Reborn On The Fourth of July?

A little gallows humor:  What do Julius Caesar and America as we knew it have in common?  Both died on the Ides of March (March 15).  That date was, indeed, roughly when America began to shut down to one degree or another.  But will America be reborn on (or before) the Fourth of July?

There is much debate lately about how and when to ease lockdown/shutdown restrictions and re-open the country for business.  Unfortunately, neither side seems to do nuance very well if at all.  Opening up everything or nearly everything all at once overnight would of course be reckless and cavalier, risking a resurgence of the virus (and associated deaths) and eroding much of the progress that has been made thus far.  But continuing the status quo indefinitely (or even simply taking too long to ease restrictions) is also not very wise either since that will do irreversible economic damage and likely will still not conquer the virus entirely.  Thus, if we wait too long, there may not be anything left to re-open by then, at least for small businesses.  And that's to say nothing of the adverse consequences to civil rights and liberties, mental health, and community cohesion as well.

(And you know, slopes are much, much slipperier than they appear, as Orwell spins in his grave.)

Even the supposed effectiveness of full lockdowns (compared to far less extreme restrictions) in terms of slowing or stopping the spread of coronavirus has been called into question by more recent studies comparing those locations that had lockdowns and those that did not, or differed in the timing.  The results strongly imply that the observed declines in COVID-19 deaths (and thus the number of infections three weeks prior) was actually driven by the more moderate social distancing measures that were in place earlier, not the lockdowns, based on the timing.  And if there somehow was any extra effectiveness of the most extreme measures such as lockdowns, it is most likely only a short-term effect that eventually reaches a point of diminishing returns after which the "cure" really DOES become worse than the disease.

Perhaps the much-maligned Swedish mitigation strategy of moderate social distancing (not to be confused with the mythical "do nothing" strategy) really isn't so crazy after all?

Thus, a careful and gradual but fairly speedy easing and re-opening is what is called for, in order to minimize the damage from both the pandemic itself as well as from the restrictions in place to suppress it.  The timing should vary by state and locality as well as exactly which types of restrictions to be eased and which types of businesses to re-open.  It would probably be best for all states to wait until at least May 1 or two weeks post-peak (whichever is later) before making any major changes (though baby steps can and should be taken sooner).  Some states have already peaked in early to mid-April, while others will not peak until early May or so.  Hospitals would also have to not be overwhelmed as well.  And testing will have to be signifcantly ramped up along with contact tracing and individual quarantining as well in order to move forward into the later stages of reopening.

And of course we need a far more massive stimulus, and the Ten Steps to Prosperity that Rodger Malcolm Mitchell recommends.  Because even if we re-opened tomorrow, consumers will still be too cautious to come roaring back right away, and the damage is already done.  Especially a significant and permanent UBI, which would cure even the worst depression a lot sooner than not implementing a UBI.

Trump's latest guidelines for reopening are surprisingly reasonable now, likely because he finally consulted with experts rather than just going with his gut as usual.  But his administration is really lagging on providing coronavirus testing kits, which would clearly hamper any reopening.  So they really need to speed that up.  It was, after all, due to the Trump administration's recklessness and negligence that this pandemic got so far out of control here in the first place, and it is estimated that up to 90% of the deaths could have been averted had they acted sooner and not screwed up so monumentally.

Thus the TSAP recommends that all states gradually lift lockdowns and partially reopen by Memorial Day (with many states doing so in early May) and fully lift all significant restrictions (except perhaps for restrictions on very large gatherings of, say, 500+ people) by the Fourth of July at the latest.  But states like Georgia that seek to re-open salons, barber shops, gyms, casinos, bars, and stuff like that while it is still April (and they haven"t even peaked yet) are really being foolish, as those riskier businesses should really be the very last ones to re-open after all the others do.  They should really wait another few weeks for those types of places and make sure they actually have a plan rather than flying blindly.

At the local (county and municipal) level, some hotspots may choose to still maintain tight restrictions or reimpose them in the event of a resurgence of the virus, but these restrictions should be exactly that--local.  In a similar vein, states may also impose modest, New Rochelle-style "containment zones" or "red zones" where local outbreaks or large clusters are observed.  As we move past the initial crude "sledgehammer" phase of suppression and into the more refined management phase, we need to be careful in how we calibrate such measures to avoid doing more harm than good in the long run.

As for school closures, that should really be decided locally for the most part.  While school closures are known to work very well in the short term in slowing the spread of infectious diseases in general, the longer-term effects are unknown, and children and teens seem to be at relatively low risk from this virus as well as not a particularly major vector for spreading it to adults.  Certainly they should at least plan on reopening in September at the latest absent evidence of a large second wave of the disease.

