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The Wrongologist

Geopolitics, Power and Political Economy

Sunday Cartoon Blogging – April 5, 2020

We’ve already lost more Americans to the Coronavirus in the month of March than we lost during the 9-year long Iraq war.

Here are the latest national numbers (which will be out of date by the time you read them). From The COVID Tracking Project: (as of 4/3)

  • Number of daily cases: 271,988, up 32,889 or +13.75% vs. April 2
  • Rate of case increase: 13.75% vs. 15% for the past week
  • Number of deaths: Total 6,962, up 1,178 vs. April 2
  • Rate of deaths increase 4/3 vs 4/2: 20.4% % vs. 23.1% on 4/2
  • Daily number of tests 4/3 vs. 4/2: 1,407,344, up 139,596 over 4/2
  • Rate of increase in tests: +11% vs. previous day

There is some evidence above that “flattening the curve” is working. Wrongo recommends visiting The COVID Tracking Project which has the most comprehensive data, both nationally, and by state. It is updated several times a day and can be exported to your device, if you are interested.

On to cartoons, starting with a chart Wrongo originally posted on Wednesday, now updated by Sharpie, showing why wearing a mask may be a very good idea:

Georgia governor Kemp said he didn’t know the virus could be spread without symptoms. Why do so many Republicans excuse their behavior by saying “I didn’t know“? Aren’t they the party of personal responsibility?

Kushner and Pence: little men trying to operate WAY beyond their abilities:

Remember when George W. Bush was the most incompetent president imaginable?

Remember when George W Bush was the most incompetent president imaginable?

Perhaps, “Thou shall not run a church as a money making enterprise” might help:

Why is gathering in a church not as dangerous as sitting in a restaurant? Is it because God will protect you in a church but not at Applebees? Or is group praying simply worth the risk? Or that Republican governors are afraid of pissing off their evangelical base?

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Can the Economy Endure a Two-Month Shutdown?

The Daily Escape:

Cannon Beach, OR – 2020 photo by franks28

The short answer to the question above is no, not without outright financial support for individuals by the government. That support if it comes, is likely to be too little, too late.

But the Fed tried something. On Sunday, it announced that it slashed its federal funds rate by a full percentage point, to a target range between 0% and 0.25%. In addition, they launched a new Quantitative Easing program for another $700 billion.

Investors threw up all over the Fed’s Sunday moves, because we’re looking at a “demand shock”, the state-enforced loss of consumer sales,something that can’t be stimulated away. The S&P futures immediately plunged 5% to hit its downside limit. That made for an interesting Monday, with the Dow ending down nearly 3,000 points, or another 13%. In the past month, the market has lost nearly a third of its value.

All these efforts to provide stability actually showed the market that our leaders have no idea what they’re doing. It’s the exact opposite of inspiring confidence.

Did the Fed panic? Fed Chair Jay Powell lowered rates right after Trump said he had the authority to remove Powell. That makes it seem, true or not, like the Fed is now in Trump’s pocket. No confidence-builder there.

Looking through a wider lens, Mr. Market has decided that the Fed is pushing on a string. Rates were already so low that there was little gain from the interest rate reduction, and little else that the Fed could do. Mostly, the Fed signaled that it is very frightened about the prospect of a global recession.

In addition, the market understood that the stimulus bill working its way through the House and Senate is inadequate to the task ahead. For one thing, Pelosi’s bill promises paid sick leave, but as written it only covers about 20% of all workers.

Again through that wide-angle lens, the growing COVID-19 business lockdown strategy will have an economic impact similar to a natural disaster, like a hurricane, but played out over a longer time frame. FEMA has found that 40% of businesses close in a natural disaster. And of the businesses that reopen, only 29% survive the after the following two years.

Since our economy is 70% services, many industries facing the lockdown, like tourism, casinos, restaurants, and hotels, will soon be in meltdown mode. The Fed has no answer to a massive drop in consumer spending, only the president and Congress can solve that.

We know that 40% of Americans don’t have enough cash on hand or room on a credit card to handle a $400 emergency. Many service industry workers will be hit with either cutbacks in their hours, or outright job losses. Without financial assistance, we’ll quickly see defaults on rent or mortgages, and delinquencies on credit cards and car payments.

So the Fed creates some more money. But just like in 2008, rather than distributing it to every citizen, they’re giving it to the banks. Somehow, all that money is going to people who already have plenty, while those who need it get nada.

Why is the answer always to give more to the supposed “job creators” when we get basically nothing in return? Why not just send a check to the actual people who need it?

Finally, what will this interest rate cut do for the economy?

