Lewis Mumford on the Medieval City

One of my favorite passages from The Culture of Cities (pp. 49-51):

In the main, then, the medieval town was not merely a vital social environment: it was likewise adequate, at least to a greater degree than one would gather from its decayed remains, on the biological side. There were smoky rooms to endure; but there was also perfume in the garden behind the burgher’s house: the fragrant flowers and the savory herbs were widely cultivated. There was the smell of the barnyard in the street, diminishing in the sixteenth century, except for the growing presence of horses: but there would also be the odor of flowering orchards in the spring, or the scent of the new mown hay, floating across the fields in the early summer.

Though cockneys my wrinkle their noses at this combination of odors, no lover of the country will be put off by the smell of horse-dung or cow-dung, even though mingled occasionally with that of human excrement: is the reek of gasoline exhaust, the sour smell of a subway crowd, the pervasive odor of a garbage dump, or the chlorinated rankness of a public lavatory more gratifying? Even in the matter of smells, sweetness is not entirely on the side of the modern city.

As for the eye and ear, there is no doubt where the balance of advantage goes: the majority of medieval towns were infinitely superior to those erected during the last century. One awoke in the medieval town to the crowing of the cock, the chirping of the birds nesting under the eaves, or to the tolling of the hours in the monastery on the outskirts, perhaps to the chime of bells in the new bell-tower. Song rose easily on the lips, from the plain chant of the monks to the refrains of the ballad singer in the market place, or that of the apprentice and the house-maid at work. As late as the seventeenth century, the ability to hold a part in a domestic choral song was rated by Pepys as an indispensable quality in a new maid.

There were work songs distinct for each craft, often composed to the rhythmic tapping or hammering of the craftsman himself. Fitz-Stephens reported in the twelfth century that the sound of the water mill was a pleasant one among the green fields of London. At night there would be complete silence, but for the stirring of animals and the calling of hours by the town watch. Deep sleep was possible in the medieval town, untainted by either human or mechanical noises.

If the ear was stirred, the eye was even more deeply delighted. The craftsman who had walked through the fields and woods on holiday, came back to his stone-carving or his wood-working with a rich harvest of impressions to be transferred to his work. The buildings, so far from being “quaint,” were as bright and clean as a medieval illumination, often covered with whitewash, so that all the colors of the image makers in paint or glass or polychromed wood would dance on the walls, even as the shadows quivered like sprays of lilac on the facades of the more richly carved buildings. (Patina and picturesqueness were the results of time’s oxidation: not original attributes of the architecture.)

Common men thought and felt in images, far more than in the verbal abstractions used by scholars: esthetic discipline might lack a name, but its fruit were everywhere visible. Did the citizens of Florence vote as to the type of column that was to be used on the Cathedral? Image makers carved statues, painted triptychs, decorated the walls of the cathedral, the guild hall, the town hall, the burgher’s house: color and design were everywhere the normal accomplishment of the practical daily tasks.

There was visual excitement in the array of goods in the open market: velvets and brocades, copper and shining steel, tooled leather and brilliant glass, to say nothing of foods arranged in their panniers under the open sky. Wander around the survivals of these medieval markets today. Whether they be as drab as the Jews’ Market in Whitechapel, or as spacious as that on the Plain Palais at Geneva, they will still have some of the excitement of their medieval prototypes.

 

The History of Pandemics


With the global disruption of COVID-19, there have been a number of stories in news outlets documenting the history of past pandemics in an effort to make sense of it all. One name that has come up frequently is Walter Scheidel. The Stanford University historian wrote a book some years ago which acquired a great deal of attention called “The Great Leveler.” In it, he contended that only catastrophes reduced wealth and income inequality, without which it would grow without bound. One recurring leveler was plagues and pandemics (along with war, famine, collapse and political revolution).

I reviewed that book in a series of three posts:

The Great Leveler Review (Part One)

The Great Leveler Review (Part Two)

The Great Leveler Review (Part Three)

I’ve gone back and cleaned up the typos (the ones I found, anyway). I think these posts are actually quite good (and I’m a terrible critic of myself), so they’re most likely worth a reread (if I do say so myself).

Here’s Scheidel himself writing in The New York Times summarizing the leveling effect he found during pandemics:

…as successive waves of plague shrank the work force, hired hands and tenants “took no notice of the king’s command,” as the Augustinian clergyman Henry Knighton complained. “If anyone wanted to hire them he had to submit to their demands, for either his fruit and standing corn would be lost or he had to pander to the arrogance and greed of the workers.”

As a result of this shift in the balance between labor and capital, we now know…that real incomes of unskilled workers doubled across much of Europe within a few decades. According to tax records that have survived in the archives of many Italian towns, wealth inequality in most of these places plummeted.

In England, workers ate and drank better than they did before the plague and even wore fancy furs that used to be reserved for their betters. At the same time, higher wages and lower rents squeezed landlords, many of whom failed to hold on to their inherited privilege. Before long, there were fewer lords and knights, endowed with smaller fortunes, than there had been when the plague first struck…

In all of these cases, he notes, the elites pushed back. They weren’t content with their “lessers” having a greater share of the pie (which is, after all, why they were elites):

In late medieval Eastern Europe, from Prussia and Poland to Russia, nobles colluded to impose serfdom on their peasantries to lock down a depleted labor force. This altered the long-term economic outcomes for the entire region: Free labor and thriving cities drove modernization in Western Europe, but in the eastern periphery, development fell behind.

Farther south, the Mamluks of Egypt, a regime of foreign conquerors of Turkic origin, maintained a united front to keep their tight control over the land and continue exploiting the peasantry. The Mamluks forced the dwindling subject population to hand over the same rent payments, in cash and kind, as before the plague. This strategy sent the economy into a tailspin as farmers revolted or abandoned their fields.

The elite pushback often failed in the short-term:

…more often than not, repression failed. The first known plague pandemic in Europe and the Middle East, which started in 541, provides the earliest example. Anticipating the English Ordinance of Laborers by 800 years, the Byzantine emperor Justinian railed against scarce workers who “demand double and triple wages and salaries, in violation of ancient customs” and forbade them “to yield to the detestable passion of avarice” — to charge market wages for their labor. The doubling or tripling of real incomes reported on papyrus documents from the Byzantine province of Egypt leaves no doubt that his decree fell on deaf ears…

During the Great Rising of England’s peasants in 1381, workers demanded, among other things, the right to freely negotiate labor contracts. Nobles and their armed levies put down the revolt by force, in an attempt to coerce people to defer to the old order. But the last vestiges of feudal obligations soon faded. Workers could hold out for better wages, and landlords and employers broke ranks with one another to compete for scarce labor.

And yet, in the long-term, people ended up no better off than they had started:

None of these stories had a happy ending for the masses. When population numbers recovered after the plague of Justinian, the Black Death and the American pandemics, wages slid downward and elites were firmly back in control. Colonial Latin America went on to produce some of the most extreme inequalities on record. In most European societies, disparities in income and wealth rose for four centuries all the way up to the eve of World War I. It was only then that a new great wave of catastrophic upheavals undermined the established order, and economic inequality dropped to lows not witnessed since the Black Death, if not the fall of the Roman Empire.

Why the Wealthy Fear Pandemics (NYTimes)

Past pandemics redistributed income between the rich and poor, according to Stanford historian (Stanford News)

Black Death historian: ‘A coronavirus depression could be the great leveller’ (Guardian)

Can a pandemic remake society? A historian explains. (Vox)

Here are some other pages from history, in somewhat chronological order:

White and Mordechai focused their efforts on the city of Constantinople, capital of the Roman Empire, which had a comparatively well-described outbreak in 542 CE. Some primary sources claim plague killed up to 300,000 people in the city, which had a population of some 500,000 people at the time. Other sources suggest the plague killed half the empire’s population. Until recently, many scholars accepted this image of mass death. By comparing bubonic, pneumonic, and combined transmission routes, the authors showed that no single transmission route precisely mimicked the outbreak dynamics described in these primary sources.

New call to examine old narratives: Infectious disease modeling study casts doubt on the Justinianic Plague’s impact (Phys.org)

Heraclitus compared our lot to beasts, winos, deep sleepers and even children – as in, “Our opinions are like toys.” We are incapable of grasping the true logos. History, with rare exceptions, seems to have vindicated him.

There are two key Heraclitus mantras.

1) “All things come to pass according to conflict.” So the basis of everything is turmoil. Everything is in flux. Life is a battleground. (Sun Tzu would approve.)

2) “All things are one.” This means opposites attract. This is what Heraclitus found when he went tripping inside his soul – with no help of lysergic substances. No wonder he faced a Sisyphean task trying to explain this to us, mere children.

And that brings us to the river metaphor. Everything in nature depends on underlying change. Thus, for Heraclitus, “as they step into the same rivers, other and still other waters flow upon them.” So each river is composed of ever-changing waters.

‘It is disease that makes health sweet and good’ (Asia Times)

Despite the lack of healthcare and public health measures as we understand them – and we will never know how many plague victims died of neglect, hunger and thirst, or of secondary infections – the plague in medieval England, and Western Europe as a whole, was mediated by a system of research, intellectual authority and technical countermeasures.

But that system was religious, based on the Christian church’s management of the passage of souls from this earth to the next world. The forerunner of the modern emergency vehicle was the bell of the priest’s attendants, advising the dying that relief was at hand, in the form of an expert trained and qualified to take confession and administer the other sacraments that would ensure safe passage, if not to heaven, at least to purgatory.

The dividing line between rich and poor wasn’t so much access to drugs or the best doctors as to post-mortem religious services: the prayers, candles, masses and chantries that were meant to speed the dead to a better hereafter. The technical emergencies the authorities faced weren’t shortages of hospital beds and doctors but of candle wax and confessors. Priests were not immune to the plague.

‘Emergency’, or its Latin equivalent, was the word used by the bishop of Bath and Wells in January 1349, six months after the plague began in England, when he broadcast an urgent message to his flock via the surviving parish priests in his diocese. ‘We understand,’ he wrote, ‘that many people are dying without the sacrament of penance, because they do not know what they ought to do in such an emergency and believe that even in an emergency confession of their sins is no use or worth unless made to [an ordained] priest.’ What they had to do, he told them, was ‘make confession of their sins, according to the teaching of the apostle, to any lay person, even to a woman if a man is not available.’

In 1348 (London Review of Books)

It’s hard to keep a virulent disease down. The first and biggest burst of plague lasted from the late 1340s until about 1353. Just as the world started thinking things were getting back to normal, another wave hit in 1360. After that there were new waves every 10 years or so. Europe’s population didn’t get back to pre-plague levels for a century and a half.

We’ve come a long way since the Black Death (Asia Times)

Quarantining was invented during the first wave of bubonic plague in the 14th century, but it was deployed more systematically during the Great Plague. Public servants called searchers ferreted out new cases of plague, and quarantined sick people along with everyone who shared their homes. People called warders painted a red cross on the doors of quarantined homes, alongside a paper notice that read “LORD HAVE MERCY UPON US.” (Yes, the all-caps was mandatory).

The government supplied food to the housebound. After 40 days, warders painted over the red crosses with white crosses, ordering residents to sterilize their homes with lime. Doctors believed that the bubonic plague was caused by “smells” in the air, so cleaning was always recommended. They had no idea that it was also a good way to get rid of the ticks and fleas that actually spread the contagion.

Of course, not everyone was compliant. Legal documents at the U.K. National Archives show that in April 1665, Charles II ordered severe punishment for a group of people who took the cross and paper off their door “in a riotious manner,” so they could “goe abroad into the street promiscuously, with others.” It’s reminiscent of all those modern Americans who went to the beaches in Florida over spring break, despite what public health experts told them.

Just as some American politicians blame the Chinese for the coronavirus, there were 17th century Brits who blamed the Dutch for spreading the plague. Others blamed Londoners. Mr. Pepys had relocated his family to a country home in Woolwich, and writes in his diary that the locals “are afeard of London, being doubtfull of anything that comes from thence, or that hath lately been there … I was forced to say that I lived wholly at Woolwich.”

Annalee Newitz: What social distancing looked like in 1666 (Salt Lake Tribune)

In​ the cold autumn of 1629, the plague came to Italy. It arrived with the German mercenaries (and their fleas) who marched through the Piedmont countryside. The epidemic raged through the north, only slowing when it reached the natural barrier of the Apennines. On the other side of the mountains, Florence braced itself. The officials of the Sanità, the city’s health board, wrote anxiously to their colleagues in Milan, Verona, Venice, in the hope that studying the patterns of contagion would help them protect their city. Reports came from Parma that its ‘inhabitants are reduced to such a state that they are jealous of those who are dead’. The Sanità learned that, in Bologna, officials had forbidden people to discuss the peste, as if they feared you could summon death with a word.

Plague was thought to spread through corrupt air, on the breath of the sick or trapped in soft materials like cloth or wood, so in June 1630 the Sanità stopped the flow of commerce and implemented a cordon sanitaire across the mountain passes of the Apennines. But they soon discovered that the boundary was distressingly permeable. Peasants slipped past bored guards as they played cards. In the dog days of the summer, a chicken-seller fell ill and died in Trespiano, a village in the hills above Florence. The city teetered on the brink of calamity.

By August, Florentines were dying. The archbishop ordered the bells of all the churches in the city to be rung while men and women fell to their knees and prayed for divine intercession. In September, six hundred people were buried in pits outside the city walls. As panic mounted, rumours spread: about malicious ‘anointers’, swirling infection through holy water stoups, about a Sicilian doctor who poisoned his patients with rotten chickens. In October, the number of plague burials rose to more than a thousand. The Sanità opened lazaretti, quarantine centres for the sick and dying, commandeering dozens of monasteries and villas across the Florentine hills. In November, 2100 plague dead were buried. A general quarantine seemed the only answer. In January 1631, the Sanità ordered the majority of citizens to be locked in their homes for forty days under threat of fines and imprisonment.

In his Memoirs of the Plague in Florence, Giovanni Baldinucci described how melancholy it was ‘to see the streets and churches without anybody in them’. As the city fell quiet, ordinary forms of intimacy were forbidden. Two teenage sisters, Maria and Cammilla, took advantage of their mother’s absence in the plague hospital to dance with friends who lived in the same building. When they were discovered, their friends’ parents were taken to prison. At their trial, the mother, Margherita, blamed the two girls: ‘Oh traitors, what have you done?’ Another pair of sisters found relief from the boredom of quarantine by tormenting their brother. Arrested after one of the Sanità’s policemen saw them through an open door, one of them explained in court that ‘in order to pass the time we dressed our brother up in a mask, and we were dancing among ourselves, and while he was … dressed up like that, the corporal passed by … and saw what was going on inside the house.’ Dancing and dressing up were treacherous actions, violating the Sanità’s measures to control movement, contact, breath. But loneliness afflicted people too…

***

The poor were judged not only careless but physically culpable, their bodies frustratingly vulnerable to disease. The early decades of the 17th century in Europe saw widespread famines, sky-high grain prices, declining wages, political breakdown and violent religious conflicts. (This is the ‘general crisis of the 17th century’ that Important Male Historians like to debate.) One Florentine administrator, surveying the surrounding countryside, reported that even before the epidemic struck, villages were ‘full of people, who feed themselves with myrtle berries, acorns and grasses, and whom one sees along the roads seeming like corpses who walk’. The city was not much better. A diarist in Florence in 1630 noted the ‘many poor children who eat the stalks of cabbages that they find on the street, as though, through their hunger, they seem like fruit’. Famine was compounded by the steep decline of the textile industry in the city, as producers in England, Holland and Spain undercut prices; the number of wool workshops halved between 1596 and 1626. These long, lean years of unemployment and hunger had left Florentines acutely susceptible to the coming epidemic.

***

The Sanità arranged the delivery of food, wine and firewood to the homes of the quarantined (30,452 of them). Each quarantined person received a daily allowance of two loaves of bread and half a boccale (around a pint) of wine. On Sundays, Mondays and Thursdays, they were given meat. On Tuesdays, they got a sausage seasoned with pepper, fennel and rosemary. On Wednesdays, Fridays and Saturdays, rice and cheese were delivered; on Friday, a salad of sweet and bitter herbs. The Sanità spent an enormous amount of money on food because they thought that the diet of the poor made them especially vulnerable to infection, but not everyone thought it was a good idea. Rondinelli recorded that some elite Florentines worried that quarantine ‘would give [the poor] the opportunity to be lazy and lose the desire to work, having for forty days been provided abundantly for all their needs’.

The provision of medicine was also expensive. Every morning, hundreds of people in the lazaretti were prescribed theriac concoctions, liquors mixed with ground pearls or crushed scorpions, and bitter lemon cordials. The Sanità did devolve some tasks to the city’s confraternities. The brothers of San Michele Arcangelo conducted a housing survey to identify possible sources of contagion; the members of the Archconfraternity of the Misericordia transported the sick in perfumed willow biers from their homes to the lazaretti. But mostly, the city government footed the bill. Historians now interpret this extensive spending on public health as evidence of the state’s benevolence: if tracts like Righi’s brim over with intolerance towards the poor, the account books of the Sanità tell an unflashy story of good intentions.

But the Sanità – making use of its own police force, court and prison – also punished those who broke quarantine. Its court heard 566 cases between September 1630 and July 1631, with the majority of offenders – 60 per cent – arrested, imprisoned, and later released without a fine. A further 11 per cent were imprisoned and fined. On the one hand, the majority of offenders were spared the harshest penalties, of corporal punishment or exile. On the other, being imprisoned in the middle of a plague epidemic was potentially lethal; and the fines levied contributed to the operational budget of the public health system. The Sanità’s lavish spending on food and medicine suggests compassion in the face of poverty and suffering. But was it kindness, if those salads and sausages were partly paid for by the same desperate people they were intended to help? The Sanità’s intentions may have been virtuous, but they were nevertheless shaped by an intractable perception of the poor as thoughtless and lazy, opportunists who took advantage of the state of emergency.

Early modern historians used to be interested in the idea of the ‘world turned upside down’: in moments of inversion during carnival when a pauper king was crowned and the pressures of a deeply unequal society released. But what emerges from the tangle of stories in John Henderson’s book is a sense that for many the world stood still during the plague. The disease waned in the early summer of 1631 and, in June, Florentines emerged onto the streets to take part in a Corpus Christi procession, thanking God for their reprieve. When the epidemic finally ended, about 12 per cent of the population of Florence had died. This was a considerably lower mortality rate than other Italian cities: in Venice 33 per cent of the population; in Milan 46 per cent; while the mortality rate in Verona was 61 per cent. Was the disease less virulent in Florence or did the Sanità’s measures work? Percentages tell us something about living and dying. But they don’t tell us much about survival. Florentines understood the dangers, but gambled with their lives anyway: out of boredom, desire, habit, grief…

Florence Under Siege: Surviving Plague in an Early Modern City by John Henderson.

Inclined to Putrefication (London Review of Books)

The majority of the population feared and condemned inoculation. Even many of those who were in favor of it were torn by doubts and religious scruples. Was inoculation a “lawful” practice? Was smallpox not a “judgement of God,” sent to punish and humble the people for their sins? Was being inoculated not like “taking God’s Work out of His Hand”?

Douglass played upon such popular scruples to the apparent discomfiture of his clerical opponents. Turning to the ministers he challenged them to determine, as a “Case of Conscience,” how placing more trust in human measures than in God was consistent with the devotion and subjection owed to the all-wise providence of the Lord. That he had not raised this issue in good faith becomes evident from a passage contained in a private letter suggesting jeeringly that his correspondent might perhaps admire how the clergy reconciled inoculation with their doctrine of predestination…

Ever since she had accompanied her husband on a diplomatic mission to Turkey, where she had become acquainted with inoculation and convinced of its merits, it had been Lady Mary Wortley Montagu’s ambition to bring “this useful invention into fashion in England.” That the country’s best medical minds had not sanctioned the practice did not deter Lady Mary. She bided her time. In the 1721 epidemic she asked Charles Maitland, the physician who four years earlier had inoculated her young son in Constantinople, to perform the operation now on her little daughter. She also enlisted the interest of the Princess of Wales, at whose request the King agreed to pardon a number of prisoners who were under sentence of death if they submitted to inoculation. Six convicts in Newgate Prison were ready to do so, and on August 9, about the time Boylston was injecting his patients, they were inoculated by Maitland. The results at first were good. The ice had been broken and during the next months further persons underwent inoculation at his hands. The culmination of Lady Mary’s crusade was the inoculation of the daughters of the Prince and Princess of Wales…

With improvement in its techniques, inoculation gained increasing favor as a method for the prophylaxis of smallpox until it finally, nearly eighty years later, gave way to Jenner’s magnificent discovery of vaccination.

When Cotton Mather Fought Smallpox (American Heritage)

Asiatic cholera, one of humanity’s greatest scourges in the modern period, came to Europe for the first time in the years after 1817, traveling by ship and caravan route from the banks of the Ganges, where it was endemic, to the Persian Gulf, Mesopotamia and Iran, the Caspian Sea and southern Russia, and then—thanks to troop movements occasioned by Russia’s wars against Persia and Turkey in the late 1820s and its suppression of the revolt in Poland in 1830–1831—to the shores of the Baltic Sea. From there its spread westward was swift and devastating, and before the end of 1833 it had ravaged the German states, France, and the British Isles and passed on to Canada, the western and southern parts of the United States, and Mexico.

