Every day, more people are walking the sidewalk alongside the beach across the street from my house. A month ago, someone would pass by every three or four minutes. A week ago, it was a steady trickle. Now, it’s a light but continuous stream.

The rules haven’t changed. The shelter-in-place mandate is still active. But as each day passes, more and more of my little city’s self- imprisoned population have decided to ignore the extremes of social distancing and get back out into the sunshine and fresh air.

I’ve not been interviewing them, so I can’t say why. But from the way they walk and even greet one another, I’m thinking they just don’t believe we are in the midst of a plague. Some no doubt think we’ve passed the peak and the threat of the virus is no longer serious. Others, like yours truly,  probably never thought it was that serious to begin with. Still others, probably don’t think at all.

But their numbers are increasing, and I don’t think it will stop. For whatever reason, we haven’t seen the body counts the media teased us with in January and February. Most of us haven’t seen any dead bodies at all.

As of today, I’ve finished my two-month-long exploration into the virus and the shutdown and its economic repercussions. I’m looking forward to resuming my morning walks and thinking about other things.

The Corona Economy, Part V

What Will America Look Like in 2021? 

“Unemployment is sky-rocketing; deflation is [here] for the first time since the Great Depression. I don’t care whose fault it is. It’s the truth.” – John Mellencamp

As I said on Wednesday, US fiscal history is a history of borrowing money to fight wars.

During the country’s first eight decades of existence, our wars were relatively small and inexpensive. That was chiefly because the Treasury’s income was small then – restricted to what it could get from sales taxes and import duties.

To finance the Civil War, which cost $2.7 billion ($42 billion in today’s dollars), Lincoln introduced the income tax – which made increasing debt and fighting expensive future wars that much easier.

WWII cost us more than 10 times as much as the Civil War ($323 billion or $5.8 trillion in today’s money). It also gave birth to the wealth- and life-destroying machine that Eisenhower warned us against: the military-industrial complex.

The atomic bomb deprived that machine of the ability to produce carnage on a global scale, so it fed on proxy wars (Korea, Vietnam, Afghanistan, and Iraq).

Then, in 1964, President Johnson launched the first of a succession of social and ideological battles – the wars on poverty, drugs, and terrorism.

And now we have the War on COVID-19.

Like the spectral enemies we fought before it, COVID-19 is a formidable killer of human beings. And like the wars against poverty, drugs, and terrorism, the cost of the War on COVID-19 is immense and will be ongoing. What irks me is that most of the perfectly intelligent people I speak with have no idea how expensive it will be. The fact is, it will likely eclipse the cost of all previous wars.

Let’s add up the damage so far:

* $10 trillion in lost production (GDP) – that can never be recovered

* $4 trillion to $6 trillion in “bailout” distributions – that will produce no sustained benefit to anyone

* $5 trillion in stock losses – that may take years to recoup

* And some trillions more in pork barrel legislation that will likely follow in the next few years

With that kind of damage on the country’s P&L statement, it’s inevitable that  the Treasury’s balance sheet will soon be in the red by more than $30 trillion. That would be 150% of our GDP – the highest debt-to-GDP ratio in our nation’s history. (Higher even than the previous WWII record of 119% in 1946.)

You might be wondering: How is it possible for an economy to get into that much debt without collapsing? How is it possible for the US to escape the fate that felled the Romans, the Germans, the Chinese and – most recently – the Venezuelans?

In those cases, the mechanism for economic collapse was hyperinflation. Gradually at first, and then accelerating as the national debt mounted, the world’s faith in the solvency of each of these countries eroded.

That is what many of my historically attuned colleagues believe is going to happen again here in the US. And to be fair to their viewpoint, all the markings are there.

So how is inflation an answer to excessive debt?

It’s because inflation reduces the onus of debt by making each owed dollar less valuable. At an inflation rate of 10% a year, each trillion dollars of debt is effectively reduced by $100 billion. At an inflation rate of 50%, the debt would effectively shrink to next to nothing in just a few years.

And if you think an inflation rate of 50% is unlikely, you need to spend 15 minutes researching inflation in the countries mentioned above. There have been plenty of times in the past when over-indebted economies saw annual inflation rates of 50%, 100%, and even 200%. In Germany, Zimbabwe, and Venezuela, inflation rose to 1000% and even more!

An inflation-diminished dollar would be good news for the Treasury’s balance sheet, but it would be terrible news for the rest of the country. It would mean the purchasing power of every dollar earned would decrease by that amount. At 50%, the loaf of bread that costs $2 today would cost $10 in 2021, $50 in 2022, and so on.

Likewise, the cost of tools and raw materials and energy typically rises and falls alongside inflation. And those costs make it more expensive for businesses to produce the goods and services they provide. But they can’t increase their fees at the same rate and, thus, take a beating, with many of them going out of business permanently.

