Month: April 2020 Page 2 of 7

Week-end Wrap – Political Economy – April 26, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Vic DiBitetto: Dear government: We need a real fucking plan, you shitbags

Shorter Twitter video:
Dear government: We need a real fucking plan, you shitbags
[via Mike Norman Economics]

Strategic Political Economy

Bill Clinton guru James Carville famously blurted “It’s the economy stupid.” Actually, it’s the economic ideology. If the American people are going to save themselves, they need to understand that their ruling elites are Malthusians of the Social Darwinian type.

McConnell Says He Favors Letting States Declare Bankruptcy
[Bloomberg, April 22, 2020]

McConnell, a Kentucky Republican, said he blocked additional state and local aid in the latest relief package, which passed the Senate Tuesday and is set for a vote Thursday in the House. “I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” McConnell added. Later, on Fox News, McConnell said that any state or local aid must be specifically linked to the pandemic and shouldn’t be viewed as an opportunity for “revenue replacement.”

“We’re not interested in solving their pension problems for them,” McConnell said. “We’re not interested in rescuing them from bad decisions they’ve made in the past. We’re not going to let them take advantage of this pandemic to solve a lot of problems that they created for themselves with bad decisions in the past.”

Lee Saunders, president of the American Federation of State, County and Municipal Employees, said most states don’t need to restructure their debt. “Rather, they are suffering unprecedented revenue loss due to the shutdown of our economy just like so many businesses in the private sector,” Saunders said. “The money they need now is to maintain vital life-saving services provided by front-line workers in the face of the most dire public health emergency in a century.”

“We’re not interested in solving their pension problems for them.” Translation: we should avoid the costs of caring for retirees and just let them die off faster. And just in case you don’t understand yet:

The Right Wing Wants You to Die

[Vice, via Naked Capitalism 4-25-20]

Earlier this week, someone showed up at a protest in Nashville, Tennessee with a sign reading “Sacrifice the weak.”….

Other rich, advanced countries like South Korea and Germany have arrived at a solution. By using state power to do what scientists and economists say is necessary—testing the population, isolating the infected, and tracing their contacts, while financially supporting citizens who have lost income—they’ve reduced death and the spread of the virus without imposing mass suffering, offering the possibility of a return to something like normal life. The United States hasn’t seriously prepared or planned to do any of these things. Instead of organizing a response, federal leaders are engaged in piracy. The Senate’s majority leader wants states to declare bankruptcy. Trump has suggested injecting bleach into patients’ lungs….

The phrase “death cult” has been used to describe the Republican Party enough lately that it’s probably lost any real meaning, but it’s not far off as a descriptor. Ohio congressman Jim Jordan, head of the House Freedom Caucus, supports the protests and doesn’t understand why the economy shouldn’t have been opened yesterday. Pennsylvania lawmaker Mike Jones participated in a protest in Harrisburg this week, calling it “the best of America.” A protest in Michigan was organized by the vice-chair of Trump’s state campaign and the grassroots vice-chair of the state Republican Party. Government is organizing protests of itself to rally support for policies that would result in mass death.

“Two Americas: COVID & Community”

[Sapienta, via Naked Capitalism Water Cooler 4-22-20] Interview with Chris Arnade.

“What I find particularly unsettling is the utter lack of commitment to a given place demonstrated by many with wealth in American society. By leaving Manhattan for a Long Island beach bungalow or Jersey City for a Hudson Valley home, they are denying any responsibility for acquaintances, neighbors, or friends and effectively refusing membership in a larger community–a community that serves them in good times. Compare this to the actions of people with lesser means than Arnade’s elite. Struggling local restaurants prepare meals for overworked EMTs. Young people stand in long grocery store lines to pick up food for elderly neighbors. Volunteers stitch together face masks for sleep-deprived nurses. Arnade writes about ‘front row’ and ‘back row’ America and urges us to perceive the dignity and the worth of those sitting in the back row. But what does the COVID-19 pandemic tell us about front row Americans? Do they deserve our respect?”