Politics of a Plague (NYRB)

Typhoid was a killer but it belonged to another world. The disease thrived in the overcrowded, insanitary conditions of New York’s slums, such as Five Points, Prospect Hill and Hell’s Kitchen. The family of one of the victims hired a researcher called George Soper and the diligent Mr Soper proved to be Mary’s nemesis – even though when he first tracked her down she chased him out of her kitchen with a carving fork. And that’s part of the problem with Mary.

It’s possible to sympathise with her refusal to believe that she could be transmitting a disease from which she never suffered herself. But Mr Soper had correctly identified her as an asymptomatic carrier of Typhoid fever. She would never get the disease herself but would never stop giving it to other people.

Not surprisingly, Mary Mallon found this impossible to understand. But the New York authorities were desperate and in 1907 Mary was exiled to the isolation facility on North Brother Island in the river outside New York.

How Typhoid Mary left a trail of scandal and death (BBC)

At the end of the 19th century, one in seven people around the world had died of tuberculosis, and the disease ranked as the third leading cause of death in the United States. While physicians had begun to accept German physician Robert Koch’s scientific confirmation that TB was caused by bacteria, this understanding was slow to catch on among the general public, and most people gave little attention to the behaviors that contributed to disease transmission. They didn’t understand that things they did could make them sick.

In his book, Pulmonary Tuberculosis: Its Modern Prophylaxis and the Treatment in Special Institutions and at Home, S. Adolphus Knopf, an early TB specialist who practiced medicine in New York, wrote that he had once observed several of his patients sipping from the same glass as other passengers on a train, even as “they coughed and expectorated a good deal.” It was common for family members, or even strangers, to share a drinking cup.

With Knopf’s guidance, in the 1890s the New York City Health Department launched a massive campaign to educate the public and reduce transmission. The “War on Tuberculosis” public health campaign discouraged cup-sharing and prompted states to ban spitting inside public buildings and transit and on sidewalks and other outdoor spaces—instead encouraging the use of special spittoons, to be carefully cleaned on a regular basis. Before long, spitting in public spaces came to be considered uncouth, and swigging from shared bottles was frowned upon as well. These changes in public behavior helped successfully reduce the prevalence of tuberculosis.

How Epidemics of the Past Changed the Way Americans Lived (Smithsonian)

Hassler shared his doubts about a closure order, but suggested that a short closure order would “limit most of all the cases to the home and give the other places a chance to thoroughly clean up and thus we may bring about a condition that will reduce the number of cases.” Several in attendance felt that a general closure order would induce panic in the people, would be costly, and would not stop the spread of the epidemic. Theater owners and dance hall operators supported a closure order, hoping that it would bring a quick end to the epidemic that was already causing a drastic reduction in revenue (one owner estimated that his receipts had fallen off 40% since the start of the epidemic). After some discussion, the Board of Health voted to close all places of public amusement, ban all lodge meetings, close all public and private schools, and to prohibit all dances and other social gatherings effective at 1:00 am on Friday, October 18. The Board did not close churches, but instead recommended that services and socials be either discontinued during the epidemic or held in the open air. City police were given a list of the restrictions and directed to ensure compliance with the order. The Liberty Loan drive, always the concern of citizens as they tried to outdo other cities in fundraising, would be allowed to continue by permit, as would all public meetings.

Despite the closure order and gathering ban, the centerpiece of San Francisco’s crusade against influenza was the face mask. Several other cities also mandated their use, and many more recommended them for private citizens as well as for physicians, nurses, and attendants who cared for the ill. But it was San Francisco that pushed for the early and widespread use of masks as a way to prevent the spread of the dread malady. On October 18, the day that the other health measures went into effect, Hassler ordered that all barbers wear masks while with customers, and recommended clerks who came into contact with the general public also don them. The next day, Hassler added hotel and rooming house employees, bank tellers, druggists, store clerks, and any other person serving the public to the list of those required to wear masks. Citizens were again strongly urged to wear masks while in public. On October 21, the Board of Health met and issued a strong recommendation to all residents to wear a mask while in public.

The wearing of a mask immediately became of a symbol of wartime patriotism…

The American Influenza Epidemic of 1918-1919: San Francisco (Influenza Archive)

It’s difficult to say where this pandemic is leading. On the one hand, it has revealed the extent to which the most essential workers of our society are underpaid and undervalued. It has shown how dependent we are on transient and undocumented workers who are routinely brutalized, especially in the food system. It has exposed the dark underbelly of how food ends up on our shelves and how fragile our food system really is. It has led to an upsurge in union activism and strikes. It has demonstrated the fragility of long, just-in-time supply chains and the downside of outsourcing absolutely everything, such that no one country can produce anything anymore.

It has laid bare the cracks in our society. It has shown that the philosophy of “small government” promoted by billionaires and corporations is a disaster in times of crisis. It has shown that the pattern of crippling and hobbling state and local governments in favor of empowering markets and wealthy private actors is counterproductive. It has shown the utter folly of tying the basics of life to formal employment, such as housing and health care. It has shown that depending on “free markets” for absolutely everything doesn’t work when those markets shut down due to inevitable crises. It has shown the fecklessness and incompetence of America’s leaders, as well as their amorality and bottomless greed.

Yet it has also empowered authoritarians and dictators the world over. It has superempowered the ability of states to track and monitor their citizens. It has devastated local economies and small businesses, while shifting wealth, power, and economic activity to transnational corporations who have access to unlimited money from captured governments. It has led to an upsurge in activity among the extremist far-right and well-armed and organized Fascist militias. The stock market reaches a new high every time the unemployment rate goes up, while the financial industry is bailed out. Unemployment is at Great Depression levels, while workers in the U.S. are told by politicians to fend for themselves. “Essential” workers are ordered back to work or threatened with benefit cut-offs. To date, it has increased inequality.

It has also reduced pollution levels and crippled much of air travel, perhaps forever. It has substantially reduced demand for fossil fuels, even as prices reach all-time lows. It has caused cities to close off streets and avenues to cars in favor of bicycles and pedestrians. It has increased the viability of working from home.

In short, it’s complicated. But much of what happens will be up to us. Will we become more extremist, authoritarian and unequal? Will we continue to embrace the Social Darwinism promoted by our betters? Or will we demand essential workers be paid better, unions to no longer be suppressed, working hours to drop, commuting to go away, streets to be prioritized to bikes, and the government spend its trillions on helping the average citizen rather than just big corporations and the investor class? It could go either way. Walter Scheidel concludes:

In looking for illumination from the past on our current pandemic, we must be wary of superficial analogies. Even in the worst-case scenario, Covid-19 will kill a far smaller share of the world’s population than any of these earlier disasters did, and it will touch the active work force and the next generation even more lightly. Labor won’t become scarce enough to drive up wages, nor will the value of real estate plummet. And our economies no longer rely on farmland and manual labor.

Yet the most important lesson of history endures. The impact of any pandemic goes well beyond lives lost and commerce curtailed. Today, America faces a fundamental choice between defending the status quo and embracing progressive change. The current crisis could prompt redistributive reforms akin to those triggered by the Great Depression and World War II, unless entrenched interests prove too powerful to overcome.

Why Democrats Suck

So the news is that Larry Summers is Joe Biden’s economic advisor.

I’ll take credit for being early on the “People like Larry Summers are the problem with the Democrats” train. I wrote a whole post on it way back in November. In it, I wrote:

Listening to arrogant Ivy League hyper-elite technocrats like Larry Summers is exactly why the Democratic Party is in the pathetic state its is in, and continually loses elections, even to incompetent morons like Donald Trump. If Larry Summers is a representation of “liberal values” than God help us all.

Don’t Think Like an Economist

Here are some insights into Mr. Summers’ worldview from various people. From Yanis Varoufakis:

‘There are two kinds of politicians,’ [Summers] said: ‘Insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcones.’ Whith that Summers arrived at his question. ‘So, Yanis,’ he said, ‘which of the two are you?’

From Elizabeth Warren:

Late in the evening, Larry leaned back in his chair and offered me some advice. By now, I’d lost count of Larry’s diet Cokes, and our table was strewn with bits of food and spilled sauces. Larry’s tone was in the friendly-advice category. He teed it up this way: I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People–powerful people–listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.

I had been warned.

From Thomas Frank’s book, Listen Liberal (p. 173):

‘One of the challenges in our society is that the truth is kind of a disequalizer.’ Larry Summers told journalist Ron Suskin during the early days of the Obama administration. ‘One of the reasons that inequality has probably gone up in our society is that people are being treated closer to the way that they’re supposed to be treated.’

And let’s not forget:

In the 1990s, during Bill Clinton’s presidency, the derivatives market was taking off and Brooksley Born was chair of the Commodities Futures Trading Commission. She warned that unregulated derivatives trading posed a risk to the nation’s financial stability. She wanted more transparency of this dark market.

But Born was undercut in her efforts by no less than Treasury Secretary Robert Rubin, Federal Reserve Chairman Alan Greenspan, Deputy Secretary of the Treasury Larry Summers and SEC Chair Arthur Levitt. This boys club turned out to be dead wrong. But they had the power. They convinced Congress to strip the CFTC of its power to regulate derivatives.

The Cassandras of Our Time: Brooksley Born and Ann Ravel (Brennan Center)

Summers is also a favorite economist of the Marginal Revolution blog from George Mason University and the Mercatus Center, the epicenter of Kochenomics.

And remember, folks, the Democrats are the “Leftist” party in the United States. After all, where are you going to go?

That doesn’t bode well for the Biden campaign does it? But it does make sense: Biden is opposed to Medicare for all, student debt forgiveness, subsidized higher education, green job creation programs, wealth taxes, higher minimum wages and universal basic income. In opposing these, he consistently invokes the old canard: Howyagunnapayforit?.

Either that, or it’s “means test” everything. After all, we have to make absolutely sure that no one “undeserving” may >*gasp*< get a benefit they don’t deserve! Perish the thought! Only the truly bereft are worthy of any kind of societal benefit; the rest of us “real citizens” can get our needs met by shopping in the big, glorious Market.

Of course, this means testing bullshit leaves all sort of cracks that people often slip through, ensuring that any government program is as unpopular as possible. This is by design. So, if you’re too rich, or too poor, you cannot get health care via the government. Too poor: get Medicaid. Suddenly earn $1 over the cutoff: sorry no Medicaid for you. Have you tried the Obamacare exchanges? Rich enough to have a “Cadillac Plan?” Oh, we’re going to tax that. All just so we don’t have to cover everyone.

Or take higher education. Make under X amount: here’s a (partial) scholarship. Make over X amount? No college aid for you. All so we don’t have free higher education for all.

Robert Evens put it well on a podcast about the West Virginia coal miners’ war (the Battle of Blair Mountain):

[59:52] “You’ll hear people saying ‘basic Income seems like a great idea, but what if X group…what if rich people get it; that’s not fair.'”

“One of the problems with that is that, when you start saying stuff like, ‘We need a basic income; we need free college; we need universal health care,’ and people start bringing [up], ‘What about this group, what about that group?’ What they’re really saying is ‘I don’t believe that this is an inherent right. I think certain individual groups might deserve it, but I don’t see it as an inherent right.'”

“And I think one of the lessons of the labor movement is [that] this shit only works when you treat it like an inherent right and you reject attempts to divide people, even among groups that might make sense to you at the time. Because, in reality, if you’re agreeing to that division at all, you are against the idea that people have a right to this sort of thing.”

The other thing it does is allow recipients of such “government largesse” to be depicted as “cheats” and “scroungers.” Add that to the bogus idea that “my tax dollars fund the government,” and you play right into the Conservative/Libertarian framing of, “They’re stealing my hard-earned (it’s always ‘hard-earned’) money to give money to those layabouts which I’m not even entitled to!” In other words, it’s deliberately sabotaging social programs to give Conservatives the ammunition they need to destroy it.

Again, to repeat, this is by design!

And since the Democrats know that the baton of government will inevitably be passed back and forth between the parties, they can count on Republicans to chip away at, or even dismantle, the programs that they’ve created. They can then depict them as the bad guys, even though that was the plan all along. Good cop, meet bad cop.

Here’s the dirty little secret: They don’t want these programs to succeed!

Thus the two party duopoly functions as one wrestling tag-team implementing the same set of Neoliberal policies to enrich the donor class at our expense.

But if both parties are virtually identical when it comes to economic philosophy, who can you vote for if you don’t agree with that kind philosophy?

No one. And that’s the goal of the two-party system. There is no alternative. That’s why the Democrats were far more effective in opposing Bernie Sanders than the have been opposing the so-called “mortal threat” Trump. #Resistance.

In my original post, I said:

My core point is this: this kind of autistic “economic thinking” is the very reason why the voting public believes there is no substantial difference between the Republicans and the (Neoliberal) Democrats. And they’re right! It’s also worth noting that Professor Cowen has let the cat out of the bag, tacitly admitting that the very discipline of economics is inherently right-wing (it makes him suspect among the left…). Yet it still masquerades as ideologically neutral!

Don’t Think Like an Economist

This article from Policy Tensor makes a lot of the same points:

The tunnel vision of global leaders and the wider discourse of the articulate class is symptomatic of a deeper malaise. Put simply, we are in the grip of a very powerful ideology. It is an ideology that subordinates all goals, including the survival of our species and the web of life with which it is inextricably intertwined, to the goal of maximizing economic growth.

But it does much more. Economics as ideology distorts our perception of contemporary and historical reality. It misguides us into flawed explanatory schema for the most important historical explananda. It sharply narrows the possibility space of human action. And, most important of all, it closes off all rational courses of action that may thwart the collapse of world civilization that is increasingly getting backed-in as we ride up the hockey stick of doom.

Economics as Ideology (1): Introduction (Policy Tensor)

The genius of economics is that it is an ideology that masquerades as non-ideological. Economists always win the debate once you accept their framing of the world: as a cost-benefit cash nexus, full of rational actors where nature has no inherent value. Add that new factory to GDP, don’t subtract all the people who will get cancer from it, and so on.

Once you accept their premises, you are guided along (as if by an invisible hand) to their desired conclusions, which, by some coincidence, always benefit the rich and powerful.

And these axioms have colonized our consciousness to the extent that we don’t even think of them as axioms, we just accept them as natural. They’ve achieved cultural hegemony in Gramasci’s terminology.


When someone says, “you just don’t understand economics,” what they’re really saying is, “You’re not looking at the world through the same blinkered, autistic view as I am, therefore you can’t be taken seriously.”

Ideology consists of widely-shared lenses that are worn unconsciously. It is when we are not aware of our limits applicability of our reference frame, when we mistake the map for the territory, that we are being ideological. More often than not, we are simply unaware that we are using a specific lens to interrogate reality. Ideology manifests itself in widely-shared and unarticulated premises. It is most evident in things that are simply assumed to be true and require no justification whatsoever — mere assertion suffices. But even though widely accepted, such premises may not hold. A gap thus opens up between discourse and reality. Such gaps are a recipe for disaster. All man-made catastrophes are due, in large part, to such gaps.

Hence Tyler Cowen’s complement to Summers cited in the original post: He never ceases to think like an economist. Because thinking like an economist will be sure to get you to the libertarian conclusions that Cowen and his patrons favor, even if you are officially classified as “liberal” or are a member of the Democratic Party. Two parties, one ideology.

Recall that the modern discipline of economics as developed under the marginal revolution in the late 1800s (hence the name of the blog) is based on the following core theorems:

There are two fundamental theorems of welfare economics.

-First fundamental theorem of welfare economics (also known as the “Invisible Hand Theorem”):

any competitive equilibrium leads to a Pareto efficient allocation of resources.

The main idea here is that markets lead to social optimum. Thus, no intervention of the government is required, and it should adopt only “laissez faire” policies. However, those who support government intervention say that the assumptions needed in order for this theorem to work, are rarely seen in real life.

It must be noted that a situation where someone holds every good and the rest of the population holds none, is a Pareto efficient distribution. However, this situation can hardly be considered as perfect under any welfare definition. The second theorem allows a more reliable definition of welfare

-Second fundamental theorem of welfare economics:

any efficient allocation can be attained by a competitive equilibrium, given the market mechanisms leading to redistribution.

This theorem is important because it allows for a separation of efficiency and distribution matters. Those supporting government intervention will ask for wealth redistribution policies.

Welfare economics I: Fundamental theorems (Policonomics)

In other words, the greatest welfare (optimal good) is achieved by government getting out of the way and letting markets rip. This is not a value statement; this is baked into the very heart of economics as a discipline! Also note:

“…a situation where someone holds every good and the rest of the population holds none, is a Pareto efficient distribution.” Hmmmm…

The second theorem states that the “winners” will compensate the “losers”, and this supposedly “cleans up” the problems with the first theorem. But as noted in my earlier post, that turns out to be not so clean-cut:

In 1939, Cambridge economist Nicholas Kaldor asserted that the political problem with cost-benefit analysis—that someone always loses out—wasn’t a problem. This was because the government could theoretically redirect a little money from the winners to the losers, to even things out: For example, if a policy caused corn consumption to drop, the government could redirect the savings to aggrieved farmers. However, it didn’t provide any reason why the government would rebalance the scale, just that it was possible. What is now called the Kaldor-Hicks principle, “is a theory, “ Appelbaum says, “to gladden the hearts of winners: it is less clear that losers will be comforted by the possession of theoretical benefits.” The principle remains the theoretical core of cost-benefit analysis, Appelbaum says. It’s an approach that sweeps the political problems of any policy—what to do about the losers—under the rug.

Of course that becomes harder when you’ve had forty years of billionaire-funded think tanks promoting the idea that any wealth earned in the market is just no matter what; that market distribution is “fair”; that taxes are “punishing the winners”; and that any assistance to the less fortunate will “encourage dependence on big government.” In short, that redistribution is immoral.

Funny how those think-tanks don’t show up in any of the theorems of welfare economics. So much for theorem #2.

And I’m sure that all those people newly unemployed are just waiting to take advantage of the Pareto optimal distributions of free markets to see them through the next few months.

But what do I know? I’m an “outsider.”

“Nothing will fundamentally change” (Real World Economic Review)

A Finance Primer 2

Previously we learned what securities were: financial instruments designed to swap debt all over the place (we’ll ignore ownership for now). Basically, they’re just IOUs.

The financial “industry” consists of trading and gambling with these securities. For every financial transaction, there are parties and counterparties. Like the tango, it takes two.

As I mentioned, banks and other financial institutions loan to each other all the time. This turns out to be quite important. I want to outline a little more of the financial system using that concept.

THE FED FUNDS RATE AND REPO MARKET

As I said above, financial institutions such as banks lend to, and borrow from, each other. But they don’t do it the way they lend to and borrow from you and me. They buy and sell IOUs.

If you deposit $100 and then return a month later to take out your $100, it’s not the exact same $100 you deposited. When you give the bank your money, they invest it and the money they give you is the money they’ve made. Banks are trying to make money from their deposits just like everyone else, so that’s why they loan it out to other institutions. One place where they do so called the financial repo market. This is basically banks loaning to other banks.

Recall that banks have a reserve requirement, which is the ratio of deposit liabilities (what the bank owes its customers) to loanable money.

If a bank has more reserves at the central bank than they need, they loan it out to other banks who may be short. This is done through what are called repurchase agreements, which is where the term “repo” comes from.

So if Bank A has an additional $50m at the end of Thursday, and Bank B needs to get $50m on its books to comply with regulations, Bank A will loan out their extra $50m for an agreed interest rate, and will repurchase the loan on Friday morning. Hence repurchase agreements.

The way this is done is by selling securities. In the above example, Bank B sells Bank A securities in exchange for cash. It agrees to buy back the securities from Bank A at a later date at an agreed-upon (usually higher) price.

Example: Transition Borrower sells government bond worth $100 to lender for $100 cash Borrower agrees to buy back bond for $101 in 1 year 1 year later… Borrower buys bond back for $101, lender receives $101.

So what happened here? Changing the verbiage to what makes more intuitive sense, the borrower gave a lender an asset in exchange for $100 cash. 1 year later the borrower paid back the initial amount ($100) plus an extra amount that they had previously agreed upon ($1) and got the asset back.

Repo Rate (for 1 year repo) = (Final Price-Initial Price)/Initial Price so in this case we see the Repo rate is 1%.

ELI5: What is the repo rate? (Reddit)

Recall that Treasury securities is basically another word for the government’s debt; i.e. the “national debt.” The same national debt that you hear all the scary stories about. Turns out that the debt is necessary for the financial system to function–something the horror stories never manage to tell you. Having no national debt would actually be a problem. Banks are, in fact, actually required to hold a certain amount of U.S. debt in the form of treasury securities.

If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world…The U.S. borrows money by selling bonds. So the end of debt would mean the end of Treasury bonds.

But the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.

Banks buy hundreds of billions of dollars’ worth, because they’re a safe place to park money. Mortgage rates are tied to the interest rate on U.S. treasury bonds.The Federal Reserve — our central bank — buys and sells Treasury bonds all the time, in an effort to keep the economy on track.

If Treasury bonds disappeared, would the world unravel? Would it adjust somehow?