  • Are restaurants going to start hiring workers that can’t actually come to work just because loans are cheap?
  • Are workers not collecting a paycheck going to go out and buy a new car/TV/house because interest rates dropped a bit?
  • Are banks going to lend cheap money to airlines, restaurants, and cruise lines when we have no idea how long this will last?

Every company on the planet has simultaneously realized that it is in an existential cash-flow crisis due to COVID-19. The big and smart companies already have drawn down their unused loan facilities to ride through the slowdown.

The slower and the smaller firms are staring at an economic nuclear-winter scenario where their revenue plunges for months, and they can’t pay their staff, or make their fixed payments.

The speed and comprehensiveness of the lockdowns, and their drastic impact make what’s going to happen very clear. Our leaders are in a fog of denial. They don’t see that much of what was the traditional mode of operating our system is crumbling.

During the 2008 financial crisis, we learned that events can move too quickly for anyone to intervene and limit the damage. Our business environment’s drive for highly efficient systems, from just-in-time inventory sourcing to reducing the number of hospital beds per capita, have created fragile systems that are now being stress-tested.

We may be learning, to our collective detriment, that all of these systems along with our leaders, have failed us.

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Is America Prepared For the Coronavirus?

The Daily Escape:

Coronavirus or not, it’s always business as usual – credit: Dave Note

The photo demonstrates why the coronavirus won’t be contained. 21st century humans will do what they want, when they want, and how they want. They’ll trust that their government will sort out the consequences.

We need to take a hard look at resilience, which is defined as the ability to recover quickly from illness, change, or misfortune. We talk about it for individuals, markets, governments, and society. In truth, it applies to every system on earth.

We had our first wake-up call about American resilience with 9/11, followed in 2005 by Hurricane Katrina. We watched the news, and saw that America was unable to snap back quickly, that we were powerless in the face of incomprehensible disaster.

There are still scars in New Orleans 15 years later.

We have ignored that the Covid-19 virus is at least as infectious, and possibly more than, the normal flu virus we see every year. But the mortality rate of Covid-19 is about 2%, or about 20 times as deadly as the normal flu, which has a mortality rate of around .1%.

Thus far in 2020, 19 million cases have been reported to the CDC, with 10,000 deaths and 180,000 hospitalized. Multiply 10,000 by 20, and that’s 200,000 deaths in the US, and following the flu model, perhaps 3,600,000 incremental hospitalizations.

We need to think about our resiliency. According to the American Hospital Association, there are 924,107 staffed beds in hospitals, down about 53,000 beds since 2000. Of the 2020 total, 792,417 are in community hospitals. The national occupancy rate for all of those beds is about 65%, based on the latest figures from 2017, so perhaps we have sufficient beds, assuming all hospital beds are equally capable.

Logistics will drive our resilience response. There is much to learn from the Chinese response. Wuhan didn’t have enough beds when the Covid-19 virus struck, and built two new hospitals in an attempt to have a place for all victims who needed to be in a hospital setting. They quickly had shortages of sterile gowns, masks and gloves. Then they had a shortage of health care professionals, and moved some professionals to Wuhan to deal with the explosion of cases.

They quarantined cities, something that we can’t do effectively without declaring martial law.

But, it gets more difficult. Covid-19 is a severe respiratory illness. Victims need the kinds of breathing therapies equipment that are usually in limited supply in each hospital. The NHS in England only has 15 available beds to treat the most severe respiratory failure in the entire country. They say they will struggle to cope if there are more than 28 patients who need them.

Testing is an issue, because without tests, we can’t be sure that the patient has the virus, and test kits are in very short supply. Iran reported on the BBC that it had just 14 test kits in the country at the time of the outbreak.

Live Science reports that in early February, the CDC sent testing kits to labs across the US, but a glitch in the kits made them unusable. Now, just five state health departments: California, Illinois, Nebraska, Nevada and Tennessee, as well as the CDC, have the ability to test for the virus. As of Feb. 26, just 445 people have been tested in the US, not including the travelers who returned on evacuation flights. In contrast, the WaPo reported that as of Feb. 25th, South Korea had tested more than 35,000 people for the virus.

How will America scale up?

We need tests that work, equipment to treat respiratory failure, hospital beds, sterile gowns and gloves, along with trained healthcare professionals. Where will they come from? These are the questions the media and politicians should be asking Mike Pence, the new Covid-19 Czar.

Don’t count on answers. The administration has already told the federal government that all communication to reporters and others, is to go through Pence. That’s even more dangerous, because there is no one who will tell Trump or Pence anything they don’t want to hear. And Pence is muzzling the scientists who really know what’s going on.

