Jul 102020
 


Gerry Cranham Protection for the pretty 1963

 

 

Imagine you’re standing across the street from a house that’s on the verge of falling apart, a condemned building, an edifice devoured by rot from bottom to top. Now imagine you see a construction crew arriving to repair it, and they start to fix the roof. You would think that’s not much use if the walls, floor and foundation are just one wolf’s huff and puff away from collapse.

Still, that is what the world’s central banks are doing today: they “fix” the top by bailing out banks and allege that somehow that will fix the rest of the edifice too. In that same analogy, while central banks prop up banks, governments try to support the walls, by bailing out businesses. Again, while the floors and foundations keep on rotting away. And when the floors cave in, so of course will the walls, just like the roof.

There may appear to be some logic to all this, but it’s only the “inner logic” of an economic and political ideology that deals exclusively with how things should be, not how they are. Of course it’s nice to have a shiny new roof, and strong walls. But neither have any value if there are no more floors to support them.

This is what is happening today to our economies and societies. The 2008 crisis wasn’t bad enough to expose the failures of the “inner logic” of the system, but the fallout of COVID19 will be. And it’s not the virus that does it all, or the lockdowns, they merely expose a system that’s been rotting for many years without its floors and foundations ever being repaired.

(And yes, you’re right, the central banks are not merely fixing the roof, they’re gold-plating it for good measure).

 

So you got the Fed team working on the roof and the government team working on the walls, and absolutely nobody working on the floors and foundations. And at some point you’re going to have to ask what these people actually know about building and construction, even about gravity: are they aware that roofs and walls are infinitely more dependent on solid floors than floors are on them?

Actually, I think they are. They just don’t think it’s possible that the floor may fall out from underneath them (i.e. they deny gravity). But that is what is threatening to happen. Not only in the US, but all over the western world. And if there’s one thing you don’t want to happen to your house, or your economy/society, it’s for the bottom to fall out. Because where will you live?

Still, with headlines such as

“More Than Half Of The US Population Is Not Working”,
“50 Million Americans Have Lost Their Job In Past 6 Weeks”,
“42 Million Unemployed, 25.5% Unemployment Rate”,
“52% Of Small Businesses Expect To Be Out Of Business Within Six Months”,
“53% Of Restaurants Closed Amid Coronavirus Have Shuttered Permanently”,
“US Retail Apocalypse: Over 25,000 Stores Could Close By Year End”
,

and more of the same on the way, we should at least consider the possibility of the bottom falling out, and prepare accordingly.

It’s one thing to want to save the businesses, but if you have huge amounts of people who can’t afford to buy anything from them, businesses will inevitably fail in huge numbers. If the bottom threatens to fall out, you need to focus on saving the floor and foundations, the people, not the businesses. Nothing to do with socialism or anything like that, but with preserving your society as a going concern.

 

The first thing I didn’t quite get, but then again did, was that all the PPP’s and their equivalents, the various global payment protection programs, were aimed at protecting businesses by guaranteeing wages and salaries of their employees. What an odd idea, I thought. After all, if you want to protect wages, there is no reason to do that through a business, you might as well pay the employee directly.

If you pay the business which must then pay the employee, how would that help or protect that business? By giving off the false impression it can still pay the wages? Of course, if you do pay it through businesses, at least no-one can bring up a theme such as Universal Basic Income, anymore than they can MMT. While you in effect practice both, you can also deny practicing either. Pretty smart, right? Neat!

But turn this around for a moment. Say the governments pay the wages and salaries. These are the biggest cost for many if not most businesses, certainly the small ones, which are, obviously, the most vulnerable to sudden events like a pandemic and lockdown. So as a government, you take that liability, and that risk, away.

It would appear that then you can assess much better how viable such a business really is. Because a business that doesn’t have to pay its biggest cost should be able to survive for a few months, even if there’s no revenue coming in, unless it has deeper problems, like -too much- debt. The advantages for everyone are clear: less paperwork for government and business owner, guaranteed wages for employees, and a better view of a business’s financial situation for everyone.

 

Not that you should pay employees 100% of their wages, as many countries have. You would only do that if you think the problems will be over soon, but in reality you have no idea if they will be. You need to support the lowest-paid people -because they are the bottom that’s about to fall out- but as you work your way up to higher wages, you start taking off a percentage, rinse and repeat, and end up paying maybe $50,000 to people who made $100,000 (and yes, that goes for government employees too).

Why would you hand someone, anyone over $100,000 for not working? Of course there are people with mortgages and car loans that are so elevated that they need more than $100,000 to keep their families alive, but that is a different story. That does not deal with the bottom falling out. For those cases, you need a separate program. Just like you do for businesses that still can’t survive once all their wages have been taken care of by the government.

Obviously, as Midwest small businessman Bruce Wilds said recently in his guest post here, Small Business Firings to Start, for some businesses showrooms, or inventory, taxes, utilities, can be major liabilities. Again, separate program. Support the bottom, the people, first. Because it’s urgent. Because you risk too many people having too little to survive on. In fact, so many that your businesses come under threat from having no customers left.

 

As one of its first measures, Greece, when it went into lockdown, lowered rents for businesses by 40%, without as much as a plan for how to compensate landlords. That’s the spirit. But it’s a spirit few will understand, let alone politicians. In the end, the reality is that most landlords and mortgage lenders will get less money. For a long time. You can try to help everyone out with cheap loans to individuals and businesses to pay off their mortgages, but that’s a just another short term plan, and has nothing to do with long time views.

And cheap loans won’t save the bottom from falling out. If you put it like that, people will actually understand: you don’t save a failing economy by pouring in cheap money. Any more than a lick of paint will save a condemned building.

But at the same time, that’s all our political systems manage to come up with. While fervently hoping for, counting on, a miraculous recovery, and planning to make the poor pay by raising taxes when we’re “back to normal”. It’s just that there comes a time when the poor have nothing left to pay with, not even for their food. That’s when the bottom falls out.

To be continued. I have much more to say on this. Like: what to do now?

Look, it’s quite simple really: if you ask yourself, or your friends, or someone on the street, if they think the economy will recover within a “reasonable” timeframe, most will say yes. Conditioned by politicians, by the media, and by their own fear of what will be their fate if it doesn’t. But that is a giant blind spot. If half of businesses and half or restaurants are shut for good where ever it is you live, where would that recovery have to come from? Do ask yourself that question, and try not to be afraid of the answer for a moment.

 

 

 

 

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May 172020
 


Gerry Cranham They all fall in the round I call 1963

 

There was this comment at the Automatic Earth yesterday that got me thinking. It was sort of wrapped in a bit of -more- innuendo about health officials not getting the results they were looking for in COVID19 numbers, as if the whole virus event is some goal-seeked conspiracy. You’ll be familiar with it by now.

I said back in the day that measures like lockdowns can’t last long, because people are social animals. You would just have hoped that when they were finally, far too late, decided upon, that countries, states, communities, would have made the best of them. But it’s been, and more importantly will be, an awful mess, other than in a few places.

And I did say that too, that the so-called leadership in the world today is good at declaring a lockdown, albeit too late, but not at anything else, not at timing it, not at executing it, let alone at managing the way out of it in reopening societies. It is all so predictable.

But people have been solidly dug into their trenches now, after 2 months, and they’ve done so much reading, and watching pundits, that they’re no longer looking for news, they’re looking for opinions, ones that match their own darkest notions. We’ve come to the point that if there’s nothing suspicious going on, then that’s mighty suspicious.

 

And there’s plenty of such opinions, and plenty among them that lay the blame for freedoms and livelihoods lost somewhere, anywhere. So yeah, in that sense it’s time to reopen, the mental health sense. But not, unfortunately, in the physical health sense. The virus is still prevalent in most communities and many a community will pay a steep price.

But nobody is aware of it, it seems, because nobody really knows what will happen. They’ve only all heard the clamoring for a return to normal. That there will be no return to normal is something nobody wants to tell them. How many people do you think know there’s never been a vaccine for a coronavirus? How many people know that there is no need for a vaccine?

Everyone’s been told to wait for a vaccine, which suits Big Pharma, which gets billions for something they don’t even need to deliver, just try, and it suits the politicians who can all say there’s nothing they can do to prevent more suffering until the magic pill shows up. They can say they opened up because there was so much pressure on them.

But yes, that comment. It made me think that perhaps people don’t understand viruses very well, and also that it’s a very good lead for a description of how they “function”.

 

Is this a fiercely contagious pathogen or not? If it’s so contagious, then it isn’t particularly lethal. If it’s incredibly lethal, then it isn’t so contagious.