What If We Paid Off The Debt? The Secret Government Report (NPR)

The agreed interest rate that banks charge each other for 1 day loans is called the Fed Funds Rate. The interest rate banks lend to each other obviously affects the rate at which banks lend to you. That’s why it’s extremely important to the financial system as a whole. It sets many of the other domestic interest rates in a sort of domino effect.

The federal funds rate is the rate at which depository institutions (banks) lend reserve balances to other banks on an overnight basis (or slightly longer). Reserves are excess balances held at the Federal Reserve to maintain reserve requirements. The rate is primarily determined by the balance of supply and demand for the funds.

[The Fed Funds Rate] is just about the most fundamental metric in the entire financial system. Everything from government bonds, to commercial loans, to your mortgage is influenced by how much banks have to pay to square their books at the end of the day.

ELI5: What exactly is the financial repo market? (Reddit)

If there is not enough cash in the system, the Fed Funds rate will increase, affecting the entire system. If the rate is being affected not by market fundamentals, but by some sort of financial crisis for instance, more money is injected via the Federal Reserve to try and bring the rate down.

The Fed Funds rate…is not strictly controlled by the Federal Reserve, but is a market effect that’s a result of Fed actions. Specifically, the Fed buys or sells bonds. If the Fed buys bonds there is more cash in the economy (which means in bank coffers) and fewer interest-paying bonds. This makes rates go down because money supply is higher and banks need to entice someone to borrow it. Inversely, if the Fed sells bonds it pulls cash out of the economy and can make rates higher…Buying or selling bonds a little at a time lets the market naturally adjust the rate to where they want it.

Why does the Fed raise interested [sic] rates (Reddit)

If banks need to borrow money directly from the Fed itself, this is called the discount window, for reasons I’m not entirely sure of, except to make this more complicated and obscure. The Fed is just the national bank, and the interest rate banks pay to borrow from the Fed is called the discount rate. This rate is determined by the Fed. When the Fed wants to inject more money into the system, they lower the discount rate so banks can borrow more money.

Money is a commodity, and it’s “price” is the interest rate. So the Fed doesn’t “declare” an interest rate. It sets a target interest rate, and then buys or sells bonds in order to achieve that interest rate.

We said last time that bonds (IOUs) are a way of “locking up” money for a while. You can imagine dollars being removed temporarily from society like prisoners sitting behind bars in a jail cell if you like. The length of time the bond is for (term) is the “sentence” for the money locked away in the bond. By the time the bond “gets out of jail,” it has had a baby called interest. How many “babies” it has had is determined by the amount of time it has been locked up for.

Selling treasury bonds takes cash *out* of the system (because people pay cash for the bonds.) Selling bonds puts cash back *into* the system (because the bonds are redeemed in cash). Sometimes, of course, the bond is not redeemed for cash, it is simply “rolled over”–one IOU is exchanged for another IOU–in which case cash is not injected back into the system.

The removal and injecting of cash into the system influences the amount of overall money in the system, which consequently determines the interest rate–the price for money. The rate the banks lend to each other helps determine the rate at which they lend to you and everyone else.

Peter Conti-Brown describes the process:

The [Federal Open Markets Committee], in its eight annual meetings, establishes the target federal funds rate, or the rate it wishes to see in the markets for these interbank, short-term loans.

To reach this target, the Fed buys or sells securities on the open market, through the trading desk at the Federal Reserve Bank of New York. Here’s the connection to the federal government: the New York Fed’s primary conventional tool to accomplish the FOMC’s objectives is the purchase and sale of short-term government securities.

When the FOMC decides to raise interest rates, the New York Fed pulls cash out of the financial system by selling the short-term government debt securities the Fed keeps on its books; when the FOMC decides to lower interest rates, the New York Fed injects cash into the finacial system by buying those securities back from the market participants.

When the Fed buys a Treasury security on the open market, it provides the bank on the other side of the transaction with cash–an electronic modification to the bank’s balance sheet. This purchase removes the security from the bank’s balance sheet, and replaces it with greater reserves in the bank’s account at its local Federal Reserve Bank.

In this way, the Fed has expanded the money supply by removing from the banking system an asset that that is harder to sell on the market–a government bond or, more recently, a mortgage backed security–and replacing it with cash, literally Federal Reserve Notes (mostly electronic, of course). These notes are easier assets to use to exchange for other goods and services. Indeed, as the notes themselves report, they are “legal tender for all debts public and private.” In the monetary metaphor, cash is the most “liquid” of assets.

The Fed regulates how much cash banks must keep in their reserves, which are deposited at the bank’s regional Fed. If the bank already has the requisite level of reserves required by the Fed, the cash that is added to its balance sheet through its sale of a Treasury security to the Fed is is something extra.

The Power and Independence of the Federal Reserve pp. 131-132

The money injected into the banks in this way is called “high powered money” because the banking system can multiply that money through the fractional reserve lending. If the reserve requirement is adjusted down, banks can hold less cash and the money multiplier effect is greater, expanding the money supply. If the reserve requirement goes up, banks can lend less of their deposits, resulting in less money creation.

Banks are generally in the business of taking the “something extra” and injecting it into the economy in the form of bank loans. Under normal circumstances, the bank will lend the cash it has received from the Fed in exchange for its more illiquid security. Doing so expands the money supply in the economy as the bank borrower spends that money and multiplies the money’s reach through a daisy chain of spending, investing, and saving.

Because most consumers of bank credit–usually businesses, but also individuals–don’t carry around much cash in their wallets or under their mattresses, the money the first bank receives through the Fed’s initial market transaction goes to another bank or business, which gives to another bank or business, and on and on. The effect is a more or less predictable expansion of the money supply throughout the banking system. ibid. pp. 132-133

In a financial panic the banks need cash. Based on the above, what happens? Rather than being locked up, money is set free. The Fed buys Treasury securities, i.e. government debt. Or it buys the mortgage-backed securities (which are theoretically backed by people paying their mortgages, except in the financial crisis they weren’t, meaning that they were essentially worthless paper). That’s why the debt increases. It has to. That’s how the system is designed. Remember, treasury securities are the government’s debt.

US Fed balance sheet increases to record $6.62 trillion (Deccan Herald)

So we see that the selling of bonds has nothing to do with the government needing to get the money from the private sector in order to spend. The sovereign never needs to “borrow” the currency over which it has the exclusive right to issue–that is logically ridiculous. It does so by convention (holdovers from the gold standard era and mercantilism), which ends up providing a risk-free asset–Treasury securities–for the private sector to hold cash. The selling and buying of this asset help to stabilize the price of money by injecting it into, or taking it out of, the banking system.

Of course, as we learned last time, the fractional reserve theory of banking is obsolete. Now that demand deposits are the main way of conducting transactions, and are treated like cash, the loan itself creates the deposit on the bank’s balance sheet.

In the [intermediation of loanable funds] (ILF) model [of banking], bank loans represent the intermediation of real savings, or loanable funds, between non-bank savers and non-bank borrowers. But in the real world, the key function of banks is the provision of financing, or the creation of new monetary purchasing power through loans, for a single agent that is both borrower and depositor.

The bank therefore creates its own funding, deposits, in the act of lending, in a transaction that involved no intermediation whatsoever. Third parties are only involved in that the borrower/depositor needs to be sure that others will accept his new deposit in payment for goods, services, or assets. This is never in question, because bank deposits are any modern economy’s dominant medium of exchange.

Furthermore, if the loan is for physical investment purposes, this new lending and money is what triggers investment and therefore…saving. Saving is therefore a consequence, not a cause, of such lending. Saving does not finance investment, financing does. To argue otherwise confuses the respecting macroeconomic roles of resources (saving) and debt-based money (financing).

Bank of England Working Paper No. 529: Banks are not intermediaries of loanable funds–and why this matters. Zoltan Jakab and Michael Kumhof.

So we saw three ways the Fed can influence the amount of money in the banking system, and hence, the economy: 1) Manipulate the fed funds rate by buying or selling Treasury securities; 2) Lower the discount rate; that is, the cost to borrow from the Fed 3.) Lower the reserve requirement—the amount of deposit money banks must keep in their accounts at the Fed.

What if the price of money is already so low that it’s practically free? Turns out that’s now. When that happens, rates can’t really go lower, so it’s a problem. We’ll discuss that another time.

####

If a particular bank didn’t have enough reserves, it would borrow from other banks in the system, as we said above. But in a financial panic, when bad loans are roiling the entire system due to bad harvest or something, every bank is trying to make sure it has enough money to stave off a bank run, and no bank wants to lend out money. They can’t get a temporary loan from the other bank, because the other bank is in the exact same boat! And so on, throughout the entire financial system.

So in that type of environment, where would the banks get the money they needed? Who would loan it out? Often the answer was a bailout organized by wealthy Wall Street financiers getting the money from London or something. But after enough of these ad hoc rescues (the last one famously spearheaded by J.P. Morgan), everyone knew that some sort of permanent bank “above” all the others was needed to loan out money from the federal government during times of banking panic or financial crisis. And these banking panics used to happen a lot. And I mean a lot. As “Adam Smith” writes:

The framers of the law that created [the Federal Reserve] were literally panic-stricken. Schoolchildren once learned the dates of bank panics in history as if they were battles: the Panic of 1837, the Panic of 1873, the Panic of 1893, the Panic of 1907. Boom, bust, the agitated lines of depositors stretching out into the street, people anxious to get their money out while it was still possible; then collapse, and depression.

When Congress established this Reserve system in 1913, it contemplated that the Reserve could stop a run on the country’s banks with money that was not gold, not silver, not anything in the vaults. By a series of mechanisms, the Federal Reserve could add money to the government’s own bank account. Stricken banks would have a senior friend, and the Federal Reserve, the central bank, would regulate the county’s supply of money. This office had great financial power. PAPER MONEY, pp. 15-16

Thus, the Fed is the lender of last resort. Peter Conti-Brown describes:

Maturity transformation is what makes banks so vulnerable to failure. The system relies on an assumption that only a few short-term depositors will withdraw their money on a given day. When more depositors show up at a bank demanding even more in withdrawals than is on deposit in the vaults, the bank will fail unless new cash can be secured.

The first priority of a bank facing a panic, then, is to publicly and ostentatiously demonstrate that it has secured new funds, usually from another bank. As soon as the panic is stabilized, a bank with a well-managed portfolio will pay back both its emergency debts to the other banks that have stepped in to the breach and those the bank owes to its regular depositors. (In the sometimes confusing vernacular of banking, the bank’s “assets” include the loans it is owed by homeowners, business owners, and the like; its “liabilities” include the deposits that savers can demand at any time.)

If the panic spreads, however, the usual sources of short-term credit to the first scared banker–other banks–are themselves tied up trying to fend off bank runs of their own. At that point, a localized panic has become systemic.

In that event, banks scramble in a dash to find liquidity in the system, wherever liquidity can be found. The central bank is the solution to the scramble for liquidity. The central bank is the “lender of last resort,” the bank that exists to restore order to the financial system.

Peter Conti-Brown; The Power and Independence of the Federal Reserve, p. 152

So the problem with all the “End the Fed” dipshits is, how ya gonna stabilize the banking system, then? Or should we just let it crash every ten years?

In the bad old days, if a bank failed, you lost all your money. Now deposits are insured, up to a limit. If your bank fails, you will be reimbursed by the insurance payout for the amount you lost up to the insurance limit (so that $1000.00 in your account is safe.) This was an innovation of the Great Depression and it pretty much eliminated bank runs.

But, as you can see above, a lot of assets on the bank’s books are loans for real estate, i. e houses. There are always some people who default on their mortgages, or course. But if enough of those mortgages go bad all at the same time, then assets go poof, and the bank’s balance sheets become insolvent all of the sudden. And if it happens all over the entire country, then the above scenario applies—each bank is trying to save its own balance sheet, and so has no money to loan to other potentially insolvent banks in the system. The Federal Reserve has to step in.

And that, my friends, is what 2008 was all about.

Debt is a tradable commodity, and when wound back to the source somebody is paying that debt. And when they stop paying, that debt suddenly becomes a worthless commodity. Multiply that by a few trillion and you’ve got an economic crisis on your hands. So goes the financial system.

Making it worse was that the mortgage debt was “sliced and diced” into mortgage backed securities and traded all over the place. So some pension system in Oregon or somewhere was dependent on a bunch of mortgages in Las Vegas, and now it’s gone bust too. Plus, many had taken out insurance policies on these securities, and the underwriters assumed they’d never have to pay up. When everything went bad at once, the claims they had to pay overwhelmed the money supply they had on hand the insurance companies went belly-up too.

Why did this happen? Well, the banks made shady loans. And, in a perfect world, banks that made shady loans should go under. But when it’s endemic throughout the whole damn banking system, you can’t just let the entire banking system itself go under, because capitalism requires a banking system in order to function (which hopefully is obvious). So it’s got to be saved, and so some people who made the original shady deals got rescued too by default. Kind of like if terrorists blew a hole in a ship, and then got pulled from the water during the rescue along with all the other drowning passengers in the aftermath. It would have been nice if we had at least prosecuted the shady dealers in the courts, but, oh well, you know…

The problem now is that the money is disappearing because businesses can’t do business, and workers can’t earn money because they’re unemployed. Even those who are not unemployed are not spending it because 1.) they’re stashing it away because of uncertainty, or 2.) everywhere they would have spent it is closed. Nonessential businesses are prohibited by governments from doing businesses at all, and many workers can’t leave their homes except for essential errands and enjoying the outdoors while keeping their distance from everyone. With no revenue coming in, business can’t pay back their loans–and loans are the bank’s assets, remember. With businesses not doing business and people not earning salaries, money is disappearing, and loans are going bad left and right.

Because banks have accounts at the Fed, as we saw above, they are first at the trough for money. We ordinary citizens do not have accounts at the Fed. Although an interesting proposal suggests that maybe we should:

Now more than ever, therefore, we need an alternative to entrusting our security to institutions so prone to disaster, which is why Fed accounts for all is a proposal that is not only attractive and practical, but also urgent. Bankers can tell you that the Fed is an enviably indulgent loan-officer, charging minimal interest rates – currently 2.5 percent—on loans which, when passed on to customers in the form of credit card debt, carry hefty (17 percent!) profitable interest rates. So why shouldn’t the rest of us get in on the act?

This is no fringe proposal, having been advanced by a number of responsible authorities and even in a paper published last year by the eminently orthodox Federal Reserve Bank of St. Louis. The authors, two Swiss economists, proposed “central bank electronic money for all” allowing “all households and firms to open accounts at central banks, which then would allow them to make electronic payments with central bank money instead of commercial bank deposits.”

Forget Checks, How About Giving Everyone a Federal Reserve Account? (The American Conservative)

This would also allow the government to replace the lost paychecks from everyone either losing their job or being forced to stay at home:

Finally, this necessary reform would pave the way for an equally useful innovation: universal basic income. The notion of assuring everyone of a guaranteed income with no strings attached has been gaining increasing attention and support around the world in recent years, and in the presidential campaign of Andrew Yang. It has indeed been implemented in a number of locales with striking success.

One notable example, the Alaska Permanent Fund, distributes up to $2,000 to every Alaskan citizen every year. When the fund was inaugurated (by a Republican governor) in 1976 the state ranked highest in poverty rates in the country. Twenty years later, Alaska had the lowest. When the British Labour Party proposed a move toward UBI in its election manifesto prior to last year’s election, the proposal elicited a predictably choleric response from some, with the Financial Times sputtering that “rewarding people for staying at home, is what lies behind social decay”. Given that we are all now encouraged or forced to stay at home, the complaint seems ironic in the extreme.

Thus we see that the Fed is 1.) A lender who lends money to solvent banks when no one else can or will (lender of last resort); and 2.) The thing that manipulates the price of money by buying and selling securities in the market to keep the supply of money in line with what the economy actually needs. This results (hopefully) in not too much inflation or deflation.

We’ll talk about those two things next time.

Where Money Comes From

(Originally from previous post—broken apart because of length)

By now, hopefully you should know that new money is created when people and businesses take out loans.

That is, money is injected into the economy by governments through banks as intermediaries.

This is something that is quite controversial in economic circles. For a long time–and still often today–many economists do not accept this explanation, despite overwhelming evidence for it.

For a long time, in fact, economists did not really think about money at all. This may seem odd, in that most of us think that economics is the study of money! But they portrayed money as simply a means of exchange–the intermediate good that allowed one thing to be exchanged for another thing in the real economy. It was not worthy of note in and of itself, they thought. Sure, how much of it there was floating around might be important, but beyond that you didn’t really need to think about it too much.

To explain how money was created, economists developed three alternative theories of banking. Let’s look at each one in turn.

1.) The loanable funds theory. This is the idea that banks are simply intermediaries between savers and borrowers.

So you save $100 dollars a week out of your paycheck, let’s say. Multiply that by thousands of workers and businesses throughout the entire economy and you’ve got increasing piles of cash piling up in bank’s vaults (or, rather, balance sheets) over time.

At the same time, you’ve also got people who need money. They want to do some sort of profitable enterprise, but they don’t have the money to do it right now. Or they want to buy something that they can’t pay for on the spot, but can pay back over a period of time, like a house or car for instance. Where do they go? To the bank, of course!

If you’re a bank, you pay savers a particular interest rate to get the money into your vaults, and then you loan out that money at a higher interest rate to those who want to borrow. That’s how you make your money.

So the banks are the intermediaries between savers and borrowers—those who want to save and those who want to borrow. Those are never perfectly in sync in any particular bank, so banks borrow from and loan to each other as a routine matter. But the banking system as a whole functions as an effective intermediary between savers and borrowers. The rest of the money is circulating, presumably.

In this scenario, only when the desire to borrow is greater than the desire to save, is new money injected into the system by governments through various means. Banks borrow new money from the government’s central bank to loan out.

2.) The fractional reserve theory. This idea is similar to above, but allows for money to be created not by individual banks, but through the banking system as whole through the process of “multiple deposit expansion.” That is, while the banks themselves are still intermediaries just as above, but when the central bank injects money into the banking system, that money is multiplied through the actions of banks making loans–the multiplier effect.

With a reserve of 10 percent, a bank would lend out 90 percent of a deposit, which would increase the deposits at other banks in the system, who would subsequently lend out 10 percent of those deposits, resulting in an expansion of money throughout the banking system due to the process of loaning money. Any individual bank still has to get deposits in order to lend, according to the theory. But that act of lending does create new money elsewhere in the system. George Goodman (a.k.a. “Adam Smith”) explains how it works. He imagines an oil company depositing $100.00 in a U.S. bank:

Now the bank has a deposit, let’s say…of $100. The Federal Reserve says that bank has to keep 10 percent of the deposit as a reserve. You walk in and borrow $90. You put that money in a checking account; now it’s a deposit there, and your cousin Charley can walk in and borrow $81, because that fractional reserve is set each time. Your cousin Charley deposits his loan in his checking account, and the bank lends $72.90 to the next borrower. That’s the way the multiplier works, and it keeps on going. If the Federal Reserve wants more money in the banks, it lowers the fractional reserve, so that you can borrow $95 instead of $90, and your cousin Charley can borrow $85.50 instead of $81. if the Federal Reserve wants there to be less money, it raises that fractional reserve.

PAPER MONEY, p. 245.

This system allegedly originated in the goldsmith’s discovery that he could make more loans than there was actual gold in his vaults, so long as too many people didn’t show up to claim their gold all at once.

Paper money, it is said, originated with the goldsmiths of Europe who held the private gold hoards deposited by wealthy citizens for safekeeping. The goldsmith issued a receipt for the gold deposit, and over time, it became clear that the receipt itself could be used in commerce since whoever owned that piece of paper could go to the goldsmith and claim the gold.

Modern banking originated in the goldsmith’s discovery that they could safely write more receipts and lend them to people, exceeding the total gold that was on hand, so long as they always kept a reasonable minimum in reserve to honor withdrawals. This was the origin of fractional reserve banking and the bank lending that created money.

This private money system endured for centuries and was inherited by the American Republic: privately owned banks created money by issuing paper bank notes, paper backed by a promise that at any time it could be redeemed in gold.

In nineteenth-century America, the money in use consisted mainly of these privately issued bank notes, backed by gold oor silver guarantees. The money’s value was really dependent, therefore, on the soundness and probity of each bank that issued notes. Banking scandals were recurrent, particularly on the frontier, where ambitious bankers, eager to make new loans for enterprises, sometimes printed paper money that had no gold behind it. Governments imposed regulations to keep banks honest, but the bankers still were free to create their own varieties of money. When banks failed, their money failed with them.

SECRETS OF THE TEMPLE; William Grieder pp. 227-228

3.) The credit creation theory. In this view, new money is created when loans are extended. That is, the bank does not have to make sure it has enough deposits to make the loan; it simply creates a deposit for the amount of the loan that the lender can draw against.

The third theory of banking is at odds with the other two theories by representing banks not [simply] as financial intermediaries — neither in aggregate nor individually. Instead, each bank is said to create credit and money out of nothing whenever it executes bank loan contracts or purchases assets.

So banks do not need to first gather deposits or reserves to lend. Since bank lending is said to create new credit and deposit money, an increase in total balances takes place without a commensurate decrease elsewhere. Therefore according to this theory, over time bank balance sheets and measures of the money supply tend to show a rising trend in time periods when outstanding bank credit grows — unlike with the financial intermediation theory, where only existing purchasing power can be re-allocated and the money supply does not rise.