The economic consequences are even greater than the blood-letting in the stock market this week would lead you to believe. The health consequences are enormous.

What about the political consequences? We’re in the middle of a presidential election, so we’re bound to hear the right and left version of this story. Wrongo doesn’t want Democrats to try and exploit the government’s less-than-adequate efforts to contain the virus.

They should be rational. They should invite scientists to testify to break through the administration’s spin. They should pass a supplemental spending bill aimed at containing the crisis based on the scientists’ advice.

This is a time for good policy that will turn out to be good politics.

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Saturday Soother – February 22, 2020

(There will be no cartoons posted this week)

The Daily Escape:

Bass Harbor Head Light, Acadia NP, ME – 2019 photo by York Chen

Some are saying that the Democrats have abandoned the House as an instrument of power, and that it might be lost forever. The idea is that Democrats have surrendered the power of oversight, because they haven’t been able to use it effectively, and they can’t enforce their subpoena power.

This was the calculus of the Trump administration. If you stonewalled the House Democratic majority, their only option was to declare contempt. Once contempt is declared, it is up to the Department of Justice to enforce the order, an impossible expectation so long as it’s Trump’s DOJ.

After a contempt order has been issued, Congress can pass the order on to the DOJ or, to the DC US Attorney’s Office for prosecution as a civil or criminal matter. In theory, a charge of contempt could result in a fine or jail time, though in reality, that’s unlikely to happen.

After that, it’s up to the courts. That process takes a long time, and the outcome is far from certain. If a judge rules against Congress and in favor of the Trump administration, it could set new legal precedent that could make it easier for future presidential administrations to withhold information from future congressional committees.

The House did exercise its impeachment power, but it’s clear that regarding oversight, Trump has no intention of cooperating, nor will his administration. So the Democrats are facing a Constitutional question: The House is either an independent instrument of power and authority, or it is not.

We’d like to think that the next president and those that follow will not abuse their powers. Or if/when they do abuse power, they will be confronted by a Congress controlled by the other party, and both contempt and impeachment will be taken seriously by the president.

If a Democratic president and a Democratic Congress were elected, they could agree on a series of changes to limit presidential overreach and misconduct. Here are a few options:

  • Statutory penalties for contempt of Congress followed by swift review by the Court of Appeals for the DC Circuit
  • Tightening time limits for responding to Freedom of Information Act requests and enacting penalties for abuse
  • Restatement and enforcement of whistleblower protections, including penalties for outing and retaliating against whistleblowers

Even these moves may not be enough to rein in a president who has operational control of the DOJ. It will take the Supreme Court to settle the issue of the power of Congressional oversight vs. the power of the president’s executive privilege.

Trump’s presidency has revealed great vulnerabilities in our politics. Americans must want democracy badly enough if democracy is to survive. Despite our adulation of the framers, the Constitution works because Americans have made it work, not because of the brilliance of its design.

We’re facing a critical presidential election. There must be serious soul-searching by all of us regarding who should have political power.

The question for November is why have so many Americans lost faith in democracy, and what must we do to restore that faith?

No coffee recommendation today, we’re already waay too amped up from Trump’s pardons of bad actors along with his threat to pardon convicted liar Roger Stone. Or, maybe his arguing in Colorado Springs that Obama should be impeached put you over the edge. Maybe you were interested in seeing Mike Bloomberg take the debate stage, only to find out that Bloomberg brought a wallet to a knife fight.

Bloomberg was probably wishing he had bought a podium in a better neighborhood!

It’s time to get some distance from the circus in DC and forget about the shouting and posturing. It’s time to take a break with a Saturday Soother. This week settle back and listen to Leonard Cohen’s “Hallelujah” performed by the 5th grade chorus from PS22 in Staten Island, NYC. Wrongo promises you will be happy that you watched:

Think about how a public school music teacher reinvents his chorus every year with a new 5th grade class. This is one reason why we need to fund arts in public schools.

Those who read the Wrongologist in email can view the video here.

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Monday Wake Up Call – January 13, 2020

The Daily Escape:

Many Glacier, Glacier NP, MT – 2019 photo by MDodd

Let’s clear the air about Iran and their use of terror. Wrongo isn’t an apologist for Iran, although he thought that the Nuclear Deal was a positive step forward. We need to look carefully at the data supporting what our government and the US media say about Iran’s terrorist activities.

Here’s what the US State Department says about Iran and terrorism:

“Iran remains the world’s worst state sponsor of terrorism. The regime has spent nearly one billion dollars per year to support terrorist groups that serve as its proxies and expand its malign influence across the globe. Tehran has funded international terrorist groups such as Hizballah, Hamas, and Palestinian Islamic Jihad.