I don’t think we have an immediate threat of hyperinflation. In fact, what we’ve been seeing so far is deflation (a reduction in prices) of oil and gasoline and most commodities and equities, and most bonds. But deflation cannot cure the debt disease, which is why it’s normally short-lived (and followed by inflation).

The Great Recession of 2008 was caused, as all recessions are, by debt and speculation. Banks, brokerages, and insurance companies had leveraged up with sub-prime real estate debt and were on the verge of bankruptcy when the Fed, under Ben Bernanke, descended from the skies and attempted to save the economy with quantitative easing (flooding the bond markets with fake dollars).

That effort, from 2009 to 2014, saved most of America’s largest financial institutions (that irresponsibly created the debt), but it did not save the economy.

The economy entered into a period in which many middle- and working-class Americans lost their homes and got considerably poorer. At the same time the Wall Street was getting richer – much ricer – and awarding multimillion-dollar bonuses to its brokers. When all was said and done, the US economy had experienced the largest transfer of wealth in its history – with $10 trillion passing from Main Street to Wall Street.

In retrospect, it’s easy to see that the 2009 bailout was a bad idea. But the corona bailout could be worse.

The big difference is this: Back then, the bailout was optional – a “grand experiment,” as Tom Dyson put it. But the corona bailout is being done out of necessity. Because of everything we’ve talked about in the last few days, the government has no choice: Bail out the Treasury or risk going bust.

Nobody is against the current bailout. Not our trading partners, not our politicians, not the CEOs of big business, not the owners of mom-and-pop shops, nor the 26 million unemployed Americans. They are all depending on the US central bank to bail them out and, along with them, the entire world’s economy.

Think about it. For the first time since Obama was elected, Republicans and Democrats have come together to embrace a massive spending spree larger than any in our history. The only differences among these traditionally competing groups in this case is how much to overspend: whether the bailout should stop at $4 trillion or $6 trillion or $10 trillion or more.

The Problems With Free Money 

Free money, as I’ve said a hundred times, is never a good idea. And it’s an especially bad idea when it’s the federal government giving it out to foreign countries, domestic corporations, and to its populace through blanket giveaways like this one.

When money is given freely, it is often wasted. And it always creates dependency and entitlement. When fake money – dollars created out of thin air by an entry ledger in the Fed’s books – is given away freely, the net effect is reduced productivity, greater social and corporate dependency, and a weakening of faith in the US dollar. The first of these damages, reduced national productivity – has already happened on an enormous scale. The second is happening now. And the third is almost sure to follow. The only question is when.

I’ve no doubt that a portion of the productive sector of the economy will recover strongly after America opens up its economy next month. But I’m quite sure that it will not fully recover, as thousands – perhaps tens of thousands – of businesses will not be reopening and millions of Americans workers will remain unemployed.

How long the Corona Recession will last is anybody’s guess. Trump is hoping it will be short-lived and the economy will be firing on all cylinders by election time. His opponents would rather have America endure another bout or two of lockdown to ensure public discontent till then.

Nobody can possibly know what’s coming. We’ve never been in this sort of situation before. But it would be foolish to presume that we can replace the $10+ trillion we’ve lost these last three months by simply resuming our old work lives.

I’d say we enjoyed a good economy last year, but the fact is it wasn’t very good at all. The recovery after the crash of 2008 was a tepid one, with growth averaging a measly 3% a year. And the debt, as I explained Wednesday, mounted strongly during the Obama years and then skyrocketed once Trump took office. The $30 trillion of federal debt we’ve incurred will have to be dealt with sooner or later.

So how will America deal with this humongous debt?

Will we follow the historical pattern of inflation leading to hyperinflation leading to debasement of the currency and then total economic collapse?

Or is there another way?

A Bit More History 

From 1933 to 1939, President Franklin Roosevelt instituted the New Deal – a series of large-scale reforms and programs meant to stimulate the economy and end the Great Depression. (See “Did You Know,” below.)

The New Deal was popular. It put the Democrats into power for nine administrations, from 1937 to 1964. And it is credited with bringing the American economy back from near collapse to the strongest in the world.

Many good programs were launched through the New Deal, including the Reciprocal Tariff Act of 1934 (which opened up international trade) and the regulation of the worst practices of banks, insurance companies, and brokerage houses (which, till then, had been basically free to bamboozle and swindle their customers).

But one thing that wasn’t good about the New Deal was a series of executive orders that suspended the gold standard, unlinking the value of the dollar to the price of gold. This changed US monetary policy forever by allowing the amount of dollars in circulation to be a decision made by a handful of central bankers, rather than millions of businesses and consumers that make decisions by prices, which are controlled by supply and demand.

What some New Deal fans don’t talk about was that in 1937, during Roosevelt’s second term, there was a significant downturn in the economy. Production and profits declined sharply and unemployment jumped from 14.3% in May 1937 to 19.0% in June 1938. This proved to some the faults in the New Deal. (Maynard Keynes, for ones, was a doubter. He attributed the eventual recovery to the efforts of the private sector up to and through WWII.)