A lost century in economics: Three theories of banking and the conclusive evidence; Richard A. Werner

William Grieder summarized this process in his mammoth book, Secrets of the Temple. First, he describes the transition from bank notes hypothetically backed by gold, to demand deposits delineated in bank ledgers:

The money illusion was transferred to a new object with the rise of demand deposits, better known as checking accounts. Instead of currency, the paper money created by banks, people hesitantly came to accept that money also existed simply as an account in the bank’s ledger, redeemable by personal drafts or checks. In the United States, the transition was inadvertently stimulated by government regulation. The National Bank Act, enacted during the Civil War, placed a heavy tax on new bank notes issued by state banks, and in order to avoid the tax, banks encouraged customers to use demand deposits–writing personal checks instead of drawing out their money in cash.

It took generations for the public to overcome its natural distrust of checks, but by 1900 most people were persuaded. Personal checks, written by the buyers themselves, were accepted as just as valuable as dollar bills. Currency remained in use, but demand deposits were by now the bulk of the money supply. The nationalization of currency issuance, completed with the creation of the Federal Reserve in 1913, simply continued this arrangement. A new dimension of trust had added to the illusion. pp. 227-228

He then goes on to describe just how money is created using these demand deposit accounts via the banking system:

New money was created not only by the Federal Reserve but also by private commercial banks. They did it by new lending, by expanding the outstanding loans on their books. Routinely, a bank borrowed money from some group, the depositors, and lent it to someone else, the borrowers, a straightforward function as intermediary. But, if that was all that occurred, then credit would be frozen in size, unable to expand with new economic growth. On the margins, therefore, bankers expanded their lending on their own and the overall pool of credit drew–and the banks credit turned it into money.

A bank officer authorizes a $100,000 loan to a small-business man–a judgement that the businessman’s future earnings will be sufficient to repay the loan, that his enterprise would create real value in the future, which would justify the risk and the creation of the additional money. Ordinarily the banker would not hand over $100,000 in dollar bills. He would simply write a check or, more likely, enter a credit in the businessman’s bank account for $100,000. Either way, money has been created by the simple entry in a ledger.

Implausible as that might seem, it was a reality that everyone would accept, even if they were unaware of its audacity. The businessman would go out and spend the money, writing checks on his new account, and everyone would honor their value. The creation of new money, thus, was really based on bank-created debt.

This concept is what baffled and outraged so many critics of the money system. Money ought to be “real,” they insisted. It should be based on something tangible from the past, accumulated wealth like gold, not on a banker’s hunch about the future.

How could such a system possibly work? Why didn’t it collapse and produce social disaster? The short, simple explanation was: trust. People trusted the banks…They believed, perhaps not even knowing the actual mechanics, that bankers would use this magic prudently. Banks would make sound loans that would be repaid, and they would always keep enough money on hand so that any individual depositor could always withdraw his when he needed it. pp. 59-60

Clearly, the trust in banks described by Grieder above has been undermined due to the financialization of the economy, not to mention the bailouts. David Graeber sums up the three school of banking in the New York Review of Books:

Economists, for obvious reasons, can’t be completely oblivious to the role of banks, but they have spent much of the twentieth century arguing about what actually happens when someone applies for a loan.

One school insists that banks transfer existing funds from their reserves, another that they produce new money, but only on the basis of a multiplier effect (so that your car loan can still be seen as ultimately rooted in some retired grandmother’s pension fund). Only a minority—mostly heterodox economists, post-Keynesians, and modern money theorists—uphold what is called the “credit creation theory of banking”: that bankers simply wave a magic wand and make the money appear, secure in the confidence that even if they hand a client a credit for $1 million, ultimately the recipient will put it back in the bank again, so that, across the system as a whole, credits and debts will cancel out. Rather than loans being based in deposits, in this view, deposits themselves were the result of loans.

The one thing it never seemed to occur to anyone to do was to get a job at a bank, and find out what actually happens when someone asks to borrow money. In 2014 a German economist named Richard Werner did exactly that, and discovered that, in fact, loan officers do not check their existing funds, reserves, or anything else. They simply create money out of thin air, or, as he preferred to put it, “fairy dust.”

…Before long, the Bank of England (the British equivalent of the Federal Reserve, whose economists are most free to speak their minds since they are not formally part of the government) rolled out an elaborate official report called “Money Creation in the Modern Economy,” replete with videos and animations, making the same point: existing economics textbooks, and particularly the reigning monetarist orthodoxy, are wrong. The heterodox economists are right. Private banks create money.

Central banks like the Bank of England create money as well, but monetarists are entirely wrong to insist that their proper function is to control the money supply. In fact, central banks do not in any sense control the money supply; their main function is to set the interest rate—to determine how much private banks can charge for the money they create. Almost all public debate on these subjects is therefore based on false premises. For example, if what the Bank of England was saying were true, government borrowing didn’t divert funds from the private sector; it created entirely new money that had not existed before.

Why is this important? It’s important because it shows that if private borrowing creates new money, then it is excessive levels of private borrowing that will expand the money supply. Consequently, debt defaults will contract the money supply. So there’s more to macroeconomic stability than merely “government money printing.”

All this is a prelude to two very important points:

1.) Private debt and public debt are two very different things. It is private, not public debt which is a cause for alarm.

And

2.) A crucial distinction must be made between the “real” economy of providing goods and services, and the banking/financial sector of the economy which makes money from debt and interest.

A lot of the mistakes in understanding the modern economy have come from just those two misunderstandings. But without understanding these facts, you cannot understand what is really going on in the economy, and you’ll be making the same mistakes as all those armchair commentators worrying about “excessive government debt,” or hyperinflation “any day now.”

A Finance Primer

“Just as the rich rule the poor, so the borrower is servant to the lender.”
PROVERBS 22:7 (NLT)

“Neither a borrower nor a lender be; / For loan oft loses both itself and friend.”
HAMLET, Act 1, Scene 3

I’m not going to try and explain all the bailouts, even if I pretended I knew exactly what is going on. There are others who are doing that.

But I would like to make some important points about finance in general, and hopefully make it a bit more clear. I hope people find this “explain like I’m five” somewhat useful.

From a very, very big picture perspective, haute finance is the creation and propagation of financial instruments. That’s it. The swapping and trading of these financial instruments constitutes the main activity of finance.

In the jargon of finance, these instruments are called securities. Both stocks and bonds are examples of securities, but there are many, many more.

More broadly, you can think of these as legally binding claims to some kind of resource. That could be real, tangible resource, or something less tangible like a loan or income stream.

The “legally binding” thing is important. A security has to hold up in court. You have to be able to take people to court and have the claim hold up in court for a security to mean anything. Hence the term “secure.” Securities are regulated by the Securities and Exchange Commission (SEC) in the United States.

The term “security” is interesting in itself. It is intended to inspire confidence like so many other financial terms like trust and credit. It is intended to express something fundamentally safe and sound, coming from the Latin securitas, meaning “free from care.” That is, no need to worry—your money is being kept safe.

Securities have two important characteristics: they are fungible, which means they can be turned into other things. The most obvious example is turning stocks or bonds into cash. You can also do the reverse: turn cash into stocks or bonds by buying them from a broker. Securities are protean by design.

How easily one thing can be converted into another thing is called its liquidity in financial jargon. Liquid assets can be converted into other things very easily. Illiquid assents can’t be. For example, I can’t convert stocks directly into bonds. And I can’t change from real estate to stocks unless I sell my real estate first (or find someone willing to exchange one for the other).

Cash (i.e. money, banknotes, or currency) is the ultimate liquid asset, in that it can be converted into pretty much everything else very easily—stocks, bonds, real estate, insurance policies, commodities, what have you.

The other important property of securities is that they are negotiable. Negotiability means that they can be easily passed along from person to person, with ownership passing to each person in the chain. I can pass along a security to you, or the guy over there, or the government, with ownership to the underlying claim passing to each entity in turn. That is, negotiable instruments do not have your name on them; they are not tied to you as a person. Ownership is always temporary and at-will.

Basically, if it can be traded, it’s negotiable.

That, then, is a security: a fungible, negotiable financial instrument that conveys ownership rights or creditor rights (an IOU). It can pass from owner to owner without limit and can be converted into cash. It’s an investment as either an owner or a creditor in which the investor hopes to make a profit. If it can easily be converted into cash, it is called a marketable security in the jargon.

If I buy a security, I give up the use of my money for a specified period of time. Why would I do that? I do it in the hope of getting more money back in the future. The longer I give up the use of my money, the more I will expect back in the future, generally speaking.

[Tangentially, I would argue that the concept of investing money now, in order to get back more money later (whether as profit or interest or whatever) is the core, animating idea behind capitalism.]

So when you hear the word “security,” think “financial instrument designed to transfer debt (or ownership claims).” And you will hear the term used all the time in financial jargon. What you should ask yourself when you hear the term is, “from whom to whom?” And why.

Securities are of just two major types: debt and equity; that is, ownership or loanership (or a mixture of the two). Equity is just a fancy term for ownership. Equity is an ownership claim on some real underlying resource.

The principle example of an equity security is stock. Businesses issue stocks to raise money from the public. When you buy a company’s stock, you buy a small slice of ownership in the company. It is an ownership claim. In the jargon, you have equity in the company.

Equity is typically ranked. In other words, some ownership claims take precedent over others. This is determined by a country’s laws.

Stocks are issued by companies, typically very big companies. The biggest companies of all are the corporations listed on the various stock exchanges we always hear about: The Dow Jones Industrial Index, the Standard and Poors (S & P) 500, the NASDAQ (National Association of Securities Dealers Automated Quotations), and so on. Different countries list their companies on their own stock exchange. Governments do not issue stock; you cannot purchase equity in the United States or Japan, for example. This is because governments have the ability to tax, which companies to not have.

The value of all the stocks on the index in the aggregate determines whether the index of that particular stock market is “up” or “down.” Theoretically, the value of the stock is determined by the underlying value of the company issuing it—how profitable it is, expectation of future growth, etc. (in practice, however, this is often rather different).

A debt security is simply an IOU.

An IOU expresses a debtor/creditor relationship. The holder of the IOU is the creditor. The issuer of the IOU is the debtor. In financial jargon, the person owning the security is called the bearer (or payee), and the entity issuing the security is called the maker, payer, or most commonly, the issuer.

So an IOU is simply a way of raising money. Typically, an IOU comes with the promise that more money will be repaid in the future over and above the original amount. That is why people buy them, after all—the expectation of getting more money back in the future. In the financial jargon, the original amount of money loaned is called the principal. The additional money you get back is the interest. The length of time of the loan is the maturity. That could be anywhere from overnight to thirty years, and everything in between. The total amount you receive from the bond purchase is called the yield.

In a pettifogging sense, there doesn’t have to be interest. I could loan you 50 bucks, and you pay me back 50 bucks. But since I’m giving up the use of that money for a specified period of time, the thought is that I should be compensated for the opportunity cost of not having that money available to me right now. Hence the interest. It’s basically a motivator for the loan. Its the cost of renting money.

The likelihood you will ever see that future cash is what determines the interest rate on the IOU, broadly speaking. If you are almost certain you will be paid back: low interest rate. If you are pretty uncertain you will ever get paid back: high interest rate. Loan to the neighborhood millionaire: low interest rate. Loan to your unemployed deadbeat brother-in-law: high interest rate. And so on.

The basic idea is that you need additional motivation in order to make a risky loan. The higher the risk, the higher the (potential) reward. If the debtor welshes on paying back the loan, it is called a default. If they don’t pay back anything, it is a full default, otherwise if they pay back a portion it is a partial default. In either case, the bond holder is said to have taken a haircut (!!).

For every debtor, there is an equivalent creditor. That’s something to keep in mind, and it will put you ahead of 99 percent of the galaxy brain armchair commenters on the internet. When you hear about the debt—any debt—don’t just think about the debt, think about who the creditor is, because there cannot be one without the other. It’s simply impossible. In order for their to be debt, there has to be a loan, and in order for a loan to exist, there has to be to somebody, somewhere, who loaned the money in the first place.

The principle example of a debt security is a bond. It is the most common debt instrument. A bond is an IOU. Unlike stocks, bonds are issued by both governments and businesses. Like stocks, they are a way of raising money. As noted above, typically in order to motivate people to lend to it, the entity issuing the bond pays it back with interest. The perception of reliability in paying back the bond determines what that interest rate is. They are typically issued for a fixed term, which is a specified amount of time for the money and the interest to be paid back.

One very common type of security is a treasury security. As the name implies this is an IOU issued by the treasury department of a government. The treasury borrows money, and pays it back in a certain amount of time. It is a government IOU. You become a creditor on the government by buying a treasury security.

You may be wondering what the difference is between a treasury security and a government bond, or whether they are, in fact, the same thing. Really, they’re different names for the same thing. Again, the financial jargon here makes it less clear. But typically, the IOUs issued by the government are classified according to how long the loan to the government is for.

The shortest-term loans are called “T-bills” (‘T’ for “treasury”) and are for only four weeks to a year. “T-notes” are for a longer period of time—between two and ten years. “T-bonds” (i.e. government bonds) are the longest term securities—thirty years—and pay interest annually. Investors use a combination of all three of these to manage money. Long-term bonds in the UK and some Commonwealth nations are commonly referred to as “gilts” because the original paper bonds issued had gold edges. Many early gilts had no maturity date; that is, they were perpetual.

Treasury securities are a way of taking money out of the system (i.e. “locking it up”) for a specified amount of time. How long it’s locked up for is the term of the security. Taxes, by contrast, are away of taking money out of the system permanently. That is, taxes are “unprinting money.”

The government buys and sells securities via its central bank to manipulate the amount of money floating around in the system, and hence to manipulate the overall interest rate (i.e. the price of money). That’s a big topic which we’ll leave alone for now.

Earlier I said that bonds are a way to raise money from the public. In the case of government this seems prima facie true, but it is not the actually the case; the government is the sole issuer of currency and does not need to raise money in order to spend. It is true, however, in the case of currency users like state and local governments, which do not issue their own currency. At the national level, then, governments issue bonds as 1.) safe havens to store money, and 2.) a way to transfer debt liabilities between entities, especially the public and the private sector, but also between nations (typically via central banks).

Treasury securities are usually considered the safest assets to own by investors. That’s because, unlike private entities, the government has a printing press (or, more realistically, keystrokes). Consequently, the interest rate on treasury securities is typically quite low. The only concern with such securities is whether the money that the security is converted into will be worth more or less in the future, which is determined by whether there is inflation or deflation. That’s a topic for another time.

At the other end of the spectrum, bonds issued by entities with a very low likelihood of paying back the money are called junk bonds.

Securities are issued by entities (governments or businesses) typically through financial intermediaries (called brokers). In rare cases, they are issued directly to the public. Once they are released into the wild, they are then traded around all over the place from person to person, entity to entity, in what are termed secondary markets (because they are negotiable, remember).

The interest rate (yield) paid by the bonds is determined determined by the face value of the bond, regardless of the price the bond is traded for in secondary markets. This means that if bonds can be bought on the cheap, there is a large potential for profit.

If we had a Venn diagram, then, all of the T-notes, bills and bonds are all treasury securities, which fall into the larger category of securities, which includes both stocks and bonds. Into that larger circle of the Venn diagram of securities we would also place other things like options, promissory notes and bills of exchange, which I’m ignoring for now. Outside of it would be things like insurance policies or retirement accounts (IRAs or 401Ks), which hold securities but are not securities themselves—don’t worry too much about this distinction).

An ordinary person like you or me does not issue stocks or bonds they way governments and companies/corporations do. They do take out loans, however. Both individuals and households often have outstanding debts from loans. These are usually paid back over time from their income.

Another dyadic relationship is the one between assets and liabilities. For every liability there is a corresponding asset. In total, these sum to zero. From the perspective of the lender, for example, the loan is the asset, the thing the loan is for is the liability. For the debtor’s perspective, the thing they took out the loan for (a house, say) is their asset, and the loan is their liability. Again, one cannot exist without the other. That mirrors the creditor/debtor relationship.

A bank’s assets are all the money it is owed. It’s liabilities are the money it must pay out to others. A $1,000 loan to someone is an asset (as long as they are able to repay it). A check drawn on the same bank for $1,000 is a liability. Recall that banks also borrow from, and lend to, each other. A bank’s (or any company’s) assets must exceed its liabilities in the long term, otherwise it is insolvent. Because loans are typically paid back over time, a bank could be solvent, but still illiquid (i.e. not enough cash on hand for current use). In such cases, central banks are designed to bridge the gap.

Thus, financial instruments (securities) are ultimately ways of transferring debt and ownership about. Debt and ownership are saleable commodities, just like aluminum or pork bellies. That’s the basic, underlying concept of finance. The sheer numbers and complexity of these exchanges is what makes it mind-boggling to the average person on the street, but hopefully the above explanation may help you to understand the basics a little better.

The big, big picture problem with the financial system is that the steps from the original borrower and the original lender (or from the original owner to the current owner) are so confusing and convoluted thanks to all the secondary markets and wheeling-dealing going on around the world that the system resembles nothing so much as the proverbial Gordian Knot—unknowable and unwindable. So someone taking out a loan from a bank to buy a house in Michigan, for example, may find that his mortgage repayments are funding a pension system in Lithuania, or some such.

TRANSFERRING RISK

Insurance is not a security; it is a way of transferring risk.

Options are also ways of transferring risk, but the are securities. An option is a right (but not an obligation) to buy or sell an asset (a security or commodity) at a specified price (called the strike price) at some point in the future. If the option is for buying, it is a call option. If it is for selling, it is a put option.

Basically, these are bets on whether the underlying asset will go up or down in price.

From a call perspective, if you expect the price to drop, you are short, if you expect it to go up you are long. From a put option perspective, the reverse is true. Often times options contracts are written on securities that the options trader does not actually own.

In general parlance, to short something means that you think it will go down in price or become less valuable (“shorting a currency”). To go long means that you expect it to go up in price or become more valuable.

If the value of an asset is dependent upon what the market does, it is considered to be a speculative asset. Speculation in financial jargon is just a fancy term for gambling.

Here’s a good explanation of futures contracts courtesy of a Reddit user:

[F]utures contracts are essentially pre-ordering something, hoping it sells out, and then scalping it on eBay, but on a far larger scale. You have a contract agreeing that you’ll buy something at a certain price (the settlement price) at a certain date (the settlement date). Let’s say that you make orange juice, and I want to buy orange juice. I offer to pay you $3 for a gallon of orange juice that I’ll pick up next Saturday. When Saturday comes by and I pick up the orange juice, if the price goes up to $5 a gallon, you still have to honor our contract and give it to me. I then can sell it for a $2 profit. If the price had gone down to $2 a gallon, I’d be left with a $1 loss.

IS MONEY A SECURITY?

Is money (cash) a security? Well, it depends on how you look at it. Most definitions would say no; money is what you use to buy securities. But I think it is possible to see money as another kind of security.

There is a good historical argument that paper money began in China as circulating IOUs from prominent merchants in place of cumbersome iron coins. These IOUs then started to be passed from person to person within the province. That is, they were fungible, since they could be converted into other things (real goods, securities, real estate, etc.), and they were negotiable, in that they could pass from person to person. Eventually, the government got in on the act and began issuing their own IOUs which could be used to pay taxes. Often these had an expiration date (like bonds, but unlike modern currencies). These became a form of portable, anonymous wealth based on paper.

Thus, money is the government’s liability. What backs it is the wealth of the nation issuing it, along with its laws and institutions. They are government IOUs in the sense that you can always settle your debts to the government with them. The government also declares them to be legal tender for the settlement of private domestic debts as well. Since everyone needs them to pay taxes, fees and fines, they become broadly accepted as a means of exchange and payment in the wider society.

The way that MMT economists often express this is that money is circulating tax credits. The money that is in circulation—in people’s bank accounts and wallets and so on—are tax credits that have not been redeemed yet.

On the other hand, securities are often distinguished from cash in that they are not perfectly liquid, and they can expressed in terms of currency. By contrast, the value of currency can only be expressed in terms of itself. Securities also typically provide some sort of return, although this is not absolutely necessary—you can have a zero (or even negative) interest bond, for example.

But cash by its nature does not provide any sort of return. If you put it in a bank account it does, but then the bank account is the security, not the money itself. That is, a security is typically considered to be an investment, whereas cash is clearly not an investment. Also, in the U.S. at least, money is legally exempted from being a security. See: https://economics.stackexchange.com/questions/14772/is-cashcurrency-a-security-and-a-debt-instrument

Nevertheless, in terms of exchanging value and being an IOU issued by the government, I think it’s safe to think of money as another type of security for now, albeit a very special and unusual one.

Money is exchanged for securities; securities are changed back into more money, that money is once again exchanged for securities (or securities are simply rolled over); so goes the pulsating heartbeat of finance all over the planet. That’s really what it is at heart—swapping securities all over the place. And everyone’s doing it—governments, businesses, individuals, and so on. It’s basically debt-swapping on a global scale.

So that’s haute finance in a nutshell: everyone is trying to at least preserve their existing wealth and, preferably, to increase it relative to everyone else. But again, the question is: who’s doing the swapping, what for, and what is ultimately lying beneath it all. That’s what you should be asking yourself whenever you hear about all this financial stuff in the press.

