Inflation, Default, or Super-Twist

The policies of deficit spending by governments to prop up economies through the pandemics have created imbalances that will, it is assumed, at some indeterminate time in the future, create a situation in which the only two options are hyperinflation or default. Inflation vs default.

The “New Normal” is evolving, and we do not yet know what it will look like, or fully how the transition will happen. We do know that governments are printing massive amounts of debt to attempt to save what they can of their economies, with the hope that post-pandemic growth can accelerate and recover economies to pre-pandemic ‘health’. But that growing debt is a burden on countries and will stay as a burden for some time to come.

I keep reading that there are two options to deal with debt growth; inflation or default. I’m not sure that either is the actual ‘end game’. Certainly, a huge amount of money is being conjured out of the air and being pumped into economies. In the US Congress has just approved a $1.9 Trillion spending package, on top of a $2 trillion spending package last year, all on top of existing government expenditure. The UK government has been paying salaries at 80% since last April or so, and will continue to do so until September or later this year. That is effectively paying 80% of a huge number of Britons' salaries for over a year.

Not surprisingly, but seemingly strangely also we see personal savings rates increase, at the same time that unemployment is at record levels (I do not believe the US unemployment numbers of 6.5% or whatever they are saying it is, those numbers are fantasy).

But there is another option, and I expect this is what we will see - a "Super-Twist" of extreme long-dated government debt, bought by governments from themselves (and paying themselves interest at very low rates). 

Inflation

Inflation has been the tool for managing down large debt for centuries, and there is an expectation that this is what will happen now. I’m not sure. Inflation requires there to be more "money" than "goods", with the oversupply of money chasing fewer goods. This certainly is true at the higher end, with inflation in luxury goods, art and property (higher end). But that means that the excess money is in relatively fewer hands. “The rich get richer” argument. Well, if the rich are getting richer, than the products and assets that the wealthy are purchasing must either expand in quantity, or those products and assets will increase in price. Classic supply and demand pricing.

But if the income levels at the ‘not rich’ end of the economy are not increasing, and the quantity of products, services, and assets are remaining constant, then there should be little inflation at that level. In fact, prices in many cases are increasing while incomes remain stagnant or increase at a pace slower than the cost of those goods and services. But there has been creeping inflation underway for decades in the developed world, with wages effectively stagnant and production capacity exported to lower-wage economies.

There are numerous examples of the management of inflation figures in developed countries, driven by the use of ‘hedonics.’ for the calculation of inflation. If you get greater functionality from a smart-TV and pay more for that TV, there has been no inflation because you are getting more for your money. Therefore, the increased ‘hedonistic’ value of the greater functionality offsets any increase in the price paid. The fact that all TVs now have greater functionality and a similar cost to previous models does not equate to inflation, even though without the additional functionality, the unit's cost would, or should, reduce. When it comes to consumer electronics, this generally is true. But when it comes to higher education, it is impossible to apply hedonics to a 500% increase in the cost of a four-year university education in the US.

The average cost of attending a four-year college or university in the United States rose by 497% between the 1985-86 and 2017-18 academic years, more than twice the rate of inflation. (Forbes, 31August 2020)

That is twice the rate of the underlying inflation figure. Yet, the underlying inflation figures have been manipulated to ensure an overall lower figure. Why? There are several reasons, but a primary reason is the pegging of some national benefits (such as Social Security, the US national superannuation scheme) to the “Consumer Price Index” (CPI) measure of inflation.

In the UK, the introduction of a £9,000 per year tuition fee for almost all universities has certainly ‘inflated’ the cost of higher education to little or no additional benefit for students.

So there has already been ongoing inflation. The assumption has been that the fiscal stimulus will automatically result in inflation across all goods and services as the mechanism for the paying down or managing the debt.

For inflation to be the tool of choice to reduce the debt it will require policies that alter the distribution of income or constrain the quantity of goods and services available. The classic way to accomplish this is through changes in the taxation system, shifting the tax burden toward higher incomes while reducing the tax burden on lower incomes, and/or through employment policies that encourage unions and mandate higher wages. Tariffs act as a stealth means of inducing inflation through the imposition of an additional cost on products, effectively inducing inflation through artificial scarcity.

Increasing wages without increasing the stock of goods and services will drive up prices, based purely on the increase in money chasing the finite goods and services. Classic supply and demand at the middle and lower income levels. There will be inflation in areas such as housing (in the suburbs and ‘country towns’ and zero, limited or even negative inflation in cities) because the population continues to rise at a rate faster than additional housing stock is being built. That is classic supply and demand inflation, and until the housing stock (in the US and in the UK, for example) has grown – in the places people want to live – the unit price of housing will increase to meet what the market will accept.

But general hyperinflation needed to devalue the debt sufficient to ‘pay down the debt’ will not be happening anytime soon. The (policy) conditions to allow this are not in place yet and will be avoided until there is no other option.

In the US (and in some other “capitalist” countries) the policy changes required to allow (or not avoid) hyperinflation will be opposed as much as possible by business interests and shareholders; the managerial and rentier class that are the beneficiaries of lower wages. These people (as a group and as individuals) control government policy through the economics of the American electoral system, and policies that will boost individual incomes at the expense of the wealthy will not be acceptable (even under a Democratic administration).

