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The Wrongologist

Geopolitics, Power and Political Economy

Churchill’s Lessons For Our Time

The Daily Escape:

Algodones Dunes, CA – 2020 photo by _christopherjs. The Algodones Dunes cover 1,000 square miles of Sonoran Desert, making it the largest dune system in the US.

Wrongo fears that some of our country’s problems may be intractable. Blog reader Fred VK agrees:

“I’ve been distressed lately by how seemingly brain dead so much of the US population seems, not only regarding COVID-19 but more, the fragile state of our nation and what the forces of Trump have done and are doing. Some say we will never get back due mostly to lack of resolve. Years ago, I developed this notion that Americans were so complacent about our country and government because they believed that everything was so set in stone that nothing could shake it and that the republic was good to go as is forever.”

Things aren’t set in stone, and they don’t go to hell in a straight line, But from where we stand today, it’s questionable whether America can (or will) be able to solve its biggest problems.

So the question is: What should we be doing when we live in a country where you know bad things will continue to happen, and you can’t stop them?

Worse, in the time of COVID-19, we’re seeing that our efforts to prevent, or to moderate what’s wrong are failing. It’s worth considering that all of our efforts are barely slowing down the worst of what is happening to the climate, to inequality, to the re-emergence of racism, and the rising threat that factionalism presents. For many of us this hits home. We or our loved ones are among those suffering: losing our lives, homes, livelihoods, or living in despair.

We are far from the first to contemplate a civilization’s decline. From Ian Welsh: (emphasis by Wrongo)

“The Roman Empire went through multiple periods of decline…stoics and epicureans debated how to live the good life in an evil world. The Chinese practically had dealing with declining and corrupt imperial eras and warring…periods down to an art: When no good could be done in the world, one returned to one’s private life to write poetry, drink wine, and care for those close to one while refusing as much as possible to be complicit in the evil of the times.”

Words to live by: Avoid being complicit in the evil of the times. This can’t all be blamed on Republicans, but they are primarily responsible for the wrong that’s occurred in America since the 1980s. Can we work together to pull out of our current nose dive? It will require far better leadership than we have now.

Wrongo is reading Erik Larson’s book about Churchill and the Blitz. Larson focuses on Churchill’s first year as prime minister. On his first day, Hitler invaded Holland and Belgium. Dunkirk was only two weeks away, and the blitz was about to begin.

Britain was woefully unprepared. They had just 45 fighter aircraft when Churchill took office, and no one thought Britain could hold out for long against the Nazis. Churchill managed to convince the British people of the “art of being fearless”. He bludgeoned his government and the military on to the same page. Many in England wanted to concede Europe to Hitler, if that meant even a temporary peace, and they had to be brought to see the fight was worth having.

This picture is from a London library during the blitz. It is also the frontispiece in Larson’s book, and shows how people try to normalize even under the worst of circumstances:

Via Shorpy

But we should no longer normalize. Churchill was able to bring his country together despite all the factionalism, and we must make that our goal. Reading Larson’s book puts our own political dysfunction in focus. It’s clear that today, when the stakes are very high (not as high as England in WWII), we also need robust and top quality leaders.

What is our job as citizens, if leadership is to be the difference? Wrongo isn’t saying we shouldn’t fight the big fights. The best way to lose the big fights is to not fight.

We need to cajole, or force if necessary, a few of our politicians to step forward and be the heroes we need.

Many heroes have emerged as the COVID-19 fight has unfolded. We’ve seen good people brought closer together. We’ve felt the pain that comes when we know we must transition from a weaker to a stronger place, but we know we’re not where we need to be.

Sadly, few if any of our current heroes have been politicians.

Some of them need to step forward, and take the chance to be the leader who can teach Americans the “art of being fearless” much like Churchill taught the British.

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Saturday Soother, Economic Damage Edition – May 16, 2020

The Daily Escape:

View of grasslands, south of Denver, CO – 2020 photo by crappydenverphotog

Happy Saturday fellow disease vectors!