Regardless of the effectiveness (or lack thereof) of lockdowns, simply going straight from red to green overnight would be utterly foolish, since it's really still too soon to safely encourage a massive influx of tourists when the "all-clear" signal is given.  So we should thus go from red to orange, then yellow, then green, and we really only need a few weeks (not months) of orange and/or yellow in between.   And even green does not preclude very mild restrictions and common-sense precautions as well.

We have already flattened the curve.  Now let's keep it flat, without also flattening the economy as well.

Is The Cure Worse Than The Disease?

We know that the Trump administration clearly bungled its response to the coronavirus pandemic.  Scratch that, they failed miserably in practically every way possible to contain or suppress this virus, and now the proverbial genie is out of the bottle.  But what if the proverbial stopped clock can be right twice a day, particularly the claim that "the cure is worse than the disease" as far as shutdowns and lockdowns are concerned?

As is typical for Republicans, Democrats, and LOLbertarians alike, no one seems to do nuance, nor do they understand Monetary Sovereignty apparently. And the Donald is clearly no exception to the rule either.

That said, there are reasons to be concerned that longer-term shutdowns and lockdowns (some pundits even predict up to 18 months!) can cause a depression that NO amount of federal money can solve until well after such drastic measures are lifted. Because we didn’t quash it early on when we had the chance, there will likely be a long battle against COVID-19, to be sure, but the current “sledgehammer” phase of the battle cannot last indefinitely. Sooner or later we will have to ease or lift restrictions and pivot to case-based interventions rather than population-based ones once any of the following occur: A) the epidemic is largely under control, B) we reach the point of irreversible damage to the economy, or C) the epidemic exceeds 1% of the population and “flattening the curve” thus becomes impossible. Whichever comes first. And at least one of these three will happen within a few weeks from now at most, for better or worse.   Lockdowns and shutdowns are best thought of as a short-term tactic, not a long-term strategy. 

That’s to say nothing of the cost in terms of individual liberty, which is at *least* as priceless as life itself, as well as the cost in terms of mental health at least in the long run. Economic depression is not the only kind of depression to worry about, after all.

And even for hardcore communitarians who believe that individual liberty is worth absolutely zilch, one also can argue that the social consequences of long-term lockdowns and social distancing are ultimately corrosive to community as well.

And as of early April, option C likely already happened at least in parts of the USA, particularly the greater NYC metro area, plus several other hotspots around the nation.  Given how most people who catch the virus experience mild or no symptoms, it is very likely that the number of reported cases is off by a factor of ten or more.  Which, of course, makes the case fatality rate lower as well.  In any case, the peak will likely happen sometime in mid to late April in much of the country, with some areas in May.

Thus, there will come a point of diminishing returns where the cure really DOES become worse than the disease.  When exactly, no one knows for sure.  But a good ballpark estimate would be "weeks, not months".

Thus, the TSAP does NOT support the more extreme measures lasting more than a few weeks, nor even the less extreme ones lasting more than a few months at most.  And for NO length of time do we support arresting or jailing or shooting people for leaving their homes, suspending habeas corpus or the Constitution, or any form of martial law.  Period.

DISCLAIMER:  The TSAP are NOT doctors, epidemiologists, or otherwise experts on this matter, so please take our predictions with a grain of salt.

The Stimulus: Too Little, Too Late--But Still A Good Start

The much awaited stimulus package finally passed Congress and was signed into law by Trump yesterday.  While it is a good start, it is far too little and far too late to prevent a coronavirus recession, let alone recover from it--but it may just be enough to prevent or delay it from turning into a full-blown depression.  Hopefully, at least.

First, the FERAL Reserve fired their "bazooka" and cut interest rates to 1% and then to zero, restarted QE, and even cut the reserve requirement to zero as well.  The stock market still crashed.  Then they pledged unlimited cash assistance (via bond and asset buying) to any banks who may need it, a sort of QE on steroids or "UBI for the rich".  The stock market continued to tank, though ultimately seemed to reach an (interim) bottom after declining about a third from its mid-February all-time high.  Then Congress belatedly realized the need for fiscal stimulus, as the FERAL Reserve's measures really only shore up Wall Street and generally fail to "trickle down" to Main Street.  And now the FERAL Reserve is essentially out of ammo in terms of monetary policy.

The CARES Act, the third and most notable of the three coronavirus-related stimulus bills passed so far, among other things bails out businesses big and small, gives relief money to hospitals, expands unemployment benefits, and most famously, gives a one-time $1200 per person to most adults and $500 for children.  The whole package is $2.2 trillion dollars total  While good, this is still unlikely to be sufficient.   Rodger Malcolm Mitchell estimates that we need as much as $7 trillion in newly created dollars to really fix things for good.