It also has engaged in its own terrorist plotting around the world, particularly in Europe. In January, German authorities investigated 10 suspected Islamic Revolutionary Guard Corps Quds Force operatives. In the summer, authorities in Belgium, France, and Germany thwarted an Iranian plot to bomb a political rally near Paris, France. In October, an Iranian operative was arrested for planning an assassination in Denmark, and in December, Albania expelled two Iranian officials for plotting terrorist attacks.

Furthermore, Tehran continued to allow an AQ facilitation network to operate in Iran, which sends fighters and money to conflict zones in Afghanistan and Syria, and it has extended sanctuary to AQ members residing in the country.”

From Larry C. Johnson:

“You notice what is absent? A list of specific attacks that caused actual casualties. Plans and plots are not the same as actions. If Iran’s malevolent influence was so powerful, we should be able to point to specific attacks and specific casualties. But you will not find those facts in the U.S. State Department report because they do not exist.”

This State Department Annual Terror report details who is really responsible:

  • The Taliban was responsible for 8,509 deaths and 4,943 injuries, about 25 percent of the total casualties attributed to terrorism globally in 2018
  • With 647 terrorist attacks, ISIS was the next-most-active terrorist organization, responsible for 3,585 fatalities and 1,761 injuries
  • Having conducted 535 attacks, al-Shabaab was responsible for 2,062 deaths and 1,278 injuries
  • Boko Haram was fourth among the top-five terrorist perpetrators, with 220 incidents, 1,311 deaths, and 927 injuries

Not a single group linked to Iran or supported by Iran is identified. Here’s a table from the report’s statistical annex that identifies the worst offenders:

Iran doesn’t make the list. The attacks are predominantly from Sunni affiliated groups that have ties to Saudi Arabia, not Iran.

America takes exception to Iran because we have a long and negative history, but with justifiable complaints on both sides. Recently, Iran has thwarted the US’s actions in Syria. We should remember that Iran is a Shia Muslim state. When we removed Saddam Hussein and destroyed Iraq’s government, the Bush Administration installed Iraqi Shias in leadership. No GW Bush administration policymakers expressed any concern that these Iraqi politicians and military personnel had longstanding relationships with Iran, which naturally increased Iran’s influence in Iraq.

Iran also had a longstanding relationship with Syria. Obama decided that by eliminating Syria’s Bashir Assad, Iran would be weakened, but that policy backfired. Iran, along with Russia, came to the aid of Syria. Assad is now secure, and America’s influence in the ME has been weakened.

Time to wake up America! We need to get educated about which terror groups are committing what terror acts. Back in the 1980s, Iran was very active in using terrorism as a weapon to attack US military and diplomatic targets, but not so much lately. Iran was behind the early development of the IEDs used in Afghanistan and Iraq. Many US soldiers died. That technology is now globally ubiquitous.

The real issue we should be asking our government to resolve is whether we can (or should) halt the expansion of Iran’s influence in the Middle East. Administrations since Carter have bet that isolating Iran diplomatically, ratcheting up economic pressure, and using limited military power will somehow energize the Iranian regime’s opposition and lead to the overthrow of the Mullahs.

They forget that we’ve used that exact policy with both Cuba and North Korea. How has that worked out for America?

We shouldn’t mourn Gen. Soleimani; he was a bad actor who tried to build shadow Shia militaries in many ME Countries. But Trump and Pompeo need to stop ranting about Iran and terrorism.

The actual issues driving Iran’s growing influence in the ME aren’t based on acts of terror. Our recent policies and actions towards Iran are now accelerating their cooperation with China and Russia, not diminishing it.

Is that in the long term interest of the US?

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Monday Wake Up Call Afghanistan Edition – December 16, 2019

The Daily Escape:

Light snow and morning fog, Yosemite NP CA – December 2019 photo by worldpins

Wrongo and Ms. Right visited the WWII museum in New Orleans last week. In most ways, it was the last war that engaged all of America. At the start of the war, we were woefully under resourced, our army had more horses than tanks. People became deeply involved in the war effort.

During the war, Wrongo as a very young boy, managed to lose our family’s sugar ration card. Businesses gave their production capacity over to the country’s war needs. President Roosevelt was on the radio each week, keeping support for the war effort high. WWII lasted for six years, from 1939-1945.

You know where this is going: Last week, we learned that our government has covered up the reality of how we were doing in Afghanistan, much like our government covered up the truth during the Vietnam War.