Jerome Powell, the Chairman of the Federal Reserve said on Wednesday that the effects of the pandemic could permanently damage the economy if Congress and the White House did not provide sufficient financial support. Job losses average 25% currently, and are higher in some states.

Powell thinks the country needs more funding for the segments of the economy that are seriously underwater. While the House has offered up a plan for new money, Mitch McConnell says he’s far from interested in new money for the states, or those who are out of work.

We can’t say often enough how badly federal leadership has failed us throughout this crisis.

In the executive branch, we’ve seen incompetence and political ideology overwhelm what little crisis leadership there might have been. Test kits were available from the WHO in January, but the CDC choose not to use them. Then, their own tests didn’t work.

Testing was deliberately limited by the administration as disease transmission grew, and the virus escaped early containment. Supplies of PPE were not allocated to hospitals according to need. And, no federal system to manage the global medical supply chains exists, despite every governor saying it’s needed.

Congress wasn’t much better. Action was marred by politics, and a misunderstanding of the economic issues. Instead of simply replacing lost wages, the SBA issued rules that firms found difficult to comply with. Banks gave preference to their big clients, and the money soon ran out. The effort to save the economy by pouring money into it through conventional channels was inadequate, inefficient, and in some cases, corrupt. The only thing that can be said is that it was better than doing nothing.

The push to reopen the economy is premature. Some state governments facing fiscal disaster are reopening. Georgia, for example, has now lost the jobs of 39.5% of those who were employed in February 2020. It is unclear that closed retail businesses can be profitable when reopened, since their capacity will be limited for public health reasons. Right now, many businesses may face bankruptcy.

In any event, rents, mortgages, utility bills and other debts continue to accrue for individuals and businesses. And we found out that 40% of low income households have experienced job losses, compared to 20% overall.

Employees are also potential victims of the reopening. The Trump administration is advising state governments on how to remove workers from unemployment insurance.  Employers can demand workers show up, and if they refuse, they no longer qualify. Why would the workers refuse? Because their workplaces will still be unsafe.

It gets worse: Nearly half of people surveyed by Magnify Money now say they have to draw money from their retirement accounts because of the COVID-19 lockdowns:

The majority of respondents who withdrew funds to cover basic expenses is disheartening. The survey revealed that 60% of respondents used their retirement funds to pay for groceries, 42% spent it on household bills, 31% used it for rent or mortgage payments and 27% used it for debt payments.

Although the scale of the pandemic-caused economic catastrophe was known almost immediately, the Trump administration had limited interest in the health and well-being of the rest of us. Their main interest appeared to be winning the presidency in November.

But you can’t beat something with nothing.

People need help. If they aren’t offered anything good, many will accept something pretty awful, like more Trump for example. Biden is promising a return to the status quo ante, but that’s magical thinking.

The economy wasn’t working for many Americans before the pandemic. Now, the pandemic has taken a sledgehammer to it, and we are looking at what is left. American Capitalism needs to be reformed.

Sorry that we’re entering the weekend on a gloomy note. Since it’s our Saturday Soother, let’s kick back and forget about all that’s weighing us down. Let’s free our minds for a few moments. It’s going to be a spring-like weekend here at the fields of Wrong, so time for more yard work.

To help you settle into the weekend, start by listening to Vaughan Williams composition from 1903, “The Solent”, played by the Royal Liverpool Philharmonic Orchestra, conducted by Paul Daniel.

The Solent is the channel between the Isle of Wight and southern England:

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

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Can We Get Our Act Together?

The Daily Escape:

Hummingbird with bee balm – 2014 photo by JH Cleary. Hummingbirds arrived on the fields of Wrong yesterday.

When was the last time that America got its act together when it needed to? It’s been a very long time, probably not since WWII, or possibly, during our effort to immunize everyone, once there was a polio vaccine. That’s between 65 and 75 years ago.