Whether it was the New Deal or private enterprise or both, there is no argument that what made America the leading economic power after WWII was the expansion of the gross national product.

The halcyon days of the 1950s and early 1960s were the consequence of the enormous expansion of capital enterprise that took place during those years. Growth in production eradicates debt and creates prosperity by virtue of added authentic economic value. That and the population explosion married to an expansion of consumer consumption were the true driving forces of America’s economic ascension.

Could it happen again?

Could America be first again? That’s a question that will be answered in the next 10 years. Can American enterprise innovate its businesses to lead the world? Or will faith in the US economy and its dollar crumble and send America down the path of the collapsed empires of the past?

You can ponder that question, if you will. But if your goal is to get yourself and your family into recovery mode, you’ll have to put your energies into building wealth the old-fashioned way: producing and selling value for a profit, and saving that profit for the future.

I’ll be talking about how you can do that in future blog posts as, after today, I’ll be back to talking about something I don’t need Wikipedia for – personal productivity, business growth strategies, personal finance, and the well-lived life.

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“We in America do not have government by the majority. We have government by the majority who participate.” –Thomas Jefferson

Are You Qualified to Vote?

“Voting is the most important responsibility we have as citizens.” Or so I’ve been told.
“If you don’t vote, you don’t have a right to complain.”

I understand the logic. But the argument is wrong. There are dozens of things we can do that are more likely to result in a better world – all of which require discipline and commitment. It’s easier to cast a vote for someone that seems to share your values and count on him or her to do the work you could be doing yourself.

It’s a moral cop-out. But that’s not the main problem I have with voting. What bothers me the most is that, with few exceptions, most people don’t have any idea about how to solve our common problems. And neither do our politicians.

In any given election, candidates may align themselves with one or another view. They might argue – as Trump has done in explaining his tariffs on Chinese goods – that they are aiming to achieve some common good. But if and when the policy is implemented, it doesn’t always achieve its advertised purpose. The result is often very different.

Take Lyndon Johnson’s “war on poverty,” which he announced in his 1964 State of the Union Address. “Our aim,” he said, “is not only to relieve the symptoms of poverty, but to cure it and, above all, prevent it.” What followed was the implementation of initiatives that to date have cost the country $23 trillion and produced only a marginal drop in the poverty rate.

And what about prohibition? Despite the good intentions of its supporters, the 18th amendment (the only one that’s been repealed in its entirety) led to the rise of alcohol smuggling and the violent criminal underworld known as the mafia.

Or more recently, the war on drugs – an abject failure that has cost the US about $1 trillion over the past 40 years. With an overall disregard for the underlying issues of substance abuse, policies were established that created an increase in corruption, violence, and tension between minorities and the police.

The fact is, human society is immensely diverse and infinitely complex. The US is an imaginary construct applied to 330 million individual people with different ideas, habits, and preferences – interacting with one another countless billions of times every day.

We understand, at best, only a small fraction of how our country works. And yet, when it comes to politics, we act as if we can fix our social, legal, and economic problems by voting for politicians that generally have no more knowledge of or experience in solving complex problems than we have.

Not to mention the problem of presidential political power dynamics: Because of the division of power between the president, the House, and the Senate, the most significant accomplishments of presidents often contradict what we would have expected when we voted for them.

For example…

Who was it that liberalized US relations with Communist China?

Answer: It was Richard Nixon, a staunch anti-communist.

And…

Who was it that passed the toughest law on crime, the law that turned the US into the country with the highest percentage of its citizens in prison?

Answer: It was Bill Clinton, an outspoken advocate for liberal policies.

And…

Who was it that ordered 542 drone strikes that killed 3797 people, 324 of which were civilians?

Answer: It was Barack Obama, winner of the Nobel Peace Prize for “extraordinary efforts to strengthen international diplomacy and cooperation between peoples.”

It’s for these reasons that I’ve felt that voting was a citizen’s #1 civic duty. I see the process today as a once great idea (including the electoral college) that has degenerated into a great, sad sham.

But the issues are real. And the problems need to be fixed. As we move towards our next election, we are being asked to choose candidates on the basis of our belief in their ability to make good decisions on such issues as:

* Black lives matter vs. all lives matter

* Gun rights vs. gun restrictions

* Equality of opportunity vs. equality of outcome

* Individual liberty vs. social justice

In a recent blog about why he rarely votes, James Altucher touched on the above with a sarcastic suggestion:

“Most people shouldn’t vote. Most people vote for the candidate their friends or colleagues are voting for. And many people are swayed by cognitive biases triggered by campaign materials and media. People follow the personalities of the candidates. I hear things like, ‘I just don’t like XYZ as a person,’ etc. So? Does anyone follow issues?”