We learned this due to work by WaPo reporter Craig Whitlock who has given us an indispensable look into our continuing failure in Afghanistan. The documents include transcripts of interviews with soldiers, diplomats, and others with direct experience in the war effort. Excerpts:

“We were devoid of a fundamental understanding of Afghanistan — we didn’t know what we were doing,” Douglas Lute, a three-star Army general who served as the White House’s Afghan war czar during the Bush and Obama administrations, told government interviewers in 2015. He added: “What are we trying to do here? We didn’t have the foggiest notion of what we were undertaking.”

“If the American people knew the magnitude of this dysfunction. . . 2,400 lives lost,” Lute added, blaming the deaths of US military personnel on bureaucratic breakdowns among Congress, the Pentagon and the State Department. “Who will say this was in vain?”

More:

“What did we get for this $1 trillion effort? Was it worth $1 trillion?” Jeffrey Eggers, a retired Navy SEAL and White House staffer for Bush and Obama, told government interviewers. He added, “After the killing of Osama bin Laden, I said that Osama was probably laughing in his watery grave considering how much we have spent on Afghanistan.”

The WaPo documents contradict years of public statements from US presidents, military commanders and diplomats who assured Americans year after year that we were making progress in Afghanistan and that the war was worth fighting:

“Every data point was altered to present the best picture possible,” Bob Crowley, an Army colonel who served as a senior counterinsurgency adviser to US military commanders in 2013 and 2014, told government interviewers. “Surveys, for instance, were totally unreliable but reinforced that everything we were doing was right and we became a self-licking ice cream cone.”

Bush, Obama and so far, Trump, have all failed us miserably for the past 18+ years. The war has cost America $975 billion-plus tens of $ billions spent by the VA on the wounds of Afghanistan veterans, a price that will rise for the next six decades. The most serious costs are the 2,434 US deaths and 20,646 wounded in action.

The Afghan mess was made worse by piling lie upon lie. We now know that the top brass in the military knew all along that we were losing, and that three successive White Houses also knew.

The greatest tragedy is that the losing is still ongoing.

These revelations are an indictment of our senior military leaders. We had advantages in resources and technology in Afghanistan (we often outnumbered the insurgents on the battlefield) and still lost. But beyond that, it indicts our political leaders, who need to understand our strategy, and be a check on our military.

Time to wake up America! This is also an indictment of all of us, for not paying attention. For not insisting on ending it years ago!

We’ve managed to blow through vast resources that were desperately needed at home. We’ve stood by while our government fruitlessly sacrificed the lives of many of our men and women. We grew our National Debt beyond what we needed to do, and got stuck in another foreign quagmire.

When we finally feel either shame or anger about Afghanistan and that we were lied to, we can take the first steps to political reform.

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Monday Wake Up Call – November 4, 2019

The Daily Escape:

Lake Sabrina, CA – November 2019 photo by Wild_NDN

All of a sudden, there are ongoing protests throughout the world. This seems to be an enormous story, maybe the biggest story of October, despite America’s focus on impeachment. And there’s some, but not a lot of media coverage. Here’s a map of the locations, and primary causes, of recent unrest around the world:

When you see the map, it’s clear that something’s happening. In some places, protesters are mainly demanding more political freedom, like what we’ve seen in Hong Kong. In others, like Iraq and Lebanon, people are sick and tired of corruption and unemployment. They want to throw out the old guard.

The map shows 14 countries, but others report as many as 22 countries experiencing protests in 2019. Can we find common threads to these protests?

They don’t show ideological consistency, although they do show similar tactics. Unlike Occupy in the US, these protesters have demands, which vary with each protest. In some places, they involve millions of people. They do not seem to be internationally driven, although the local powers that be often say that they are.

A Chinese friend of the Wrongologist who lives in Hong Kong provides lots of coverage on local violence. For our media, violence is always “breaking out,” or protests always are “descending into” it, but we rarely hear deep explanations for why it occurs.

Let’s look at a few reasons that transcend individual countries:

Economic Slump

This argument is true for Chile, Ecuador, Venezuela and Haiti in Latin America. It is also true in Iraq in the Middle East. Despite their differences, each country saw commodity-driven economic growth, followed by a slump or stall. Haiti, despite its own economy largely being stagnant, saw billions in aid from oil-rich Venezuela come in, then disappear when Venezuela had its economic issues.

Income Inequality

Jeffrey Sachs frames income inequality as social unhappiness and distrust, in Why Rich Cities Rebel: (brackets by Wrongo)

“Three of the world’s more affluent cities have erupted in protests and unrest this year. Paris has faced waves of protests and rioting since November 2018…after…President Macron raised fuel taxes. Hong Kong has been in upheaval since March, after Chief Executive Carrie Lam proposed a law to allow extradition to the Chinese mainland. And Santiago [Chile] exploded in rioting this month after President Sebastian Piñera ordered an increase in metro [subway] prices….taken together, they tell a larger story of what can happen when a sense of unfairness combines with a widespread perception of low social mobility.”