Covid-19: The Good and The Bad

There’s a lot of talk about whether the Covid-19 pandemic will lead to a better world or a worse one. I’ve seen plenty of opinions on both sides. No one knows for sure, but let’s take a look at some of the evidence.

Good: Health care tied to your job is widely seen as a disaster. This system was absolutely cruel, insane and counterproductive from the start; a historical accident due to temporary World War Two wage restrictions and previously high unionization rates.

Now, with unemployment soaring while a pandemic is ravaging the country, the sheer insanity of tying health care access to your job is being seen as the abomination it is by increasing numbers of people. I don’t see how anyone besides anti-government zealots and outright social Darwinists can defend it anymore.

Surveys have shown that a vast majority of Democrats and Independents, and even a slight majority of Republicans favor some sort single-payer health care system not tied to employment. It seem like that is finally winning the intellectual argument. Will this finally be the impetus that makes it inevitable? If not, what will it take???

Yet the Democratic Party has put their thumb on the scale for a candidate who has expressly said he would veto Medicare for All even if it somehow got through Congress. It pulled out all the stops to prevent the only candidate running on a health care reform platform from gaining the nomination for president. But how many times can it do this in the face of widespread public support for the policy? How long can the “good cop, bad cop” two party duopoly hold off this desperately needed reform in order to keep the money spigot from health care profiteers flowing? How long can the U.S. hold out being the only rich nation on earth that lets thousands of its citizens die or go bankrupt every year due to health care costs? Forever???

In addition, the federal government is claiming that it will pay health care providers directly for Covid-19 treatment. The question will increasingly be: why stop there? Why keep people from going broke over Covid-19 virus treatment, but allow them go broke if they get anything else like cancer, or Lyme disease, or some other unexpected malady? Hopefully more and more people will begin asking this question.


Good: this will change how a generation thinks about politics.
The generation that came of age during the Great Depression had no time for the bootstraps myth or lectures about “personal responsibility” from the wealthy and their toadies. They knew how unpredictable and fickle unregulated markets are. They saw with their own eyes people who worked all their lives going hungry, losing their homes and suffering. So will this generation.

It’s a cliche about the Baby Boom generation, but in my experience largely true: they grew up in a time of unprecedented affluence thanks to a system managed by government that they largely dismantled. They repeatedly voted for their own selfish interests above the national good. They pulled the prosperity ladder up after themselves and left future generations to drown. They outsourced their thinking to Fox News and wholly bought into the world view espoused by billionaire-funded right-wing think tanks. Having achieved prosperity largely thanks to hidden socialism, they left future generations to deal with capitalism with the gloves off.

Every toxic idea in the country right now is sustained by the older generation. It’s not even close. Look at the age breakdown of those who voted for Biden versus those who voted for Bernie. Look at where the majority of Trump’s support is. It’s heavily concentrated in the over-50 age cohort. And the older you go, the stronger the support. OK Boomer.

https://twitter.com/floridamanic/status/1248681990016073728

And the idea that the younger generation will somehow morph into conservative Republicans as they get older and amass wealth? Forget about it. First of all, they’re not going to amass wealth. That was clear even before Great Depression conditions, thanks to stagnant wages and high education costs. And the healthcare industry will siphon off a large chunk of that wealth, making sure that it doesn’t trickle down to younger generations through inheritance (unless you’re in the top ten percent). The financial industry will take much of the rest.

Plus, a lot of those people are going to be downwardly mobile as they get older, not upwardly moble. I know I am. I’ve made less and less money with each job I’ve held in the last decade, rather than more, and I suspect I’m not alone. Besides, why would someone who believes that health care is a basic human right suddenly change their views because they turn 40, have kids or buy a house? It doesn’t make any sense.

The Great Depression and WWII changed the way we talked about the economy: left to its own devices it would wreak havoc on people’s lives (massive unemployment), “heedless self-interest [is] bad economics” (FDR), and governments can effectively pursue the public good (defeat fascism, provide economic security). As the memories of that era faded along with the social solidarity and confidence in collective action that it had fostered, another vernacular took over: “there is no such thing as society” (Thatcher) – you get what you pay for, government is just another special interest group.

Another opportunity for a long-needed fundamental shift in the economic vernacular is now unfolding. COVID-19, along with climate change, could be the equivalent of the Great Depression and WWII in forcing a sea change in economic thinking and policy.

The Coming battle for the Covid-19 Narrative (VoxEU)

I’m not a big fan of historical determinist literature like “The Fourth Turning” that are often touted by futurists. But a valid point that books like that make is that generations are shaped by the historical circumstances they have experienced. We’ve had a generation that has been shaped by terrorism, endless foreign wars in the Middle East, blatant government corruption, decreasing living standards, a financial panic that devastated the global economy, staggering levels of inequality, unaffordable housing and rampant homelessness, and now a global economic depression caused by a pandemic worsened by forty years of anti-government neoliberalism. They are angry and desperate. They’ve seen the world disintegrate in front of their eyes. They’ve endured extreme suffering. Their hopes and dreams have been dashed forever. There’s no way they are going to vote for the status quo when they gain the reins of power (assuming voting is allowed, however, see below).

Bad: the end of democratic elections. I live in Wisconsin. Perhaps you’ve heard about what happened here this past Tuesday. I’ve seen reports on it all over the world:

Wisconsin is the first state in three weeks to hold a primary with in-person voting since stay-at-home orders swept the nation amid the coronavirus pandemic. The Badger state imposed its own lockdown on 25 March. All other states have postponed their primary season elections or moved entirely to postal votes while the country remains in the throes of its health emergency.

Wisconsin has recorded more than 2,500 coronavirus cases and 92 deaths.

On the eve of the election, Wisconsin’s Supreme Court blocked Governor Tony Evers’s last-minute executive order to suspend in-person voting.”No Wisconsinite should ever have to choose between exercising their constitutional right to vote and being safe, secure, and healthy,” the governor said.

But the Republican-controlled legislature immediately took Mr Evers – a Democrat – to the state Supreme Court, where conservatives hold a 4-2 majority. That same day, the US Supreme Court intervened, barring an extension of postal voting. Pollsters expected a lower turnout on Tuesday to benefit the conservative judicial candidate – who was endorsed by the president – for the state’s highest court.

https://www.bbc.com/news/world-us-canada-52208440

This past Tuesday I didn’t vote. I couldn’t vote. Normally, I would walk to the pavilion in the park next to my house to vote. When I go after work (because we don’t get time off to vote in the U.S.) I often to have to wait in line (queue), but it’s not too extreme. Even in busy election, it usually takes less than half an hour.

This past election, polling stations in the city of Milwaukee went from 180 to 5. Five, in a city of over 500,000 people. And people had to maintain six feet of distance while waiting in line. If everyone eligible to vote had done so, lines would have stretched to the Illinois border, and polls would still be open a week later.

Waiting in line for Wisconsin voting from gifs

And the usual workaround of mail-in or absentee voting didn’t work. Personally, I don’t even know how to do any of these things. I guess I’m supposed to request a ballot weeks ahead of time. I know I don’t get one automatically. But how was I to know that any of this was going to happen?

And from what I’ve been hearing, even the people who requested mail-in ballots didn’t get them in many cases. And attempts to extend the deadline for mail-in votes were quashed by the state supreme court and upheld by the national supreme court.

[T]he Badger State was turned into a civic punchline by its Republican legislature, which used the COVID crisis for a power grab. With the country in the grip of a deadly pandemic and the state already under a stay-at-home order, Wisconsin’s lawmakers refused to reschedule the primary, essentially smothering the turnout for the sole purpose of re-electing a single key judge to the state supreme court.

Not everyone thought this was prudent. Gov. Tony Evers, a Democrat, sought to convert the primary to a vote-by-mail format and extend balloting until May 19, which would keep people from breathing on each other at polling stations.

So the GOP legislature went to court. And after the U.S. Supreme Court struck down a lower court opinion that had changed the date and extended the absentee ballot deadline — with Trump’s appointments casting the deciding votes, mandating that the show go on — the State of Wisconsin put the lives of their voters at risk and held the primary as scheduled.

You probably saw what happened next: Workers at hundreds of polling stations were no-shows, and lines became intolerable — and more dangerous — in the most urban venues. Milwaukee, which has 330,000 voters and the state’s largest minority population, opened just 5 of its 180 polling sites, with wait times averaging 2 hours. Green Bay had only 2 polling places, downsized from 31.

Welcome to Wisconsin, where democracy goes to die (NJ.com)

It’s disenfranchisement of voters on scale beyond that of even the most corrupt third-world kleptocracy. And it happened in America, the supposed “leader of the free world.” And it was officially sanctioned by the Supreme court. Imagine if this had happened in Russia or Venezuela.

Trump Adviser Caught on Tape Discussing ‘Aggressive’ Voter Suppression in 2020 (Rolling Stone)

This may very well be the beginning of the end of elections in the United States. There’s already massive disenfrahisement due to the disproportionate influence rural areas have over urban ones, and outdated institutions like the electoral college. And even though Democrats won the most votes for the Wisconsin state Senate, thanks to gerrymandering, the Republicans hold a supermajority despite receiving less votes overall.

Bad: Increasing government control over our movements. I see Edward Snowden is warning about governments using the pandemic to build “an architecture of oppression.” I think that’s a valid concern. The excuse that we need to monitor every last citizen 24 hours a day in order to ensure public health may lead to widespread monitoring of people’s movements to an unprecedented degree. Chinese-style monitoring of the citizenry may become the norm the world over. That should give us serious pause.

Can you imagine a world where you won’t even be allowed to leave your house without a special permission slip from government, or where you are forbidden from having a second person in the car with you when you go for a drive on penalty of a fine? Well that’s the reality right now in Spain. If you had told me that this would happen before the pandemic, I would have thought you were crazy or paranoid. Now it’s real. In Italy drones are taking people’s temperature and issuing fines.

Italy was the first Western democracy to enter a national lockdown in the face of a disease that has officially killed more than 18,000 in the Mediterranean country and nearly 100,000 worldwide. It is now one of several European nations using police drones to an extent that would have seemed unimaginable — and almost certainly unacceptable — just a month ago.

And now there’s talk of people having to carry around some sort of paper around validating that you were vaccinated or had already had Covid-19 in order to travel or to attend certain public events in the future. That’s a scary world to live in. It’s also ripe for abuse. What else might those papers say about who can travel and who can go outside, I wonder? Will we be greeted by that sinister phrase from the days of the Iron Curtian, “papers please” everywhere we go now? Will this be just an accepted part of everyday life around the world?

I’ve even heard talk of people’s home thermostats and cell phones monitoring their body temperature at all times and relaying that information to the government. Again, this will be portrayed as necessary, and it’s hard to argue that it isn’t necessary right now. But at what cost do we superempower governments to do things like this? And what is the cost if we don’t?

Good: increasing labor unrest among the lowest-paid tier. There’s a lot of unrest among workers in the country who are deemed to be “essential” and yet not given the necessary protective gear to do their jobs safely. That is, some of the lowest-paid workers in the country are risking their lives and the lives of others (many live with older adults, for example) for a pittance.

This is resulting in widespread outrage, as it should. Thankfully, some workers are fighting back.

Across the United States, we are seeing workers walk off the job in wildcat strikes in response to the employers’ failure either to shut down the workplace or to make it safe. The strikes are too few to call them a strike wave, but we should be aware that on their own initiative workers are taking what practically is the most powerful action they can: withdrawing their labour. The strikes are taking place in both the private and public sector, in both unionised and non-union workplaces large and small.

Wildcat strikes across the US as pandemic spreads (Red Flag)

It’s disorganized now, but after taking everything dished out by the rich and corporations for years, it looks like workers may finally be fighting back. Just being told to “get a better job” rings hollow when there are no jobs to be had. Minimum wages are not enough to risk the lives of your parents and elders.

It’s become clear that things like mandatory paid sick leave are necessary for the good of everyone, not just the workers themselves, and that private corporations won’t provide this stuff unless compelled to do so by the state. Libertarian notions of “individual contract negotiation” by workers are increasingly seen as the bullshit they are.

Bad: a surfeit of labor leading to lower wages and more inequality. When unemployment is sky-high, it exerts downward pressure on wages.

After the Black Death, wages and living standards went up due to the shortage of necessary labor. In this crisis, by contrast, widespread layoffs are reducing the need for labor, while the number of people removed from the labor force through mortality is insignificant. Already in the United States, sixteen million people have been “officially” removed from the labor force (likely an undercount), against a total of two million deaths in the absolute worst-case scenario–deaths concentrated among those already out of the labor force. The official death toll right now is “only” about 100,000 worldwide.

That will strengthen, not weaken the hand of employers. That’s not good.

And employers are already becoming more brutal and thuggish. The leaked Amazon memo demonstrated the degree to which the fortunes of plutocratic billionaires are predicated on suppressing worker wages and unions, meaning that, yes, it is a zero-sum game.

There is a very real concern that wages will actually fall across the board in the years to come, exacerbating already unprecedented levels of inequality. A lot of economic forecasting I’ve read is calling for depressed economic activity for an entire decade!

We’re approaching French Revolution levels of inequality across the entire planet. How much more can we take before sometime, somewhere, we have a Storm the Bastille moment???

Bad: elimination of small and local business. It’s no secret that small and local businesses will bear the brunt of the shutdowns and be a disproportionate number of the bankruptcies that result. And large national businesses like Amazon will be the major beneficiaries. Every forecast I’ve seen has shown this. This will make the economy even more concentrated and monopolistic. It will empower capitalist oligarchs even more. The only silver lining might be that the old “anyone can start their own business” justification for employer abuse will ring increasingly hollow. But it’s certainly not a good thing overall.

Bad: increasingly authoritarian governments worldwide. This trend started well before the outbreak, of course. But there is a very real fear that the outbreak will accelerate the worldwide embrace of authoritarian and quasi-fascist governments that has going on since perhaps 2012.

This is due to the human herd instinct to rally around leaders in a time of crisis, no matter how bad or incompetent those leaders might be. From that standpoint, the crisis is actually a boon to bad and incompetent leaders. We can see this with approval ratings for Trump, for example (although they’ve recently dipped slightly).

Hungary seems to be the canary in the coal mine. Viktor Orban has passed what amounts to an Enabling Act using the outbreak as a sort of Reichstag fire. But in the United States as well, all sorts of institutions are being sidelined and disabled using the pandemic as a convenient distraction, including oversight of the vast sums money being distributed to corporations and the financial sector. The rush to embrace authoritarian and fascist leaders during the Great Depression is often cited as an example of this trend–Mussolini, Hitler, Franco, etc.

Another tactic empowering authoritarians is using the virus to scapegoat already marginalized groups in order to gain popularity:

Bad: scapegoating and xenophobia. Already there is a coordinated and concentrated effect to deflect blame from government incompetence to other parties. Who those parties are varies depending on the enemies list of the particular authoritarian leader.

Already the Republican Party in the U.S. is seeking to blame the Chinese and stoke racist fears to rile up their base. An example is a recent anti-Democrat attack ad:

At one point the ad flashes to an image of former Washington Gov. Gary Locke (D), the Seattle-born Chinese American who also served as former President Obama’s ambassador to China.

Democrats said the image, which features Locke standing near Chinese flags, is indistinguishable from the other images of Chinese officials and was included either because Locke looks Chinese or in an effort to stoke suspicion around him because of his ethnicity.

Democrats say Trump campaign ad singles out Locke over race (The Hill)

Combine that with the pivot towards referring to Covid-19 as “the Chinese virus,” or “the Wuhan virus” among Republicans. It’s clearly a deliberate messaging effort.

And I’ve been seeing a sudden and dramatic uptick of extremely virulent anti-Chinese rhetoric online in places like Reddit, which is replete with various bots, trolls, and government influencers. It’s almost like we are being primed for something…

Good: support for UBI. Support for a universal basic income has gone up since the crisis began. I’ve seen reports that Spain is planning to roll out a permanent UBI. I’d be very surprised if Spain ends up being the first country to actually do this for real, but we’ll see. I know that Switzerland, the Netherlands and Finland have all flirted with the idea in the past but never had the guts to pull the trigger. Will they embrace it now?

But if a country does manage to successfully implement UBI somewhere, it proves that it is possible. Right now, the examples pointed to are all partial implementations that are nowhere near the scale and ambition of the most serious UBI proposals that I’ve seen. But I’ll be skeptical until I see it.

Officials are still sorting out many of the details. There’s no concrete start date yet, though Calviño has said that the Spanish government aims to roll out the new program “as soon as possible.” It’s also unclear what the monthly sum will be, and how it will be determined. Calviño hinted that some families might receive more or less “depending on their circumstances,” which sounds like some sort of means-testing. It’s a massive undertaking, to say the least, and many wrinkles remained to be ironed. But make no mistake: this is a huge fucking deal.

Spain’s UBI Is A Wake-Up Call For Americans (Current Affairs)

Good: public outrage over bailouts. After 2008, there was a widespread narrative that the very people who were most responsible for the financial crisis had been bailed out by the government, while people the average person was left to fend for himself or herself, often losing their home in the process. This was oversimplified, of course, but true in many ways in a broad brush sense.

Now I’ve seen much the same narrative surrounding the current series of bailouts. Trillions for companies and CEOs, with nothing but crumbs for the millions of workers suddenly laid off from their jobs through no fault of their own. An easy to fill out one-page form to get billions in government loans, with crashed web sites and busy phone lines for those trying to claim money from an unemployment system that they’ve already paid into.

And this torches-and-pitchforks outrage is going to have political consequences down the line. How many times are the people going to allow trillions of dollars of what they’ve been gaslit into believing is their “taxpayer money” to be shuffled to Wall Street and CEOs, while rents can’t be paid and food pantries are overwhelmed with demand? Is this a situation of “Charlie Brown and Lucy with the football” forever? People who question this absurd system are going to become increasingly popular in the months ahead:

“Why does anybody ‘deserve,’ using your word, to get wiped out from a crisis created like this?” replied Wapner.

“Just be clear, like, who are we talking about?” said Palihapitiya, himself a billionaire. “A hedge fund that serves a bunch of billionaire family offices? Who cares? Let ’em get wiped out. Who cares? They don’t get to summer in the Hamptons? Who cares!”

After Wapner suggested it would be “immoral” to let any company get wiped out in the economic crisis, Palihapitiya responded that “on Main Street today, people are getting wiped out.”

“And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are,” said Palihapitiya. “Six million people just this week alone basically saying, ‘Holy mackerel, I don’t know how I’m going to make my own expenses for the next few weeks, days, months. So it’s happening today to individual Americans. And what we’ve done is disproportionately prop up and protect poor performing CEOs, companies, and boards. And you have to wash these people out.”

Palihapitiya’s interview quickly went viral on social media…

Venture Capitalist Stuns CNBC By Saying We Should Let Hedge Funds Fail (Truthout)

Of course last time much of that anger ended up being captured by a well-funded and organized Right via the so-called “Tea party” movement. Will the Left drop the ball and let that happen again? The coronation of Joe “nothing will fundamentally change” Biden by the DNC does not bode well for this.

Good: low oil prices and less air pollution. I’ve written about this before, so no need to say much more. BUT

Bad: less support for renewable energy. With oil prices low, the incentive for renewables will be decreased. Government support for renewable energy will also be curtailed.

…in the new Covid-19 era, renewables are expected to waffle in the coming years since many projects also need government backing and assistance to be viable. Most Western democracies are currently burning red ink to fund their economies to get throught the Covid-19 crisis, spiking what were already hefty debt levels.

Consequently, many countries will simply be unable to afford to back renewable projects, even as both solar and wind were becoming more cost efficient, achieving economies of scale, and were increasingly being included in many countries’ power development plans.

The loss of financial support for renewables will cause them to cede their growing market share back to oil and gas producers. This will be good news for global oil majors and their price war ravaged balance sheets, and bad news for the environment and activist investor causes.

OPEC Deal Won’t Revive Ravaged Oil Prices (Asia Times)

Local pandemic chalk art.

COVID-19 Thoughts 2

Thanks for all your kind words and comments. For right now, at least, I’m all right financially, so any extra money you have lying around, please donate however you can to those who are on the leading edge of this crisis. I’ll return to this at the end.

1. Work hours

I saw an amazing statistic recently: if the average U.S. worker stayed home for two solid months, they would still have worked the same number of hours as the average German worker.

As the kids say, I can’t even…

What are all those extra hours getting us?

Germany is a rich country, after all. Despite working less hours, they are still able to extend health care coverage to all of their citizens. There are no medical bankruptcies, either. And so, I ask again, what exactly are we getting for all those extra hours?

I think you can guess the answer. Someone is benefiting from those hours, but it’s not the workers themselves.

2. Neoliberal health care

The United states has struggled with procuring adequate medical supplies and having enough hospital beds. In this, we’re not unique—many counties around the world are also struggling.

But there is a critical difference. The difference is, the United States spends almost twenty percent of it’s GDP on health care. The most recent statistics I’ve seen are 17 percent.

Put another way, more than one out of every six dollars in our economy is spent on health care. Seventeen cents out of every dollar exchanged goes to health care. Here are the 2018 statistics from the OECD: https://www.statista.com/statistics/268826/health-expenditure-as-gdp-percentage-in-oecd-countries/

No other country is even close. The next highest is Switzerland with 12 percent. And the irony is, when it comes to public (i.e. “taxpayer”) money, the spending of the U.S. and Switzerland is pretty much the same!