He then gave his readers a six-question quiz on some of the issues that are being talked about in the current presidential election. We liked that idea, and came up with 20 questions of our own.

Take the following quiz and see how you do.

Are You Qualified to Vote?

20 Questions to Help You Decide 

1. What is a tariff?

___ The amount by which the cost of a country’s imports exceeds the cost of its exports

___ The amount by which the value of a country’s exports exceeds the cost of its imports

___ A ban on trade or other commercial activity with a country

___ A tax or duty to be paid on a particular class of imports or exports

2. Which statement is true of the US balance of trade with China?

___ It is positive.

___ It is negative.

___ It is about equal.

3. How do free-market economists generally view tariffs?

___They are necessary to protect against unfair trade practices by foreign countries.

___They result in higher overall consumer and material costs and are bad for the economy.

___ They are political in nature and have a net neutral economic effect.

4. Factoring in all other variables, including experience, hours worked, and using precise job descriptions, what is the gender wage gap in the US?

___ 17%

___ 7%

___ 2 %

5. US senators are elected to serve a term of office that lasts how long?

___ 6 years

___ 4 years

___ 2 years

___ indefinitely

6. Trump often claims that the employment rate for African-Americans rose to a historical high before COVID-19 and the shutdown. True or false?

___ True

___ False

7. Trump’s handling of the COVID pandemic has been criticized harshly by the Democrats and the media. He denies this and proffers, in his defense, his early decision to ban most travel from China. Putting that aside, how did he respond to the WHO and CDC guidelines and to Fauci’s directives in the first three months of the pandemic?

___ He ignored them completely.

___ He was resistant and slow.

___ He followed them as they were announced.

8. Which one of the following is NOT a member of Trump’s cabinet?

___ Benjamin Carson

___ Elaine L. Chao

___ Kayleigh McEnany

___ Alex Azar

9. During the Democratic primary debates, Kamala Harris attacked Joe Biden for his past opposition to school busing. How does she explain running as his vice president?

___ She changed her mind after he sent her a note apologizing for his former opinion.

___ She said that her comments were taken out of context.

___ She said she didn’t really mean it. She attributed the accusations to debate tactics.

10. Kamala Harris and Joe Biden received their law degrees from _________ and _________, respectively.

___ Howard University, University of Delaware

___ Syracuse University, University of Delaware

___ University of California, Syracuse University

___ Howard University, Syracuse University

11. What is the name of the governor of New York?

___ Andrew Cuomo

___ Chris Cuomo

___ Bill de Blasio

___ Rudy Giuliani

12. Which of the following acts did Trump NOT sign into law?

___ Preventing Animal Cruelty and Torture Act

___ Allow States and Victims to Fight Online Sex Trafficking Act

___ Tested Ability to Leverage Exceptional National Talent Act

___ Save Our Seas Act

13. Trump issued 137 executive orders in the first three years of his presidency. Some in the media have criticized him for that, suggesting that he is using his authority to override Congress. Which of the following statements is true?

___ 137 is more than twice the number of executive orders that Obama issued during his first three years.

___ 137 is roughly equal to the number of executive orders that Obama issued during his first three years.

___ 137 is 29 more than the number of executive orders that Obama issued during his first three years.

14. What do NYC, Baltimore, Portland, and LA have in common?

___ As a group, they reported 90% of the country’s COVID-19 cases.

___ They were devastated by damages following looting and rioting.

___ They cut funding to their police departments.

___ None of them imposed mask regulations.

15. As a state attorney in California, what was Kamala Harris known for?

___ Going easy on marijuana offenders

___ Being tough on marijuana offenders

___ Going easy on cocaine users

___ Being tough on cocaine users

16. Which of the following is NOT a policy position held by Kamala Harris?

___ Supports the right of transgender females to compete in women’s athletic competitions

___ Supports raising teacher salaries and expanding early childhood education programs

___ Supports ending Trump’s tariffs on steel and aluminum imports from the EU

___ Opposes pro-choice legislation, supporting a bill banning abortion after 20 weeks of pregnancy

17. Which of the following is true about the US Electoral College?

___ It was created by Republicans to favor Republican candidates.

___ It was created by Democrats to favor Democrat candidates.

___ It was created to reduce voter fraud.

___ It was created to give states with smaller populations more of a say in Congress.

18. Presidents Barack Obama, Theodore Roosevelt, and Jimmy Carter were all nominated for the Nobel Peace Prize. Which of the following statements is true for Trump?

___ He has never been nominated.

___ He was nominated once.

___ He was nominated three times.

19. When asked, in an interview, about the humanitarian crisis at the border, who said, “Our message absolutely is: Don’t send your children… on trains or through a bunch of smugglers”?