“The Economy of Evil”

[Historic.ly, via Naked Capitalism Water Cooler 4-22-20]

Open Thread

By Ian Welsh

On April 25, 2020

Comments

Feel free to use the comments to this post to discuss topics unrelated to recent articles.

April 24th US Covid Data

By Ian Welsh

On April 24, 2020

Comments

There will be no Covid data post tomorrow, Sunday will cover both Saturday and Sunday.

Our benefactor writes:

New cases holding steady despite a restating downwards of NYC cases. Definitely going to make it to 60k deaths by April 30 at this rate.

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On the Causes and Consequences of the Oil Price Crash

By Ian Welsh

On April 23, 2020

Comments

Image by Yuan2003

So, we had a crash of oil prices, where some futures contracts were actually negative, which means that sellers had to pay people to take oil off their hands.

Obviously, oil use has dropped during the Covid-19 crisis, and before that, prices had already decreased in an attempt by non-US producers to reduce prices low enough to crush US shale production.

Oil is a real thing: It takes up storage. Storage space is running out, and it’s not clear when demand will recover, so oil that is to be delivered now-ish is an expense–you have to pay to store it. Thus, the negative prices.

There was a bounce Wednesday, ostensibly due to Trump saying he had ordered the US Navy to blow up Iranian boats if they continued to hassle other ships. (If they do this in the Gulf, and it goes to shooting, Iran will win the initial confrontation. They have a lot of missiles.)

One could equally say this is a dead-dog bounce.

At any rate, even double digit prices are below most people’s production costs for oil, and they are above the price every major government that relies on oil needs to balance their books. This means Saudi Arabia, the four gulf oil states, Iraq, Iran, Russia, and so on. Ironically, Iran, having been under sanctions already, will be in better shape than most of the others.

It is also, obviously, low enough to make US (and Canadian) shale oil production completely uneconomical: generally that needs at least $60/barrel, and much of it needs more.

So we have countries and companies with bleeding treasuries. The US has the ability to print money, presumably it will do so to keep Shale oil around in Zombie form. Countries which cannot print money and have other countries accept it could be in trouble. This depends mostly on how long this goes on. A couple months, even three or four, uncomfortable, but no big deal.

If this crisis bubbles on for a year and a half of shutdowns, partial relaxations, then more shutdowns, we’re into some very dangerous territory. I’m not sure the House of Saud, for example, can survive that scenario (it couldn’t happen to a nicer country, etc.).

The world has been in a very long economic relationship, in which the most important commodity has been oil, and the producers sold it in dollars, so the US and the swing producers all benefited. Obama and Trump more or less broke the deal with the promotion of shale oil, and China has increasingly been insisting on buying oil in Yuan, but the relationship had stumbled on, even though it meant enabling countries that the US has been treating as enemies, like Russia.

Trump wanted to force Europeans to buy more American oil and less Russian oil: This was a major part of his economic plan, such as it was. Trump likes to find a place where he’s more powerful, and push that as hard as possible, and things like sanctions against Russia, Iran, and Venezuela were–and still are–situations in which he has unilateral power that no one else has been entirely able to get around (though China has somewhat). The EU has proven unwilling to stand up to the US in the case of sanctions.

Right now, there’s no particular reason to think this can’t continue. The US can still print infinite dollars, because foreigners will still accept them–even though the US is no longer the most important manufacturing state. So the US can bail out shale oil. Oil producers, who do not have hegemonic currencies, do not have infinite rope.

This changes only the major producers of things the US needs cease to be willing to trade in US dollars. China and the EU could (but I very much doubt will) cut the US’s throat if they ever chose to act together. Perhaps China could even do it alone. The problem, of course, is that there would be a lot of collateral damage to them. US oil is expensive, but the US can produce it. China and the EU need to import it. If they want to make such a change, they have to secure strong supply guarantee from other nations.

This is theoretically possible, but the problem is simple: Any nation that did this would then fall under (even more) US military threat. Bombs are very good at ending oil exports, and neither the US nor China is willing to go to war over this. Perhaps China could move troops and nukes into vulnerable countries, but that would trigger a new cold war, and the Chinese don’t want that–at least not yet. China is working on their own trade area, to compete with the US-led trade area (which the US is abandoning anyway, as it shits on the WTO it created), but it is not ready yet (the Belt and Road Initiative is China’s name for this trade restructuring).

