Month: December 2021 Page 3 of 4

We are currently seeing a fair bit of inflation, driven by supply chain issues. A recent comment by commenter Che Pasa is instructive.

Already, our local grocery store is charging $4.00 for a pound of broccoli, $3.00 for a head of lettuce, and 10 percent more for everything that hasn’t increased in price by 30-50 percent or more already. On the other side, they’ve lost literally half of their staff — who quit because their pay was too low. It was costing some of them more to work (what with transportation, child care, basic living expenses, etc.) than they were being paid.

The entire comment is worth reading.

Inflation happens all the time. During the New Deal and post-war eras, and up through the late 60s to mid- seventies, what happened is that wage inflation was stronger than the inflation of most things people needed to buy, and especially including important things like houses, cars, and tuition.

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When stagflation hit, elites decided that the core problem was “ordinary people are buying too much,” so ever since 1979 (42+ years), the Federal Reserve and other central banks have had a policy that whenever people’s wages rise faster than the inflation of basic necessities, they strangle wages, which they call “wage push inflation.” I’ve written about strangling wages a bunch of times, a longer version is available for those who want the whips and chains version.

There were, in the 70s, basically two choices: Strangle demand, or fix the supply issues by transitioning off carbon based fuels. They chose to strangle demand, and make the rich richer, because it seemed easier and it had the side-effect of making everyone the decision makers cared about filthy rich.

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What we have right now are supply chain disruptions caused by Covid. Ports in China get shut down when Covid strikes, there aren’t enough truckers, there isn’t enough production of many goods due to health-related disruptions (people being sick, dying, or under quarantines, and so on). Once that begins, folks begin to hoard, and in a “just in time” production and shipping system, there is no slack. Small disruptions cascade across the system as a result and warehouses have no inventory to make up for even slight disruptions in supply.

Most “value chains” to use management and trade speak, are spread out over multiple countries: parts are manufactured in many places, then gathered to be assembled. A snarl at any of a number of locations, or in shipping between them, causes delays all down the line.

In other words, we have a structural logistical problem caused by our systems being over-engineered for efficiency as measured by profits, without any built-in slack or even being designed to make sense. The people I talk to who are familiar with the system tell me that no one  understands it; it’s too complicated and dispersed.

But for 42 years, we’ve relied, almost completely, on financial solutions to economic problems, run primarily through central banks, with finance and treasury departments occasionally assisting. The solution to every problem has been to give rich people and corporations more money and assume that will create “supply,” while crippling everyone else to manage “demand.”

That methodology won’t work for this. Giving rich people more money won’t fix things, because the people who run the logistics system are making a lot of money off of these shortages; their profits are up. They’ll take money if the Fed wants to give it to them, but they have no reason to fix anything.

In principle, I suppose one can cut even more money off to ordinary people, and that’s what is being done, in stages, and as pandemic support is removed. However, the shortages are so severe that this may lead to even Americans and Britons, some of the most supine people in the world, deciding that rioting is better than starvation.

Or maybe it won’t. Maybe they are so beaten down, that unlike Indian farmers (who recently forced their leader Modi to back down), they will simply sit and take it.

But this isn’t a problem which can be fixed by the usual, “If we just give more money to rich people and privatize some more, the market will sort it out” solution that has been essentially the only policy method modern elites have ever known.

It requires, instead, actually restructuring logistics and manufacturing, actually forcing ports, shipping, trucking, railroad companies to change how they operate — including probably busting up various oligopolies, (many of which aren’t just dragging their feet, but are using this as an excuse to raise prices even when supply isn’t short). It requires forcing merchant marines to stop flagging in countries of convenience and to re-flag with major countries, rather than be, effectively, controlled by those countries.

It requires nuts and bolts understanding of how the system works, the re-engineering of it, and — if it’s too complicated to understand– making it simple enough to fix.

Elites, in other words, would have to understand how the actual economy works and not just assume that printing more money or changing interest rates or selling public facilities will make everything okay.

This comes back to what I wrote after 2008, that by refusing to let incompetent losers like the entire financial industry go out of out of business, by saying “we will print as much money as is required to keep current elites in power,” the central banks of the world had made real economic collapse, not just financial, inevitable, because they had made it impossible to change who was making the decisions, and the people making the decisions were incompetent fools.

Because, darling Virginia, there exists a real economy, not just numbers in a ledger. Food must be grown, processed, and sent to shelves. Ores must be mined and refined. Products must be made, shipped, and sold. People must eat and have power and water.

Every time our elites fail to manage the actual economy, as for example when Texas lost power this past year due to the power companies’ failure to repair and maintain their infrastructures, what happened? Instead of being punished for it, instead of losing power, they were rewarded either by windfall profits or — if somehow they would have lost money — they were bailed out. So, after the bailout they became even more rich and powerful.

The people who are in charge of the world logistics system are getting rich because of their failures. Central banks cannot fix that. The people who are in charge of the world health system are getting rich because of their failure to handle Covid. Central banks cannot fix that.