Gallup finds that while Hong Kong ranks ninth globally in GDP per capita, it ranks 66th in terms of the public’s perception of personal freedom to choose a life course. The same is true in France (25th in GDP per capita, but 69th in freedom to choose) and in Chile (48th and 98th, respectively).

It appears that traditional economic measures of well-being are insufficient to gauge the public’s real sentiments. The protesters perceive the politics behind the prices, and that’s what they are moving against.

Income inequality also shows up as withdrawal or repricing of government services. From the NYT:

“In Chile, the spark was an increase in subway fares. In Lebanon, it was a tax on WhatsApp calls. The government of Saudi Arabia moved against hookah pipes. In India, it was about onions.”

In Ecuador, the focal point of the protests was a demand for restoration of fuel subsidies. From The Financial Times (paywalled):

“The mass protests that have broken out during the past year in Asia, Europe, Africa, Latin America and the Middle East…are usually leaderless rebellions, whose organization and principles are not set out in a little red book or thrashed out in party meetings, but instead emerge on social media.”

Social media is the enabler for leaderless movements. When the Hong Kong demonstrations broke out in June, Joshua Wong, the most high-profile democracy activist in the territory, was in jail. In Moscow, Russia arrested leader Alexander Navalny, but demonstrations continued without him. In Lebanon, France and Chile, authorities have searched in vain for ringleaders. In Iraq, Muqtada al-Sadr, has emerged as the leader of the movement to replace Prime Minister Mahdi.

Underneath it all, whether we’re talking about people wanting political freedom or economic security, these riots are about class, wealth, and income. They are about the fact that all of these countries have very rich people who make the rules.

And their rules never favor the non-rich.

It is unclear if any of these protests will effect change. History rarely favors the man in the street.

Pro tip: If you are going to riot, take the time to head over to the part of town where the rich live, and riot there.

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Fed Study Shows Rising Financial Desperation in Poorer Zip Codes

The Daily Escape:

Aliso Creek State Beach, near Laguna Beach, CA – 2019 photo via

Simon Johnson observes at Project Syndicate: (emphasis by Wrongo)

“To defeat populism requires coming to grips with a fundamental reality: bad economic policies no longer necessarily result in a government losing power. In fact, it is now entirely possible that irresponsible populists may actually strengthen their chances of being re-elected by making wilder and more impossible promises – and by causing more economic damage.”

Johnson, former chief economist for the IMF, believes that structural economic factors, including automation, trade, and the financial crisis have left many people feeling neglected by those who control economic policy.

When politicians back policies that add economic uncertainty, or that discourage investment, we see lower economic growth, and fewer good jobs. Ordinarily, dissatisfaction shows up at the ballot box, holding that government accountable at election time.

But this is no longer reliable, because politicians wiggle out of the trap by saying that the media are biased, that the experts are wrong, and that the facts are not the facts. And the angrier people become, the easier it is to persuade them to accept that no one is to blame, and vote again for those who helped to cause their economic distress in the first place.

A new study by the St. Louis Federal Reserve Bank examined American financial distress by Zip Codes. It sheds light on a topic we regularly debate: Why are there so many signs of distress in a supposedly robust economy? And this time, will politicians be held to account?

Since 2015, the lowest income households have been taking on more debt. Their wealth has become even more concentrated in home ownership. The level of distress in lower-income households has also increased, despite the official story of increasing prosperity.

The study drills into Zip-Code level data to show that even adjacent Zips show striking divergence in wealth accumulation (or erosion). For instance, they looked at the percentage of people within a Zip Code that have reached at least 80%t of their credit limit on their bank-issued credit cards.

That is believed to be a good proxy for financial distress.

Before the 2008 crisis, analysts missed the rising levels of household debt. That debt was often funded by borrowing against home equity. Rapidly falling home prices after 2008 showed how fragile many of those borrowers were.

The contrast between national averages and Zip Code households is stark. Looking at averages, the recovery appears to be quite broad.  But zooming in by Zip Code showed a bifurcated economy still suffering from the 2008 crisis. The researchers found that looking at the value of assets and reliance on debt shows a clearer picture: (emphasis by Wrongo)

“…the poor and high-leverage ZIP codes that are more affected by wealth shocks may still be vulnerable. What’s more, trends in less affluent groups are masked in nationally aggregated statistics by groups with more wealth.”

May be vulnerable”? They will certainly be vulnerable when the next downturn begins.