 

First of all, remember a virus doesn’t think or plan or have a strategy, none of that. If conditions are right a virus will multiply. And while doing so, it will mutate. These things happen in virustime, counted in time sequences as infinitesimal as the size of a virus itself. And one in a billion or so a mutation will stick for more than two nanoseconds, because it offers an advantage to the virus.

That’s how it gets to spread from, first, animal hosts within the same species, and then, in very rare circumstances, to other species, like humans. And even then it’s exceedingly rare that a virus could do harm to a human being. The odds of that happening are maybe one in a trillion or something, I doubt anyone could tell you, including virologists.

The virus “wants” one thing: to multiply. Just like any other being, including us. And being both very lethal and very contagious doesn’t help it do that (not that it’s trying). Earlier well-known coronaviruses like SARS and MERS got that balance wrong. Because that’s what it is: a trade off between lethality and contagiousness. Neither can be too high.

SARS is noted by the WHO for a case fatality rate (CFR) of 9.6%. At that percentage, with the lethality and contagiousness it had/has, the virus lacks the time to jump from old host to new host, especially when existing and potential hosts are being isolated. MERS had a 34% CFR, and obviously didn’t prevail long.

MERS never even really left Saudi Arabia (and appears to have never achieved human-to-human transmission). SARS did get to other countries, I remember especially Canada, but that whole epidemic was over in 7 months.

 

You need the right amount of contagiousness combined with the right amount of lethality in order to have a pandemic. Jump from host to host, but not too fast, because in no time every potential host would be infected and develop antibodies (herd immunity). And not too lethal, because not enough “old hosts” would be left to infect enough “new hosts”.

The present SARS-CoV-2 coronavirus appears to have struck a delicate balance. People may say it’s not all that contagious, and it’s not so lethal, but it’s those qualities that enabled it to be a pandemic. One thing it hasn’t achieved yet is becoming endemic, and we would be wise to keep it that way. But the odds that we will have a vaccine before we can do that are slim.

Where to go from here is very opaque. People shout out for the world to be opened, but all they will get is a small part of that world. Mass events, bars, restaurants, subways, planes, and so much more, can no longer function the way they did. As long as the virus is out there, it may be ‘only’ modestly contagious and lethal, but enough that people will be willing to avoid many things that were considered normal before 2020.

That will lead to huge changes in society, enormous amounts of jobs that will not return. If we fail to adapt to those things as badly as we failed in our lockdowns, the changes can only become even larger, even deeper, until there may be little left that we still readily recognize.

There are still very few, if any, countries where everyone is tested for SARS-CoV-2. We will need to test everyone at least once a week, and twice on Sundays. And isolate whoever tests positive. It didn’t need to come to this, but we all screwed up something awful, except for a very small number of countries and societies.

 

Get ready for the next round; there is no other way out. And if we let the virus become endemic, and it returns in waves of every year or so, the testing regimen will have to continue too. Until there is a vaccine, but that may never come. Or we reach herd immunity, but that is merely a fickle concept used mostly for cattle and may never come either. Or only at the cost of millions of lives.

We need to prevent the virus from “finding” new hosts. It is that easy. And there are ways to do it. But they don’t rhyme with “I won’t give up my freedom for your safety”. If that’s the route we take, we’re all going to live in very small and separated worlds. And what does “freedom” mean anymore then?

It’s obviously much easier to join the crowd and claim Bill Gates wants to force vaccinate us all, and the elites want to enslave us; and no doubt there’s a few psychos with crazy dreams. But maybe just maybe this is, or should be, more about us, about what we do, what powers we have, and what we do with those.

If the elites, or whoever else, wants to use the virus to make you their bitch, don’t let them. But do you really believe that letting a virus with just the right mix of lethal and contagious, run wild and undetected in your society, is the way to achieve that? Or might it be better to wear a face mask in public for a bit and get tested, or test yourself, until the virus is gone?

If you choose door number one, don’t you agree that you should blame yourself for that choice, not the so-called elites? Maybe you should take responsibility for your own lives, not blame whatever goes wrong on others. Maybe that’s a higher degree of freedom than saying we can’t do anything about it anyway, so let 50 million people die as long as I am free to go to McDonalds.

And you would be playing into Bill Gates’s hands to boot if you do that, provided you believe that he wants to depopulate the planet. How’s that work, he’s your bogeyman, him and the elites, and therefore you give them what they want? They want to depopulate, so you say sure, let the virus roam, while you could prevent it from doing that?

You might want to look up “freedom” in a dictionary.

 

 

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May 062020
 


Saul Leiter Phone call c1957

 

Don’t worry, we’re still talking virus, just from a slightly different angle. I was going to do something completely different, but then I saw an article at the South China Morning Post (SCMP) today that made me think “I don’t think that’s true”, realizing that at the same time many people would think it is.

Foreign holdings of US Treasuries are a misty environment for perhaps not just many, but most people. What triggered the SCMP piece is Trump’s threat, if it was ever meant to be one, to default on US dollar-denominated debt owned by China. Which by one estimate consists for about 70% of Treasuries.

And there are entire choirs full of voices willing to tell us that China can simply start dumping the -estimated- $1.2 trillion in Treasuries it holds, and threaten if not end the USD reserve currency status that way, if the US doesn’t “behave”. There’s little doubt that China would want this, but that doesn’t make the idea any more realistic.

What should give that away is, how easy can we make it for you, that it hasn’t done so yet. And now a conflict over the origin of a virus would trigger this? On a side note: if that origin is somewhere in China, even if it’s unintentional, how could Beijing possibly “admit” to it? How could it ever settle the lawsuits that would ensue?

No, the US cannot default on China’s holdings of its Treasuries. That alone would be a larger threat to the reserve currency status than anything anybody else could do, other then nuclear war. But at the same time, China cannot dump its Treasury holdings. because that would hurt … China.

And don’t forget that China and the US are in a symbiotic relationship of chief seller and chief buyer. Drastic changes in that relationship would -almost- certainly lead to consequences that neither can fully oversee, and that could hurt either or both tremendously.

Where are the US going to buy what they now buy from China? Who is China going to sell to what they today sell to the US? The countries are for all intents and purposes Siamese twins. Whatever can change, can only do so gradually. And even then.

No matter how much I read about it (a lot), this particular field is still not my expertise. But when I read the SCMP piece, it reminded me right off the bat of something that Michael Pettis, professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets, wrote on May 28 2019, in an update of an article he wrote in January 2018 (all pre-virustime).

I liked Michael’s take from the moment it was published, because I learned a lot. I think you might too. I can’t do this without some elaborate quotes, but at least that will make me shut up a little. Please bear with me. I don’t find the SCMP piece all that interesting, but it’s good as a failing counterweight to Pettis.

With all that in mind, let’s take the SCMP piece first:

 

China Could Cut US Debt Holdings In Response To White House COVID19 Compensation Threats

[..] White House officials have debated several measures to offset the cost of the coronavirus outbreak, including cancelling some or all of the nearly US$1.1 trillion debt that the United States government owes China. While analysts added that the US was highly unlikely to take the “nuclear option”, the mere fact that the idea has been discussed could well prompt Beijing to seek to insulate itself from the risk by reducing its US government debt holdings.

That, in turn, could spell trouble for the US government bond market at a time when Washington is significantly ramping up new issuance to pay for a series of programmes to combat the pandemic and the economic damage it is causing. “It’s such a crazy idea that anyone who has made it should really have their fitness for office reconsidered,” said Cliff Tan, East Asian head of global markets research at MUFG Bank. “We view this as largely a political ploy for [Donald Trump’s] re-election and a cynical one because it would destroy the financing of the US federal budget deficit.”

[..] any move to cancel the debt owed to China – effectively defaulting on it – would be counterproductive to US interests because it would likely destroy investors’ faith in the trustworthiness of the US government to pay its bills [..] The US Treasury two-year yield continued to trade near record low levels this week, suggesting market traders and fund managers are largely shrugging off what is widely seen as a far-fetched idea that the US could cancel some or all of China’s debt.

The whole idea that the US would default on its own Treasury debt is nonsensical. Why write about it? Is that only because you don’t understand what’s involved? And your editor doesn’t either?

Nevertheless, the news that the idea was discussed by top US officials is likely to raise concerns among Chinese leaders about the growing risks of holding a large amount of US government debt at a time when relations appear to be deteriorating rapidly, analysts said. Iris Pang, Greater China chief economist at ING Bank, said unless it had no choice, China would want to avoid quickly offloading its US government debt without first considering other punitive measures against the US.