We didn’t get our act together during the Vietnam era. We’re reminded of that with yesterday’s 50-year anniversary of the Kent State shooting in 1970, when four unarmed college students were killed by soldiers of the Ohio National Guard. It was a small, but significant tragedy that became a part of a greater national tragedy, the Vietnam War.

We didn’t get our act together after 9/11 when we attacked Afghanistan and Iraq. Like Vietnam, we’ve been losing to people who wear sandals and fight with antique weapons, for 50+ years.

These aren’t the only examples. New Orleans was whacked by Hurricane Katrina, but a week later, survivors were still sitting on roof tops surrounded by floating corpses. Even now, 15 years later, there is still evidence of damaged buildings in the city’s 9th Ward.

We haven’t gotten our act together to fight the COVID-19 pandemic. We’re currently seeing 1,750+ deaths per day. While the death toll is dropping in NYC and NJ, it’s rising pretty much everywhere else.  Here’s a chart showing the growth in cases, not deaths:

The dotted lines are a 7-day moving average, which allows us to see the trends more clearly. Politicians outside of the NY metropolitan area who are busy relaxing restrictions look like they’re simply giving up and pretending it’s over, when it isn’t. Ohio Gov. Mike DeWine (R) is dropping requirements that residents wear masks. It is now a “strong suggestion”. Kentucky Gov. Andy Beshear (D) wants residents to wear masks starting May 11, but will not enforce it.

Getting our act together has never been a feature of America’s Coronavirus fight. A depressing story in the New Yorker, “Seattle’s Leaders Let Scientists Take the Lead. New York’s Did Not”, sheds light on Seattle’s response vs. New York City’s. Although the initial coronavirus outbreaks emerged in both cities at roughly the same time, by the second week of April, Washington State had about one recorded fatality per 14,000 residents. New York’s death rate was nearly six times higher.

The article describes how Seattle’s political leadership followed a tried and tested CDC playbook for epidemics, called the CDC’s Field Epidemiology Manual, which places public health and scientists at the core of the response. New York’s mayor DiBlasio cut NYC’s public heath bureaucrats out of the loop. In early March, both NYC’s mayor and NY’s governor Cuomo were giving speeches de-emphasizing the risks of the pandemic, as the city was announcing its first cases.

This partially explains why Washington State has less than 2% of coronavirus cases in the US, while NY has 27%.

We’re all familiar with the confusion of message and policy sown by Trump as the primary national spokesperson for the pandemic, a person notoriously hostile to science. His team includes Mike Pence, Dr. Fauci from the NIH, Dr. Deborah Brix from the State Department, and Jared Kushner, from the family. With contributions from Mike Pompeo and Steve Mnuchin.

The New Yorker quotes Dr. Tom Inglesby, director of the Center for Health Security, at Johns Hopkins:

“When there are so many different figures, it can cause real confusion about whom to listen to, or who’s in charge of what….And, if the response becomes political, it’s a disaster, because people won’t know if you are making recommendations based on science or politics…so there’s the risk they’ll start to tune out.”

From the NYT:

“As President Trump presses for states to reopen their economies, his administration is privately projecting a steady rise in the number of coronavirus cases and deaths over the next several weeks. The daily death toll will reach about 3,000 on June 1…nearly double from the current level of about 1,750.”

Math tells us that this will amount to about 81,000 more deaths by then, making the total somewhere around 150,000, assuming that the death rate remains on its current trend.

Should we expect that America will continue to flub it’s response to the pandemic? If so, Aaron Sorkin and Jeff Daniels will have to re-do the famous opening scene from “The Newsroom” where Daniels says “America is not the greatest country in the world anymore”:

Since we haven’t gotten our act together for so long, a failure to control the 2020 COVID-19 pandemic will be depressingly similar to the tragedies of the past.

Failures of leadership, coupled with warring political factions who refuse to work together for a common good.

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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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