Since 2015, debt and financial distress have been rising the fastest in these low-wealth areas, while it rose the slowest since 2015 for the wealthiest households. We already see softness in economic indicators like retail sales, home sales and housing construction. It’s reasonable to expect that the next recession isn’t far away.

We’ve had a long economic recovery, but its gains were not distributed as broadly as they had been in previous downturns. What we got was an uneven economic recovery, with most gains going to an increasingly narrow group.

More people are left out of this supposedly robust economy than the politicians and most economists think. The Fed study shows that the averages conceal plenty of pain. Maybe this isn’t an earthshaking idea. We all see income and wealth disparities in our communities, it’s not that unusual. But the fact that the differences are now extreme enough to show up in ZIP Code level data seem significant, and worrying.

So, will politicians pay any price in 2020 for the continuing maldistribution of gains since the 2008 recession? Or, will politicians tell the people that no one’s to blame, that the Laffer curve will surely work this time?

The miracle of modern Republican economic theory allows for both the Laffer curve, and “pulling oneself up by the bootstraps” not only to be truths, but to be the desired outcome.

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Monday Wake Up Call – 2019 Memorial Day Edition

The Daily Escape:

Memorial Day, Arlington National Cemetery – 2013 photo by William Coyle

 “Patriotism is supporting your country all the time, and your government when it deserves it.” Mark Twain

Today we celebrate the sacrifice of those who died fighting in America’s wars. We mourn those we knew, and we remember those we never knew.

We can’t seem to get our fill of war. In fact, since 1943, the year of Wrongo’s birth, the US has been at peace for just five years: 1976, and 1977, 1978, 1997 and 2000 are America’s only years with no major war.

So today, we celebrate those who have died in service of our global ambitions. Maybe we watch a parade, shop at the mall, and attend the first cookout of the year. Perhaps we should be required to spend more time thinking about how America can increase the number of years when we are not at war.

But today also brings us something else to think about. The Yale School of Forestry published an article about the use of Agent Orange in Vietnam, Fifty Years After, A Daunting Cleanup of Vietnam’s Toxic Legacy. Here is a snippet:

“From 1962 to 1971, the American military sprayed vast areas of Vietnam with Agent Orange, leaving dioxin contamination that has severely affected the health of three generations of Vietnamese. Now, the US and Vietnamese governments have joined together in a massive cleanup project.”

During the US Air Force campaign known as Operation Ranch Hand, Agent Orange was used to strip bare the coastal mangroves of the Mekong Delta and the dense triple-canopy forests that concealed enemy fighters and supply lines. One-sixth of South Vietnam was blanketed with 20 million gallons of herbicides, and as many as 4.8 million Vietnamese civilians were exposed to the spraying.

The three remaining hot spots of dioxin contamination were the US airbases at Da Nang, Bien Hoa, and the smaller air base at Phu Cat. These were the sites from where the spraying was launched. The residual levels of dioxin on those sites posed a serious ongoing threat to public health. Of the three, Bien Hoa was by far the worst. During our war in Vietnam, it was said to be the busiest airport in the world.

Phu Cat was cleaned up by the Vietnamese without US assistance. Next came Da Nang, a six-year project that was completed last October. It cost $110 million, of which $100 million came from the US State Department, channeled through USAID.

The sheer volume of soils and sediments that must be remediated is staggering. In Da Nang, it was 90,000 cubic meters; in Bien Hoa it is 495,300. The US has agreed to commit $300 million to the Bien Hoa cleanup over 10 years, but USAID couldn’t bear the entire cost. So, after much debate, the Department of Defense agreed to contribute half of the total.

This has to be done, since dioxin is a deadly chemical. It is both hydrophobic and lipophilic: it hates water and loves fat. It sinks into the sediment at the bottom of bodies of water, it attaches to organic matter and moves up the food chain, from plankton to small aquatic animals and finally to fish. In soil, it ends up in free-range chickens and ducks and their eggs.

It becomes more concentrated at each stage, a process known as bioaccumulation. Eighty-seven percent of dioxin enters the body through ingestion, before migrating into fatty tissue, the liver, and breast milk. And fish and poultry are staples of the Vietnamese diet.

The WHO stipulates a tolerable maximum of 1 to 4 picograms (one trillionth of a gram) per kilogram of body weight per day. The mean amount they found in breastfed infants in the Bien Hoa area was 80 picograms.

And we shouldn’t forget how haphazardly the VA has dealt with the medical issues of Vietnam Vets who were exposed to Agent Orange. For many years veterans with Agent Orange-related diseases were denied disability compensation by the VA. This only changed with the passage of the Agent Orange Act of 1991. Now, the VA acknowledges certain cancers and other diseases are caused by Agent Orange.