[..] China could trigger a crash in the US dollar and financial markets by flooding the market with US Treasuries for sale, which would push down US bond prices and cause yields to spike. But that would also ignite a global financial catastrophe, hurting China as well. Instead, China could cut back or stop buying new US Treasury issues, which would gradually reduce its holdings of US government securities as old ones expire and are not replaced. “In the coming months, [China could] halt its Treasury purchases to send a clear signal of its intentions,” said Pang. “If it decides to do that, it could make actual sales [of its other holdings] at a later date.”

This is my central point here. The article says: “China could trigger a crash in the US dollar and financial markets by flooding the market with US Treasuries..”, and I don’t think that’s true. Yeah, they can do tariffs or buy less US soybeans, but then again, those have been linked by Trump to US purchases from China.

In the meantime, China may consider imposing tariffs of its own, or reducing its US agricultural purchases. China has agreed to buy an additional US$200 billion worth of US products and services over the next two years compared to 2017 levels as part of the phase one trade deal signed in January. [..] There have always been calls for China to diversify its US$3 trillion in foreign exchange reserve holdings, around one-third of which are held in US Treasuries. According to the latest US Treasury Department report, China’s holdings slipped to US$1.09 trillion in February from a peak of US$1.32 trillion in November 2013.


[..] “There’s a strong urge for countries like China, and Russia, to move away from US dollar settlements. This is simply because the US dollar can be weaponised by the US government,” said Xu Sitao, chief economist at Deloitte China, referring to the recent practise by the US government of cutting off foreign individuals, companies and governments from the global US dollar financial transaction settlement system, greatly complicating their ability to conduct business. “Clearly there’s more willingness for certain countries just to diversify and move away from US dollar settlements.”

Sure, but that’s old stuff, as old as the petrodollar. Still, the article supposedly deals with -life-during-and-after-COVID19. Has nothing changed? Well, perhaps not. But then why the article?

[..] David Chin, the founder of Basis Point Consulting, said China could be forced to toughen up its act if it no longer earned US dollars from its exports to the US because of a significant US-China decoupling. If that were to happen, China could sell its US Treasury holdings for yuan, seeking to engineer a collapse in the US dollar to end its status as the ruling currency. “Its ‘I die, you die harder’,” Chin said. “With no US export market, China would go the other way and rely on internal consumption, trade with Belt and Road countries and the rest of the world in their local currencies, and prepare to ‘eat bitter’ as local conditions worsen.”

If China doesn’t have the US as an export market, both go down, so I’m not sure why a news outlet would want to discuss this without providing the proper news “environment”. And anyway, it’s just not true. Here’s Michael Pettis very methodically putting the final nail in that coffin, and showing why the whole notion is just a load of crock.

 

China Cannot Weaponize Its US Treasury Bonds

China cannot sell off its holdings of U.S. government bonds because Chinese purchases were not made to accommodate U.S. needs. Rather, China made these purchases to accommodate a domestic demand deficiency in China: Chinese capital exports are simply the flip side of the country’s current account surplus, and without the former, they could not hold down the currency enough to permit the latter.

To see why any Chinese threat to retaliate against U.S. trade intervention would actually undermine China’s own position in the trade negotiations, consider all the ways in which Beijing can reduce its purchases of U.S. government bonds:

1) Beijing could buy fewer U.S. government bonds and more other U.S. assets, so that net capital flows from China to the United States would remain unchanged.

2) Beijing could buy fewer U.S. government and other U.S. assets, but other Chinese entities could then in turn buy more U.S. assets , so that net capital flows from China to the United States would stay unchanged.

3) Beijing and other Chinese entities could buy fewer U.S. assets and replace them with an equivalently larger amount of assets from other developed countries , so that net capital flows from China to the United States would be reduced, and net capital flows from China to other developedcountries would increase by the same amount.

4) Beijing and other Chinese entities could buy fewer U.S. assets and replace them with an equivalently larger amount of assets from other developing countries , so that net capital flows from China to the United States would be reduced, and net capital flows from China to other developing countries Beijing and other Chinese entities could buy fewer U.S. assets and not replace them by purchasing an equivalently larger amount of assets from other countries, so that net capital flows from China to the United States and to the world would be reduced.

These five paths cover every possible way Beijing can reduce official purchases of U.S. government bonds: China can buy other U.S. assets, other developed-country assets, other developing-country assets, or domestic assets. No other option is possible. The first two ways would change nothing for either China or the United States. The second two ways would change nothing for China but would cause the U.S. trade deficit to decline, either in ways that would reduce U.S. unemployment or in ways that would reduce U.S. debt.

Finally, the fifth way would also cause the U.S. trade deficit to decline in ways that would likely either reduce U.S. unemployment or reduce U.S. debt; but this would come at the expense of causing the Chinese trade surplus to decline in ways that would either increase Chinese unemployment or increase Chinese debt. By purchasing fewer U.S. government bonds, in other words, Beijing would leave the United States either unchanged or better off, while doing so would also leave China either unchanged or worse off. This doesn’t strike me as a policy Beijing is likely to pursue hotly, and Washington would certainly not be opposed to it.

I always thought this was a crystal clear explanation of what lies behind the threats that are continually uttered from both sides. One half of a Siamese twin can stab or poison the other, but what would be the outcome of that? And Pettis has more, and then much more at the link.

[..] Even if Beijing forced institutions like the People’s Bank of China to purchase fewer U.S. government bonds, such a step cannot credibly be seen as meaningful retaliation against rising trade protectionism in the United States. As I have showed, Beijing’s decision would have no impact at all on the U.S. balance of payments, or it would have a positive impact.

It would have almost no impact on U.S. interest rates, except to the extent perhaps of a slight narrowing of credit spreads to balance a slight increase in riskless rates. It would also have no impact on the Chinese balance of payments in the case that it leaves the U.S. balance of payments unaffected. To the extent that it would result in a narrower U.S. trade deficit, there are only three possible ways this might affect the Chinese balance.

First, China could export more capital to developed countries, in which case the decision would have no immediate impact on China’s overall balance of payments, but it would run the risk of angering its trade partners and inviting retaliation. Second, China could export more capital to developing countries, in which case the decision would have no immediate impact on China’s overall balance of payments, but it would run the very high risk of increasing its investment losses abroad. Or third, China could simply reduce its capital exports abroad, in which case it would be forced into running a lower trade surplus, which could only be countered, in China’s case, with higher unemployment or a much faster increase in debt.

The US cannot default on its debt because its reserve currency status would be shot. Trump knows that and still throws it out there. So what do you do as a serious journalist? Repeat that without as much as a question mark?

In the same vein, China cannot sell its USD-denominated assets, or at least not at any meaningful kind of pace. So what do you do as a serious journalist? You claim that it can?

 

 

 

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May 042020
 


Steve Schapiro Muhammad Ali (Cassius Clay) with mini gloves, Louisville, KY 1963

 

 

There was another comment at the Automatic Earth yesterday questioning the function and wisdom of various lockdowns. I thought I’d explain this in more detail.

 

Ilargi if you or anyone else could explain what the exit strategy is from a lockdown I’d be interested in hearing it. As it is, this lockdown I repeat is no different than financial QE – everyone comes out weaker than they were before treatment. Financial QE covers up her problem just like lockdown does, but makes it worse in the long run. The only exit strategy I can see is to keep lockdown until a vaccine or effective treatment, neither of which are on the horizon.


If you are arguing that even healthy economies can survive indefinite closure, with intermittent re-openings I don’t know what to tell you. The suggestion is made that Sweden has a huge vested interest in understating fatalities. It is also certainly true that the rest of the world has an even greater vested interest in criticizing the Swedish approach because it demonstrates how useless the total lockdowns are. BTW the reported differences in fatalities between Sweden and the rest of Scandinavia are not statistically significant. Playing with numbers and not understanding how things may not be as they seem.

 

First, let’s re-establish that no lockdown would have been needed if and when politicians and scientists had done what’s in their job descriptions. That does not mean that no lockdown was called for once they did fail. Indeed, it’s the failure to act at the very beginning, say January 31, when the WHO sent out its first warning, that made lockdowns inevitable.

I don’t say that to exonerate the WHO in any way, because it subsequently, for weeks on end, kowtowed to China’s refusal to allow its teams entry into the country, and followed that up by waiting and hesitating another full 6(!) weeks, until March 11, to declare a pandemic.

Second, a lockdown and the way it’s executed are not the same thing. The decisions to lock down their societies may be the only thing(s) the Little Manager politicians have gotten right, but they still did get it right. And sorry, but you cannot use their ginormous failures made both before and during the lockdowns, to argue that the lockdowns themselves are a failure. These are separate issues, don’t let’s get them mixed up.