___ Donald Trump

___ Joe Biden

___ Mike Pence

___ Barack Obama

20. What was Supreme Court Justice Ruth Bader Ginsburg’s position on “packing” the court?

___ She was in favor of it.

___ She was opposed to it.

Answers 

1. A tax or duty to be paid on a particular class of imports or exports

2. It is negative. The trade deficit increased by 5.9% ($67.1 billion) when measured in August – the highest deficit since August 2006, when it was $68.2 billion.

3. They result in higher overall consumer and material costs and are bad for the economy. Free-market economists obviously prefer a free market, an unregulated system of economic exchange that limits or excludes interventions such as quotas, tariffs, quality controls, etc. Check out my essay on this very topic HERE.

4. 2% – According to a PayScale analysis, when adjusted for men and women with the same job and qualifications, women earn approximately 98¢ for every $1 earned by men. Review the info HERE. And HERE is a pretty informative video on the subject. Plus, HERE is a podcast interview (with transcript) between journalist Steven Dubner and Claudia Goldin, a Harvard economist, about the wage gap.

5. 6 years

6. True – The data showed that black unemployment was at a record low 5.8% in February before the virus hit. It rose to 16.8% in May, according to the Labor Department.

7. He followed them as they were announced. Fauci himself stated that Trump followed his recommendations. Additionally, in a January 30 press release, CDC director Dr. Robert Redfield wrote, “We understand that this may be concerning, but based on what we know now, we still believe the immediate risk to the American public is low.” And before Redfield’s statement went out, Trump had announced the formation of his coronavirus task force with Alex Azar, Fauci, and Redfield, among others.

8. Kayleigh McEnany – Kayleigh is the White House Press Secretary, a non-cabinet position.

9. She said she didn’t mean it. She attributed the accusations to debate tactics. In an interview with Stephen Colbert, Harris laughingly said, “It was a debate!… Literally, it was a debate!” Watch the video HERE.

10. University of California, Syracuse University – Harris received her JD from the UC Hastings College of the Law in 1989. Biden received his law degree from SU’s College of Law in 1968.

11. Andrew Cuomo – Chris Cuomo, Andrew’s brother, is a CNN television journalist. Bill De Blasio is the mayor of New York. Rudy Giuliani is the former mayor of New York (1994 – 2001).

12. Tested Ability to Leverage Exceptional National Talent (TALENT) Act – This was the last bill passed by Barack Obama. The other 3 are acts all signed into law by Trump.

13. 137 is 29 more than the number of executive orders that Obama issued during his first three years. According to the National Archives’ Federal Register, in their first three years as president, Obama and Trump signed 108 and 137 executive orders, respectively.

14. They cut funding to their police departments. NYC (with 477,000 cases), Baltimore (with 18,000), Portland (34,000), and LA (281,000) account for only about 10.5% of the total cases in the US. Note: All of these cities have imposed mask mandates.

15. Being tough on marijuana offenders – Harris is on record for having jailed nearly 2000 people for marijuana offenses.

16. Opposes pro-choice legislation, supporting a bill banning abortion after 20 weeks of pregnancy. Harris is generally considered extremely pro-choice. She actually fought against the bill that would ban 20-week pregnancies, which caused some backlash.

17. It was created to give states with smaller populations more of a say in Congress.

18. He was nominated three times – by (1) Christian Tybring-Gjedde of the Norwegian Parliament for “trying to create peace between nations”; (2) Magnus Jacobsson of the Swedish Parliament for leadership in the accord between Kosovo, Serbia, and Israel; and (3)

David Flint and other law professors in Australia on the basis of Trump’s “Doctrine Against Endless Wars.”

19. Barack Obama – He said this in an interview with ABC in 2014.

20. She was opposed to it. Watch the video HERE.

Primary Sources

Difference Between Joe Biden and Donald Trump

https://www.thebalance.com/u-s-trade-deficit-causes-effects-trade-partners-3306276

https://www.investopedia.com/news/what-are-tariffs-and-how-do-they-affect-you/

https://hbr.org/2019/01/research-gender-pay-gaps-shrink-when-companies-are-required-to-disclose-them

https://www.marketscreener.com/news/latest/Coronavirus-Obliterated-Best-African-American-Job-Market-on-Record–30746362/

https://people.com/politics/dr-fauci-says-trump-listened-his-recommendations-not-being-forced-to-say/

https://www.cdc.gov/media/releases/2020/p0130-coronavirus-spread.html

https://www.realclearpolitics.com/video/2020/08/17/kamala_harris_dismisses_past_biden_criticism_it_was_a_debate.html

https://www.usatoday.com/story/news/factcheck/2020/09/28/fact-check-false-claim-biden-harris-during-race-dem-nod/3506180001/

https://2020election.procon.org/view.source-summary-chart.php

https://www.whitehouse.gov/the-trump-administration/the-cabinet/

https://www.federalregister.gov/presidential-documents/executive-orders/barack-obama/2011

https://www.govtrack.us/congress/bills/115/hr39/summary

https://www.nytimes.com/2020/09/11/opinion/fact-check-trump.html

https://www.forbes.com/sites/jemimamcevoy/2020/08/13/at-least-13-cities-are-defunding-their-police-departments/#6c01eebf29e3

https://www.businessinsider.com/who-is-kamala-harris-bio-age-family-key-positions-2019-3

https://townhall.com/tipsheet/cortneyobrien/2020/09/28/trump-nominated-for-nobel-peace-prize-for-third-time-n2577092