Your rulers are impoverishing and killing you, because it benefits them.

Incompetent or evil? Why not both?

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by Tony Wikrent

Strategic Political Economy

[Twitter, via Naked Capitalism 12-5-2021]

… the playing fields of Eton:

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The Pandemic That Capitalism Made

Umair Haque, via Naked Capitalism 12-9-2021]

It Would Cost Less to Vaccinate the World Than Big Pharma Earns in Vaccine Profits. If That Doesn’t Make Sense…That’s Because It Doesn’t

Do you ever wonder about those pharma TV commercials, and why any company would pay millions to have a speed-talker drone on about bad side-effects for 30 seconds? The intended result is what Haque writes about former CDC Director Tom Frieden’s comments in Europe that “Big Pharma is war profiteering” off COVID: 

Why does he say that? Well, first note that he had to head to the UK, to say it on Dispatches, which is one of the nation’s finest and most hardest-hitting news programs. In other words, nobody in America would even run the story.

 

Normalizing Corruption: The Biden White House purports to be worried about corruption — just not the kind now dominating American politics.

Andrew Perez, December 9, 2021 [Daily Poster].

“Corruption robs citizens of equal access to vital services, denying the right to quality health care, public safety, and education,” the Biden administration wrote Monday [report], adding that corruption ‘has been shown to significantly curtail the ability of states to respond effectively to public health crises.’ The Biden administration, as it turns out, is a perfect example of this: Every policy solution they propose involves some sort of corporate giveaway. This is the kind of institutionalized and legalized bribery that’s almost never discussed — the corruption that’s responsible for high health care costs and poor health care outcomes in the U.S., and that has made it effectively impossible for lawmakers to rationally respond to the COVID-19 pandemic here and around the globe. As if to drive the problem home, within hours of releasing their corruption report, the Biden White House was flailing on TV trying to defend an overly complex COVID testing plan that will keep Americans paying inflated retail prices for at-home tests with the hope that their health insurer will agree to reimburse them at some later point. This plan is wildly impractical, but it would be a boon for the same testing manufacturer that just so happened to start paying Biden’s former top aide shortly after Biden was elected president.”

 

Insulin’s deadly cost: Ultrahigh prices in the U.S. mean many diabetics can’t afford the medication they need to survive

[Fortune, via Naked Capitalism 12-9-2021]

“Billionaire Koch-Backed Group Sues FTC Over Antitrust Enforcement” 

[Bloomberg, via Naked Capitalism Water Cooler 12-9-2021]

“A nonprofit backed by billionaire Charles Koch sued the U.S. Federal Trade Commission to obtain documents related to a series of policy changes that have been criticized by the country’s biggest business lobbying group as an attack on American companies. The Americans for Prosperity Foundation filed a complaint on Wednesday in federal court in Washington seeking an order requiring the FTC to produce records in response to a Freedom of Information Act request the group filed with the agency. ‘The FTC’s aggressive agenda on antitrust enforcement is out of step with mainstream legal thinking and is best regarded as anti-consumer, anti-innovation, and harmful to economic growth and prosperity,’ it said.”

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Back in 2008, I wrote that Russia would not allow Sevastapol, and thus Crimea, to slip from its grasp. At the time, that view was the decided minority — Russia had “too much to lose,” and I just didn’t understand Russia/European integration.

I’m less certain about the current situation, but as I see it there are two factors. Russia’s been very clear.

1. Russia will invade the Ukraine rather than let it join NATO. This is the red line. Moscow is a lot harder to defend if troops start from the Ukraine.
2. While Russia won’t invade only because if the Nord Stream 2 pipeline gets stopped, if that pipeline is decisively stopped, Russia loses a lot of its incentive to keep negotiating with the US and EU.

It should be pointed out, again (because people seem to forget), that Russia is still the World’s Number Two Nuclear Power. A war with Russia has a chance to escalate to apocalypse. To his credit, Biden has said the US will not fight a war over the Ukraine, but there are a lot of forces in the US that disagree. Biden is right (as he was about leaving Afghanistan), and they are wrong.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

Russia is also powerful conventionally. Absent NATO intervention, the Ukraine is not going to win a war against Russia. It’s just that simple (and all this selling them military equipment will simply become a way to transfer that equipment to Russian hands if there’s an invasion), it’s not enough to tip the calculus of whether to go to war. No matter how much equipment gets sent, unless it’s nukes (which would trigger the aforementioned war, similar to the Cuban Missile Crisis almost did), Russia will still be able to crush the Ukrainian military.

Russia was promised, when the USSR broke up, that NATO would not expand past Germany. They feel betrayed; they feel this is a core interest, and they think that nations in their sphere of influence shouldn’t belong to an alliance whose purpose is to fight them (which is what NATO was created for).