Lockdowns in and of themselves, when properly executed, cannot NOT work, simply because of the way viruses spread. Yes, we need to know exactly how they do, but not knowing this in the present case is exactly why we need a lockdown, why we need to keep people, who are all potential hosts AND spreaders, away from each other. Until we know precisely how the virus spreads and/or until we know that the people involved are not virus carriers.

Terms such as “indefinite closure” don’t come from me, so please have the courtesy not to suggest I want one. Questioning the principle of a lockdown is not terribly helpful or smart, and neither is suggesting that Sweden is doing well. If only because such questions and suggestions, if you follow their “logic”, seek to deny the very way viruses spread, if not the existence of a virus in the first place.

Which is one of the few things we do know about COVID19: we know it exists and we know it spreads. We may get distances – between people- and timing – of various stages of infection- wrong, but the principle stands.

 

The lockdown is useful, make that inevitable, because it prevents further spread of a deadly virus from one host to another. Our ancestors understood this well before they even knew what viruses were, and I don’t understand why we would today no longer possess that wisdom.

The knowledge we have gained since times of old also allows us to understand that if a virus cannot spread to a new host for an x amount of time, it will die off. Which may sound a tad curious because science does not consider viruses to be microbes or “living organisms”, but that’s not really the issue at hand.

However, the NOT spreading will have to happen in as many instances as you have potential hosts, i.e. infected people, to make it work at a societal level, obviously. And that’s why lockdowns are inevitable: it’s all about numbers.

The “good news” is that the very reason lockdowns are useful already signifies that lockdowns don’t have to last until there is a “vaccine or effective treatment”; no “indefinite closure” is needed. You don’t necessarily have to eradicate a virus to inhibit it from jumping from host to host; you can also put distance and other barriers between (potential) hosts.

And there’s more good “news”. I think it was Nassim Taleb who said a while back that the answer to people saying a lockdown is a bad thing because it also isolates healthy people is: we need a lockdown precisely because we don’t know who is healthy or not.

If we do know who is healthy, however, we don’t need a lockdown. Ergo: testing, testing, testing. Certainly in the beginning, we must test people every 24 hours or so, test them for the virus. test them for antibodies, improve our tests, add more tests, test still more, we can all fill in the rest. And no, that is not an indefinite thing either. Testing will tell us to a much higher degree than we know today, when and where to distance people from each other.

Someone who has tested negative every 24 hours for days or weeks on end can be treated differently from someone who has not. And such a person will be, certainly initially, more careful in interacting with people. Take it from there, and you will in the end actually be rid of the virus, because it will not find enough new potential hosts.

That also means you don’t absolutely need a vaccine. Which is a good thing, because no coronavirus vaccine has ever been “discovered”, and because we have no idea what it would contain. Whenever I hear grand theories about grand bad plans elites or whoever are supposed to have with the virus, I first think: what would the virus need to propagate?

And I always come back to the same answer: it only needs our continuing incompetence: other than lockdowns and face masks, we have given it all the space and opportunity it has needed. It doesn’t need any help from 5G radiation or glyphosate (though both should be subject(ed) to the precautionary principle), or anything people come up with in the extra time their lockdown allows for. All it needs is for us to continue doing what we have: not test.

And opening up our societies again without mass testing, of course, will be the biggest gift we can offer it. This doesn’t mean I deny the possible existence of some plan, or that I want to claim to have knowledge of where the virus originated. It only means that from where I’m sitting, the virus doesn’t need any assistance to do what it has done so far, not that it may or may not have gotten any. Still, door A is factual, and door B is purely hypothetical. And we don’t have seas of time to debate this, we have lives to save.

 

It’s early May, and there no longer are any excuses for anyone in the western world not wearing face coverings in public, and neither are there excuses for countries lacking the capacity to test their citizens appropriately. Still, in most countries, we are nowhere near that capacity. That is inexcusable. Social distancing is not.

What shuts down societies today is not the virus, not the lockdowns, but the failure to adhere to basic principles with which to approach all potentially epidemic microbes or viruses. The failure to be properly prepared -at all times-, because some thirteen-a-dozen politician elected in a popularity contest considers it too expensive, or too much work. Even if warnings about a next epidemic had been sounded for many years.

The exit strategy is testing while Big Pharma looks for a vaccine. Good thing we don’t have to wait for the latter, because, yes, that would risk an indefinite closure. Testing will get us out once our “leaders” resolve to make it a priority. They should all be voted out of office for not having done that yet, and take their scientific advisers with them. And that’s after we may or may not forgive them for their initial failures.

We may need to overhaul a whole bunch of things to make sure no such perfectly preventable failures happen ever again. But you know how people are. And anyway, we’re in a bit of a bind at the moment.

It’s been 125 days since that first WHO warning, and there are still even many rich countries that can’t manage to test their medical and care workers, let alone the rest of their people.

And you want to argue that the problem here is lockdowns?

 

 

 

 

 

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May 012020
 


Joseph-Désiré Court Le Masque 1843

 

No, I’m still not over the fact that they all initially missed the virus when they should have seen it most of all. The reasons why must be evaluated in every single location, in governments, CDC equivalents and obviously the WHO. A main reason is that they were all focusing on their economy, not the virus, -at least somewhat- ironically damaging their economies in the process.

I’m just afraid that you’re not going to prevent the next time, the next huge and deadly miss, as long as elections are popularity contests ultimately controlled by special interests. But at the same time, we’re past that first moment, which was somewhere in November or December (31st at the latest), and the next major threats loom.

After the Big Miss came the lockdowns, and as I said in Little Managers, that’s the one thing all these politicians may actually be somewhat good at. They stink at initial detection and reaction time, they stink at forward vision, but they can get people to stay home for a bit, and sell them that in the media.

They even get praised for it. Which is understandable, since their role is to set old ladies’ minds at ease, and most people, whatever age they are, have such minds, understandable but unfortunate, because 1) we’re about to leave the lockdowns phase as well and 2) they’re sure to screw up this one as royally as the first detection moment.

 

It would be good if everyone by now understood why lockdowns become inevitable after, but only after, initial detection has failed and the virus has been allowed to enter a society, if you face a highly contagious and deadly -to humans- virus that you don’t know anything about, but there are plenty people today who claim the lockdowns are what does the damage.

In case there is such a virus and you miss your first -and only- chance at “Crushing the Curve” (as opposed to flattening it, which is of limited use at best), you must prevent it from jumping from host to host, which means you need to keep people apart from each other to one extent or another. Societies have understood this for 1000s of years, and we don’t?

Keep people apart until you either know more about the virus, or you have a vaccine, or people become immune to it. Well, there’s no vaccine – did you know that no vaccine for a coronavirus was ever developed?-, immunity is in a very early phase, and just about literally everything we think we know about the virus is contradicted within 24 hours or so by a different report or group of “experts”.

 

These are truly not things we should let politicians fresh out of popularity contests decide. But that’s the model of our societies. The various relaxations of the various lockdowns are going to be an unmitigated disaster, guaranteed. We have all the elements for such disasters. It’ll work out fine in a few locations, but in most it will be terrible.

Because these guys and gals are under pressure from people who’ve been complaining about the lockdowns since the moment they were called. Because their “scientists” are, as we saw in The Only Man Who Has A Clue, utterly useless when it comes to even the most basic rules of risk assessment. But then for a few consecutive days numbers of cases and deaths seem to go down, and there is an election coming up next year or the one after that, and off to the races we are.

As long as there are no urgencies or calamities, we don’t notice these things, because everyone is busy living their own lives and fulfilling their own demands. And then when things do go wrong, there’s no redundancy, no resilience, no safety nets, and eventually no nothing. Because everyone’s too busy with their own lives.

We conduct our societies as if there is zero risk of a pandemic or any other disaster, because there’s no profit in redundancy. It’s a miracle we still have fire departments and hospitals, and those in most cases only still exist because someone has found a way to make money off of them (taxes).

 

Still, the worst thing about all the little managers “leading” us into the future is undoubtedly that little managers have no vision for that future. That’s why you hear “re-open”, re-this and re-that so much. But there is no “re-“, there is no going back to “normal”. And when you look at where we were pre-corona, you’d be mad not to ask why on earth we would want to go back there.

Shouldn’t we perhaps at least learn something from this virustime episode? Of course we should. But our “leaders” lack the ideas and vision to learn anything. They don’t go forward into the future, they go backward, fat asses first. They owe their jobs and their power to the past, after all.