Default

The alternative being discussed (in speculative writing) is a default in portions of the debt. Of course, this has never happened, except in country after country. It has not happened in the US and the UK, Japan, and other major developed economies. Default is the last refuge of countries that cannot continue to access international financial markets and therefore no longer able to finance their debt. But there are countries for whom international markets for their bonds are an “also” and not an “only” option.

For countries such as Argentina, default has been a strategic tool used once access to international markets becomes impossible based on existing government financing capacity. Other countries such as Greece have used “debt restructuring” to avoid any overt default.

The default route, including debt restructuring, comes at a terrible cost, with countries finding themselves cut off from financial markets, and being unable to meet obligations to their own populations.

Economies are destroyed. Banks are destroyed, companies cannot access revolving credit for operational expenditure, purchasing, payroll, etc. The national productivity gains that accrued during the borrowing and spending years (if some of that borrowing actually funded capability creation) are wiped out, and the entire economy performs a “hard reset”. Deflation across the board results in economies that, eventually, restart at a lower cost base, impacting profits for corporations and tax income for the government. Infrastructure project come to a halt, and social support networks collapse.

Argentina, Venezuela, Zimbabwe and Greece are examples, each responding in different ways. Argentina is the serial offender of Latin America with a cycle of recovery and exuberance, followed by over-borrowing and collapse. Venezuela and Zimbabwe are similar in that they converted national productive assets into social programmes to buy the support of the masses, only to ultimately “run out of other people’s money”, yet still not learn and restructure their economies for recovery. Both remain mired in poverty and hopelessness.

Greece has restructured its economy, and until the pandemic hit, the economy was growing again, within a huge debt overhang that was being managed.

Furthermore, in all cases of default, the losers will be the asset holders, and that means the wealthy, who see their net worth slashed.

And as the wealthy control the setting of policy and the justification of policy, and as they wish, first and foremost, to protect their own assets and interests, we can be confident that policies that may lead to default in the shorter term (3 – 5 years) will be avoided.

But what if these policies will result in a future potential default situation? Almost any policy will be acceptable if expected to preserve wealth in the short to medium term. Stimulus spending is meant to ensure the preservation of wealth by reducing the risk of a systemic collapse or a market implosion. To avoid those, ongoing imbalances are acceptable, because the alternatives are so frightening.

That is where we are now. The policies of deficit spending by governments to prop up economies through the pandemics have created imbalances that will, it is assumed, at some indeterminate time in the future, create a situation in which the only two options are hyperinflation or default.

Another Way – Super-Twist

Do not expect the Fed or the Bank of England, or any other central bank that can, to either stop funding stimulus, to allow their currencies to collapse, or to default on sovereign bonds or gilts.

Any increase in inflation will convert into an increase in rates (the assumption is that rates provide a view of future inflation) and a corresponding increase in funding costs for governments. That vicious cycle results in governments being unable to fund their debt, and are the hilltop of the slippery slope to hyperinflation or default. Therefore, rates must and will be managed.

The provision of guaranteed liquidity under any circumstances is the bedrock of managing the markets. Too much liquidity and the markets turn into bubbles, while too little liquidity and the markets could collapse. So central bankers must send the message that there is unlimited liquidity, while at the same time drip-feeding that liquidity into markets is required, all the while “ignoring” the fire-hydrant of government spending. As the government borrows, in theory, liquidity is removed from the markets to fund that borrowing. The money has to come from somewhere.

Instead of borrowing solely from the markets, governments purchase from themselves (and from other governments in the process of spreading their risk and helping to prop each other up). The debt is purchased with varying maturities.

In 2011 the Fed implemented Operation Twist, with the objective of reducing the yield curve and extending duration of the Fed’s debt. Buy short duration debt to take it off the table while selling longer duration debt at the same or similar rate, pushing the debt out and reducing the yield curve, pushing down inflation expectations.

There has been speculation about a “Century-Bond” in the UK before, with questions about who would find such a gilt attractive. The basic answer would be the government itself. Any government that can issue debt in its own currency and purchase it from itself at such a long duration would be well incentivised to issue such debt. Of course, long-duration gilts and treasuries will not go away, nor will they be paid off. But at 1% interest the burden of debt required to impact annual budgeting would need to be multiples of total GDP and the tax take. And such gilts or treasuries held in ‘public’ hands would retain value and still be available for exchange.

How long could the UK or the US continue to issue such long duration debt (and purchase it from itself)? As long as the markets will purchase that debt. And when purchasers disappear, they can purchase it from themselves knowing that they will be making debt payments to themselves at 1% per year.

But Bubbles?

As long as governments are purchasing the debt at a rate that provides liquidity to the governments, they will retain the monetary policy tools to add or remove liquidity to external markets. As bubbles expand, excess liquidity can be drained off by shifting purchasing of the long-duration debt to themselves, and likewise, liquidity crunches can be avoided (or mitigated) by releasing funding to stabilise markets.

Will they be able to destroy “boom and bust”? I highly doubt it. But they will have the policy tools (and the cash) to smooth the busts and rein in the booms. Boom too fast, and liquidity will be removed. Likewise, the busts will see floods of liquidity to stave off systemic collapse or depression.