The current collapse of oil prices is unexpected; while a pandemic has always been possible, knowing when it would happen was not. The pandemic has simply revealed the current production’s costs and dynamics. Saudi Arabia has been moving towards vast danger for ages because of its over-reliance on oil; this simply means the consequences may hit sooner. Oi-consuming nations have been maneuvering to reduce their dependence on imported oil in general, and unreliable oil in particular, but they were not yet ready to make any big moves. Almost everyone has been chafing under the petrodollar and under the current world payment system, which the US has abused with its constant sanctions. Despite this, no one has created a viable alternative and been willing to take the hits necessary to move off the dollar and the US/eu payment system (“EU” is in lower case deliberately).

Most oil producing nations, including the US and Canada, are generally bad actors on the international stage: with crimes ranging from moderately bad to invading oil producing nations regularly and sanctioning other ones constantly, or to being the world’s premier supporters of fundamentalist religion and terrorists.

So don’t cry too much for oil producing nations, nor even for their customers, who have enabled them greatly. But beware that the game is changing: Covid-19 has highlighted existing issues and if it continues long enough it could precipitate changes which have been desired by many, but remained unimplemented because people have been unwilling to bear the costs and risks.

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April 23rd US Covid Data

By Ian Welsh

On April 23, 2020

Comments

Our benefactor writes that there will likely be one million cases + 60 thousand deaths by the beginning of May.

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April 22nd US Covid Data

By Ian Welsh

On April 22, 2020

Comments

Deaths aren’t going to wind up as only 60K, in fact, pretty safe to assume the US is already there when uncounted deaths are added in. However, the curve seems flattened, but as yet unwilling to decisively curve down.

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The Sheer Awe-inspiring American Clusterfuck

By Ian Welsh

On April 21, 2020

Comments

This is not exaggeration for effect.

I am awed by the American handling of Coronavirus. Truly awed. I’ve been writing about the slow-motion American collapse for ages. Heck, last year I wrote an article about how the US is a failing state:

The US is a gold-flecked garbage heap slowly rolling towards the ocean. On fire.

Yee-hah!

So, right now we have five states in the US that never bothered to self-isolate.

We have the Governor of Georgia announcing he will allow gyms, barbers, and fitness clubs, among others, to reopen on the 24th.

We have the Governor of Florida reopening Florida’s beaches. Good thing Florida doesn’t have a lot of old people!

There are astroturf protests asking for an end to isolation. “Let us die, let us die, let us DIE!” (Also, let us kill others.)

Virtually all the relief money has flowed to the top, not the bottom. Landlords and tenants are in crisis. Unemployment is going over 30 percent and in many places higher. A vast swathe of US small business will be destroyed, and they are unlikely to recover in a generation. Firms which borrowed money to do stock buy backs, or to give money to their private equity purchasers are slopping at the trough, but many of the actual businesses on the ground (like Neiman Marcus) will go under.

PPE can’t be found for hospital or logistics workers. Important pieces of the logistics hub, like meat packing plants, are shutting down. Warehouse workers are protesting, truckers are scared, etc.

The US is unable to make or procure an adequate number of masks or prioritize who gets them (though, really, everyone should be). The ventilators made by GM are inadequate, because Trump wanted to keep the price down.

Hospitals not only don’t have enough PPE, they’re going bankrupt because they haven’t been given enough money.

And so on.

Failing state. Cannot actually do really basic things. New Zealand did everything right, the US has done almost nothing right, and when it has, it is undone by some drooling, incompetent, ideological stooge or corrupt businessman or politician: “Get them back to work! I’m losing money!”

Here’s one simple issue: New York and other states are turning the corner. Stats are difficult, but it can be seen in the reduction of new cases in the hospitals. It will take some time to really get the curve down, but it’s being done.

Meanwhile, there are still accelerating pockets of infection in states that never shut down and other states are re-opening too soon.

