thirty days to support the financial markets.

This is a grim and determined attempt to make sure that at the end of this crisis, the same people control the economy that control it today.

The correct action is mostly legislative: A halt to all mortgage payments, rent, utility bills, and other bills due for the duration of the crisis. Then give a UBI to everyone. Businesses which need to keep running and need help can be given enough money (given, not loaned, not market operations) to continue for the duration. Those that don’t shutter, and their fixed costs like rent, mortgages, loans, etc. are all simply put on hiatus. For the duration that they are not operative, no interest is accrued, etc.

Those businesses which cannot survive on this basis, and which are not needed during the isolation period, are therefore obviously not critical. Let them go bankrupt. The shareholders will be wiped out, the bondholders will become shareholders. That’s how capitalism works.

This may seem unfair, as an epidemic is an act of God, but the industries asking for bailouts are ones that instead of putting aside a rainy day fund, spent all of their profits on stock buybacks, then in many cases also took out loans and made stock buybacks.

Stock buybacks are ostensibly to “return value to shareholders,” but really they are done in such large amounts because executives are granted share options, and they want the price to go up so their shares are worth more. If they wanted to return value to shareholders, they would simply pay dividends or perhaps reinvest. Companies which have been smart, for example Apple, have huge warchests and can survive a long period. Companies like Boeing who thought their job was to enrich their executives and who cares if planes fall out of the sky because they have gone to the cheapest engineers possible, well, they deserve to die. Same is true of Airlines. GE is a shell of itself, and should be allowed to go into receivership.

Companies that are important once isolation is over, and which the government doesn’t want broken up or consolidated can simply be bought up by the government. “If we’re giving you a bailout, you belong to us.” Give it a few years, sell them back for a profit, or keep them if they are natural monopolies.

But let’s move back to the original question of real economies vs. fictional ones. The real economy is the people, the buildings, and the capital equipment. The fictional one is the financial ledgers which determine who owns what and owes what. These are entirely made up by us, by rules we created and we can change those numbers and rules any time we want, as the Federal Reserve is illustrating yet again.

The job is not to preserve the fictional numbers, or to preserve incompetent ownership and control. The job is protect the real economy: people, buildings, and capital equipment.

These are two separate things. As long as the people and the stuff is still there, we can reconstitute the economy any time we decide. So we protect the people first, and the numbers last, if at all.

This crisis is also making clear who actually is important: grocery workers, logistics workers, farmers, utilities workers, people maintaining the internet, doctors, nurses, garbagemen, health assistants, etc.–people who maintain the actual goods and services we need or really, really want up at all times (like the internet).

Most of the work we do, most of the economy, is unnecessary, and a lot of it is filled with people who hate their jobs.

So perhaps this is an opportunity to see what jobs matter, make them into good jobs that people like (because essential jobs should not be done by miserable people), and then look at the other jobs and get rid of the ones that mostly create misery or pollution or goods or services we really don’t need.

This is a chance to see what actually matters, and reorient our society towards that.

More one what that would look like in future articles.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Week-end Wrap – Political Economy – March 22, 2020

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On March 22, 2020

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Week-end Wrap – Political Economy – March 22, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The Financial Collapse

The Fed Backfires: Shock and Awe Rate Drop to 0%, Emergency Bond Buying Program Leads to Limit Down Drops in US Equity Futures as Real World Coronavirus Damage Worsens
[Naked Capitalism 3-16-20]

Reserve Requirements
[Federal Reserve, Naked Capitalism 3-19-20]

[Twitter below via Naked Capitalism Water Cooler 3-17-20]

‘Weird Alex’ Pareene@pareene
I can’t believe I’m entering the second global financial meltdown of my adult life and more or less the same people are still in charge of everything


103K

9:51 AM – Mar 16, 2020

Fed Announces Program for Wall Street Banks to Pledge Plunging Stocks to Get Trillions in Loans at ¼ Percent Interest
Pam Martens and Russ Martens: March 18, 2020 [Wall Street On Parade]

Veterans on Wall Street think of it as the cash-for-trash facility, where Wall Street’s toxic waste from a decade of irresponsible trading and lending, will be purged from the balance sheets of the Wall Street firms and handed over to the balance sheet of the Federal Reserve – just as it was during the last financial crisis on Wall Street.

Capitalism in the time of COVID

Read More

Open Thread

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On March 21, 2020

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As usual, feel free to use the comments to discuss topics unrelated to recent posts.

Lessons of the Virus: Who Creates Value and What the Good Life Is

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On March 18, 2020

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So, we’re going into a recession, and will likely soon be in a depression. Why? Because the workers have to stay home. It seems that the workers, do, after all, create the value.

Marx giggles in his grave.

