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WILL IT TAKE FOOD SHORTAGES TO END SUPPORT FOR THE SHUTDOWN?
Will It Take Food Shortages to End Support for the Shutdown?
Americans are uniquely privileged, to the point of simply imagining they can stay home for months and months without suffering severe economic hardship as a result. Our unique privilege is delusion, the mentality that America is rich and will remain rich without particular effort on our part. Abundance simply materializes around us, regardless of incentives, and the job of politicians is to rearrange this abundance more equitably.
Polls such as this one showing widespread American support for quarantines and business shutdowns are evidence of this American privilege. Eighty percent of respondents think shutdowns by various state governors are justified as a response to the COVID-19 virus, and one-third support extending closure for another six months!
This reflexive and unthinking complicity from the American public is partially explained by media hype, of course, over an illness which at this writing has killed fewer than sixty thousand Americans. Fear and hysteria always sell. The press clearly wants the coronavirus to be a major event, one that unseats Trump in the fall. (For its part, the administration is doing a terrible job, starting with the awful Dr. Fauci, whom the president should have sacked months ago.) And clearly the various governors’ responses are wildly out of proportion to the actual public health threat, even if initially well intentioned due to sheer uncertainty of the virus’s lethality.
But something far more fundamental is at work here. Americans simply fail to understand, or even much think about, the fragility of distribution chains and the goods and services we rely on. Earlier this week the chairman of conglomerate Tyson Foods warned that disruptions at processing plants could create very serious shortages of beef, chicken, and pork in US grocery stores, and decimate livestock farmers. And of course this was bound to happen as the dominos fell: the shutdowns would not only impact “nonessential” goods, but everything.
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A Modest Proposal for the Fed
A Modest Proposal for the Fed
Quantitative easing, the program of asset buying initiated by the US Federal Reserve Bank in 2008, represents the most profound monetary experiment in the history of the world. Between fall of 2008 and fall of 2014, three successive rounds of QE quadrupled the monetary base of the world’s most-used and dominant currency, from less than $1 trillion to more than $4 trillion. The Fed literally created new money, bought Treasury debt and mortgage-backed debt (of dubious character) from commercial banks, and credited them with new reserves.
It was a great trick. If QE can be done without adverse effects or with few adverse effects, it represents nothing short of monetary alchemy (h/t Nomi Prins). Everything we thought we knew about the Fed as backstop lender of last resort to commercial banks, as hallway monitor of inflation and unemployment, is out the window.
If QE works, then every government on earth must take notice of the opportunity to effectively recapitalize their own banks and industries free of charge. QE turns central banks into kings of capital markets, into active participants in the economy. As one twitterati put it, expansionary QE created the biggest untold American story of the last twenty years: the Fed can now inflate and deflate assets, devalue savings, influence wages and productivity, encourage corporate malfeasance, and engineer balance sheets—all the while creating economic winners and losers.
What politician or central banker could resist?
Recall how defenders of QE not only argued it was necessary, but beneficial. Paul Krugman was among the worst offenders, insisting that low interest rates would mitigate any harms from such rapid monetary expansion. These defenders dismissed, and continue to dismiss, what is now obvious: since 2008 the US economy has experienced significant asset inflation in equity markets and certain housing markets, plus a creeping but steady rise in many consumer prices.
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Democracy, the God That’s Failing
Democracy, the God That’s Failing
When Professor Hans-Hermann Hoppe made his famous argument against democracy back in 2001, the notion that voting was a lousy way to organize society was still radical even among many libertarians. Virtually everyone raised in a western country over the past century grew up hearing “democracy” used as a synonym for wonderful, good, just, and valid. It takes a great deal of unlearning to overcome this as an adult, and to question the wisdom of representative government installed via democratic mechanisms.
Fast forward to 2017, however, and the case against democracy is being made right in front of our eyes. Witness Hillary Clinton, who not long ago gushed about our “sacred” right to vote — that is until her stupendous loss to Trump. Today she clings to the specious nonsense that the Russians somehow influenced our election by planting stories and using social media, which if true would be an excellent argument against voting rights. If the natives are so easily duped by a few silly posts in their Facebook feeds, why on earth is their vote meaningful or sacred?
Other progressives like Michael Moore demand that Trump be arrested, presumably for treason. Left-leaning cable news pundits openly call for Trump to resign or be impeached. Mainstream newspapers wonder whether he’ll even finish his four-year term. The overwhelming message from the media is that Trump is a disaster, an existential threat that must be stopped.
But it’s not just progressives questioning democratic outcomes. Neoconservative Bill Kristol tweets that he’d rather be governed by an unaccountable deep state than Trump. Mild-mannered conservative moralist Dennis Prager, a reasonable and likeable right winger in my view, argues quite seriously that we are in the midst of a second civil war with those who simply reject their electoral defeat. And the libertarianish jurist Richard Epstein, writing for the somnambulant Hoover Institution, unloads a litany of grievances against Trump that would make Bill Maher blush.
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The Futility of Our Global Monetary Experiment
The Futility of Our Global Monetary Experiment
Jeff Deist: The Fed recently announced just this past week that it would not use specific dates for targeting higher Fed funds rate this year and you almost get the sense that poor Janet Yellen is at the end of this Greenspan-Bernanke experiment and there’s not much left for her to do. I mean, what’s our sense of Yellen and her position?
David Stockman: Yeah, I agree with that. I think in some ways they’re petrified as to where they ended up or they should be. After all, we’re in an experiment of monumental proportions.
Let’s just assess where we are. If they don’t raise the interest rate in June — and I think all the signals now are pretty clear they’re going to find another reason to delay — that will mean seventy-eight straight months of zero rates in the money market. As I always say, the money-market price, that is the Federal Funds Rate or Overnight Money or a short term treasury bill, is the most important price in all of capitalism because that determines the cost of carry, the cost of speculation and gambling.
When you conduct a monetary policy that says to the speculators, to the gamblers, “come and get it,” you are guaranteed free money to carry your positions, whether you’re buying German Bonds or you’re buying the S&P 500 Stock Index or the whole array of yielding or price gaining assets that are available in the financial market. This monetary policy also sends the message that you can leverage and carry those positions for free and roll it day after day without worry because the central bank has pegged your cost and production, and in a sense has pledged on its solemn honor that it will not change without many months of warning. And that’s what this whole thing is about — changing the language and so forth. I think you have created a massive distortion in the very heart of capitalism in the financial system.
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