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“Not voting is not a protest. It is a surrender.” – Keith Ellison

How to Vote If You Consider Yourself an Independent Thinker 

Most of the people I know have locked down on certain slogans that parade themselves not just as ideas but as full-blown ideological philosophies. Make America Great Again, Systemic Racism, Right to Life, Right of Choice, Black Lives Matter, the Green New Deal. And they vote on their adherence to those slogans. For them, the decision between Trump and Biden is black and white.

The pollsters know who those people are. They represent the vast majority of the population. But it will be the independently minded voters that will likely determine this election.

From The Washington Post:  Olivia Troye, who was part of the coronavirus task force, said recently that in her view the president has a “flat out disregard for human life.” Trump’s main concern, she said, “was the economy and his reelection.”

We weren’t at those meetings, so we have no way to judge her first characterization. But let’s assume that she’s right about the second and the third. (I’ve seen enough of his public statements to believe it.)

I am good with his concern for the economy. I think that should be our president’s primary concern in this regard. (We can talk more about this later.)

As to his single-minded desire to get reelected, why should that surprise anyone? For Trump, the political experience is a game of winning. That’s how he approached business. That’s how he frames all his ideas, appeals, and promises. In the entire population of our elected representatives, I can think of only one in my lifetime that was different. Ron Paul.

The nature of politics is about power. And the means to power is getting elected. People that want to become politicians want to play that game, which means they are essentially untrustworthy.

Which means: We shouldn’t vote for politicians based on what they say, but what they do. That’s a statement most people would ordinarily agree to.

But here’s the problem: That’s too difficult for most people. We are too busy with our quotidian lives to pay attention to the dozens of issues that are researched, discussed, and debated every day in the oval office or in the halls of the Senate or the Congress. And that is just at the national level. State and local government is just as complicated.

Since we can’t possibly understand particular issues well enough to make informed decisions about them, we do the next best thing. We elect politicians to represent our general sentiments about what kind of world we want to live in and give them the responsibility to do all the analysis and thinking.

Of course, they don’t have time for that sort of work either. They are too busy meeting with their supporters, raising funds, and campaigning to do any serious analysis of the problems. Studies have shown that most senators and representatives read only the equivalent of executive reports on the bills they are responsible for deciding.

That’s why, for me, the rule is:

* Assume that all politicians are not only willing to misrepresent their thoughts and feelings, but are actually very good at it.

* Assume that when it’s election time, politicians have no problem with prevarication, misdirection, and, if needed, outright lying about what they actually believe, think, and do.

* Pay zero attention to what candidates say during their campaigns.

* Spend what little time you have to finding out what they have actually done in the past. What actions they took in office. And how those actions tie into your idea of the world you want to live in.

If I were to decide between Trump and Biden based on what they are saying right now, I’d stay home and watch old movies on Election Day. Half of what they are saying I don’t believe because it contradicts what they actually did when they had power. And the other half sounds either senile or insane. (Take your pick.)

But when I look at what they have done – what Trump has done as president and Biden did over 47 years as a politician – the choice between them is not so very clear. To make my decision, I’m going to have to spend some time researching what they’ve actually done and then think about it.

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“I’d like to think that anxiety is a form of emotional intelligence – alerting one to future threats that others ignore. The problem is it doesn’t work that way because anxiety is always forward facing. By the time tomorrow comes, you are worried about some new threat.” – Michael Masterson

11 Ways the COVID Lockdown Will Change the World, Good and Bad

1. More zoom meetings.

Most breakthrough technologies make only a superficial difference, but Zoom is a game-changer. It has all the benefits of being in a room with others, with none of the drawbacks. Zoom meetings are, without question, more efficient. There is something about them that encourages people to spend less time chatting and stick more closely to the agenda. Plus, nobody has to waste time traveling – in some cases, for hours – to attend.

2. Less office space.

The lockdown has woken us up to the reality that most of our work can get done as well, or better, remotely. Even, as I said above, meetings. Office space is expensive. If you don’t need it, why pay for it? Two-thirds of our economy is now information-based. As a result of this trend, I’m guessing that businesses like those of my clients will graduate eventually to about 20% of the office space they currently use.

3. A recession in commercial real estate.

My partners and I just put a halt on a plan to raze the converted warehouse I work out of and replace it with a much larger, $14 million, glass and steel office building. We’ve always been big buyers of real estate. That’s over. We’ll be looking, instead, at selling ours. And we won’t be alone. According to Moody Analytics, the country’s office vacancy rate has been rising. So far, it’s gone from 9% in Q1 2020 to 15% in Q2.