I am, as I must tediously keep pointing out, not a fan of Putin, who has done great evil, and who has led Russia into a resource economy trap. But Russia is a great power, Ukraine was part of Russia for centuries, and it is in their sphere of influence. As for Putin, it must be understood that Russians are far better off under his leadership than they were before, and that US-led shock therapy causes catastrophic contraction (i.e., the population dropped because of all the deaths) when applied.

If the US and Europe had seriously wanted Russia as an ally, they wouldn’t have treated it not just as a conquered enemy, but as looting target and ideological straw man. If democracy and capitalism had been made to work for Russia as they were for Japan, Germany, South Korea, and Taiwan, then Russia today would be a sold Western ally, which is what Russians in the 90s mostly saw as the ideal outcome. They wanted to be Europeans.

Instead, Russia is a de-facto Chinese ally. From a geopolitical viewpoint, this is malpractice on a vast scale. China is the actual threat to American hegemony, not Russia, but Russia is important enough to matter — if allied with China. It removes an entire flank the Chinese would otherwise have had to guard against, and flips a powerful military ally to the other side.

Oh, and Taiwan? If there is a Russian war with the West, I’d expect the Chinese to  use that opportunity to force Taiwanese re-unification.

But, bottom line, I don’t think there will be a war unless the West gets very stupid. I could be wrong; there are people who think Putin believes the Ukraine must be re-integrated, whatever the cost, but I don’t see it. The damage to Russia would be too great from sanctions, loss of European markets, and having to fight a guerilla war.

Still, stupidity, on either side, can happen.

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Younger readers may not remember the run-up to the Iraq war. It was a full-court push, with constant lies about Iraq’s “weapons of mass destruction,” and how Iraq was a threat to the US. The media went along with it, with almost no exceptions — and those exceptions paid the price; they were fired or demoted or, at best, their careers stalled.

Fred Hiatt, the Washington Post’s opinion editor just died, and the praise is flowing in, but Fred pushed the Iraq war, hard.

This is not to deny that he may have been a wonderful person to those who knew him — kind, funny, caring, and a good boss. But none of that matters to those killed, maimed, raped, tortured, or impoverished by the Iraq war and all that came from it, which includes ISIS.

To be clear, while there was a propaganda push, it was obvious at the time that it was based on lies. I knew it, and so did millions of others. Even at the time, if you read the stories carefully, it was clear they were bullshit, and that Iraq presented no threat to the US. Saddam was a bad guy, sure, but he wasn’t a threat to much of anyone but Iraqis, and, as events later proved, he was a lot less of a threat to them than what came from a US invasion.

The ostensible job of journalists is to tell the public the truth about important matters. That’s the headline job description, and I suspect most journalists at least began their careers believing it.

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But freedom of the press, as in the famous quote, belongs to those who own them, and journalists work for people with agendas, and senior members are part of the elite themselves. It wasn’t always so, but the days of working class journalists are long gone.

So, when a big propaganda push happens, there’s always a quandary: Your own class and your boss want you to push it.

This leaves journalists, especially senior ones like Fred Hiatt, with three possibilities.

1. They can be stupid and believe the lies.

2. They know they are lies, but they also know that their real job is to repeat those lies, and if that means they contribute to mass death, rape, torture, and so on, well, that was the price of admission. In this case, they have become evil.

3. They tell the truth and are then punished. If, somehow, someone like this has managed to make it to a senior, important position, they lose it. But that’s rare, because you don’t get a job like Hiatt’s without having “made your bones.” Hiatt, a former foreign correspondent, would have spread lies many times before, proving he understood the real job.

So Fred may have been a mensch, but he was either an idiot or someone who used his position of power and influence to contribute to an act of great evil.

But, really, this isn’t about Fred Hiatt. He wasn’t unusual at all, he was straight-up normal for men and women in his position, in his profession. The New York Times pushed the war hard, so did all the networks, and so on. It was elite consensus, and nobody who doesn’t bow down to elite consensus gets the good jobs at an important newspaper or on TV. If they somehow slip through and finally draw a line, they are dealt with.

This means they have, virtually to a person, all sold their souls. They’re almost all evil — well over 90 percent. They’ve made the devil’s bargain of “I will help great evil succeed in exchange for prestige and wealth in this life.”

We’ve set the system up this way, yes, but understand that it isn’t just that the system makes people do this, it is that the people who are willing to do this are those the system selects and promotes. In this regard, they very much are like street gangs wherein to join, you have to murder someone. In journalism, you just have to lie about something that will get people killed or hurt. As a Federal Reserve banker, you just have to support policies you know will impoverish (and kill) millions of people. Etc.

Good people won’t do it, and even people who aren’t that good, but aren’t bad, will eventually find a line they won’t cross.

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Those people don’t make it to important positions, and that’s by design. The system runs on hurting people; Iraqis, Americans, whoever the people in power want to hurt. And if you want power and prestige in this society, you have to not just be cool with that, you must be willing to contribute.