And their only “science advisers”, the virologists and epidemiologists, also only look backwards, since their knowledge comes from past events, and they can only model the next “viral event” according to guesses, hunches, and a series of old algorithms. Some can construct a full genome of a virus within days or weeks, but still have no idea what it does.

We have the wrong people in charge at every step of the way. Because we have no idea what risk assessment is. Still, we’re all smart enough to understand that politicians and epidemiologists are the last people we would want to do that. And yes, that brings us straight back to The Only Man Who Has A Clue. When you don’t know what you’re up against, you don’t just try and guess and pray for a good outcome, you go back to basics: masks, testing, distance.

Lockdowns can’t last forever, people are social animals. Also, lockdowns don’t solve the problem, that’s not their goal; they merely buy you time. Would you say we have used that time wisely? Would you say it’s safe now to put less distance between people, who are for all intents and purposes potential hosts for a lethal virus?

I see a lot of claims that we know much more about the virus now, 4-6 weeks later, but I also see tons of contradictory reports, and I can only conclude we still know very little. Indeed, even many things we thought we knew turn out not to be true. And those happen to be the kinds of things that are essential if you want to assess risk.

Politicians and epidemiologists could only possibly have done one thing right -and they largely did- in this process: the lockdown. They understand what it is, and they have the tools to sell and enforce it. But that’s it. They don’t understand the risks involved in relaxing the lockdowns. It’s not just the pressure on them to “normalize” their societies, it’s that they don’t understand risk, period -but think and claim they do-.

That in itself is likely the biggest risk we face.

 

 

And I kid you not, I was setting out to write about finance and bailouts and stuff, and thought a little intro might be helpful, and it got a bit out of hand. Finance and bailouts “and stuff”, coming up, hopefully tomorrow. Got so much to say about that too. Sometimes it’s nice to just read news and opinions for a number of days without writing about it, but for me there’s always a lot of “what are these people thinking?”.

There are all these claims about elites and politicians and their grand schemes and plans and intentions, but so far I always veer back, along with Fat Tony, to the vastly underestimated achievements of sheer incompetence. But by all means, prove me wrong.

 

 

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Mar 272020
 


Rembrandt van Rijn Portrait of his father 1628-29

 

I was following the numbers all afternoon, because I knew this was going to be the day that the US would become the no. 1. The no. 1 loser, that is. Here’s some of what I wrote in the Automatic Earth Comments section as we went along:

500,000 global cases was at noon EDT. 3.5 hours later there were another 20,000. [..] At 12.38 pm the US was 6,300 cases behind China. That is now 1,200.

God’s Own Country will take the definite no. 1 position sometime this afternoon, and then run away with it. The US has many fewer fatalities so far, but there, too, it will come out on top.

All this is why America pronounced Nicolas Maduro a drug trafficker and narco-terrorist today.

The US took the topspot at about 3pm. That done and achieved, I realize I’ve been so busy lately documenting the spread of the coronavirus and -some of- its consequences that the next steps in the demise, though clearly visible, risk going unnoticed.

But then I saw that the US is charging Venezuelan President Nicolas Maduro with drug trafficking (narco-terrorism?!), and I was wide awake again. Why does the US, on the verge of becoming the worst hit “corona country”, charge him now, of all possible times, when they could have done it any given day for the past 7 years? Well, exactly because of the corona threat.

And I don’t think this is Trump; he may take a political hit, but he only has to do better than Joe Biden, and anybody could do that. This smells much more like some deep state thing, Mike Pompeo and his crew.

 

In their phone alerts, CNN had a few real howlers as the day went by.

“Health officials say the peak is yet to come”

“Stocks see third day of gains”

Meanwhile, it took them hours to clue into the fact that the US had become the no. 1. But it’s that second point that warrants scrutiny. In the expectation and the “fulfillment” of the $6 trillion “stimulus” package, stocks managed to rise. Yay! But that no. 1 position won’t leave any of that standing. No sirree.

The US is no longer capable of formulating and negotiating adequate legislation even in times of real crisis. And it’s not that it’s GOP against Dems, and one would do everything so much better than the other. It’s one set of special interests against another, and in the end both win. And there is no escape left from that.

I said earlier about the stimulus that such a package in the US today is possible only provided that the rich get 1000 times what the poor get. That’s the only way to get those $1,500 checks to people who actually need them. For every such check a million bucks goes to the rich and powerful.

And if only they were also 1000 times more likely to catch the coronavirus, at least we would have a sense of justice. But no such luck.

 

What the stimulus will really end up doing is it will expose the Fed. You can talk about unlimited QE all you want, but talk enough and it will lose all meaning. I’ve long said that there are no markets left because there is no price discovery, and lately I’ve seen many people saying exactly that, just much later.

The stimulus really only serves to take even more price discovery away, if that was still possible. And that’s it. The rich will be handed hundreds of billions with nowhere to go. The losses in the stock “markets” lately have been staggering, trillions were lost. But then you look at a graph and you think holy sh*t, there’s so much more to go, so much more downside before we get to anything resembling normal. This was two weeks ago:

 

 

Markets as they -used to- exist under capitalism can be an awesome instrument, because there is such a multitude of participants. However, when you start trying to control the “markets” because sometimes they fall a little and you don’t like that, you unleash formidable forces that are also part of that instrument. Like so many natural phenomena, they will tend towards a balance, and you can’t stop that. Not for long.

The process that looks like it may end soon started under Alan Greenspan and the housing bubbles he blew, and the seeds of the demise were sown right then and there. Now that $6 trillion has been thrown at the wall that won’t stick, what is next?

The Fed policies (and I include most other central banks under that moniker) worked for a while because the QE’s and the ultra low rates supported banks and other enterprises that were essentially zombies. They also “zombified” many other companies that might have been able to survive without them. Look at Boeing.

Look at Apple. They look like a great company but what are their shares worth? Nobody knows, because they bought back too many of them to make price discovery viable. So at least part of Apple looks great only because of trickery, not because of great products. Steve Jobs is turning in his grave as we speak.

 

And now the zombies may be killed off by a virus. Just not if the Fed can help it. But if America runs away with that top spot hard enough, if tens of thousands of new cases become a daily occurrence (we’re at 17,000 so far today), and the first ten thousand fatalities are counted, the country will be locked down and the “markets” will fall off a cliff.

Unless, and that what I’m starting to fear may happen, the powers that be see no other choice than to close the “markets”. That will mean the entire financial system is on the brink of collapse. It would be announced as temporary, but the damage would be done. Everything would turn into one giant margin call, banks would be forced to close, the works, a real depression.

Let’s hope that none of this happens, but the signs are not favorable. America appears much less prepared for a pandemic than even Lombardy was, with too little or too late of everything, ventilators, masks, protective clothing, medicine, you name it. You can’t run an economy in a setting like that.

But at least you’ll be rid of the zombies. It’s a shame, really, that there is no virus that kills only zombies, that so much else must be destroyed with them. The thing is, we did have these instruments to kill zombies, they were called central banks. Should have used them when we had the chance.

 

Our readership is up a lot, but ad revenue only keeps dropping. I’ve said it before, it must be possible to run a joint like the Automatic Earth on people’s kind donations. These are no longer the times when ads pay for all you read, your donations have become an integral part of it. It has become a two-way street; and isn’t that liberating, when you think about it?

You heard it here first, like so many other things. And no, though it would be far more lucrative financially, the Automatic Earth will not adopt any paywalls, not here and not on Patreon. But you can still support us there, as well as right here. It’s easy. Thanks everyone for your donations overnight.

 

 

 

 

 

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Mar 232020
 


Rembrandt van Rijn Man in Oriental Costume (The Noble Slav) 1632

 

It’s been two weeks since I last wrote an original article. That’s a long time. Then again, that article was The Virus is a Time Machine, which was – and still is, pardon the pun, deadly accurate. All my time between then and now has gone into the daily Debt Rattles, which have increasingly become almost exclusively Virus Rattles. A lot of it has been numbers, not because of the numbers themselves, but because they are what reveal the trends, the trajectory, the dynamics to us.

When I first saw in the numbers a few days ago that US cases and deaths were both up some 45% over 24 hours, that frightened me. Because it told me a story. Without the numbers, that story is not there. That is also why I think it’s absolutely no use to look at these numbers and compare them to other ones, like those of regular flu, or traffic deaths, or whatever people come up with.

The coronavirus is new, it’s very young, even in virus time. You can’t compare it to other viruses. I have this image in my mind of Arnold Schwarzenegger peering into Jesus’s manger and saying: “what’s the problem, I can take that guy”. Don Ciccio had a better idea when he chased down 9-year-old Vito Andolini at the start of Godfather II: “when he grows up, he’ll come after me”.