4. A new market for commercial conversions.

The bulk of the office space that goes empty will be converted to apartments and condos. This will be a boon for construction companies that are able to efficiently do that sort of thing. But it will also put a pause on the new construction of apartments and condos for as many years as it takes to absorb the unused space.

5. Subscription services as the norm in selling information.

All forms of information – from entertainment to news to advisory services – will convert their marketing models to subscription-based services. This change has been going on for some time, but it’s going to speed up. According to Zion Market Research, the subscription business model, valued at $3.8 billion in 2018, is expected to grow to $10.5 billion by 2025.

6. A much-needed revolution in higher education.

Despite claims that we can’t replace in-class learning, people are quickly discovering that remote education is perfectly well suited for at least 60% of the subject matter being taught today. Private colleges will realize, as other information businesses already have, that they can make more money and do a better job with computer-assisted programs.

Campuses will continue to exist for the social aspects of the college experience, but the amount of time kids spend in class will be slashed by 80%. Even more important – and this, I admit, is a wish rather than a prediction – students will opt out of such useless courses as gender theory and Marxist economics and spend their education dollars on courses they can profit from.

7. The end of most shopping malls…

There is no longer any reason to travel to a mall, except for the enjoyment of having someplace to go. Strip malls will be the first to go. Half of those in existence are already dead in the water and won’t be coming back. Some larger, luxurious, shopping malls will thrive, but only a fraction of those that exist today.

Coresight Research predicts that 25% of all the malls in the US will close within five years. In February, Macy’s announced the closing of 125 stores over the next three years. JC Penny has plans to close as many as 150 stores. And, in fact, Simon Property Group (the largest owner of US malls) is working on a potential deal to turn closed department stores into Amazon fulfillment centers.

8. And the end of brick-and-mortar retail.

For most products, direct-to-consumer marketing will be the standard in selling. Online shopping and next-day delivery will become the norm. And even for products you might want to try on or try out – like clothes or tools or TV sets – increasingly easy return policies will bolster direct-to-consumer commerce.

9. An increase in the use of psychopharmacological drugs and psychiatric services

All this remote (i.e., solo) shopping, entertainment, and education will cause an epidemic of anxiety, addiction, and depression – a serious problem that began surging as early as March.

Three examples:

* In March, the Substance Abuse and Mental Health Administration’s “emotional distress” phone hotlines spiked 338%; their text hotlines skyrocketed from 1790 last April to 20,000 in April of this year.

* An analysis by the White House’s drug policy office reported an 11.4% year-over-year increase in fatal overdoses in the first four months of this year.

* An August poll taken by the CDC revealed that 25% of respondents aged 18-24 had considered suicide in the prior 30 days; 40% reported at least one adverse mental health condition as a result of the coronavirus.

10. Amazon’s revenues will double in the next 5 years.

 Amazon’s current revenues are more than $300 billion a year, but the lockdown has given millions the opportunity to get used to online shopping. Amazon has big plans, and I don’t see how – other than by some kind of antitrust action – they can be stopped. I wouldn’t be surprised to see them bypass the $500 billion barrier in the next few years and go on to bypass Walmart.

11. The Googles and Facebooks of the world will become the first digital countries, eventually replacing nation states. 

What is a country but a political, economic, and cultural entity held together by a common mythology of identity and a touch of police and military power? Internet businesses like Google, Facebook, and YouTube have established their own cultures, economies, and politics that are funded by voluntary taxes and enforced by unilateral power over their hundreds of millions of digital citizens.

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“Collette said hope costs nothing. But it does. It costs the time you spend hoping.” – Michael Masterson

The Corona Economy: How Bad Is It… Really? 

It’s time for another look at our Corona Economy. Time to assess the amazing amount of economic damage the shutdown has caused and make some guesses about how long, how bad, and how widespread the coming recession will be.

Recession? What? You think that things are under control? You feel confident that the economy will bounce back once we get this virus thing out of the way?

This is the way I see it…

The US economy is shrinking.

In my May 1 blog post, I noted that since the Corona Crisis began, our national production was down $10 trillion. That’s $10 trillion that was lost forever. No matter what happens in the future, that loss cannot be erased. In the three months since then, GDP has continued to shrink. In the second quarter alone, it fell by 10%. That’s higher than any 3-month period in the history of our country.

Unemployment is still crazy high. 

The unemployment rate has gone down considerably since it peaked this spring, with jobless claims down from nearly 7 million in the third week of March to 1.2 million last week. Overall, the official unemployment rate has dropped from about 13% in April to 10.2% today.