We notice also who actually matters, who is actually necessary in society. The people who grow food. The people who take care of sick people. The people who make medicine. The people who distribute food and goods. The grocery and drug store workers. The garbage men. The people who work in sewage, water, power, and keeping the telecom backbone up.

Everyone else? Might be nice to have, but they aren’t necessary, and that includes most of the bosses. Some coordination is needed, yes, but it’s not as rare a skill as bosses like to pretend.

Meanwhile, we have makers making ventilator valves, as firms threaten to sue them stop them. It turns out that a valve which can be made for $1, normally costs $11,000.

There’s your capitalism, children: Ghouls who vastly overprice goods so they can get rich off of other people’s death and suffering.

Nations are scrambling to give workers forced to stay home money, because if they don’t, the economy will slide off a cliff. It turns out, as we should have learned in the Depression (and did, but forgot) that it is people who buy things; the demand, that matters if you want a great economy.

Over in China, it has been calculated that seventy-seven thousand lives were saved by the decrease in pollution caused by all the factories shutting and taking the cars off the road. Coronavirus may have saved more lives than it killed.

Now, some of what those factories produce we need (ventilators, for one, but remember the price markups), but a lot of it we don’t. We could work half as much, not have stuff we don’t need, and spend time with our friends and families. Maybe even see our kids. Wouldn’t have to have school babysit them for most of the day, because parents are away.

Just do less, divide the money more equally, and do without shit we don’t actually need.

We’d be healthier, guaranteed, as the pollution dies down and stress drops through the floor. We’d be happier, and in their spare time a lot of people would make the cool stuff they always wanted to make, but couldn’t, because they were doing corporate drone jobs.

Coronavirus is going to suck more than anything most people still alive in the West can remember (though older gays will understand.) But there’s a lesson here, if we’re willing to take it.

This is going to be a hard lesson to take, because central banks and politicians are moving to bail out the rich (they did so first, and are still doing so), and so they will retain their money and power and try to use it to buy up assets on the cheap after smaller business go bankrupt, but focus on the problem. Everything the rich have they have not because they “earned it” or because they actually create more value than a janitor or nurse, but because the laws are written to allow and the politicians and central banks funnel them endless money, while picking them up every time they fall, wiping the boo-boos off and giving them trillions of dollars.

It’s all politics, in the end. It’s all power.

Now the politicians they own, in their incompetent handling of the coronavirus, are going to be responsible for the death of millions.

These are unnecessary deaths. Countries which acted promptly and competently did not and are not seeing large numbers of deaths.

This means the politicians are guilty, at best, of negligent homicide. Death from incompetence, by corrupt, venal politicians owned by billionaires and mega-corps.

A better way is possible. But not if these people stay in power. They must be removed.

If we don’t remove these politicians and business leaders more of us will die. Many, many more.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

A Company Handling Crisis Communication Correctly

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On March 17, 2020

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So, in Canada, the biggest grocery chain is Loblaws. They also own the largest chain of drug stores, Shopper’s Drug Mart (which they should never have been allowed to buy). Loblaws is about as upscale as the mass market goes, above it is Whole Foods (which doesn’t have a lot of Canadian stores), and some specialty supermarkets.

I shop quite a bit at Loblaws because it’s near me. It’s slightly highly priced, though you can get some cheap stuff if you shop carefully and take advantage of their specials. Some years back, they were part of a cartel fixing bread prices. At least in my local stores, the employees tend to be sullen, which is a reflection on the stores and Loblaws, not the employees. The rare exceptions are usually middle aged or older part-time workers who have the strength of personality to remain cheerful despite the store atmosphere.

All that background aside, and understanding that there’s a lot I don’t like about Loblaws, I haven’t seen better corporate communication, or heck, government communication than what I’ve received from Loblaws (since I have their points card). It’s reassuring, clear, and matter-of-fact. I’m going to put it below, because I want people to see what good comms and crisis management looks like.

Hi Everyone,

Things continue to move fast and change quickly.

Earlier today the Canadian Government announced they are restricting our international borders to limit the impact of COVID-19. As each of us try to understand how that will affect our daily lives, our friends, and our families, I wanted to reach out again.

Those who went shopping recently will have seen extraordinary numbers of people in stores, long lines, and aisles empty of product. This was a result of extreme levels of buying as millions of Canadians stocked up their kitchens and medicine cabinets. I’m sure the many photos of bare shelves on social media only increased your level of concern.

First and foremost. Do not worry. We are not running out of food or essential supplies. Our supply chain and store teams are responding to the spikes in volume and quickly getting the most important items back on the shelf. Volumes are already normalizing somewhat, and we are catching up. There are a few items, like hand sanitizer, that may take longer to get back, but otherwise we are in good shape.

Another concern you may have is that your supermarket or drugstore could raise prices on the items you and your family need most. Do not worry. This will not happen at our stores. We will not raise a single price on any item to take advantage of COVID-19.