How does health spending in the U.S. compare to other countries?

The above page also shows that we pay *double* the expenses per capita of the OECD average.

So we should theoretically be the *most* prepared country in the world, right. Right?

Where is all that extra money going?

Clearly it’s not going to more beds, more hospitals, more doctors, more equipment, cheaper drugs, or more patient care.

No, once again, I think you can see where this is going: the only beneficiaries are a tiny sliver of well-placed elites at the apex of the system who make out like bandits, not the people whom the system is hypothetically designed to serve. Because every necessary civic function in America is based on grift (see also: education, finance).

Related, see this tweet:

Recall my post about Neoliberalism: that only markets can allocate things efficiently is the core animating idea of Neoliberalism. And that competition drives efficiency. Well, we see how well that’s working now, don’t we? Case in point: rather than a coordinated, centralized virus response across the country, it appears that states are having to bid against each other for necessary supplies in the private market:

Only a portion of the medical supplies being flown in by the Federal Emergency Management Agency from overseas are being allotted to critical hotspots prioritized by the agency and the Department of Health and Human Services.

The rest will resupply the private market, where competition between states and the federal government has been a source of frustration for governors trying to shore up equipment to treat patients with coronavirus, according to multiple officials.

The Trump administration has touted the incoming flights, billing them and the equipment they’re bringing in as a reprieve to states desperate for supplies. But states are not the sole recipients of the equipment, according to a FEMA spokesperson. Supplies will also be sent to the private market, where states have been in fierce competition with each other to get hold of hard-to-come-by supplies.

Only some medical supplies from overseas going directly to coronavirus hotspots (CNN)

Supplying these private sector distributors seems quite problematic for at least a couple reasons, to put it mildly.

First is that there’s no clear mechanism to allocate these supplies on the basis of need based on a coherent national plan or framework. Secondly, it opens the door to massive profiteering. Even if companies aren’t technically gouging, that’s what bidding is. And you really can’t call this a legitimate private sector market if every state is having to bid with private companies to secure medical supplies during a historic national health emergency. The private sector rationale is also undermined if the US military has taken over a significant part of the fulfillment process.

You Need to Look at This (Talking Points Memo)

This is something states have been doing with businesses and jobs since the 1980’s under neoliberalism, after all. States would compete against one another as to who could offer businesses and corporations the most tax breaks, subsidies and giveaways, along with who could legally give the least support to workers in terms of benefits and salaries. The federal government, instead of putting a stop to this race to the bottom or at least ameliorating it, just let it rip in the name of market efficiency.

Now they’re competing for masks and ventilators to save lives. Because markets.

Let me see if I’ve got this right. The Federal government essentially forces states to bid against one another, because that’s how capitalism is supposed to work (?) and then, the winning state has what it has won in the bid confiscated by the Federal government so that the supplies can be distributed by private entities because that’s how capitalism is supposed to work (?). This would seem to make the communism of the USSR look like a model of efficiency.

Gee, I wonder why:

Republican fundraiser looks to cash in on coronavirus (Politico)

How much blood will Neoliberalism have on its hands? And will anyone remember?

3. Oil

I’m really stunned right now that the price of oil may go to $0.00. That is people may pay you to take the oil off their hands. You can pump the stuff out of the ground, but if no one wants to use it and there is no place to store it, it is ultimately useless. Maybe store it underground?

This oil glut is creating a scenario where some obscure grades of oil already have actually dropped below zero. For instance, a Wyoming crude grade was recently bid at negative 19 cents a barrel, Bloomberg News reported last week.

Shrinking storage capacity means that oil producers in some cases have to pay someone just to take the barrels off their hands.

“The price is trying to go to a level to force companies to keep the oil in the ground. If it has to go negative to incentivize that behavior, then it will,”…

Subzero oil prices are certainly bizarre, but there is some limited precedence in the energy market.

Last year, US natural gas prices in West Texas traded in negative territory for more than two weeks because there were not enough pipelines to carry the gas away, Reuters reported.

The world could soon run out of space to store oil. That may plunge prices below zero (CNN)

Imagine if I had predicted back in 2008-2009 that not only would we NOT be out of oil, but that it would be practically free. That is would be at historic lows. That you practically couldn’t give the stuff away.

You would have thought I was insane. Peak Oil people would have laughed in my face.

Imagine, then, if I had also predicted that in 2020 there would be another Great Depression; that it would be global in scope; that U.S. domestic GDP would be cut in half, that unemployment levels would go to 30 percent, and that barter would make a comeback.

Those very same people would have said, “Yes, of course that’s going to happen!” That’s exactly what a lot of the Peak Oil experts were predicting would happen, after all.

But of course, none of the above was caused by a lack of oil. Quite the opposite.

And, on top of that, two of the major oil producing countries have actually increased their production, against any reasonable semblance of logic. There is a lot of speculation as to why, but from what I can tell, no one is exactly sure. The most popular theory is that Russia and Saudi Arabia want to put U.S. shale and tight oil companies out of business. These companies have apparently been unprofitable since their inception.

No one, and I mean no one, predicted that.

Nobody predicted this level of demand destruction.

And this leads us to the perils of prediction.

This was a problem I had with a lot of the end-of-the-world scenarios all the way back when they started to become popular during the first decade of the twenty-first century. A lot of Peak Oil experts and pundits were so sure they knew exactly what was going to happen. There was no doubt in their minds whatsoever. They even published books and put up web sites telling us exactly how it was going to play out.

They were wrong, of course.

Oh, they weren’t wrong about the basics. Fossil fuels are a finite resource. They won’t last forever. The earth isn’t making more of them on any timeline that would be useful to us. And our entire industrial civilization is predicated on us using vast amounts of them, without which the modern industrial way of life would be impossible. But how it played out in the real world was not linear at all from the above facts. Wikipedia summarizes:

Since the oil price peaked about US$147.50 in summer 2008 many projects have been brought online, and domestic production increased from 2009 to 2015. In 2012 the oil production of the USA increased by 800,000 barrels, the highest ever recorded increase in one year since oil drilling began in 1859. The US had recently increased its oil drilling location as it has passed Saudi Arabia and Russia. Oil-bearing shales in North Dakota and Montana are producing increasing amounts of oil. As of April 2013, US crude production was at a more than 20-year high, since the shale gas and tight oil boom; production was near 7.2 million barrels per day. Peak production was 10,044 barrels per day in November 1970. A second, but lower peak of 9,627 barrels per day was achieved in April 2015.

Now all those shale oil and tight oil extractors are going bankrupt. How will this play out? Nobody knows. According to some estimates, we may be reaching Peak Oil demand. If that’s the case, then a collapse of industrial civilization would appear unlikely. If demand continues to stay at a lower level due to a combination of societal factors induced by the pandemic such as working from home and traveling less, along with governments getting serious about reducing carbon in the atmosphere, we may have averted a crisis, even if fossil fuels are inevitably set to decline.

Oil wells responsible for almost 1m barrels a day may have already been shut down because the price of oil is now lower than the cost of shipping it, according to US banking giant Goldman Sachs, with the number of wells growing “by the hour”. This is likely to “permanently alter the energy industry and its geopolitics” and “shift the debate around climate change”, said Jeffrey Currie, head of commodities at the bank.

Demand for oil has plummeted as the coronavirus locks down people in their homes and airplanes on runways. “The virus will bring forward peak demand for fossil fuels,” said Kingsmill Bond, at analysts Carbon Tracker. This latest cyclical oil shock is hitting an industry already heading towards a structural peak created by nations committing to net zero future emissions, he said.

“As for the impact of the virus on the timing [of peak demand], it depends of course on the severity,” he said. In 2018, Carbon Tracker estimated peak demand would come in 2023 but Bond said it was possible that the crisis has advanced this by three years. “That means that peak emissions was almost certainly 2019, and perhaps peak fossil fuels as well,” he said. “It will be touch and go if there can be another mini-peak in 2022, before the inexorable decline begins.”
While the oil companies themselves have long argued peak demand is too far off to put a number on, most observers thought it would happen this decade. Mark Lewis, head of climate change investment research at BNP Paribas, agreed the crises could bring it closer.

Will the coronavirus kill the oil industry and help save the climate? (Guardian)

4. Pollution

I’ve already pointed out the benefits of the economic shutdown in terms of less pollution. While reports of dolphins swimming in the canals Venice appear to be inaccurate, all over the world the lifiting of the pollution cloud has led to a glimpse of a world with less frivolous economic activity in the name of growth for growth’s sake.

I thought this was interesting:

Jalandhar Residents Wake up to View of Himalayan Range as COVID-19 Lockdown Leaves Air Cleaner (News18)

Leaving aside the deleterious effects of particles on lung health, what is a view of the Himalayas worth? What price can be put on it? Is it worth more than the economic activities that generate all the pollution that takes away the view produce?

That’s a clunky way of saying that pollution itself is a cost. Like Herman Daly said, there’s wealth and illth, and illth needs to subtracted from wealth to get a true accounting of the benefits of growth.

And the carbon reduction we should have been doing all along has been effected by the economic shutdown:

“I wouldn’t be shocked to see a 5% or more drop in carbon dioxide emissions this year, something not seen since the end of World War Two,” Jackson, a professor of Earth system science at Stanford University in California, told Reuters in an email.

“Neither the fall of the Soviet Union nor the various oil or savings and loan crises of the past 50 years are likely to have affected emissions the way this crisis is,” he said.

A U.N. report published in November found that emissions would have to start falling by an average of 7.6% per year to give the world a viable chance of limiting the rise in average global temperatures to 1.5C, the most ambitious Paris goal.

“I don’t see any way that this is good news except for proving that humans drive greenhouse gas emissions,” said Kristopher Karnauskas, associate professor at the Department of Atmospheric & Oceanic Sciences at the University of Colorado Boulder.

Coronavirus could trigger biggest fall in carbon emissions since World War Two (Reuters). So much for denying that humans have any effect on the atmosphere.

Of course,

…the improvements are for all the wrong reasons, tied to a world-shaking global health emergency that has infected more than 950,000 people – while shuttering factories, grounding airlines and forcing hundreds of millions of people to stay at home to slow the contagion. Experts warn that without structural change, the emissions declines caused by coronavirus could be short-lived and have little impact on the concentrations of carbon dioxide that have accumulated in the atmosphere over decades.

And:

The coronavirus pandemic is shutting down industrial activity and temporarily slashing air pollution levels around the world, satellite imagery from the European Space Agency shows.

One expert said the sudden shift represented the “largest scale experiment ever” in terms of the reduction of industrial emissions.

Readings from ESA’s Sentinel-5P satellite show that over the past six weeks, levels of nitrogen dioxide (NO2) over cities and industrial clusters in Asia and Europe were markedly lower than in the same period last year.

Paul Monks, professor of air pollution at the University of Leicester, predicted there will be important lessons to learn. “We are now, inadvertently, conducting the largest-scale experiment ever seen,” he said. “Are we looking at what we might see in the future if we can move to a low-carbon economy? Not to denigrate the loss of life, but this might give us some hope from something terrible. To see what can be achieved.”

Monks, the former chair of the UK government’s science advisory committee on air quality, said that a reduction in air pollution could bring some health benefits, though they were unlikely to offset loss of life from the disease.

“It seems entirely probable that a reduction in air pollution will be beneficial to people in susceptible categories, for example some asthma sufferers,” he said.

“It could reduce the spread of disease. A high level of air pollution exacerbates viral uptake because it inflames and lowers immunity.” Agriculture could also get a boost because pollution stunts plant growth, he added…

Road traffic accounts for about 80% of nitrogen oxide emissions in the UK, according to Monk. For the average diesel car, each kilometre not driven avoids 52 milligrammes of the pollutant entering the air.

“What I think will come out of this is a realisation – because we are forced to – that there is considerable potential to change working practices and lifestyles. This challenges us in the future to think, do we really need to drive our car there or burn fuel for that,” said Monk.

Recall item #1 above, Americans could stay home for two months and still work the same number of hours per year as the averge German–Germany being a very rich country. Of course, the Trump administration is using the crisis as an excuse to roll back environmental protections.

If there’s any future human civilization, they’ll be able to detect this pandemic in the ice cores. Speaking of which, an interesting article came out on the BBC showing that we can detect past historical events using ice cores:

Lead and silver are often mined together and in this period, mines in the Peak District and in Cumbria were among the most productive in Europe. Lead had many uses in this time, from water pipes to church roofs to stained glass windows. But production of the metal was clearly linked to political events according to the authors of this latest research.

The researchers were able to match the physical records from the ice with the written tax records of lead and silver production in England.

“In the 1169-70 period, there was a major disagreement between Henry II and Thomas Beckett and that clash manifested itself by the church refusing to work with Henry – and you actually see a fall in that production that year,” said Prof Christopher Loveluck, from Nottingham University.

Excommunicated by the Pope in the wake of the murder, Henry’s attempt at reconciliation is detailed in the ice core. “To get himself out of jail with the Pope, Henry promised to endow and build a lot of major monastic institutions very, very quickly,” said Prof Loveluck. “And of course, massive amounts of lead were used for roofing of these major monastic complexes. Lead production rapidly expanded as Henry tried to atone for his misdemeanours against the Church.”

The researchers say their data is also clear enough to show the clear connections between lead production rising and falling during times of war and between the reigns of different kings in this period between 1170 and 1220.

Thomas Becket: Alpine ice sheds light on medieval murder (BBC)

5. What Socialism is Not

I’ve seen a lot of memes arguing that the checks from the government are in some way socialism.

The government sending people money is not socialism.

It plays into this idea in America that any time the government spends money–or does anything, really–it’s somehow socialism.

That definition actually plays into the hands of the critics. It’s like the meme that we need to raise enough taxes to pay for stuff. It does more harm than good.

6. Collapse-prone

There was the the 2000 Dot-com crash, the 2008-2009 housing bubble, and now Coronavirus. By my estimation, in the twenty-first century we’ve had a major stock-market crash about every ten years so far.

Tell me again how we should put all our faith in the Market?

7. Historical echoes

When the last great economic crisis of this magnitude hit, we also had a Republican president who believed–along with everyone in his party–that the private sector was best, and that government “interference” in the economy was unwarranted, or should at least be kept to an absolute minimum. That didn’t work out well. From a Slate article review on a biography of President Herbert Hoover:

When the crash came, Hoover offered soothing rhetoric—”The fundamental business of the country … is on a sound and prosperous basis”—that in retrospect seems tone-deaf but at the time amounted to a reasonable attempt to rally the nation. Following his voluntarist philosophy, he got labor and business to agree to a program to prop up wages. He even promoted public works on a small scale.

Yet his obsession with restraint exposed his conservatism. “Prosperity,” he intoned, “cannot be restored by raids upon the public Treasury.” He spurned a huge relief effort for the growing ranks of the destitute, deeming reports of want exaggerated. “Nobody actually starved,” Hoover said. The hospitals and morgues told a sadder tale. Not until a year after the crash did he set up an employment commission, which, Leuchtenburg seethes, “churned out press releases with pap topics such as urging people to ‘spruce up’ their homes.” A mediocre speaker who shunned the bully pulpit, Hoover did little even to “talk up” the economy or public morale.

Hoover’s boldest stroke, the creation of the Reconstruction Finance Corp. in 1932, was too little too late. Authorized to lend money to banks, insurance companies, and other firms, the RFC struck some observers at first as a happy volte-face for Hoover, with government now given a key role in the intended recovery. (Others wondered why bankers, but not the jobless, were now on the dole.) But Leuchtenburg maintains that Hoover enacted the RFC only when the civic-mindedness that he expected from financial and industrial leaders didn’t materialize. “Only unwittingly—by revealing the inadequacy of his voluntaristic approach—was Hoover the progenitor of FDR’s enlargement of federal authority.”

The Riddle of Herbert Hoover (Slate)

I was reminded of that once again by this comment:

Here’s the thing, tho (if I may draw a historical parallel…), this is what got Hoover kicked out of office in 32. He did the same thing Trump and (apparently) Trudeau is doing, which was asking nicely for big business NOT to fire people and to provide help when they could instead of hoarding what liquid capital that they could. With the DC police descending on the “bonus army” months before the election (Great War vets who had come to ask for their bonus they were to get on retirement early), Hoover’s goose was cooked by FDR… Unfortunately, Biden is no FDR…

He certainly is not. As I sarcastically said last week, if only the opposition party had a politician with radical populist ideas who modeled his career and governing philosophy on FDR, that would be ideal at a time like this. As for what made Herbert Hoover, a Stanford-educated engineer and philanthropist who had managed the American relief effort that provided food to starving Western Europeans after World War One so ineffective while in office:

A pro-business ideology that believed that the problem should be solved by the private sector (both business and civil society), not government. He did not want to regulate markets or corporations, pure and simple. The pro-business wing of the GOP had won out by then. While Trump is surely not a great philanthropist, he is a firm believer in the supremacy of the private sector and in government not regulating businesses at all.

While Communism seems to have died, market fundamentalism seems to keep resurrecting itself, no matter how invalidated by historical events over and over again.

Incidentally, the exact same thing as above happened during the Great Depression: see the 1933 Wisconsin Milk Strike.

8. Rising to the challenge

What could be accomplished with a Rooseveltian president:

GE already has a division of the company that makes medical equipment. But workers at the Lynn facility and other GE Aviation branches say their equipment can be retooled to make ventilators, and thanks to the years of downsizing, they have plenty of space to do it.

Similar battles are taking place at GE facilities across the country, some of which have been hit by the sweeping layoffs the company announced last week (Lynn has been spared job cuts for the time being). The nationwide IUE-CWA identified at least seven different facilities that had both the capacity and capability to make ventilators, which gives the company the option to both put laid-off workers back on the job and manufacture a product in extremely high demand by the government and hospital systems across the country.

“We’re going to get out front of this… to say you’re not going to use this crisis to line your pockets again,” Adam Kaszynski, the president of the IUE-CWA Local 201 in Lynn told Rolling Stone. “Workers know what to do. We have empty buildings, we have communities you can put jobs and manufacturing back into, making a product that is heavily needed by society right now.”

Kaszynski’s fear is that GE will use the crisis to shift production to non-union plants, rather than meet workers demands for a safe workplace and productive work to serve a national good. “This is disaster capitalism,” Kaszynski said. “They’re going to have to explain to everyone their vision of the world if they shift jobs out of this community.”

And for the workers that remain, the ongoing epidemic is a constant fear.

General Electric Workers Want to Build Medical Equipment to Fight Coronavirus. Management Is Standing in the Way (Rolling Stone)

Yup, we’re laying off workers that could be producing desperately needed medical equipment. If that’s not an indictment of neoliberal capitalism, then what is?

Imagine if after Peal Harbor, Roosevelt had politely asked the car manufacturers and oil plants and rubber plants and other industrial barons whether they might want to voluntarily pitch in and help the war effort, you know, if it didn’t affect their bottom line too much. That’s not what happened. If it did, we’d probably be speaking Japanese or German today, as the saying goes.

Yet after 40+ years of Neoliberal conditioning that has convinced us that the most terrifying words in English are “I’m from the government, and I’m here to help,” (an actual quote from Ronald Reagan), Americans can’t even conceive of another way of doing things. It is the private sector that runs the government, not the other way around. And all the private sector cares about is profit. So much for the idea that we are advancing as a society. In many ways, we’ve regressed.

9. Bottom-up collapse

The polemical writer Umair Haique has been writing up a storm recently. Unfortunately, only a limited number of articles can be read on Medium, but this one about bottom-up collapse is interesting.

Haique argues that what’s causing collapse is the destruction of the lowest strata of societies and ecosystems by superpredation from above. Once the scaffolding goes, those that think they are above it all soon find themselves temporarily suspended in midair, like Wile E. Coyote.

Everywhere we look today, we see bottom-up collapse — savage, violent, runaway predation, which causes the bottom to be depleted, which causes the middle to implode, which takes the top away with it, too.

When we deplete the bottoms of systems, which are also their foundations, whether in natural systems, or human, socially-constructed ones, like economies — we unleash second and third order effects, which we don’t often anticipate. (Sure, people like you and me might point them out — but who’s listening to us?) Those effects are things like what happened in America and Britain — growing poverty didn’t lead to people making sensible choices, it led to people being blinded by rage. In just the same way, the collapse of insects and glaciers doesn’t just exist in a vacuum — the second and third order effects mean runaway extinctions, nonlinearities, accelerations, discontinuities…

The Age of Collapse (Medium)

On a related note, this comment from Reddit makes much the same point. We are trying to save the roof, while letting the foundations crumble.

This pandemic has laid bare the absolute truth that our society, economy, and civilization as a whole functions from the bottom up, not the other way around. We have been sold this top down, trickle economic bullshit for centuries. But what’s keeping us from completely falling off that cliff we are looking at right now? All of those “burger flipping” and “unskilled” folks who have no other choice but to keep working. But they don’t deserve to make enough to support themselves? THEY are disposable?