How do you handle this? Well, what I would do if I were governor is get together with other governors who aren’t completely evil and corrupt and close the borders between states. Shipped goods from lunatic states gets put in depots on the border and is picked up by local shippers, everyone from a state which hasn’t isolated correctly doesn’t get in unless they go into quarantine.

To do this, the Governors will likely have to call up the National Guard. The US will be divided into groups of states which have shut off almost all travel between themselves.

All assuming Trump doesn’t get in the way and make it impossible, in which case, reinfection! More isolation, etc.

A complete clusterfuck.

Iceland, which has handled this pandemic in exemplary fashion, has noted that they have done what they were taught to do by Americans. Americans can no longer do these things. Jane Jacobs, in her book “Dark Age Ahead,” said that the key sign of the oncoming Dark Age was old knowledge being lost; that things which we could once do, we no longer could. She actually used the CDC as an example, and that was decades ago.

This is genuinely awe-inspiring to watch. I am truly amazed. I imagine it’s like watching the late Roman Empire, muttering to oneself, “We were never as great as they say, but we we could get things done.”

But the American elite reaction to anything these days is to see it as a looting opportunity. Pump up the stock market, let the peons starve and run out of rent money, shovel money to the rich, and buy up distressed assets. That’s what both DC Republicans and Democrats are doing and okay with. Yes, yes, Democrats are okay with it. They could actually play hardball and have not, and instead have capitulated after token protests.

There are clusters of competence, of course, but they are overwhelmed by incompetence, corruption, and callous disregard for anyone who doesn’t make at least seven figures a year. The elites are inbred, out of touch with actual production and only capable of playing political games. They get money by manipulating politics, not by genuine production.

The masses are little better. If New York Governor Cuomo had put New York on isolation even two weeks earlier, he could have saved thousands of lives. He has been behind the ball on everything all the way down the line. Of course, his approval numbers are soaring. (He’s an inbred incompetent, but less incompetent than Trump, so I guess he’s graded on a scale.)

It’s impossible to keep up with this, but the bottom line is that the US is broken. You’ve off-shored too much production capacity, your elites are incompetent, out of touch, corrupt, and trained to make their money by hurting other people. Your population refuses to vote for anyone who does the right thing, and instead keeps choosing (with the aid of the media, yes) people who are evil and so impaired that a sensible person would be aghast at the thought of even hiring them to walk their dog or babysit their kids. (Tell me that you would tolerate either Biden or Trump doing either job. But those are the people you want to be the most important person in the country.)

All empires and great nations end. With almost no exceptions, they rot from the inside, and any outside push is secondary–such as from threats they could easily have defeated in their prime (as Rome was able to keep the Germans on the other side of the Rhine for centuries).

America is a failing state. It can’t even handle problems for which the solution is well-defined. It can’t resist turning every crisis into an opportunity to make its elites richer. Its population prefers incompetent and depraved leaders who have spent their entire lives demonstrating contempt for the people who vote for them.

Failing state.

But awe inspiring to watch. Surreal. Amazing.

edit (April 23, 2020): Replaced “New Zealand” with Iceland for the quote about who they learned from. Both countries have handled Covid far better than the US to date.

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April 21st US Covid Data

By Ian Welsh

On April 21, 2020

Comments

Our benefactor notes that the mortality rate has flattened at 5.4 percent. Because of limited US testing, this isn’t the real percentage; subtract a little bit and you still get a sense of mortality rates for those severe enough to get tested and, in many cases, to wind up in hospitals.

Deaths per day is meaningful because this is effectively a count of deaths in hospitals plus other obvious Covid deaths (in some states). If it’s declining, less people are dying in hospital.

I don’t want to be premature, but the curve is bending. The problems comes from those states which have never moved to isolation and those states moving to quickly to remove isolation (such as Florida re-opening beaches and Georgia’s announcement of opening various businesses on the 24th). Reopening, in particular, causes a delayed effect; remember that Covid is asymptomatic at first and, for some people, symptoms never occur, but during that time the disease is spreading.

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.