Of course, we should trust that those different governments will fail, increasing the potential for a pan-economy systemic crisis. But coordination between Central Banks should reduce the likelihood.

Am I placing too much faith in Central Banks? Absolutely, in the "short term". I am also confident that the hubris of success will lead directly to excess risk-taking by governments and Central Banks resulting in instability. Will the system be self-correcting? Probably, up to a point.

But there will be bubbles, and policy-makers will accept those as the cost of stability. Squeeze a balloon, and it will pop out somewhere else. Release the pressure, and the balloon will return to its ‘stable’ shape. Prick the balloon, and it will burst. Squeeze the balloon too hard, and it will burst. I trust the Central Bankers to squeeze within boundaries, until they don’t.

But we are still ‘early’ in the process of managing financial stability and growth through unconstrained government borrowing and expenditure. There will be many years to run before a real bursting of the balloon.

  

Inflation, Default, or Super-Twist

The policies of deficit spending by governments to prop up economies through the pandemics have created imbalances that will, it is assumed, at some indeterminate time in the future, create a situation in which the only two options are hyperinflation or default. Inflation vs default.

The “New Normal” is evolving, and we do not yet know what it will look like, or fully how the transition will happen. We do know that governments are printing massive amounts of debt to attempt to save what they can of their economies, with the hope that post-pandemic growth can accelerate and recover economies to pre-pandemic ‘health’. But that growing debt is a burden on countries and will stay as a burden for some time to come.

I keep reading that there are two options to deal with debt growth; inflation or default. I’m not sure that either is the actual ‘end game’. Certainly, a huge amount of money is being conjured out of the air and being pumped into economies. In the US Congress has just approved a $1.9 Trillion spending package, on top of a $2 trillion spending package last year, all on top of existing government expenditure. The UK government has been paying salaries at 80% since last April or so, and will continue to do so until September or later this year. That is effectively paying 80% of a huge number of Britons' salaries for over a year.

Not surprisingly, but seemingly strangely also we see personal savings rates increase, at the same time that unemployment is at record levels (I do not believe the US unemployment numbers of 6.5% or whatever they are saying it is, those numbers are fantasy).

But there is another option, and I expect this is what we will see - a "Super-Twist" of extreme long-dated government debt, bought by governments from themselves (and paying themselves interest at very low rates). 

Inflation

Inflation has been the tool for managing down large debt for centuries, and there is an expectation that this is what will happen now. I’m not sure. Inflation requires there to be more "money" than "goods", with the oversupply of money chasing fewer goods. This certainly is true at the higher end, with inflation in luxury goods, art and property (higher end). But that means that the excess money is in relatively fewer hands. “The rich get richer” argument. Well, if the rich are getting richer, than the products and assets that the wealthy are purchasing must either expand in quantity, or those products and assets will increase in price. Classic supply and demand pricing.

But if the income levels at the ‘not rich’ end of the economy are not increasing, and the quantity of products, services, and assets are remaining constant, then there should be little inflation at that level. In fact, prices in many cases are increasing while incomes remain stagnant or increase at a pace slower than the cost of those goods and services. But there has been creeping inflation underway for decades in the developed world, with wages effectively stagnant and production capacity exported to lower-wage economies.

There are numerous examples of the management of inflation figures in developed countries, driven by the use of ‘hedonics.’ for the calculation of inflation. If you get greater functionality from a smart-TV and pay more for that TV, there has been no inflation because you are getting more for your money. Therefore, the increased ‘hedonistic’ value of the greater functionality offsets any increase in the price paid. The fact that all TVs now have greater functionality and a similar cost to previous models does not equate to inflation, even though without the additional functionality, the unit's cost would, or should, reduce. When it comes to consumer electronics, this generally is true. But when it comes to higher education, it is impossible to apply hedonics to a 500% increase in the cost of a four-year university education in the US.

The average cost of attending a four-year college or university in the United States rose by 497% between the 1985-86 and 2017-18 academic years, more than twice the rate of inflation. (Forbes, 31August 2020)

That is twice the rate of the underlying inflation figure. Yet, the underlying inflation figures have been manipulated to ensure an overall lower figure. Why? There are several reasons, but a primary reason is the pegging of some national benefits (such as Social Security, the US national superannuation scheme) to the “Consumer Price Index” (CPI) measure of inflation.

In the UK, the introduction of a £9,000 per year tuition fee for almost all universities has certainly ‘inflated’ the cost of higher education to little or no additional benefit for students.

So there has already been ongoing inflation. The assumption has been that the fiscal stimulus will automatically result in inflation across all goods and services as the mechanism for the paying down or managing the debt.

For inflation to be the tool of choice to reduce the debt it will require policies that alter the distribution of income or constrain the quantity of goods and services available. The classic way to accomplish this is through changes in the taxation system, shifting the tax burden toward higher incomes while reducing the tax burden on lower incomes, and/or through employment policies that encourage unions and mandate higher wages. Tariffs act as a stealth means of inducing inflation through the imposition of an additional cost on products, effectively inducing inflation through artificial scarcity.