Business will recover as long as people have money to spend. It doesn’t matter how much money we pump into failing businesses if there is no market for their product. It is known that putting money into the hands of people who need to use it greatly increases the velocity of every dollar. But we still sit here talking about writing blank checks to corporations that haven’t learned a thing from the last 2 recessions. Corporations that will just turn around and reward their executives, while raising prices and laying off workers. They will continue buying back stock with cash reserves, and leveraging artificially high stock prices to acquire more debt in order to continue the cycle. Rinse and repeat.

It’s true, societies function from the bottom up, not the top down. One of the factors in the Secular Cycles model takes into account predatory elites. When elites are able to prey without constraint; when they are able to channel so many of society’s resources to themselves that average people can’t even reproduce themselves, that is a factor in societal collapse. You enter the phase of declining living standards and stagflation.

Yet despite this, elites still feel themselves invulnerable to pressure from below. They’ve got money coming in directly from the government and people with guns guarding them, after all. But how long can society withstand the forces that are causing it to crack? Ian Welsh points out:

The vast spread of guillotine memes over the past 4 years should alarm our elites, but they still mostly seem to feel invulnerable and are still working to preserve their position in the system rather than fix the system and the society. You can see this in how Democrats are standing up a clearly senile Biden and denying the peasantry health care, even in the face of pandemic.

Why Western Elites Are So Incompetent and What the Consequences Are (Ian Welsh)

10. Personal

Thanks for all your kind words. I can’t say everything is fine; I would be lying. But it’s the weekend, at least.

A recent study found that people’s happiness and life satisfaction hit rock bottom at the age of 47 (47.2 to be precise). Guess how old I am.

‘Out of nowhere I felt really sad’: readers on how they felt at 47 (Guardian)

I also noticed that around this time is a pretty common age for people to make that decision: List of suicides on the 21st century (Wikipedia)

Maybe that’s why I feel like checking out right now. Add to that the fact that you’re pretty much locked-in to whatever you life is at this point, whether for better or worse. When I look back and reflect on my life, I realize I haven’t enjoyed any of it. Not a single moment. Not at all.

It’s like sitting through a movie that’s absolutely unbearable. Take your pick–The Room, Leonard Part Six, Glitter–if you are suffering watching a movie that you absolutely can’t stand, wouldn’t you walk out? Wouldn’t you leave. Wouldn’t you be, in fact, better off leaving? Why not?

I mean, life’s a lot of pain and sorrow. The endless competition for jobs, the constant need for money, bill collectors hounding you, the pressure to perform at work, worrying about an accident or bankruptcy taking everything, and so on and so on. Add to that the loneliness and complete social isolation in my case.

Where’s the joy? Where’s the happiness? I know haven’t found it. It’s just work ’till you die. There is no turning point. There is no happy ending. Like the awful movie, it doesn’t get better as it goes on; only steadily worse.

What are signs that someone is secretly unhappy? (Reddit)

Anyway, those are where my thoughts are at these days.

I had thought of putting up a Patreon earlier this year, and I may do that once this is all over. But for now, a lot of people are hurting financially more than I am. One of the advantages of wanting to move is that I have been squirreling away money for years for just that purpose. It should be enough to survive, at least until this blows over in six months or whenever.

BONUS:

Seen while taking a walk through the park next to my house. Not sure the context here, but I hope it’s a medicine chant for us all.

Ideas About the End of the World

1.

I’ve maintained for years, and am on record as saying that the amount of jobs that are truly necessary to keep society running is probably only about 25 percent, and the rest is useless busywork that exists for no other reason than the fact that we must earn a paycheck to justify our continued existence on this planet; i.e. be economically useful to someone else in order to survive.

Events of the past few weeks have mostly borne that out, although maybe that number may be closer to 50 percent. Perhaps 75%. It is certainly less than 100%.
It’s a really grim way to run an experiment, and I would never wish it to happen the way it did, but there it is.

What this means is that much of the amount of economic activity that is going on most days is counterproductive and useless.

If we only need 75% of the economic activity that goes on, we should share that activity among 100% of the workforce. That means people will be able to work a lot less.

What we shouldn’t do is just toss 25% on the unemployment lines and tell them to go fend for themselves.

In other words, it’s not the work that’s necessary but the jobs.

And the only point of the jobs is to make sure the people who have them can pay for food and shelter (at least).

This is insane! There’s got to be a better way.

It reminds me of the dystopia envisioned by Nick Bostrom:

Bostrom [raises] the possibility of a dictatorless dystopia, one that every single citizen including the leadership hates but which nevertheless endures unconquered. It’s easy enough to imagine such a state. Imagine a country with two rules: first, every person must spend eight hours a day giving themselves strong electric shocks. Second, if anyone fails to follow a rule (including this one), or speaks out against it, or fails to enforce it, all citizens must unite to kill that person. Suppose these rules were well-enough established by tradition that everyone expected them to be enforced.

So you shock yourself for eight hours a day, because you know if you don’t everyone else will kill you, because if they don’t, everyone else will kill them, and so on. Every single citizen hates the system, but for lack of a good coordination mechanism it endures. From a god’s-eye-view, we can optimize the system to “everyone agrees to stop doing this at once”, but no one within the system is able to effect the transition without great risk to themselves…

The implicit question is – if everyone hates the current system, who perpetuates it? And [Allen] Ginsberg answers: “Moloch”. It’s powerful not because it’s correct – nobody literally thinks an ancient Carthaginian demon causes everything – but because thinking of the system as an agent throws into relief the degree to which the system isn’t an agent.

Meditations on Moloch (Slate Star Codex)

Perfect description of late-stage capitalism, don’t you think?

2.

And who are the most important people?

It’s not the celebrities and CEOs. It’s not the “visionary” entrepreneurs. It’s not corporate executives. It’s not the Wall Street financiers, hedge fund managers, bankers, and other assorted “Masters of the Universe” (who are busy scheming up ways to profit off the crisis). It’s not even most of the vaunted Professional Managerial Class (PMC).

No, it’s the people who we’ve always known are the backbone of society: food service workers, grocery store clerks, shelf-stockers, truckers, doctors, nurses, technicians, farmers, butchers, factory workers, delivery carriers, etc.

It’s they who make society run. The people who keep the lights on and food on the shelves. The people who keep order and make sure the sick and injured are treated.

It’s the people who’ve seen their wages stagnate for a generation.

It’s the people whose productivity has soared during that time, yet have seen none of the economic gains.

It’s the people who get the lowest pay fewest benefits in our society, because we say the only things you are entitled to are what you can claw free from the impersonal “free” Market, and nothing else.

In America, the idea has developed over the past few decades that the Ayn-Randian-styled “makers”—the wealthy investors, entrepreneurs and CEOs—are the source of all our wealth and prosperity, while the rest of us ninety-nine percent are merely parasitical “takers” who sponge off their “greatness.” It’s become an article of faith among many segments of society.

This should kill that idea dead forever. Dead, permanently. Bereft of life. Off to join the choir invisible.

In fact, it is the CEOs and financiers who are parasitical on their workers, just as Marxists described. If they “went Galt,” no one would notice. In fact, we might even be better off. Of course, some executives are running critical businesses. But their role as paid managers is still the most critical aspect of their jobs.

It is workers who make society function, not executives, financiers and CEOs. Period. If there are water drinkers and water carriers, the CEOs and the investor class are the drinkers, and the farmers, nurses, shelf-stockers, truckers and technicians are carrying the water for the rest of us. It’s about time they get what they deserve–a bigger share of the pie.

David Graeber noted that under modern capitalism pay and benefits seem to be inversely correlated with how essential your job is to keep society functioning.

Instead, it is the Bullshit Jobs that get the highest pay and benefits (most of which are probably being done from home now). It’s time that came to an end.

In California, New York, Illinois, Pennsylvania, New Jersey, and elsewhere, state governments have rolled out increasingly strict orders to enforce social distancing and close all businesses except those deemed “essential” or “life-sustaining.” While these lists vary from state to state, each includes grocery stores, laundromats, restaurants (serving takeout and delivery), factories that produce foodstuffs and other products, gas stations, pharmacies, and hospitals.

What do all of these businesses have in common? They rely on the labor of low-wage workers who, in many cases, toil without benefits, unions, and workplace protections. Public workers are still on the clock, too, cleaning our streets, delivering our mail, and making sure we have access to utilities and other social services. While many government workers have unions, they are often accorded the same lack of respect as their low-wage, private-sector counterparts.

But imagine a global pandemic without postal workers or UPS drivers getting us our messages and packages; without cashiers and stockers keeping grocery stores up and running and full of food; without care and domestic workers providing life-saving medical and emotional support to some of society’s most at-risk people; without utility workers making sure we have a supply of water, electricity, and gas; without laundromat workers enabling us to clean our clothes, towels, and sheets; without sanitation workers collecting our trash and slowing the spread of germs…

…what does it say about our country when the jobs that are most critical to sustaining life at its basic level are also some of the lowest paid and least valued? Grocery store workers and first responders are exposing themselves to a massive health crisis in order to keep the rest of us functioning as normally as possible. Many of them work for minimum wage or close to it — and without health benefits — meaning that they could contract coronavirus and get stuck with either a massive bill or no health care at all. Meanwhile, with many school districts closed indefinitely, parents are missing the critical and challenging work done every day by nannies, childcare workers, and educators of all kinds.

These workers have a right to higher wages, full benefits, health and safety guarantees, and strong unions — just like every other worker.

Workers are More Valuable Than CEOs (Jacobin)

3.

A lot has been written about how ideas previously unthinkable are now considered within the bounds of possibility.

One often-mentioned idea is that of the Universal Basic Income (UBI).

It turns out that society goes on functioning just as well even if a lot of us just say home (as I noted above).

Why not pay people to do that? Why not take all the excess drivers off the road, remove all the excess pollution, alleviate all the excess stress?

We’ve been indoctrinated to believe that every job is necessary simply because it exists. That has been proven to be false.

If society can by on a lot less people working, why shouldn’t it?

And we should find a way to take care of those not working, rather than throw them under the bus. That could be UBI or a Job Guarantee. And it certianly should include working a lot less.

Universal health care, paid sick leave for all, vacation time for all, universal basic income—it’s time these get on the radar. Finally, proponents have more than enough information to insist on the need for them. Maybe it’s time for unions and labor militancy to finally make a comeback. It’s about damn time.

Workers at McDonald’s, Waffle House and other fast-food and retail outlets have gone on strike today across Durham and Raleigh in North Carolina in protest against unsafe working conditions, lost hours and pay cuts.

The workers are demanding increased safety protocols and payment for lost hours as a result of the Covid-19 pandemic.

Fast-food companies have been designated as essential services and can remain open, but the strikers say they have treated their workers as anything but essential, failing to protect them against infections and laying them off as soon as they are not needed.

“Frontline workers like us are getting hit the hardest right now,” said Rita Blalock, a McDonald’s cook in Raleigh. “McDonald’s is calling itself an “essential business’ but isn’t providing us with the essential protections we need to be safe at work.”

https://www.theguardian.com/us-news/live/2020/mar/27/coronavirus-us-live-news-trump-stimulus-vote-house-thomas-massie-latest-updates?page=with:block-5e7e46fe8f081e5eda238394#block-5e7e46fe8f081e5eda238394

Yet as might be expected, the minions of Kochenomics are arguing that now is in fact the perfect time to lower minimum wages!

Most likely, we should lower current minimum wages. And that is all the more true, the more you have been worrying about coronavirus risk and Trump’s poor performance in response. These are all very simple points, I am tempted to say they are “not even Econ 101.”

Minimum Wage Hikes are a Much Worse Idea Now. (Marginal Revolution)

What an utterly nihilistic, morally bankrupt, sociopathic philosophy. These people really do deserve to be up against a wall.

4.

Will this event finally be the wakeup call that MMT is fundamentally correct?

It damn well should.

How can anyone seriously still continue to assert that taxes fund government spending???

The U.S. government just somehow came up with two trillion dollars in spending! The Fed is injecting, by some estimates, a trillion dollars a day in liquidity and credit to keep Markets afloat.

Where did that money come from? Are they checking the government’s vaults and balance sheets? Are they making sure that the government has enough money stashed away somewhere in its accounts to pay for all of the things that they are proposing? Are they rummaging through the couch looking for loose change?

Are they going to have to wait until April 15th when all the taxes come due to see whether or not we’ve taken in enough revenue from the public to “pay for” all of the things the government is proposing to deal with the ongoing crisis?

Are they going to drastically increase taxes right now in the midst of a pandemic in order to “raise” all the money necessary to accomplish these things? With unemployment at record highs, where are the incomes and private-sector profits supposedly needed to fund all these government initiatives going to come from?
Aren’t we told by the usual choads that the government needs to get money from somewhere “out there” in order to pay for its operations? Doesn’t the government have to “steal” money from private enterprise to do anything at all?

Is the government going to borrow the money from people who somehow magically have money right now available to lend to it? Are they going to borrow money from China—the very place where the virus originated?

Of course not!

All the above notions are absolutely preposterous. Yet we’re constantly told by craven politicians and the corporate media that taxes fund government spending; that the government is just like a household; and that we always need to balance our books.

As I’ve said, when it comes to bailing out the rich and powerful, there’s always an infinite amount of money. When it comes to helping the average American, well then, Howyagunnapayforit?

For example, when it comes to a universal health system in America that will save money and lives in the long run, what do you hear? Howyagunnapayforit?

What have we heard over and over again any time Bernie Sanders mentions doing anything at all? Time and time again, Neoliberal Democratic candidates wagged their fingers at us and assured us that we can’t afford all this “free stuff.” In fact, most of the Democratic candidates explicitly ran a platform of preventing giving the American people the same benefits that that citizens of every other industrialized nation enjoy. Now those very same Neoliberal Democrats are writing blank checks to corporations and the rich along with the Republicans they supposedly “oppose.” Socialism for the rich and “rugged individualism” for the rest of us.

It’s time for this charade to end.

The idea that we are somehow “broke” or out of money is another fairy tale that deserves to die, stone cold dead.

Taxes don’t fund government spending, and the government is not like a household.

Maybe people will finally get the message.

4.

The only thing that matters is resources. Real resources. Money is simply a tool for utilizing resources. That’s what it’s for, not sitting in the accounts of billionaires and bankers, idle. Or inflating the value of choice real estate, yachts, and rare artwork.

No amount of money in the world can get you a respirator when you don’t have one. No amount of money can conjure a vaccine where none exists.

For too long, we’ve obsessed over making the numbers go up, and neglected real resources that money is supposed to enable society to produce—health care, infrastructure, education, etc.

A lot of times MMT gets criticized for being obsessed over money printing in the absence of real resources. But the exact opposite is true! MMT recognizes that is only the resources that truly matter, not numbers on a spreadsheet, and that money is a tool for utilizing real resources, whether those are respirators or solar panels. In fact, MMT is the only economic school of thought that seems to pay attention to real resources above everything else.

5.

Given the fact that we’re entering a dark period very similar to the Great Depression and World War Two, it sure would be nice if there were a transformative political candidate running for office at this time who based his entire career and political ideas on those of Franklin D. Roosevelt.

Too bad there’s no such political candidate like that running right now.

Oh, wait a minute, of course there is!!!

Circumstances just keep slapping us upside the head telling us to change course and vote for Bernie Sanders. Will the Democratic voters listen? Even the proverbial “suburban soccer mom” who is the Dems’ idealized voter is not immune to Coronavirus and health care bills.

We need transformative change. If this isn’t a sufficient wakeup call, then what will it take???

Seriously, what will it take????

AHIP confirmed that out-of-pocket expenses for the treatment would not be waived, and could cost patients thousands of dollars. The average amount for someone admitted to the hospital with pneumonia, a respiratory condition that many coronavirus patients are facing, was $20,000 in 2018 for patients covered by private insurance, according to an analysis by the Kaiser Family Foundation and Peterson.

That could leave many people falling back on the age-old American dilemma: get healthcare or lose all financial security. And it could leave physicians finding loopholes and workarounds to stay afloat.

“Insurance companies are not beholden to the patient, they are beholden to the shareholder,” Hollander said.

US private health insurance companies clog system amid Covid-19 pandemic (Guardian)

Mass Job Cuts Across U.S. Threaten to Leave Millions Without Health Insurance (Bloomberg)

Teen Who Died of Covid-19 Was Denied Treatment Because He Didn’t Have Health Insurance (Gizmodo)

And yet, health insurance industry profits are higher than ever:

But remember, Bernie is “extreme” and Joe Biden is “electable.” *Sigh*.

5.

Is there anything more ghoulish, more horrifying, than calls to sacrifice human lives for the sake of “the economy?”

Yes, the economic devastation could claim more lives than the pandemic. But that’s up to us. It’s a choice. We have control over the economy. We have no control over the virus.

The rules of money are entirely arbitrary. Money is IOUs enforced by the rule of law. That’s it. Those relations that give rise to money can be conjured, extinguished, and renegotiated. There is no fixed “lump of money” in the world. Claims are not sacrosanct. It’s a game with rules made by us, and they can be altered or changed by us at any time.

Yet people are told they must get “back to work” to make sure that the stock market and economic indicators go up.

Trump seems to have channeled Lord Farquaad: “Many of you will die, but that is a sacrifice I am willing to make.”

I’ve even seen people making an analogy I’ve often made: the Market as a god who demands human sacrifices.

The health of “the economy” is more important than the health of the actual people in it! It’s insane!

The coronavirus crisis in the United States is only just beginning. But it’s not too early for some Americans to flout social distancing and isolation guidelines and return to work, according to some executives.

Dick Kovacevich, the former CEO and chairman of Wells Fargo, told Bloomberg News that healthy workers under the age of 55 should return to work in April if the outbreak is controlled, saying that “some may even die” with his plan.

“We’ll gradually bring those people back and see what happens. Some of them will get sick, some may even die, I don’t know,” said Kovacevich, a current executive at Cisco and Cargill. “Do you want to suffer more economically or take some risk that you’ll get flu-like symptoms and a flu-like experience? Do you want to take an economic risk or a health risk? You get to choose.”

‘Some may even die, I don’t know’: Former Wells Fargo CEO wants people to go back to work and ‘see what happens’ (Business Insider)

A lot of people like to scream from the rooftops and wave the bloody shirt over how many people Communism has killed. But I wonder if the victims of Coronoavirus will be added to the body count of laissez-faire capitalism. Don’t bet on it. The argument was disingenuous from the start.

Now is the time to renegotiate the social contract.

6.

Those of us who remember the fears over Peak Oil are surely reeling from the irony that, even as the worst-case scenario of economies collapsing, mass unemployment, shelves stripped bare of goods, hoarding, ATMs not dispensing cash, people stockpiling firearms, soldiers patrolling the streets, and potential rationing, the price of oil is at an all-time low!

In fact, it’s so abundant that they’re literally running out of places to store the stuff.

Who saw that coming in 2008? We were looking for collapse in the wrong place all this time.

7.

And this apocalypse was totally, 100% predictable.

“Nobody would have ever thought a thing like this could have happened,” Trump said.

In fact, the US intelligence community, public health experts and officials in Trump’s own administration had warned for years that the country was at risk from a pandemic, including specific warnings about a coronavirus outbreak.

When this strain of coronavirus, SARS-CoV-2, was identified in Wuhan, China in early January, health experts immediately cautioned that it could turn into a global health crisis.

“This was foreseeable and foreseen, weeks and months ago, and only now is the White House coming out of denial and heading straight into saying it could not have been foreseen,” Marc Lipsitch, director of Harvard’s Center for Communicable Disease Dynamics, told CNN on Sunday.

https://www.theguardian.com/us-news/live/2020/mar/26/coronavirus-us-live-house-vote-2tn-stimulus-package-bill-senate-news-updates-trump?page=with:block-5e7d272b8f0878a2a48ab0ad#block-5e7d272b8f0878a2a48ab0ad

A global pandemic of this scale was inevitable. In recent years, hundreds of health experts have written books, white papers, and op-eds warning of the possibility. Bill Gates has been telling anyone who would listen, including the 18 million viewers of his TED Talk. In 2018, I wrote a story for The Atlantic arguing that America was not ready for the pandemic that would eventually come. In October, the Johns Hopkins Center for Health Security war-gamed what might happen if a new coronavirus swept the globe. And then one did. Hypotheticals became reality. “What if?” became “Now what?”

How the Pandemic Will End (Atlantic)

Which raises the question: what about all the other crises coming down the pike that are totally, 100% predictable? What about them???

The biggest one is, of course, climate change. We’ve been warned for decades that this is coming. It’s effects are being seen right now. Yet the political class is still in denial.

Another one I’ve seen much more often due to empty shelves is food security. This has exposed just how fragile our food system is.

This week, it’s become clear to many Americans that this highly consolidated, monoculture-based food system is at least somewhat fragile—and thus dangerous in times of calamity. Diversity should not just extend to the types of things we grow in the U.S., but also to the sizes and sorts of agricultural entities we represent. This hodgepodge—farms, dairies, ranches, slaughterhouses, packing and distribution facilities, grocers and markets, delivery services and roadside stands—could offer us elasticity and strength. If Costcos and Wal-Marts are able to bear the brunt of the nation’s panic right now, good for them. But if we could relieve some of that pressure and uncertainty by bolstering local markets and farm sales, it would both increase Americans’ peace of mind and help build resiliency into our food system.

Yet here in the U.S., we’ve used federal dollars to weaken this sort of food system. We’ve encouraged agricultural consolidation since the last century, urging farmers to “get big or get out,” fostering homogenization in the array of foods we grow and the types of farms and agribusinesses we represent.