Some of you may also be worried that your local Shoppers Drug Mart or supermarket could close as part of shutting down certain stores and services. Do not worry. We have been in contact with both Provincial and Federal governments. We all agree that food and drug stores are essential services and we must do what we need to in order to keep them operating and serving every community in the days and weeks ahead.

It won’t be business as usual. But, you will be able to count on us. Our teams from across the country, at stores in every community, have been hard at work around the clock to live up to that commitment.

Please keep in mind our service relies on keeping them, and in turn you, safe and healthy. That is our top priority, and it may mean limiting the number of people in our stores at any given time as well as asking customers to keep a certain distance from each other while shopping to reduce the risk of making one another sick.

We are prepared for this, and to support those most in need, we are opening some of our stores early with dedicated hours for seniors and people living with disabilities to come before the crowds. We are also encouraging those customers who cannot shop our stores to take advantage of our e-prescribing and PC Express options like click-and-collect and home delivery. Last week we lowered delivery prices and eliminated pick up fees and, just like in our stores, we’ve seen a spike in volume.

We are managing the rising number of orders and ramping up our systems as quickly as we can so customers can shop online with confidence. However, it will be difficult for us to meet all the additional demand, possibly limiting availability for people who are sick, in self-isolation, or at elevated risk. So, I would ask that if you are healthy, mobile, and symptom-free, please do your best to make it into the store.

All of us will face uncertainty and new challenges over the coming days. Our stores and our services will be far from perfect. But, we will do everything in our power to make sure you have what you need for yourselves and your families.

As we have more updates we will continue to communicate, online, in-store, and through our PC Optimum app.

For now, let me leave you with four things:

  1. We have the food, drugs, and essential products you need and that supply will continue even as Canada restricts its borders.
  2. We are going to make sure our stores stay up and running to serve your community.
  3. We will not, under any circumstance, change our actions or prices to take advantage of COVID-19.
  4. Please be patient with us when you are shopping, and don’t forget to practice social distancing.

Over the last few days, it has been remarkable to witness Canadians supporting one another in our aisles: Bags carried to cars. Crowds parting so young moms could check out. Cheers for speedy cashiers. Customers helping stock shelves.

One example in particular stood out. A few days ago, someone stuck a handmade sign to the front of a store. It reads “Be kind”. This is great encouragement to cap off perhaps one of the most-tense weeks of our 100 years running stores, and to help all of us prepare for what is next.

Be kind to each other. We will get through it.

Galen Weston

Again, I don’t much like Loblaws management, but this is sterling communications and action and shows calm and good will. One can be cynical, but whatever the motives, this is how it’s done.

(Also, why the hell do people keep buying all the fresh meat? Does everyone have a huge freezer? I don’t get it.)

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

How Bad Is Coronavirus Going to Be and What Should We Do?

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On March 17, 2020

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Depends where you are, but the basic rule is that without social distancing it will kill a LOT of people and we have left social distancing too late in a lot of countries.

Florida, for example, has 4,704 ICU beds and five million seniors over 60.

Assume even five percent need care, and you have catastrophic numbers. There will be, for all intents and purposes, no care in most cases.

Britain is going to be terrible, and I’m expecting in excess of a million deaths.

Necessary steps are still not being taken. In Canada, I’m just beginning to see (in Ontario and Quebec) call ups of retired nurses and doctors. Facilities capable of making masks, ventilators, and other equipment should have been federalized already, and re-tooled. (We have little of this, by the way, the West has shipped most of the manufacture of medical devices offshore.) Many years ago, I noted that there should be a registry of retired health care workers who were willing to be called up in a crisis, but fortunately, most people will answer the call.

New hospitals, from pre-fabs or by taking over other buildings, should be going up in major urban centers in the US, the UK, and Canada. A registry of people who have had the virus should be put in place, and we should be prepping to train teenagers to care for people, since they are virtually immune.

All rent, mortgage, water, credit card payments, interest charges, car payments, etc, etc. need to be put on  hiatus. Landlords can’t charge renters, banks can’t charge mortgage payments to landlords, etc., all through the chain. Nor should payments be deferred. They aren’t made now, or ever.

A temporary UBI needs to be put in place, probably based on regional cost of living, and checks or deposits should go out every week during social distancing. Just send them to everyone who isn’t a minor. If you’ve stopped payments on everything, then the UBI can be relatively small, if not, it has to be large.

Central banks can then give banks enough money to stay afloat, etc.

None of this is particularly hard to think up, it’s just a question of doing it. The problem is that it reveals that a lot of our economic relationships are basically bullshit (something the Great depression and WWII generations learned, which we’ve forgotten). They are social fictions, perhaps useful, perhaps not, which can be put aside when necessary.