Increasing wages without increasing the stock of goods and services will drive up prices, based purely on the increase in money chasing the finite goods and services. Classic supply and demand at the middle and lower income levels. There will be inflation in areas such as housing (in the suburbs and ‘country towns’ and zero, limited or even negative inflation in cities) because the population continues to rise at a rate faster than additional housing stock is being built. That is classic supply and demand inflation, and until the housing stock (in the US and in the UK, for example) has grown – in the places people want to live – the unit price of housing will increase to meet what the market will accept.

But general hyperinflation needed to devalue the debt sufficient to ‘pay down the debt’ will not be happening anytime soon. The (policy) conditions to allow this are not in place yet and will be avoided until there is no other option.

In the US (and in some other “capitalist” countries) the policy changes required to allow (or not avoid) hyperinflation will be opposed as much as possible by business interests and shareholders; the managerial and rentier class that are the beneficiaries of lower wages. These people (as a group and as individuals) control government policy through the economics of the American electoral system, and policies that will boost individual incomes at the expense of the wealthy will not be acceptable (even under a Democratic administration).

Default

The alternative being discussed (in speculative writing) is a default in portions of the debt. Of course, this has never happened, except in country after country. It has not happened in the US and the UK, Japan, and other major developed economies. Default is the last refuge of countries that cannot continue to access international financial markets and therefore no longer able to finance their debt. But there are countries for whom international markets for their bonds are an “also” and not an “only” option.

For countries such as Argentina, default has been a strategic tool used once access to international markets becomes impossible based on existing government financing capacity. Other countries such as Greece have used “debt restructuring” to avoid any overt default.

The default route, including debt restructuring, comes at a terrible cost, with countries finding themselves cut off from financial markets, and being unable to meet obligations to their own populations.

Economies are destroyed. Banks are destroyed, companies cannot access revolving credit for operational expenditure, purchasing, payroll, etc. The national productivity gains that accrued during the borrowing and spending years (if some of that borrowing actually funded capability creation) are wiped out, and the entire economy performs a “hard reset”. Deflation across the board results in economies that, eventually, restart at a lower cost base, impacting profits for corporations and tax income for the government. Infrastructure project come to a halt, and social support networks collapse.

Argentina, Venezuela, Zimbabwe and Greece are examples, each responding in different ways. Argentina is the serial offender of Latin America with a cycle of recovery and exuberance, followed by over-borrowing and collapse. Venezuela and Zimbabwe are similar in that they converted national productive assets into social programmes to buy the support of the masses, only to ultimately “run out of other people’s money”, yet still not learn and restructure their economies for recovery. Both remain mired in poverty and hopelessness.

Greece has restructured its economy, and until the pandemic hit, the economy was growing again, within a huge debt overhang that was being managed.

Furthermore, in all cases of default, the losers will be the asset holders, and that means the wealthy, who see their net worth slashed.

And as the wealthy control the setting of policy and the justification of policy, and as they wish, first and foremost, to protect their own assets and interests, we can be confident that policies that may lead to default in the shorter term (3 – 5 years) will be avoided.

But what if these policies will result in a future potential default situation? Almost any policy will be acceptable if expected to preserve wealth in the short to medium term. Stimulus spending is meant to ensure the preservation of wealth by reducing the risk of a systemic collapse or a market implosion. To avoid those, ongoing imbalances are acceptable, because the alternatives are so frightening.

That is where we are now. The policies of deficit spending by governments to prop up economies through the pandemics have created imbalances that will, it is assumed, at some indeterminate time in the future, create a situation in which the only two options are hyperinflation or default.

Another Way – Super-Twist

Do not expect the Fed or the Bank of England, or any other central bank that can, to either stop funding stimulus, to allow their currencies to collapse, or to default on sovereign bonds or gilts.

Any increase in inflation will convert into an increase in rates (the assumption is that rates provide a view of future inflation) and a corresponding increase in funding costs for governments. That vicious cycle results in governments being unable to fund their debt, and are the hilltop of the slippery slope to hyperinflation or default. Therefore, rates must and will be managed.

The provision of guaranteed liquidity under any circumstances is the bedrock of managing the markets. Too much liquidity and the markets turn into bubbles, while too little liquidity and the markets could collapse. So central bankers must send the message that there is unlimited liquidity, while at the same time drip-feeding that liquidity into markets is required, all the while “ignoring” the fire-hydrant of government spending. As the government borrows, in theory, liquidity is removed from the markets to fund that borrowing. The money has to come from somewhere.

Instead of borrowing solely from the markets, governments purchase from themselves (and from other governments in the process of spreading their risk and helping to prop each other up). The debt is purchased with varying maturities.

In 2011 the Fed implemented Operation Twist, with the objective of reducing the yield curve and extending duration of the Fed’s debt. Buy short duration debt to take it off the table while selling longer duration debt at the same or similar rate, pushing the debt out and reducing the yield curve, pushing down inflation expectations.

There has been speculation about a “Century-Bond” in the UK before, with questions about who would find such a gilt attractive. The basic answer would be the government itself. Any government that can issue debt in its own currency and purchase it from itself at such a long duration would be well incentivised to issue such debt. Of course, long-duration gilts and treasuries will not go away, nor will they be paid off. But at 1% interest the burden of debt required to impact annual budgeting would need to be multiples of total GDP and the tax take. And such gilts or treasuries held in ‘public’ hands would retain value and still be available for exchange.