Of course, the official unemployment rates are entirely bogus. They don’t count people who are unemployed and not looking for work. This number was about 6 million before the $600 giveaways. It’s probably 10 million now. Plus, the official rates don’t include part-time workers that want, but can’t find, full-time jobs. And on top of that are the problems with the way workers are classified. The most egregious: Those on furlough are counted as working, rather than as unemployed.

If you add back in those purposeful and possibly accidental errors, the actual unemployment rate is probably about 16%, which would make current levels higher than at any time since the Great Depression.

200,000+ businesses have been closed for good. 

According to a study by the University of Illinois, Harvard Business School, Harvard University, and the University of Chicago, more than 100,000 small businesses had shut down permanently from March to the beginning of May. In June and July, another 100,000 may have been shuttered.

“We are going to see a level of bankruptcy activity that nobody in business has seen in their lifetime,” James Hammond, chief executive of New Generation Research told The Washington Post. “This will hit everyone, but it will be harder for small businesses since they don’t have a lot of spare cash.”

And Mark Zandi, chief economist at Moody’s Analytics, predicts that total failures for small businesses this year will pass 1 million.

It goes without saying that the closing of hundreds of thousands of small businesses will have a domino effect on hundreds of thousands more, the little shops and restaurants that survive on the patronage of these small businesses in small communities around the country.

Entire industries have been decimated. 

Travel bans have gutted the transportation industry, drastically cutting not just airline revenues but train travel, bus travel, and car travel. Uber and other such businesses are down more than 75% since last year.

The near halt in travel has sent oil prices tumbling, putting thousands of businesses that support oil and gas distribution out of business and millions more Americans out of work.

In the retail sector, it’s not just small shops and restaurants that have been forced into bankruptcy, it’s beauty shops and fitness studios and day care centers. The list goes on and on.

But things don’t seem so bad… right? 

I know. The unemployed have been getting federal paychecks. Businesses are getting billions in loans. And the stock market has been charging along.

That don’t change the facts.

When I last wrote about this (May 1), I noted that the numbers then were worse than they were at the nadir of the Great Recession of 2007-2009. And that even though the Great Recession officially ended in June of 2009, the growth of the GDP afterwards was anemic. Well… except for a modest improvement in the phony unemployment rate, all the key economic health indicators have only gotten worse.

Remember how difficult it was to make ends meet from 2009 to about 2016? It could be worse this time.

What about the bailout? Shouldn’t that help? 

The coronavirus scared the hell out of millions of Americans, with studies predicting mortality rates of 6% and 3 million dead before the end of the year.

It was a national health emergency that could have united the country. Instead, it morphed into a ludicrous political drama, with the Democrats accusing the Republicans of being heartless and incompetent, and the Republicans accusing the Democrats of exaggerating the danger to tank the economy and bring Trump’s ratings down.

When it came time to pass an economic stimulus bill, partisan politics continued. The first round of bailouts cost US taxpayers $2.4 trillion that the Treasury had to borrow. And that was on top of $2.2 trillion approved to cover the budget deficit. The current package will add another $1 trillion to $3 trillion to that, bringing the total national debt to $25 trillion or more.

That – spending trillions of dollars we don’t have – has been the government’s solution to an economic disaster that is as bad as any we’ve had since the Great Depression.

Let’s stop here and remind ourselves that debt and spending have been the primary causes of every economic disaster the US economy – and, for that matter, every economy – has ever had.

If your kid were in debt because of a gambling habit and told you he was going to get himself square by borrowing money from a loan shark, would you think that was a good idea?

So that’s the real problem. We may never know how necessary it was to shut down the economy, but the solution to the economic damage it did has been a borrowing spree greater than ever in our history (and in the entire world).

And nobody in Washington thinks there is the slightest thing wrong! The old debate about responsible spending and balancing the budget has gone out the window. Those free checks from the government have bought the hearts and minds of the entire electorate. We may be doing something we’ll regret later, the most conservative say, but what the hell! Let’s print more trillions and wish for the best!

What to expect. What to do. 

If you believe the stock market is the economy, I don’t know what to tell you. There are good reasons to believe stocks will continue to move up. The biggest reason is all these trillions of free dollars.

I have converted about 75% of my stocks into cash for reasons I explained on July 24. As I said then, my decision wasn’t based on any certainty that the market is going to crash, but on the possibility that it might.

If you understand that the stock market is not the measure of the wealth of the US but the measure of only the wealthiest 10%, you should be very concerned about all this debt and continued spending. You should be worried that sooner or later the bill will come due. And the only feasible way that the government can manage that debt is by allowing for an extended period of “moderate” inflation – low enough that the Treasury can pay the interest on its debt, but high enough that it can erode the value of that debt. And what that means is stagflation: years and years of increasing prices without any significant economic growth.

Unless you are already wealthy, this means that you will get a lot poorer over the next 5 or 10 or even 15 years.

There are things you can do to protect yourself and profit. I’ll tell you about it in my next essay on the Corona Economy.

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