 

The people responsible for the corona crisis getting so out of hand where you live are your “leaders”, the same ones who are now telling you to stay home 24/7 in order to solve the crisis they caused, not you. I’m not saying that to start a revolt, because now they’re the only people standing between you and anarchy, but please stop praising them. I see so many instances of people saying their leaders looked so reassuring on TV last night etc. I get that, I get why, but they are all abject failures.

If you’re in charge of a country’s government, you have at your disposal a State Department or some equivalent, you have dozens of people following world news in depth, and you have direct access to whatever the WHO says. Put all that together and you have no excuse for sitting on your hands 2+ months only to see the situation having gone way out of hand. And it makes no difference if all your peers have been as negligent as you are, it’s your job.

Last week the Hong Kong Free Press ran an article saying that China could have cut 95% of cases if its measures to contain the outbreak had begun three weeks earlier. The same is true where you live. China screwed up royally, and so did and do your respective “leaders”.

 

 

In a way, it’s good to see that more people and more news outlets have now woken up to what’s going on, and then some lately, but it’s also weird to see so many “sources” act as if they own the topic, and invented it, who never knew what it was until like ten days ago, while the Automatic Earth have been on top of it for over 2 months. Which is why, inevitably, they, the overnight experts, get most of it wrong. Just like the governments and politicians who have all of a sudden awakened from their slumber, and are now ordering people to do whatever their “leaders” think of next.

The problem with that, with relying on coming up with things without having a solid background like the Automatic Earth could have provided them with, is the same problem that caused them, both media and political systems, to be so awfully late in the first place. I first covered that in The Party and the Virus a full 7 weeks ago.

That was back when it appeared to be all about China, but it’s just as applicable in the west. The way we select our politicians, and our media, doesn’t allow for them to risk crying wolf. They will always wait to see what their peers do, who therefore also wait. Safety first for them, but -well, obviously- not for you.

That’s what we’re looking at today. The age-old excuse of “nobody knew, and nobody could have known”, just look at my peers, look at all other PM’s and presidents and governments. There is no behavior more typical for modern day politicians, whether they’re Chinese party officials or western cabinet ministers. But it’s all BS; they could have known, and therefore should have, because it’s their job. But they were fast asleep.

Trump and Boris Johnson may be taking the denial phase to a whole new level, and Bolsonaro too, but they really only fit a pattern. And ironically even they see their popularity rise, because people are scared and seek security and solace and protection, no matter how poorly dressed up.

Saying that Donald and Boris are terrible, no matter how justified, only serves to hide the failures of all other politicians, no matter how inclined you are to believe their messages. The simple fact is they are all terrible, they were all 12 weeks or more late in their (re-)actions.

Not that they should have ordered a billion dollars in respirators at the end of December, but when the first victims died in China, and the WHO was notified, they should have taken inventory of the state of their countries’ health systems, their response systems, the whole set-up. In order to be at the helm IF disaster struck.

They never did, or not till much later. That’s why medical supplies of all applicable shapes and forms are woefully short today in Italy, and will be soon in dozens of other countries. Please stop praising these people. They all failed horribly at their jobs. Their collective failure has already caused thousands of deaths, and that may well become millions.

 

 

The WHO is praised too, but it is just as guilty of deadly neglect as all the politicians. The organization and its directors get paid large sums of money to protect the world from events exactly like this. And they did not; they are not only useless, they are harmful.

On December 30 2019, several people, among whom Wuhan doctor Li Wenliang, who died of the disease mere days later, talked on social media like WeChat about the outbreak. On December 31, Li Wenliang was called in for questioning, Wuhan health officials confirmed 27 cases of the new illness -a “pneumonia of unclear cause”-, and China, which now figured denial was no longer an option,”officially” told the WHO about the outbreak.

On January 14, the WHO said Chinese authorities had seen “no clear evidence of human-to-human transmission of the novel coronavirus.” On January 15, the first confirmed US case left Wuhan and arrived in the US with the virus. On January 20, 6 days after the WHO statement, top Chinese doctor Zhong Nanshan announced the virus CAN be passed between people. He would later state that the outbreak would be over by early February.

On January 21 the CDC confirmed the first coronavirus case in the United States. Then came Lunar New Year and 100s of millions of Chinese traveled to their families. By then the WHO should obviously long have sounded a big fat five alarm. They didn’t.

Instead, WHO director general Tedros Adhanom Ghebreyesus repeatedly heaped praise on China. He did this on January 28, then again on February 12, (when China still refused to let a WHO team enter the country):

On January 28, Tedros met with Chinese President Xi Jinping in Beijing. Following the meeting, Tedros commended China for “setting a new standard for outbreak control” and praised the country’s top leadership for its “openness to sharing information” with the WHO and other countries.

… and many times after. On January 23, the WHO’s emergency committee couldn’t decide whether to declare a “public health emergency of international concern” (PHEIC). Tedros, who held the decisive vote, despite admitting that “this is an emergency in China.”, declined. A week later, he did declare a PHEIC. What’s much worse, along those same lines, the WHO declared a pandemic only on March 11.

 

 

Meanwhile, the US is well on its way to become the worst hit country of all. Someday we (if we survive) will look at those spring break kids on Florida’s beaches and wonder how crazy people can get. Two weeks ago when I wrote The Virus is a Time Machine, the US reported 409 cases. As we speak the tally stands at 40,841, and it will rise further before the day is done.

Please be good and safe. Follow the instructions about safe distance and stuff. In Britain, stay 2 meters away from people, in Holland, 1.5 meters. Must be the air density. But just do what they say for now. It’ll get more bizarre later, plenty time to resist and protest.

Follow those “directions” for now, but whatever you do, please never ever praise the very people who dropped the ball so humongously to cause so much suffering, only to take unprecedented control over your lives, and telling you it’s for your own good.

It’s not that they planned this all, there are too many conspiracy notions out there about that too. People have through history hugely underestimated the power of incompetence, and history rhymes so much it hurts.

Get through this thing, it won’t last forever, people will force an end to lockdowns before the summer’s over, simply because people are social animals; can’t keep us apart.

Next up: the same clowns in charge of “fixing” the economy broken by the negligence and the incompetence of, yes, the same clowns. Better start preparing right now. If you think this virus thing is bad, wait till you see what they have on offer next.

 

 

Much as I don’t want to, I must ask for your support. Readership is up a lot, but ad revenue only keeps dropping. I’ve said it before, it must be possible to run a joint like the Automatic Earth on people’s kind donations. These are no longer the times when ads pay for all you read, your donations have become an integral part of it. It has become a two-way street; and isn’t that liberating, when you think about it?

You heard it here first, like so many other things. And no, though it would be far more lucrative financially, the Automatic Earth will not adopt any paywalls, not here and not on Patreon. But you can still support us there, as well as right here. It’s easy.

 

 

 

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Mar 012020
 


John Waterhouse Diogenes 1882

 

 

This is a new essay from Alexander Aston. He describes how once the world has passed through the -narrow- bottleneck of the coronavirus and its effects on our societies, which are long overdue for a redo, and on the central bank-engineered distortions of the markets that are -make that were- supposed to be the foundation that allowed us to flourish, there will be a better world waiting.

I’m all for it, and I have no rational issues with it either, but when I read“..these are the moments at which humans are the most creative and most inspiring”, my warped mind can’t NOT think: ..yes, we’re moving towards a better world, and we’re terribly sorry that you didn’t make the cut..”

Here’s Alexander:

 

 

Dear Raúl, I hope you are well. Things are all right on my side. Submitted my thesis, am being examined by the heads of Archaeology for both Cambridge and Oxford, which is a huge, albeit intimidating complement. Otherwise, just watching the world come unglued, so I wrote you something to put up if you like it. All the best – Alex

 

 

“A mighty space it was, with gigantic machines here and there within it, huge mounds of material and strange shelter places.


And scattered about it, some in their overturned warmachines, some in the now rigid handling-machines, and a dozen of them stark and silent and laid in a row, were the Martians—dead!—slain by the putrefactive and disease bacteria against which their systems were unprepared; slain as the red weed was being slain; slain, after all man’s devices had failed, by the humblest things that God, in His wisdom, has put upon this earth.”

– HG Wells

 

 

It took until the first two months of 2020 for the long Twentieth Century to finally come to an end. One thing now seems absolutely clear, this will be the decade that the majority finally come to understand that things are never going back to “normal.” To be sure, the complex entanglements of institutions, narratives, cultural practices, and economic relationships that emerged during the previous century have been under immense strain these past two decades. Enormous effort has been expended to maintain the inertia of the global system, from the immense violence of imperial politics and regime change wars, to the more subtle violence of economic dispossession by a privileged elite that control the mechanisms of power.