What really needs be done are Rodger Malcolm Mitchell's Ten Steps to Prosperity, starting with abolishing FICA, implementing Medicare For All, and implementing Universal Basic Income (UBI), all paid for with new money creation.  We also need a Green New Deal and to improve our public health infrastructure as well.  Also, we at the TSAP believe that we need to pass an Act of Congress adding another, much more effective tool to the Fed's toolbox:  QE For The People, in which the Fed would deposit newly created money directly into the bank accounts of every single American.  This can be done in existing bank accounts, via debit cards, and/or by giving everyone with a Social Security number or ITIN an account at the Federal Reserve.  The latter was actually recommended by an author at The American Conservative of all places, who even described it as similar to UBI, showing that this idea is not just for leftists anymore, but rather transcends the entire political spectrum.  QE For The People will be far more effective than QE for the banks, since it works to stimulate the economy from the bottom up and middle out, not from the top down.

Also, the federal government should use its power of infinite money creation to purchase (at several times the market value) ventilators, masks, PPE, hospital beds, and any other essentials in short supply now, and distribute them for free.  And it would literally cost taxpayers nothing.  And yet, it took a crisis of such massive  proportions to finally and belatedly force the government's hand to even grudgingly give Americans free testing, paid sick leave, and modestly expanded food assistance in the first two stimulus bills.  Now is NOT the time to be cheap!

And lest anyone grouse about the National Debt, keep in mind that our Monetarily Sovereign federal can just print (or more accurately, keystroke) the money.  Yes, really.  That is what it means to be Monetarily Sovereign.  Money is just a simple accounting entry nowadays, so make the entry and be done with it.

Yesterday.

And if Fitch or Moody's or S&P threaten any credit rating downgrades for the USA, let them do what they will.  Then we should #MintTheCoin (i.e. a multi-trillion-dollar platinum coin) and call their bluff.  Problem solved.  Done, done, on to the next one.

It's not only about saving the economy from ruin, but now it's also literally a matter of life and death at this point.  Seriously.  So what are we waiting for?

UPDATE:  As of April, the Federal Reserve apparently has also begun helping Main Street as well as Wall Street, and taking unprecedented steps to do so.  Not quite full QE For The People yet, but hopefully it will eventually pave the way for it.  It's like they finally realized that a fully functioning Wall Street cannot really exist for long without a fully functioning Main Street.  After all, a purely FIRE economy cannot exist without an actual physical economy to back it up.

How To Recession-Proof The Economy

With the coronavirus now officially a pandemic, and the stock market in freefall, recession (if not depression) fears are rapidly mounting.  But what if we were to tell you that not only depressions, but also nearly all recessions, are fully preventable?

Sounds crazy, but keep in mind that before John Maynard Keynes and his groundbreaking economic policies came on the scene, depressions were once a regular occurrence in the USA and globally.  Since 1945, we have not had a single full-blown depression, though we have come very close many times.  And even the Great Recession was a near-depression due to not being Keynesian enough, and implementing unnecessary austerity.  Thus, the next logical step would be to do the same for recessions, and use the power of federal Monetary Sovereignty to prevent them before they start.  Yes, we really can do that.

Almost every recession or depression is fundamentally caused by a shortage of money.  That is a proven historical fact.  So the solution is to make sure the money supply (via federal "deficit" spending as well as monetary policy) grows fast enough to keep up with and allow for a growing economy, and make up for shortfalls caused by any contractions in business activity due to internal or external shocks.

So what to do this time around?  For starters:

• As a stimulus, give everyone at least $1000 cash immediately, no strings attached.  Repeat a few months later if necessary.
• Implement paid sick leave and paid family leave, yesterday.  For ALL workers.
• Provide emergency cash to businesses struggling due to the pandemic.
• Put a moratorium on all evictions and foreclosures during the pandemic.
• Do NOT make any cuts to healthcare, food stamps, unemployment benefits, or any other parts of the social spending budget.  Instead, expand them, yesterday.
• Invest massively in free testing for coronavirus, and in research and development for treatment and a vaccine for this virus.
• Resolve shortages by using federal funds to actively incentivize production of any essentials that are in short supply.

Longer-term, implement Rodger Malcolm Mitchell's Ten Steps to Prosperity, starting with abolishing FICA, implementing Medicare For All, and implementing Universal Basic Income for all.  All of which would be paid for by new federal money creation.  Talk about priming the pump!

We have a choice, so let's make the right one.  Whether it's recession or disease (or both in this case), the old adage certainly applies:  an ounce of prevention is worth at least a pound of cure. 