The Vietnam War ended in 1975. The Vietnam vets that survived the war only to suffer from Agent Orange-related diseases had to wait at least 16 years before our government began helping the majority of them. Vietnam waited 50 years before our government acknowledged our culpability in destroying much of their environment.

This is a sad reminder about today’s Memorial Day, all of our past Memorial Days, and the ones to come.

It is good to be reminded again about our dead soldiers, and also to be reminded of what our government ordered them to do.

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Monday Wake Up Call – May 6, 2019

The Daily Escape:

Torres del Paine NP, Chile – 2016 photo by Andrea Pozzi

After our granddaughter’s graduation in PA (summa cum laude), we had a few wines and beers, and talk turned to politics and the mess America is in now. Son-in-law Miles, (dad of next week’s grad) asked a very good question. “Is now really the worst of times? What about when Martin Luther King was assassinated?

Wrongo immediately flashed back to JFK’s assassination. He was a DC college student when JFK died. But his focus wasn’t on the loss of a president, or what that meant to the country. His focus was on what the loss of JFK meant personally.

That changed in 1968 with the assassinations of MLK and RFK. Wrongo was in the Army, stationed in Germany when Dr. King was killed. There was great tension in the enlisted men’s barracks. For a few days, it took a lot of effort in our small, isolated unit to keep anger from boiling over into outright fighting between the races.

By the time we lost RFK, it was clear that the Vietnam War would drag on, killing many of Wrongo’s friends. But, Wrongo’s job was to defend America from the Russians, with nuclear weapons if necessary.

It was difficult to see how or when Vietnam would end. It was hard to imagine Richard Nixon, Henry Kissinger, or Robert McNamara doing much to stop young Americans from dying in Asia.

The year 1968 also included the Tet Offensive. Mark Bowen in his book, Hue 1968, says:

“For decades….the mainstream press and, for that matter, most of the American public, believed their leaders, political and military. Tet was the first of many blows to that faith in coming years, Americans would never again be so trusting.” (p. 507)

When Americans finally saw the Pentagon Papers in 1971, they learned that America’s leaders had been systematically lying about the scope and progress of the war for years, in spite of their doubts that the effort could succeed. The assassinations, Vietnam, and Watergate changed us forever.

Our leaders failed us, it was clearly the worst of times. We were in worse shape in 1968 than we are in 2019. Back then, it felt like the country was coming apart at the seams, society’s fabric was pulling apart. Then, May 4th 1970 brought the killings of college kids at Kent State, which was probably the lowest point in our history, at least during Wrongo’s life time.

Last week, we acknowledged the 49th anniversary of America’s military killing American students on US soil. We vaguely remember the Neil Young song “Ohio” with its opening lyrics:

“Tin soldiers and Nixon coming, we’re finally on our own…”

That’s why the decade from 1960-1970 was the worst of times. We got through it, but we have never been the same.

In 1968, we saw that change can arrive suddenly, fundamentally, and violently, even in America. Bob Woodward spoke at Kent State last week, on Saturday, May 4th. He offered some brand-new information about Nixon’s reaction to the student shootings: (emphasis by Wrongo)

“In a conversation with his chief of staff H.R. Haldeman in September 1971, Nixon suggested shooting prisoners at New York’s Attica Prison riot in a reference to the Kent State tragedy. “You know what stops them? Kill a few,” Nixon says on a tape of the conversation.”

Woodward continued:

“We now know what really was on Nixon’s mind as he reflected…on Kent State after 17 months….Kent State and the protest movement was an incubator for Richard Nixon and his illegal wars.”

Woodward meant that what was coming was a war on the news media, creation of the “Plumbers” unit to track down leaks, and attempts to obstruct justice with the Watergate cover-up.

Many of us see 2020 shaping up as another 1968. Some see Nixon reincarnated in Trump.

We haven’t faced this particular set of circumstances before, so we can’t know just how it will go. Will it be worse than the 1960s, or just another terrible American decade? Is it the best of times, or the worst of times?

Are we willing to fight to preserve what we have anymore?

Wake up America, you have to fight for what America means to us. Constitutional liberties are under attack. The right to vote is being undermined. Extreme Nationalism has been emboldened.

To help you wake up, listen once again to “Ohio” by Neil Young in a new solo performance from October, 2018. He’s added some documentary footage and a strong anti-gun message:

You may not know that Chrissie Hynde, the future lead singer of The Pretenders was a Kent State student, and was on the scene at the time.

Those who read the Wrongologist in email can view the video here.

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