How long could the UK or the US continue to issue such long duration debt (and purchase it from itself)? As long as the markets will purchase that debt. And when purchasers disappear, they can purchase it from themselves knowing that they will be making debt payments to themselves at 1% per year.

But Bubbles?

As long as governments are purchasing the debt at a rate that provides liquidity to the governments, they will retain the monetary policy tools to add or remove liquidity to external markets. As bubbles expand, excess liquidity can be drained off by shifting purchasing of the long-duration debt to themselves, and likewise, liquidity crunches can be avoided (or mitigated) by releasing funding to stabilise markets.

Will they be able to destroy “boom and bust”? I highly doubt it. But they will have the policy tools (and the cash) to smooth the busts and rein in the booms. Boom too fast, and liquidity will be removed. Likewise, the busts will see floods of liquidity to stave off systemic collapse or depression.

Of course, we should trust that those different governments will fail, increasing the potential for a pan-economy systemic crisis. But coordination between Central Banks should reduce the likelihood.

Am I placing too much faith in Central Banks? Absolutely, in the "short term". I am also confident that the hubris of success will lead directly to excess risk-taking by governments and Central Banks resulting in instability. Will the system be self-correcting? Probably, up to a point.

But there will be bubbles, and policy-makers will accept those as the cost of stability. Squeeze a balloon, and it will pop out somewhere else. Release the pressure, and the balloon will return to its ‘stable’ shape. Prick the balloon, and it will burst. Squeeze the balloon too hard, and it will burst. I trust the Central Bankers to squeeze within boundaries, until they don’t.

But we are still ‘early’ in the process of managing financial stability and growth through unconstrained government borrowing and expenditure. There will be many years to run before a real bursting of the balloon.

  

Lockdown or Economy, a false choice

Have you heard people say that lockdowns are destroying economies? The argument is that we should open up, let the virus run its course, and build herd immunity (now that it seems only old people die, and that only a tiny percentage of overall cases result in death). Yet the assumptions seem to be that there is an either-or choice. The reality is much different. 

(Twitter: 27/12/2020 – the very voice and face of evil)

Locking down has enormous consequences for economic activity and mental health; this is true. This is balanced by a reduction in the mortality based on a lower or slower spread of the virus. A slower spread of the virus should ensure that the medical system, hopefully, can cater for the load that sick people place on the system. There are only so many hospital beds, and only so many medical professionals. Overload that system, and people will not receive required care, fatalities will rise, and the pool of available healthcare professionals will shrink as they are removed, hopefully temporarily, as they become sick and burned-out. There is also an element of trying to keep the sick-load down until effective interventions are available, and vaccines are available in volume. 

Remove lockdowns (or more accurately, do not impose lockdowns), and the benefits of fewer people becoming ill, dying, and overloading the medical system, will disappear. Now factor in the social impact of a visibly collapsing health system, mounting deaths and infection lurking around every corner and in every shop. There would be no need for a lockdown to stop people from flying. Bars could remain open, generating income for bar owners and employees. Shops and offices could stay open, and the economic activity would reduce unemployment and economic loss. Small investors leveraged to build businesses and futures would have these protected by an economic system that would continue apace, continuing employment and continuing the turnover required to service business (and personal) loans and build assets.

That is the argument. And it is dead wrong.

Mass illness and death have a way of seeping into the soul of a society, and fear is a dampener on economic activity. Trauma begets behaviours (and is caused by behaviours). So, tourism would come to a sudden stop. Likewise, while shops may remain open, economic activity in the shops would have come to a virtual halt. Yet wages would continue to be due, and as revenue collapsed and staff were fired, it would not be long before the markets themselves would begin to ‘price in’ the future impact of collapsing economic activity.

In the US, with a for-profit healthcare system linked to individual employment, the double threat of losing a job while at the same time being forced to work in environments that were clearly advantageous to the spread of the virus could not have anything other than a negative impact on workers' productivity. Worse than worker productivity, worker health will suffer through institutional failure to implement health-saving policies. The only policies that will matter will be wealth-saving policies. We’ve already seen the impact.

Earlier this month in Douglas County, one person who was sick went to work, and later tested positive for the coronavirus.

Within two weeks, that one action led to two subsequent outbreaks. The first killed at least seven people, nearly 20% of the county’s total COVID fatalities since the pandemic began. The second forced more than 300 people into quarantine.

Working from home would become a desirable option for workers (if they can), regardless of the ‘lockdown’ situation.

And the higher death rate among the elderly would drag workers away from the office for funerals and grieving, further impacting the social fabric. The higher death rate would also cause a national grieving significantly greater than the current numbing effect of the virus.

The question of “save lives or save the economy” is a false question. If society did not set out to save as many lives as possible, there would have been no economy. It would have stopped.  

Throughout the pandemic, modelling has included expected cases and mortality based on various levels of a lockdown or other social distancing measures. By early April deaths were climbing quickly, and projections looked pretty scary. The CDC’s site included its historical projections. Below is the 13 April 2020 projections of potential cumulative deaths in the US through July 2020, based on various levels of restrictions.