The Crash Of 2020 Has A Silver Lining

Looks like the long-overdue Crash of 2020 is finally here, with the novel coronavirus panic being the catalyst that finally popped the truly massive stock market bubble--scratch that, BOIL--that was several years in the making.  And there does not appear to be a firm bottom in sight yet.  And shhhh!--don't even talk about the even bigger derivatives bubble yet.  In other words, this can get real ugly real fast!

(And not even the FERAL Reserve can delay the inevitable for much longer, it seems.)

But as bad as it gets, better that it should happen several months before the 2020 presidential election rather than after.  A big crash and/or recession before the election would virtually guarantee Trump's defeat, and by extension (hopefully) Bernie's victory.  And so would finally mark the end of America's 40 year failed experiment with neoliberalism, that was started by Reagan and self-destructed by Trump.  Bookended by two unlikely "dark horse" yet celebrity candidates, Reagan and Trump, that both cut their teeth in Hollywood before entering politics late in life, and who both said they would "Make America Great Again" (right!), this will be the end of an era--or more accurately, the end of an ERROR on January 20, 2021.  Then we can finally pick up where we left off in 1980 when Carter almost won re-election but for the Reagan campaign's October Surprise dirty tricks (a conspiracy theory that actually turned out to be true, by the way).  Yes, you read that correctly.

And thus, America's long, dark night of the soul will finally be over.  Not just the past four years, but the past 40 as well.  That is, of course, only if enough Americans actually get off their butts and VOTE--not just in the general election, but also in the primaries as well.  The basket of deplorables will sure as hell vote regardless, so all progressives and even the fence-sitters need to get out and vote as well.

The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.  We are "turning Japanese", and not in a good way either.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory is interesting, it only seems to explain, at most, a tiny portion of the overall trend of secular stagnation.  In fact, a recent study by the American  Economic Association found that there is essentially no robust correlation between population aging and economic growth (or lack thereof).  Why?  Advances in automation and robotics seem to offset the putative adverse effects of an aging workforce to the point where the effect of aging is practically negligible.

In fact, another recent study finds the ideal total fertility rate (TFR) in terms of standards of living overall is in fact in the 1.5-2.0 range, basically the same as what the TSAP has long advocated since our founding nearly a decade ago in 2009.  Yes, really.  Take that, birth dearthers!

Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.  Though meanwhile, renewable energy technologies are making massives strides, which again looks like it will offset such trends at least partially.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

In fact, in our Monetarily Sovereign federal government, Congress can simply spend new money into existence without the strings of interest attached, and without any corresponding increase in tax revenue either.  Rodger Malcolm Mitchell notes this in his Ten Steps to Prosperity, which includes, among other things, Medicare For All, free college for all, and a form of UBI as well.  Interest rates can still be used by the central bank as an inflation-fighting tool, but the creation of money will be decoupled from it.

(Note to Japan:  You should do the same thing as well, especially the helicopter money (QE for the People) and UBI.  Then you will finally get out of your 30 year funk, and possibly even raise your birthrates a bit.)

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

Did Trump Just Start A War With Iran?

On January 2, 2020, Trump apparently ordered a drone airstrike near Baghdad, Iraq, that killed Iran's top general, Qassim Soleimani.  This assassination was of very, very questionable legality given that Trump did not notify Congress (or really anyone else, for that matter) before giving the orders.  And now Iran is openly threatening (unspecified) revenge and retaliation for this foolish and reckless act of bravado and hubris by the Manchild Who Would Be King.

We are well aware that General Soleimani was not a good person by any stretch of the imagination, nor is his own Revolutionary Guard Quds Force particularly cuddly either.  They have in fact been officially designated as a terrorist organization by the United States Department of State years ago due to their notoriously rogue activities in the region, including their support for violent militias in Iraq.  But when the "leader" of the USA decides to go rogue himself and arbitrarily assassinate a leader of a sovereign nation that we are NOT actually at war with, that is a dangerous and irresponsible escalation that threatens to unleash a conflagration across the whole region, if not even further.  At the very least, it will delay any hope for peace in the region by at least a generation, and at worst can perhaps even trigger World War III.

And of course we can kiss goodbye practically forever any chance of reviving the Iran nuclear deal that, while imperfect, was in fact working to keep Iran from getting their hands on The Bomb for the foreseeable future--before Trump pulled out of it of course.  If Iran didn't have a reason to want nukes in the past, well they sure do now!  This latest stunt thus clearly does FAR more harm than good, and we at the TSAP condemn his reckless and irresponsible actions.

(As for motives, can you say, "Wag the Dog"?)