A few years of relative, but diminishing stability were bought at great expense. Authoritarianism, rentier feudalism, political corruption, regional instability, distrust, anger, and disbelief have wormed their way into every facet of our global society. The cost of refusing to adapt, for the benefit of a very select few, is immense systemic fragility. It is fitting that the hubris, intransigence and bankruptcy of imagination in our modern political economy shall finally be brought low by a microscopic organism.

Some will read this and misunderstand me and believe that I am being apocalyptic about the physical illness brought about by the coronavirus. The virus is serious, and will have dramatic consequences, but it is no black death. The virus is a catalyst, something beyond our agency to control which is triggering cascading changes in a system that has been rotting for some time. As an archaeologist, if I found evidence of intensive and intersecting energetic, ecological and economic disruptions in society, what I would expect to find at the end of those stratigraphic layers is a new cultural phase.

 

That is, I would expect a very different kind of society and culture, albeit causally linked, from that which preceded it. Another way to frame this is that periods of systemic collapse and reorganisation generate new forms of social psychology, new narratives, beliefs and practices. A new epoch is here, and we will all quickly learn that we are very different kinds of people than we thought we were. Soon, things will start looking radically different from what we have known to be the order of things. States, institutions, practices and beliefs that once seemed permanent fixtures of our world will be swept away.

This may seem extreme, the momentum of history has not fully tipped us over the edge yet, which allows psychological space for defaulting to normalcy bias. The problem is that causality is not linear, and it does not operate at singular scales. What we are experiencing has been building for decades, but the synergy of these causal processes, their true emergent effects are about to become fully apparent. The virus is a spark, not the cause, and it is breaking down the last reinforcing bonds holding the global system together. If the ruling class had not been debasing our societies and parasitizing their citizenries for decades, our social resiliency to this pandemic would be much higher. High energy production costs, low demand, and low consumption have been masked by systemic financial fraud.

Instead of innovation, we have spent decades investing in a Potemkin economy. We are about to find out that, despite all our mathematical abstractions and sorcery, the hardcore material basis of our economies rules supreme. Simply put, one cannot shut down countries like China for months on end without powerful material ramifications. Supply chains are going to be severely disrupted, and this is going to implode the illusion of the financialised economy along with our disastrously entwined energy systems. People are going to have difficulty accessing everything from car parts to asthma inhalers, and this is going to shake their fundamental understanding of how the world works. People will be scared, they will be angry, and their final vestiges of faith in the system will begin to collapse.

 

The problem goes deeper than mere economic implosion, it goes to basic principles of trust and belief. Human history is a story of an incredible capacity to self-organise and work collectively. However, this requires collective attention upon shared forms of value, narratives and cultural practices that raise levels of trust necessary for stable social relationships to be organised. Faith in the promise of our societies has been severely eroded on all sides these past few years. People still believe in their societies, but just barely, and usually based on the misapprehension that either they can undo the damage or that their chosen leaders will solve all the problems.

Our narratives have been fundamentally shaken and fractured, but soon they will start collapsing and it is going to be very difficult to rebuild trust once they finally give. Our collective faith in the system will break down completely with the loss of the shared forms of value through which we incorporate ourselves into our social relationships and ensure our well-being; those things that glue our collective narratives together. This is when we will be most vulnerable to social violence, because we won’t know whom to trust, and we will be desperate to survive the upheaval. This is also when radically new forms of organisation will begin to emerge, as people build coalitions and communities to meet new challenges. These relationships will become the bedrock for new cultural relationships.

It is hard to tell exactly what happens, but there are a few predictions that are within reason. Prolonged quarantines could result in cascading defaults from the bottom up while severe supply chain disruptions have the ability to trigger institutional defaults. Likewise, the slowdown in air travel could potentially send Boeing into a complete tailspin. Regardless, we are liable to see massive deflationary pressures in everything other than essential goods. What’s more, the virus will probably devastate countries weakened by imperialist intervention and sanctioning. Places such as Syria and Yemen are very likely to see truly horrific outbreaks due to their obliterated social infrastructure.

 

The virus could also potentially collapse the weakened Iranian state. Ironically, the zero-sum logics of Empire have created conditions through which the pandemic can entrench and project itself. This raises another horrifying possibility, that certain sociopaths will use the synergetic fears of refugees and contagion as political weapons. This will only lead to atrocities against the most vulnerable. Furthermore, the fact that the Coronavirus has established itself in Italy, the most fragile of Europe’s major economies, is a harsh twist of fate. The shutdown of the country is likely to lead to major financial contagion in the Eurozone and place pressures upon core principals such as freedom of movement. Either the European Union will break apart in this process or it will transform into something very different than it has been.

Another likely outcome is that the American health profiteering system will finally be shown for the utter social failure that it is. The infection is liable to spread in a country where people refuse treatment because they are afraid of bankruptcy. Finally, if the virus is not contained, it could very well affect the U.S. elections. The loss of political legitimacy could make the country ungovernable given the social antagonisms surrounding the candidates. At the end of the day, our cultural logics have fetishized competition and treated our societies as zero-sum games designed to provide luxury communism for billionaires and debt slavery for the rest of us. It is not surprising that it is greed, selfishness and entitlement that are undoing our societies, we have failed the prisoners dilemma and now we are being sentenced.

We live in a moment of radical historical change, but do not despair. Things will be difficult, but these are the moments at which humans are the most creative and most inspiring. We will see hard, sometimes brutal things, but we are also going to see new kinds of beauty brought into this world. We must hold on to that, we must hold on to a sense of vision and endeavour, that something better is still possible. More than anything, take care of each other. The future belongs to those who know how to cooperate best, how to share effectively, how to generate new forms of value, new narratives, new communities. We are at the end of the beginning and much will depend on our choices, our courage and our compassion in the coming years. I wish all of you luck and solidarity as we become Twenty-First Century people.

 

 

I know about Persia and Xenophon,
Egypt and the Sudan,
But I prefer to be caressed
By fresh mountain air.

I know the age old history
Of human grudges,
But I prefer the bees that fly
Among the bellflowers.

I know the songs that breezes sing
In the chattering branches;
Don’t tell me that I lie –
I do prefer them.

I know about the frightened buck
Returned to its pen, expiring;
I know that weary hearts die darkly
But free from anger.

– José Martí

 

 

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Feb 202020
 


Saul Leiter Man with flowers, NY 1950s

 

A few days ago, I was thinking of writing another corona article, focusing on two things: 1) the ease and speed with which the virus spreads -because I think that is hugely underestimated-, and 2) testing. But then the situation with the two cruise ships started going berserk.

I had intended to use the Diamond Princess as a case for the ease and speed of infection, but it became clear quite rapidly that you can’t use the ship to prove any case, other than that people are completely nuts. But we already knew that. And while Dostoyevsky wrote some great books on the topic, it’s not a great framework for a piece on a virus. Unless perhaps if it infects the brain.

Not that I don’t think the ship is still a good example to make the point, but too much plain bonkers stuff has been going on with and around it. The quarantine, the evacuations, the infection numbers, you name it. I’ll get to the testing later, that was/is a whole other chapter.

A problem, if you’re me, with letting an essay simmer for a bit, is that ever more sources start accumulating, until there’s too many to either comprehend or use in an effective way. First thing to do is not to wait another day. Let’s start with 1) The ease and speed with which the virus spreads, aka transmissibility,, and see where we land.

 

1) The ease and speed with which the virus spreads

People continue to have this idea that COVID19 isn’t all that bad, yada yada, an “analysis” crowned by the comparisons to seasonal flu. Which make no more sense then to compare it to bovine flatulence. Stop it.

The way and extent the virus was spreading aboard the Diamond Princess became clear before the evacuation efforts. The US government, and others, were watching it happen, and pulled the plug. What the Japanese were doing and thinking is less clear. It’s sort of fun to see Washington refrain from calling Tokyo on it, best allies and all, but it makes you think at the same time.

So if using the Diamond Princess is not a good example, we need to look elsewhere. This Feb 16 Zero Hedge graph of infections outside China might be a good start. Whether it represents an exponential or a quadratic function is sort of an inside joke by now, but it’s clear enough in either case.

 

 

Even more obvious perhaps is this from the South China Morning Post (SCMP):

Coronavirus Up To 20 Times More Likely Than Sars To Bind To Human Cells

The deadly new coronavirus is up to 20 times more likely to bind to human cell receptors and cause infection than severe acute respiratory syndrome (Sars), a new study by researchers at the University of Texas at Austin has found. The novel coronavirus and Sars share the same functional host-cell receptor, called angiotensin-converting enzyme 2 (ACE2).