With the minimum “contact reduction” of 20%, deaths would have reached a range of between 130,000 to a horrifying 350,000. That range itself is horrifying, and reflects the dearth of information available at that time for modelling. It is scary to note that total US deaths passed 125,000 in June, not far off an extrapolation of the 40% contact reduction line above. 300,000 cumulative deaths in the US was reached in December, and current projections are for more than 420,000 deaths by inauguration day on 20 January 2021. 

Imagine 200,000 deaths by May 2020. Who would leave the house? Who would even consider going to work? Would there be an economy?

So while the modelling of total deaths took place, there was not an associated modelling of the potential impact on economic activity based on those deaths.  The comparison should have included not just vague statements about the health system being overloaded, but should have quantified the potential impact of health and economic activity.

The trauma of people being forced to continue to work in offices, factories and shops would be significant. The London Underground provides an example. Even under ‘normal circumstances’ the Tubes are packed, and people are surly and uncommunicative. There are unwritten behavioural rules, such as you don’t talk to others (or if you do, it is either boisterous groups, or quiet individual conversations) and do not make eye contact with strangers. Now imagine that in a pandemic in which everyone is expected to go to work, and the Tube is still crowded, but now there are people with fevers and coughs as well. 

In non-pandemic times, others are tolerated because an unwritten code says ‘we are all in this together’, as long as being together will not kill us. In normal times the unwell person on the train is requested to get off at the next stop and stay on the platform until they feel better or ask for assistance from station staff. 

In a pandemic, station staff are suddenly required to act as front-line medical responders. The infection will spread to them quickly, and the numbers of staff unavailable due to illness will rise. As the London Underground workforce is well unionised and protective, strike action should be expected and would effectively shut down the Underground. So as the pandemic spreads (in a no-lockdown situation) the number of train services will fall, cramming more people into fewer trains, increasing infection rates. 

At some stage, people will simply refuse to take the Tube.

That needs to be figured into the economics of the pandemic, and the ‘stay open’ arguments. Does NYC continue to function if New Yorkers refuse to take the Metro? Does the Metro still function is staff are out on strike or there are too few staff due to sickness?

Then consider the psychological effect of an infection rate climbing quickly, yet with a demonstrably deaf governmental and business community. If we (well, I) have been shocked by the level of conspiracy thinking that has happened with lockdowns, imaging the level of conspiracy thinking that would take place in an “everything should continue as normal” scenario.

I would imagine that business would be even more reviled, and all faith in government to protect people, or even to have the people’s interests in mind would evaporate. Covid-19 would be seen as a tool by which the government was ridding itself of the elderly to avoid pensions and healthcare obligations to the elderly, returning the economy to longer-term demographic stability. Kill off the old, and Social Security costs will fall, and taxes won’t need to rise, allowing more tax cuts for the rich.

And about the ‘rich’. Clearly, THEY are taking this seriously, and are able to distance and protect themselves and their families while the workers who create their wealth must continue to work, be exposed, get sick, and lose everything to the illness. The current anger (yes, there really is anger) at the wealth accumulation by higher earners and the extravagant increases in wealth at the very top through the pandemic will have repercussions. A ‘wealth tax’ cannot be ruled out.

Now imagine a ‘no-lockdown’ scenario, with mounting deaths, raging illness and (in the US in particular) the stripping of families of what meagre assets they have, impoverishment of the newly unemployed (after all, if there is no lockdown there should be little need for a stimulus package). Remember that even those who are benefiting from stimulus are seeing assets diminished and poverty approaching. Renters are falling behind with no associated equity assets to rely upon to provide financial depth. Homeowners are finding mortgage payments difficult or impossible to make. Banks will allow loans to extend only so long.

This is happening with stimulus and with lockdowns. Without lockdowns, the higher infection rates and higher death rates due to crippled health systems will exacerbate the economic problems.

Anti-lockdown advocates also make the spurious claims that ‘more people will die from suicide than will be saved by a lockdown’. This is complete bollocks. The suicide rate will be the same or higher, as large numbers of people are pushed into extreme poverty through economic collapse (which will happen simply because too many sick and dying people will mean too little shopping and too little working). In addition, those that suffer from depression due to the visible increase in illness all around them will have no services available to assist them, as those services will also be impacted by increased employee illness and absenteeism. Volunteers will become fewer as they deal with issues of their own at home and in their families.

Long-Covid

Missing from the discussion has been the economic impact of "Long-Covid" on more general health, and the psychology of returning to work in an "open economy". Long-Covid refers to those patients who continue, sometimes months later, to have Covid-19 related symptoms and in some cases, significant disabilities. 

A core element of a thriving economy is the confidence that the structures are in place to ensure that long-term aspirations will be achievable by "playing the game" of work hard, gain rewards, live a comfortable life. Curtail the probability of a quick recovery and a "back to normal", and expect an even slower recovery. That is the simple psychological impact that will hinder a full return to normality.

Then there is the associated economic impact of a potentially large cadre of individuals who will be unable to fully return to their pre-pandemic jobs and lives. They will "contribute" less to the economy, while likewise increasing the cost of the economy. Societies are expensive to run, and taking care of the weak and the sick to a standard that provides opportunity and enables a quality of life is part of that cost. It is the insurance policy that we all de facto pay for.

Long-Covid will result in untold individual and family suffering, and will be a drain on the economy that is so loved by those with assets. 