Imagine, in contrast, the comfort in knowing that five miles from your house, there’s a farm that will deliver a box of vegetables to your doorstep. (And that it is only one of several local options to choose from.) Imagine if, rather than depending entirely on a local supermarket’s freezer section (and thus also on a slaughterhouse hundreds of miles away) for your meat, you already had a half-cow in your freezer right now. Imagine if you could swing by the farmers’ market this Saturday, enjoy some fresh air, and pick up eggs, milk, and butter that had passed through only a few pairs of hands. Many of these markets work to provide fresh local produce to food stamp recipients, so that the food is not too cost-prohibitive. Most depend entirely on a local customer base to flourish and thrive.

Our Monoculture Food Supply is a Potential Coronavirus Calamity (The American Conservative)

It’s not just grocery shoppers who are hoarding pantry staples. Some governments are moving to secure domestic food supplies during the conoravirus pandemic.

Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others, including carrots, sugar and potatoes. Vietnam temporarily suspended new rice export contracts. Serbia has stopped the flow of its sunflower oil and other goods, while Russia is leaving the door open to shipment bans and said it’s assessing the situation weekly.

To be perfectly clear, there have been just a handful of moves and no sure signs that much more is on the horizon. Still, what’s been happening has raised a question: Is this the start of a wave of food nationalism that will further disrupt supply chains and trade flows?

Give Us This Day Our Daily Bread: Coronavirus and Food Security (Naked Capitalism)

For years, many of us have been touting the need to downscale and relocalize our food supply and make it more resilient. We can’t rely on the “3,000-mile Caesar Salad” anymore. We’ve also been calling for a drastic rethink of how we do agriculture.

It also turns out that moving our entire industrial base to the Global South to save money wasn’t such a great idea after all. It turns out the the long, fragile, fragmented, just-in-time supply chains don’t work when there’s a global calamity. And there’s bound to be a whole lot more of the them in the future.

Instead, we spent the last few decades listening to the economics priesthood touting the money calculus. As if the money calculus were more “real” than actual goods.

A large body of evidence is beginning to accumulate showing how climate breakdown is likely to affect our food supply. Already farming in some parts of the world is being hammered by drought, floods, fire and locusts (whose resurgence in the past few weeks appears to be the result of anomalous tropical cyclones). When we call such hazards “biblical”, we mean that they are the kind of things that happened long ago, to people whose lives we can scarcely imagine. Now, with increasing frequency, they are happening to us.

In his forthcoming book, Our Final Warning, Mark Lynas explains what is likely to happen to our food supply with every extra degree of global heating. He finds that extreme danger kicks in somewhere between 3C and 4C above pre-industrial levels. At this point, a series of interlocking impacts threatens to send food production into a death spiral. Outdoor temperatures become too high for humans to tolerate, making subsistence farming impossible across Africa and South Asia. Livestock die from heat stress. Temperatures start to exceed the lethal thresholds for crop plants across much of the world, and major food producing regions turn into dust bowls. Simultaneous global harvest failure – something that has never happened in the modern world – becomes highly likely.

In combination with a rising human population, and the loss of irrigation water, soil and pollinators, this could push the world into structural famine…

Covid-19 is nature’s wake-up call to complacent civilisation (George Monbiot, The Guardian)

A sharp economic downturn was inevitable even before this crisis hit. Everyone knew we were in a bubble, and bad debts had not gone away after the last crisis.

Let’s not forget about antibiotic resistance. That’s not gone away, either.

And Peak Oil isn’t gone forever. The laws of physics have not been repealed. It’s yet another “slow moving catastrophe” that’s totally predictable but we’re not prepared for.

8.

When did political conservatism become denialism?

It seems like leaders on the Right all over the world tend to downplay the potential risks of absolutely everything. We’ve already seen it with climate change. Now it’s the same thing with the pandemic. Right-wing authoritarian leaders like Trump or Bolsonaro were busy denying that there was anything to worry about, and that it was just a media fabrication (“fake news”):

The federal government led by far-right President Jair Bolsonaro has been trying to downplay the severity of the threat facing the country ever since experts around the world first sounded the alarm about the highly contagious virus in early January.

So far, the president has claimed that the disease is just “a fantasy” and “a little flu”, accused the media of fuelling hysteria by reporting on the death toll in Italy, encouraged – and even attended – a series of pro-government street demonstrations across the country and supported religious leaders who refused to close down churches and evangelical temples in response to the pandemic.

When it was revealed that at least 23 members of his entourage have been infected with the virus, he not only refused to remain in isolation, but made a point of shaking hands with his supporters and taking selfies with their mobile phones. The president later claimed that he tested negative for the virus, but refused to make the results of the diagnostic test public.

Bolsonaro’s COVID-19 denial will devastate vulnerable Brazilians (Al Jazeera)

Meanwhile, Trump’s response:

1. Call it “fake news” or a hoax.
2. Worry about the Dow Jones.
3. Openly contradict the experts.
4. Promise unrealistic solutions.
5. Set a totally unrealistic, arbitrary date for business as usual.

And right-wing media in this country have been collectively downplaying the virus since it first emerged on the radar. “It’s nothing, just the flu, go about your business as usual,” was the unified message. Either that, or peddling outrageous conspiracy theories about government bioweapons, or how it was all a manufactured media ploy to bring down Trump. Even on the national level, “Red” states are flouting reasonable precautions, while politicians in “Blue” states are doing everything possible to contain the spread and take care of their people.

It’s like the entire modern conservative movement is just an exercise in denial.

And notice how any warnings about potential problems on the horizon are dismissed as “Leftism” in the popular press. Whether it’s food security, climate change, peak oil, political authoritarianism, emerging diseases, antibiotic resistance, or what have you–the people who have been banging the drum about these issues for years are dismissed by right-wing corporate media as “liberals” and “leftists.” The only threat the Right take seriously is terrorism.

So the new definition of “Leftism” is living in reality, apparently. And Right wing “conservatism” is denying potential crises, even as they manifest themselves in real time. I wonder, what exactly are the conserving?

It’s tempting to see this as a modern phenomenon, but as viewers of The Crown might recall, during the Great Smog of London while thousands of people fell ill from air pollution and many died, Winston Churchill dismissed it all as simply “the weather.”

Despite his initial insistence that the crisis was a freak natural occurrence unrelated to human actions and beyond the capacity of policymakers to influence, Churchill quickly acknowledged that the fog covering London in December 1952 was made more intense, and a danger to health, because of the coal smoke it contained. And it was rising coal consumption that provided the final ingredient in the coincidental combination of factors that caused this tragedy.

In 1952, Britain was only gradually recovering from the destruction and debt burden of the Second World War, and many essentials, including coal, remained rationed. Yet just before the notorious fog disaster hit London, Churchill’s government had announced that the poorest and most polluting grade of coal (known as “nutty slack”) could be obtained without ration coupons. Spurred by official advertising that encouraged people to stock up on fuel and burn it without the constraints that rationing had imposed, consumption shot up.

Lessons from London’s 1952 fog could save millions today (Climate Home News)

Why did it finally end? Thanks the dreaded “Leftism” and eeevil “big government”:

UK’s Clean Air Act was really the first sort of overarching federal legislation in the world where you had a government, not just local government or state government, that placed some pretty restrictive rules on industry and on local citizens, and provided subsidies so that Londoners could begin to convert from coal-burning fireplaces to smokeless fuel, which is very expensive. It really was a blueprint for other nations to follow.

It was the pioneer effort that was really only brought about because of Norman Dodds and many people from the Labour Party, who pushed the issue so far and forced the British government to finally act. This was a systemic problem that no one really took seriously in the government because it was just something that was always there and the government was bankrupt.

In 1952 London, 12,000 people died from smog — here’s why that matters now (The Verge)

Churchill’s attitude towards starving people wasn’t all that different, either:

More recent studies, including those by the journalist Madhushree Mukerjee, have argued the famine was exacerbated by the decisions of Winston Churchill’s wartime cabinet in London.

Mukerjee has presented evidence the cabinet was warned repeatedly that the exhaustive use of Indian resources for the war effort could result in famine, but it opted to continue exporting rice from India to elsewhere in the empire.

Rice stocks continued to leave India even as London was denying urgent requests from India’s viceroy for more than 1m tonnes of emergency wheat supplies in 1942-43. Churchill has been quoted as blaming the famine on the fact Indians were “breeding like rabbits”, and asking how, if the shortages were so bad, Mahatma Gandhi was still alive.

Churchill’s policies contributed to 1943 Bengal famine – study (Guardian)

Again, will these deaths be attributed to capitalism? Or is it only communism that can kill people?

Bolsonaro urges Brazilians to get back to work, says concern over coronavirus overblown (France24)

When will we learn???

9.

What is it with the Democrats’ obsession with means testing?

Why must every program come with strict controls to ensure that just a small, tightly targetted sliver of society get any kind of government benefits? Controls that almost certainly ensure that a significant portion of people who need those benefits will not get them? Controls that ensure the people using the program can be depicted as needy “scroungers” receiving “handouts,” giving the perfect ammunition to those who want to strip away such benefits?

Unless that’s part of the plan.

The Democrats are a morally bankrupt party. They need to go. They only survive because any alternative has been suppressed. The two-party duopoly is an abomination. Our ineffective and dysfunctional government has been exposed to the world for all to see. Of course, under neoliberalism, that is by design.

[Senator Chuck] Schumer, who famously pegs his policy positions to appeal to a fictitious Long Island family that almost certainly would have voted for Trump, was by no means the only national Democrat to respond to broad upheaval with this kind of meticulously hedged and carefully tranched language: If you fit into social unit x, then you will be eligible in some circumstances to receive benefit y.

When the House was debating a bill that would have provided immediate cash payments to Americans harmed by the indefinite shuttering of much of the economy, Speaker Nancy Pelosi pumped the brakes. Her aim was not so much to ensure that the maximum aid would reach the greatest number of people but to guard against the prospect that too much federal support might reach insufficiently vulnerable people with untoward quickness. “The Speaker believes we should look at refundable tax credits, expanded [unemployment insurance] and direct payments,” Pelosi’s deputy chief of staff tweeted, “but MUST be targeted.” When Pelosi introduced her plan on Monday afternoon, the benefits were immediate, but also tiered and conditional—more an interest-free loan than an emergency cash disbursement.

…Senator Kamala Harris, whose dud presidential campaign has lately become a slightly more plausible vice presidential one, took the opportunity to reheat her LIFT Act, which would direct preposterously insufficient payments to a narrow subset of Americans who were neither too rich nor, not a little nauseatingly, too poor. (Harris later deleted those tweets.)

When the front-runner for the party’s presidential nomination finally weighed in on the ongoing negotiations over the scale and targeted reach of a bailout at week’s end, it was to ask that the nation’s reigning plutocrats be mindful in processing the bailouts they were about to receive…

All the while, the Republicans did what Republicans do—sought to direct whopping no-strings-attached funds to powerful interests while effectively removing all nonwealthy people from the equation, pausing at regular intervals to laud the integrity and handsomeness that their forgetful and vinegary president had brought to duffing every single aspect of the governmental response to the virus.

The Democrats, in response, did what they generally do. They made clear that they were disappointed in the Republicans; they advocated for something vague and qualified and means-tested that might benefit some people in a clever double-banked fashion; they made sure that it would not arrive too soon, or too generously…

America’s Diseased Politics (New Republic)

10.

And speaking of pollution, the lack of pollution during the shutdown is a vivid example of how we would all be better off if there were a lot less economic activity going on than there is now.

In fact, there will be lives saved from the lack of pollution as surely as there will be lives lost due to the pandemic. Once the pandemic is at heel (if it ever is), will we go back to business as usual? Or will we scale back the useless economic activity we now know is unnecessary (point #1) and enjoy the benefits of cleaner air and bluer skies going forward?

This is something degrowth advocates have pointed out for a long time now. Now we’re being forced into degrowth situation in a way we were not ready for and did not choose. Nonetheless, we are able to observe its effects.

Growth for the sake of growth has always been a mad philosophy. Growth produces pollution which eats away at the benefits. It provides diminishing returns–and we’ve long soared past that point. Now we have hard evidence to point to.

Coronavirus: Lockdowns continue to suppress European pollution (BBC)

Air pollution plunges in European cities amid coronavirus lockdown (Jerusalem Post)

The swans and fish returning to the canals of Venice show us what kind of world we can have, if only we can choose it.

As I’ve maintained for years, what we need more than anything else is not flashy new technology or rockets to Mars, but lifestyle changes.

11.

We’re seeing the results of 40+ years of Neoliberal philosophy of starving the state. I’m hardly alone in making this observation.

The enitre Neoliberal project was designed to establish the supremacy of markets and private wealth over the state and the public good.

Is there a chance this could be “Neoliberalism’s Chernobyl” as Michael Brooks put it? Is it possible that this will finally expose this bankrupt and failed philosophy for what it is?

Rudderless, blindsided, lethargic, and uncoordinated, America has mishandled the COVID-19 crisis to a substantially worse degree than what every health expert I’ve spoken with had feared. “Much worse,” said Ron Klain, who coordinated the U.S. response to the West African Ebola outbreak in 2014. “Beyond any expectations we had,” said Lauren Sauer, who works on disaster preparedness at Johns Hopkins Medicine. “As an American, I’m horrified,” said Seth Berkley, who heads Gavi, the Vaccine Alliance. “The U.S. may end up with the worst outbreak in the industrialized world.”

How the Pandemic Will End (Atlantic)

Perhaps this crisis will show us the need for competent, collective governance when it comes to certain issues we will be facing in the years ahead. Maybe the “starve the state” headlong rush toward Neofeudalism will finally be halted.

We can only hope people will see the light.

12.

Finally, some personal notes.

After spending the last two and a half years dealing with the fallout from my mother’s death, I thought I had finally put it all behind me. I had spent years getting rid of stuff (turns out I should have held on to the toilet paper), sold the house, and filed the final tax returns.

I was hoping I could finally escape the miserable frozen wasteland that I’ve been trapped in my entire life.

That’s all gone now. All my hope and dreams are dashed.

Imagine you have been held in Siberian prison camp for forty years. The only thing that kept you going was the knowledge that someday your sentence would end and you would be released. It was the only hope you had. It was the one thing that kept you going, against all the day-to-day misery. Then, when the day of your release finally arrives, the warden informs you that your release has been denied, and that your sentence is now for life.

What would you do? Would you give up hope? Would you kill yourself?

Here in Wisconsin, social distancing is just our everyday way of life. I’ve been completely and totally socially isolated for a long time. I mean, it comes in handy during times like these, but it’s kind of like a living death. Most days, I’m just so lonely I want to die.

I have no family. No relatives. I don’t have a single friend in the world.

I guess the only friends I have in the world are you, dear reader. And I don’t get to meet or interact with any of you. I don’t even know who you are.

I guess I’m fortunate in not having to worry about anyone else, with only myself to take care of. Yet the thought nags: why not check out? Why deal with any of this suffering? Why not just end it all? No one would miss me, after all. Literally no one on earth would care. The thought of being trapped here the rest of my life has had thoughts of death going through my head continuously. It could all be over so quickly. It’s just so much easier…

And yet, I know that so may people are suffering all over the world. So may people are so much worse off than I am. Perhaps you are one of them. Perhaps you’ve lost your job. Perhaps you have a health condition that makes you vulnerable to the virus. Maybe your housing situation is precarious.

It feels selfish to revel in my problems when there are so many worse off that me. The scale of the suffering is unimaginable.

I guess that means I’m in dark place and struggling. But we all are, right now. It’s so hard to live with uncertainty. So much grief in such a short span of time. I debated mentioning this. But I might as well be honest–what have I got to lose?

Anticipatory grief is that feeling we get about what the future holds when we’re uncertain. Usually it centers on death. We feel it when someone gets a dire diagnosis or when we have the normal thought that we’ll lose a parent someday. Anticipatory grief is also more broadly imagined futures. There is a storm coming. There’s something bad out there. With a virus, this kind of grief is so confusing for people. Our primitive mind knows something bad is happening, but you can’t see it. This breaks our sense of safety. We’re feeling that loss of safety. I don’t think we’ve collectively lost our sense of general safety like this. Individually or as smaller groups, people have felt this. But all together, this is new. We are grieving on a micro and a macro level.

There is something powerful about naming this as grief. It helps us feel what’s inside of us. So many have told me in the past week, “I’m telling my coworkers I’m having a hard time,” or “I cried last night.” When you name it, you feel it and it moves through you. Emotions need motion. It’s important we acknowledge what we go through. One unfortunate byproduct of the self-help movement is we’re the first generation to have feelings about our feelings. We tell ourselves things like, I feel sad, but I shouldn’t feel that; other people have it worse. We can — we should — stop at the first feeling. I feel sad. Let me go for five minutes to feel sad. Your work is to feel your sadness and fear and anger whether or not someone else is feeling something. Fighting it doesn’t help because your body is producing the feeling. If we allow the feelings to happen, they’ll happen in an orderly way, and it empowers us. Then we’re not victims.

That Discomfort You’re Feeling Is Grief (Harvard Business Review)

13.

Back before everything fell apart, I was working on my long-promised book. It was more a test run than anything else. It was intended to be roughly based on H.G. Well’s An Outline of History, updated with the latest information we know about history, anthropology, and human evolution. Sort of that crossed with Hariri’s Sapiens, crossed with Turchin’s Secular Cycles, crossed with Diamond’s Collapse. It was intended to be a “Big History” book looking at the entire scope of humanity through the lens of geography, demographics, social psychology, economics, climate, and energy, rather than just events, names, dates and places. And yes, disease was one factor.

The first chapter was a gallop through human evolution. Near the end of it, I had planned to write this conclusion:

With the rise of humans to the top of the food chain, mankind’s predators now boiled down to just two. One was the microscopic bacteria and viruses which became more common and abundant due to humanity’s changed relationship with the natural world; specifically the keeping of domesticated animals and the switch to living in large, sedentary social communities. These micropredators would kill far more humans that anything else before them. The other predator that man had now worry about due to these large social grouping was his fellow man. Together, these twin predators—macro and micro—would shape the forces of history from this point forward.

Stay safe, and be well everyone.
-CH

Random COVID-19 Thoughts

I’ve been spending the past week dying of COVID-19.

Okay, it probably was the standard flu. Even so, it was surreal to watch the entire world being brought to its knees by pandemic disease while you’re on your sickbed feeling like you are literally dying. It really makes one rethink their priorities.

Meanwhile the presidential contest has degenerated into a race between a functional illiterate versus an actual dementia patient.

At least this will finally demonstrate to all Americans what a ridiculous farce the Presidential race is. As I always say, the first step to reform is for people to quit believing in the status quo.

It also demonstrates to Americans how much the political parties and the media are there not to facilitate the people’s will, but to subvert it. The Democratic Party has fought much harder against Bernie Sanders and his campaign than it has against Donald Trump and his supporters.

Anyway, I don’t quite know what to say that hasn’t already been said. So here are just some random thoughts.

Neoliberal globalization has been dealt a serious blow. Outsourcing all your manufacturing and being dependent on supply chains stretching across the world was a bad idea that many have been warning about for a long time. Finally we are able to see why.

Opinion: Moving Our Pharmaceutical Factories Overseas Was A Huge Mistake (Buzzfeed)

Furthermore, the downsides to the whole Neoliberal project of shrinking the state are becoming increasingly apparent.

The stock market meltdown shows the absolute folly of trusting everything to gamblers’ bets the anarchic Market.

The fact that we have entered a quasi-feudal society again is becoming clear. I saw a good Twitter post. The headline was “Amazon and Gates Foundation may team up to deliver Coronavirus test kits to Seattle homes.”

To this, someone commented, “How do you find out who your feudal lord is if you don’t live in Seattle?” Someone replied “Somebody needs to put up findmyfeudallord.com in a hurry.”

Of course, this is supposedly in jest, but it’s no joke! We are entering the era of Neofeudalism just as climate change and pandemics continue to bite. This is what happens when you shrink the state and allow everything to be controlled by private power in the name of empowering the Market.

For context, here is good Stack Exchange conversation on Feudalism: https://history.stackexchange.com/questions/14997/has-feudalism-been-a-programmed-event-for-nations-in-the-past

People are increasingly cognizant that they are already living in a feudal society. And the only candidate willing or able to reverse this trend has been apparently dealt with by the mainstream media and the Party establishment. This only guarantees that all the urgent social problems will continue to fester and get worse, with no real solutions for another four years.

Is this the beginning of the end for Neoliberalism? Is COVID-19 the thing that finally shows just how bankrupt a philosophy it is?

Will America learn anything from this? If history is a guide, probably not.

How does one write about collapse when it’s happening all around you in real time? Just read the headlines!

Anyway, I find myself unable to type anything or formulate thoughts for some reason today, so I’ll leave it there. Perhaps the flu has permanently scrambled my brain. I’ll outsource my thoughts to this column, which sum them up pretty well: There are things that scare me more than Donald Trump (Medium)

Back before I got deathly ill and could stay wake more than a few hours a day, I was writing a long series of posts debunking all the ridiculous Federal Reserve conspiracy theories. Since it’s mostly written, I’ll probably roll that out soon. I don’t know if I’ll be able to finish it, though.