The report, published on the website bioRxiv on Saturday, said the new coronavirus had around 10 to 20-fold higher affinity – the degree to which a substance tends to combine with another – for human ACE2 compared with Sars. But the researchers added that further studies were needed to explore the human host-cell receptor’s role in helping the new virus to spread from person to person.

“Compared with SARS-CoV, 2019-nCoV appears to be more readily transmitted from human to human,” the report of the study said. “The high affinity of 2019-nCoV S for human ACE2 may contribute to the apparent ease with which 2019-nCoV can spread from human to human.”

The ACE2 receptor has already been reported as being much more prevalent among Asian people, but please don’t presume the buck stops there. Non-Asians have them as well, and we’re not even sure what role they play, or if fewer of them would protect you from being infected. Allegedly, smokers have more ACE2 enzymes as well. As do older people.

Another transmissibility example is the death of an entire family in Wuhan:

Virus Kills Chinese Film Director and Family in Wuhan

A Chinese film director and his entire family have died from the novel coronavirus in Wuhan, the epicenter of the outbreak. Chang Kai, a film director and an external communications officer at a Hubei Film Studio subsidiary, died in hospital on Feb. 14 from the virus now called COVID-19, according to a statement from the studio. He was 55.


But Chang’s death was not the first in his family—the Chinese media reported that Chang’s father and mother were infected and died one after the other. Chang and his sister, who looked after their parents at home, were both infected with the virus as a result. His sister died just hours later. Chang’s wife is also infected, still alive, and is still battling the virus in an intensive care unit.

But everything above loses most of its meaning compared to the following, also from the South China Morning Post. You might want to sit down for this one.

Until now, ‘accepted knowledge” is that the first death from COVID19 was registered on January 9 2020, a 61-year old man in Wuhan. And that the incubation time for the virus was maximum 14 days – hence the 2-week quarantines everywhere. No more.

The government of Xinxian county, in the city of Xinyang, on Sunday reported that one of its new cases had been confirmed 34 days after the patient returned from a mid-January visit to Wuhan.

He had been sent to hospital with suspected symptoms on January 28, but twice tested negative before testing positive on February 16. A further two people who attended family gatherings with the man in Xinxian were reported as infected, while three were suspected cases or under hospital quarantine.

The county government announced it would extend the home quarantine period from 14 to 21 days for residents who had been to Hubei or had contact with people who had been there.

It also reported a case that was confirmed 94 days after the patient’s contact with a relative from Hubei. The patient had taken care of his father-in-law, who arrived from Wuhan on November 13 and died days later.

The son-in-law continued to stay in the father-in-law’s house until January 31. However, the government statement said the origin of the son-in-law’s infection had yet to be identified. Zhuhai, in the southern Guangdong province, last week reported two cases with incubation periods longer than 14 days. Similar cases have also been reported in Anhui and Shandong provinces.

This potentially pushes back the first known case to November 13 2019 and the first known death to November 13 and change. “Died days later”. Shall we say 4-5 days? That means the first fatality was November 17-18. While incubation time may have been pushed forward to 94 days.

 

 

 

 

2) Testing

The most important term coming out of the coronavirus news, going forward, will be “false negative”. Closely followed by “asymptomatic”. There are tons of stories about people testing negative 2-3-4- times before testing positive. And also tons of stories about people with no symptoms infecting others. It’s all about the things you don’t see.

The Chinese had it about as wrong as can be early on, and knee-jerked into the Party deny and hide mode. They have it right now, though: the only way to keep the virus from spreading is to limit contact between people, even if that may seem to reach extreme proportions. If there is no vaccine, there is no other way. But if it’s just the Chinese that do isolation, that solves nothing.

When I first read that the passengers of the Holland-America Line cruise ship Westerdam had been allowed to leave the ship when it landed in Cambodia a week ago after, I think, 9 days of floating around aimlessly, I thought this was a “Go Forth and Multiply” message for the virus. Second thought was: who’s in charge here? Still wondering about that one.

The Westerdam had 2,257 people on board, 1,455 passengers and 802 crew. They were not allowed to dock anywhere after a man who had gone off board in Hong Kong tested positive. As we speak, some 255 passengers and 747 crew members are still being held on the ship while further testing was conducted. That means 1,200 passengers and 55 crew have left the ship. Cambodia let lots of them fly to Malaysia, and they flew all over from there.

And only then did they discover an 83-year old American woman who had already flown to Malaysia had tested positive. The ship had a lot of Americans (400?) , Canadians and Dutch people on board. Where did they go? Mostly home, of course. And now all those countries are scrambling to locate these people. Even if they do, who have they infected in the meantime? They’ve been in close proximity to others, like on planes.

And, again, who’s in charge? Did the Holland-America people, and the Cambodian government, keep in constant touch with the WHO and the Chinese? Would it have made any difference if they did? Or is it as bad as it seems, a Wild East sort of set-up with everyone fending for themselves?

What are the odds that someone in the Cambodian government now has a new offshore bank account with $10 million in it, in a deal made before the 83-year old American woman tested positive, in exchange for letting the ship dock and making sure the passengers would leave ASAP?

 

Hard as it may seem to imagine, the Diamond Princess may be, and have been, even more of a mess than the Westerdam. Someone said: “it was a mess on board, and the mess is now moving off board”. And now we have the first 2 fatalities from the ship.

Diamond Princess: everyone confined to their cabins, little interaction, but still in the past week numbers of new infections have exploded, with many dozens of new cases every day. So now we have a total of what, 500-600 new infections ever since the US said: enough!

Why were they, why were larger numbers, not discovered earlier? Well… There were 3,711 people on board. 5-6 days ago, 10-12 days after the first positive test, 1,219 had been tested. Which means that after 10+ days of quarantine, less than a third had actually been tested. As of Monday, 2,404 passengers and crew, out of the 3,711, had been tested. That still left 1,300. Many of whom are now gone.

The remaining 61 American passengers on the Diamond Princess who opted not to join the evacuation will not be allowed to return to the US until March 4, according to the American embassy in Tokyo.

Undoubtedly some logic behind the lack of testing until recently will be offered by Tokyo, but you must wonder how many of the 542 new cases of the last four days had been tested at all, and how long some of them had been infected, probably without showing any signs. For instance, the 14 cases on the flights to the US this week were all asymptomatic virus carriers. All of them, according to official channels.

And now we read that Japan has no intentions of quarantining its citizens who were on board the Diamond Princess:

Earlier in the week, the United States evacuated more than 300 nationals on two chartered flights. A State Department official said there were still about 45 US citizens on board the cruise ship as of Thursday. Americans flown back will have to complete another 14 days quarantine, as will returning Hong Kong residents. Disembarked Japanese passengers, however, face no such restrictions, a decision that has sparked concern.

One more thing, then I’ll stop. Zero Hedge a few days ago quoted a Taiwan Times article saying people can be infected multiple times. And be worse off for it. A first infection leaves your immune system ravaged, and combined with the damage caused by the medication taken, can make you helpless against a second attack.

Chinese Doctors Say Wuhan Coronavirus Reinfection Even Deadlier

Doctors working on the front lines of the novel coronavirus (COVID-19) outbreak have told the Taiwan Times that it’s possible to become reinfected by the virus, leading to death from sudden heart failure in some cases. “It’s highly possible to get infected a second time. A few people recovered from the first time by their own immune system, but the meds they use are damaging their heart tissue, and when they get it the second time, the antibody doesn’t help but makes it worse, and they die a sudden death from heart failure.. ”


“The source also said the virus has “outsmarted all of us..” [..] “It can fool the test kit – there were cases that they found, the CT scan shows both lungs are fully infected but the test came back negative four times. The fifth test came back positive.” -Taiwan Times

We will now start to see the economic effects (you haven’t seen anything yet in that regard). More on that later. Rule of thumb: companies have 1-2 weeks of supplies in stock. Just-in-Time. Then they need more delivered. But the Chinese economy is on its last legs. Please don’t think it’s about Apple or some other major company. This is about a million smaller companies and (chain) stores in the west. What was it, 80% of US drugs come from China? Or was that just antibiotics?

There are ways to minimize the damage a virus can do. Mankind as a whole, in the places where the proverbial chain literally is as strong as the weakest link, has not minimized it. Instead it has told the virus: “Go Forth and Multiply”. Prepare accordingly. If we’re lucky, this will die down and pass. But that’s the problem: it’ll happen only if we’re lucky, not because we’ve done all we know we could.