While the skyrocketing sickness and death rates in an "open economy" will effectively close that economy regardless of the wishes of politicians and oligarchs. Long-Covid will make create further drains slowing further the recovery of that much-worshipped economy.

Summary

“Open the economy, Now!” Lockdowns cause more harm than benefit. This is true, but only if there is no pandemic. When society is being ravaged by a highly contagious illness, the impact is far beyond the economic. And ignoring the pandemic in the pursuit of continued profit will backfire. More will die, and business will still fail, and prospects for a speedy recovery will wither. 

The DOW and Pandemic disconnect

The DOW Industrial Average stock index reached 30,000 yesterday, a new record high. Trump claims credit, of course. 

The markets are a good forward-looking indicator of the economy (or they were) and as such, any immediate movement is a reflection of near to mid-range expectations, and trends provide a forward-looking expectation of medium to longer-term economic performance. A rising market used to indicate an expectation of a generally growing economy.

And yet we know that the US economy is in deep trouble. Pandemic trouble coupled with long-term small to medium-sized business trouble. The promised V-shaped recovery is petering out and will return to a more 'normal' recovery. Wall Street and Main Street have rarely been so out of sync.

So why the jump to record-level valuations?

Of course, the stimulus that has been and continues to be pumped into the markets to avoid a crash decoupled Wall Street from Main Street some time ago. So the significant jumps over the past two weeks can and should be seen as market (and therefore the investing class) expectations that there will be greater certainty under a Biden administration, and therefore medium to longer-term plans can be made, and investment programmes confirmed.

It begs the question of why, with the need for ongoing stimulus and 8%-10% federal budget deficits, the markets think the future is so bright. 

The answer is that the US economy has passed the point of being able to fix its systemic debt problem, and any attempt to do so will simply destroy the markets, killing large and medium-sized companies (the small companies are barely holding on already) and that will wipe out any hope of an employment recovery, plunging the US into a multi-year depression. Therefore with an adult in the White House, and an economic team that is willing to tell him hard truths, the markets are betting that the stimulus will keep on rolling.

It begs the question of where the markets would be today without the constant meddling-by-tweet and bogus trade wars of the past four years? 

Still the pandemic continues to build. 

There can be no doubt, and history will declare (and so will any who are looking at this even now and into the coming year) that Trump’s personal response and the craven enablers in the Republican party, and directly contributed to a disaster in the US. 

Meanwhile, US Covid-19 deaths are at a seven-day moving average of 1640 deaths, a number that was last seen on May 12th (as a seven-day moving average). The first time that the rate was that high was as the pandemic was building force (as it is again) on April 7th. There were 34 days between the first time the average was above 1650 and the first time is dropped below 1650. 

If those numbers provided a pattern and an expectation for now, then we will not see the numbers reach this level again for another month. Certainly the numbers could already have peaked, but that is not what the seven-day moving average is telling up. With up/high days and lower/dropping days, the seven-day moving average continues to climb.

The same is happening with new cases. The seven-day average is still rising, at 176,000, even though there are occasional ‘down’ days, usually at the weekends. The three-day average is on another downward wave, but the latest number are not encouraging. Hospitals are becoming overloaded again, and National Guard troops are being called in to deal with the numbers of corpses in Texas.

 

Across the country, the cases are still growing and growing fast. And we are being warned that the coming winter will make matters even worse, with people being cramped inside, and when they go to places where others are or have been, the need to retain the heat will necessitate recycled warm air, increasing the risk of contagion. So for the US, there is little hope that the next weeks will see any actual peak in cases, and certainly little hope that there will be any sustained drop in the number of new cases. Unless, of course, Trump is able to continue to reduce the total number of tests being performed, and thus artificially holding down the number of cases.

Yes, still there is no meaningful response from the Republicans.

All they can do is look on now, still afraid of Trump and his ability, they believe, to destroy their political futures, by calling them out as disloyal. Even now. 

So Amerika has to wait, and hope that Biden and his team will be ready on day-one to implement effective measures. Certainly, the roll-out of vaccines will already be underway before Christmas, but the general population will not be seeing vaccinations until mid to late-January. First will be the front-line workers in healthcare, and then their families, and then the elderly, and then those at most risk. Only after those have been vaccinated will the general population be able to be vaccinated. That will probably not happen until February or later, depending on how fast the Biden team can push, or how much of their programme can start before he is sworn in. (By stealth of course, because Trump will “burn it down” if he sees any tangible support for Biden that is actually is able to interrupt).

Here in Greece things seem to be moving in the other direction, though it will take another week before we can have any confidence. 

The bad news is that the seven-day moving average number of deaths continues to rise, and is over 80. There was a high last week of over 100 deaths in a day. The hospitals are overwhelmed, and in Thessaloniki and the north, 99% of ICU beds are occupied. The military is building a field hospital on the grounds of the Military Hospital here in Thessaloniki, providing an additional 50 (ICU?) beds at least.

Two private clinics have been requisitioned, adding 200 beds to the total available in the public system in Thessaloniki. Hopefully, these will be enough, but I very much doubt it with the steep rise in cases through November. 

Thessaloniki is the epicentre, with over 600 new cases yesterday, reaching more than 14,500 cases in Thessaloniki in total, in November only.