If these things are not done, a huge swathe of small businesses will disappear during this crisis, and never return. They can’t go even two weeks without income. If we have to shelter longer, which we may well have to in some places, then the carnage will be even worse.

But a lot of people can’t afford to not be making money for even two weeks, they live paycheck to paycheck.

Understand that if these policies aren’t put in place, that people who have money afterwards will swoop down and buy all the distressed property, just like they did after 2008 — because rich people are being bailed out through central banks, even if no one else is. They’ll have money, small businesses and landlords will be broke, and they’ll be able to buy cheap. They’re chomping at the bit to do so.

I’ll put up a post on how to deal with the psychology of being mostly confined to one’s home, and unable to be with other people soonish.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

 

 

Economics of a Flu Pandemic: Part II

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On March 15, 2020

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Republication of this article from 2010

I just finished reading the Nesbitt Burns Investors Guide to Avian Flu. It’s a good report, but the advice to investors is limited (basically, expect a flight to safety such as gold and US treasuries and keep money on the side to buy up distressed properties after the pandemic.) They do a very good job of detailing the history of flu pandemics, the current state of preparedness and the likely consequences. (They’re essentially the same as the ones I discuss in my essay in the FluWiki, but Sherry Cooper and Donald Coxe run through them in much more detail and style.)

The more I look into this the more pathetic it all seems. Our society, as a whole, has no surge protection – no ability to take shocks. We have no excess beds, no excess equipment, no excess ability to produce vaccines or medicines, nothing. Everybody has worshiped at the altar of efficiency for so long that they don’t understand that if you don’t have extra capacity you have no ability to deal with unexpected events. And now some people are suing the Ontario government for their SARS handling, which I fear will perversely make the government less willing to do what needs to be done when a crisis hits.

Public healthcare in a pandemic or epidemic is a triage operation. You isolate people and you shut things down deliberately, and people are going to die because of the decisions you make. If nurses and doctors decide that their own lives are more important than those of the sick, or if ordinary citizens decide to break quarantine or travel restrictions, then there could be complete disaster. The moment of the SARS outbreak that caused me the most fear was when there were reports of people fleeing Beijing. In a real pandemic situation, all that would do is spread the disease further and kill even more people.

In a pandemic, no one should be out and doing things who doesn’t need to be. Take food – it should be delivered to each person’s door and left there, once the delivery person leaves, the occupant comes out to get the food. No interpersonal contact other than that which is unnecessary.

When I was approached to write about the economics of a pandemic, my first thought was: “Find out what happened during the Spanish Flu pandemic.” Apparently, Coxe thought the same thing and his conclusion is that because our society and economy is so much more integrated and so much more connected (for example the flu had to spread by ship back then), and so much more “just in time” that it isn’t really a model you can use. We’ll likely get hit harder, faster, and because many locations have such limited inventories, relying on getting it as they need it, the supply disruptions are likely to be much worse. I can’t find any flaw with his argument.

The lack of urgency on the part of governments is rather distressing:

It is hoped the Canadian studies will begin late next summer. February’s federal budget set aside $34 million for production of trial batches of an H5N1 vaccine. But Canada’s flu vaccine manufacturer, ID Biomedical, still has not been given the go-ahead to do the work.”We’re close to entering into a contract. Hopefully it will be done shortly,” Health Minister Ujjal Dosanjh said Monday.

The company has said it would take 12 months from contract signing to vaccine delivery, because it must build and license a special high-biosecurity facility within its existing vaccine plant.

Now, I don’t know the details of what is required to set up such facilities, but I’m not getting a huge sense of urgency from the government here. The contract should be signed now and whatever is necessary to build extra facilities should be done, as well as whatever is necessary to get them up and operating faster. I do understand that biosafety is an absolute necessity, but getting these facilities up too late is as good as “never.” Let’s be frank, 34 million is peanuts. How much money did they lose trying to create the gun registry (a database no larger than many commercial databases successfully brought in for much less)?

I would suggest to politicians that if an influenza pandemic does occur, and people decide you didn’t do everything you could have to prepare for it, that, at the very least, you will no longer have a political career. At the worst, well, you won’t be alive to worry about it.

There aren’t enough respirators, there aren’t enough hospital beds, there isn’t enough vaccine production capacity or antiviral production capacity. There is so little being done to deal with those deficiencies that there might as well be nothing being done. Doubling production isn’t what is necessary, production needs to be ramped up by orders of magnitude. If it’s never used, oh well, it’s better than building a bridge to nowhere in Alaska which even Alaskans don’t want.

I don’t know when there will be an influenza pandemic. No one does. It’s an odds game. But right now, the odds aren’t so good. It’s time to spend some money and buy some insurance against the possibility. Put the facility in your riding and tell your constituents how you just got them some jobs.

But do it.

(This is a reprint, at a reader’s request. You can find part one of Economics of a Flu Pandemic here.)

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

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