Characteristic of the rapid growth of the virus is the fact that in October - the month in which the spread of the coronavirus had already begun - Thessaloniki had recorded 4,027 cases while in September it had only… 422 cases, a number that is now exceeded daily by the city. In less than two months, Thessaloniki jumped from 422 cases to 14,517, proving the aggression of the new virus. It is noted that in total, since the beginning of the pandemic at the end of February in Thessaloniki, 20,334 cases have been recorded.

https://www.typosthes.gr/ygeia-epistimi/covid-19/234679_koronoios-paramenei-ypo-piesi-me-607-nea-kroysmata-i-thessaloniki

Across Greece, the numbers of new cases are coming down, which if a good thing to see. However, this may be illusory for the same reason as the US, we are entering ‘real’ winter. The article also said that the optimum temperature for the virus is 8 – 10 degrees Celsius (of 48 – 50 Fahrenheit). 

If there is good news it is that the seven-day moving average of new cases is heading downward. Not much yet, but definitely, a peak, if only a week old. We will need much more time to see that it is a real peak and fall, which will be problematic with the winter conditions. But the lockdown here is in its third week, and that is about the time it takes for the asymptomatic contagious cases to spread as far as they can, then begin to die off. After all, if the virus cannot reach someone, then it cannot infect them.

So while cases continue to rise rapidly, the speed of rise has slowed down a little. But the numbers are still increasing, and that continues to drive the need for more beds.

The latest news this morning is that we will be in lockdown at least until December 6th, which is another two weeks. I would not be upset if it were another week after that, to really limit the potential spread. 

The spread cannot be halted by the lockdown; we still need to buy food and go and feed the stray cats. And we are not alone. The entire city must have some limited interactions, even if more limited than ours. And our interactions are limited. We do not move more than about 100 meters from the building, and even then we enter any building with caution, checking that there are not many people inside and that there is plenty of ventilation via open window and doors. The pet-shop is a good example. The front door is open all the time, and upstairs there is a pet grooming station with its window open. Hopefully, this is providing enough airflow to reduce the risk of spread. 

And masks are obligatory, and for the most part, are now being worn property. For the most part. There are still too many people who think that they cannot speak through a mask, so pull the mask down to talk, and then usually to talk too loudly.

But lockdowns work, and this one is already reaping some rewards in peaking infections. I hope. 

Be warned: Next to a battle lost, the saddest thing is a battle won

Be warned, the only thing worse for the United States in the short term than a Trump victory will be a resounding Trump defeat. After Waterloo, the Duke of Wellington was quoted as saying “Next to a battle lost, the saddest thing is a battle won.”

So Trump has declared that negotiations for a second Covid-19 stimulus package are over until he “wins the election”.  This should not be confused for anything other than what it is; the beginning of the Scorched Earth policy that will be implemented to the fullest if/when Trump loses the election.

Defeat is looming, and he knows it. He feels the rejection of the people, who are supposed to love him and all he has done for them. He knows that he will face accusations in multiple courts if he loses, and that the Republican Party will turn on him when he no longer has adequate leverage over individual senators and congressmen. He fears jail, he fears impoverishment. But mostly he fears exposure. That is why he was happy to pay $130,000 to a porn star to keep a fleeting affair secret. That is why he has stopped every attempt at the exposure of his tax records. He fears exposure and the destruction of the myth of the all-wonderful and all-powerful Trump.

And most of all he fears rejection.

And losing the vote will be the ultimate rejection. And they will pay for that rejection. Since he proved that he was quite capable of imposing horrible retribution on his closest family (his brother), no one should be in any doubt that he will impose even greater retribution on the entire country that rejects him.  On the morning of April 22, 1945, Hitler is supposed to have said "Everyone has lied to me, everyone has deceived me… the SS has left me in the lurch. The German people have not fought heroically. It deserves to perish… it is not I who have lost the war, but the German people."

I expect that exactly the same delusional thinking is going through Trump’s head right now, and that he will take as much of the United States with him when he goes. 

Halting the negotiations on a stimulus package may seem like just another negotiating tactic; it is not. This is his announcement that there are two choices; Trump, or destruction of Amerika. And he will carry through on that threat.

First, he will attempt to invalidate the election process (ongoing), then he will attempt to invalidate the election results (see the Atlantic and others), and finally, he will take down the country and leave a smouldering ruin for his successor.

So what does Scorched Earth look like between November and January?

The following is speculation of course, but I would not be surprised to see some or all of the following, but not in this or in any particular order.

1. Complete withdrawal from all negotiations with Democrats on any topics.
2. Refusal to allow any administration officials to participate in any transition meetings or planning.
3. All bills will be vetoed, regardless of content, either by a direct and explicit veto or by letting them sit on his desk long enough to the automatic veto to occur.
4. He will fire the head of the CDC and the FDA, for failing to bring a vaccine to market early enough to save him.
5. Ordering the immediate withdrawal of all American troops from any foreign bases and a “Home by Christmas” order.
6. Firing any and all generals who refuse, or who are seen as dragging their feet. Quite possibly firing hundreds of generals and senior officers as it becomes clear that the orders will not be fully implemented.
7. Notice to withdraw from NATO.
8. Executive Orders banning all Asians, Muslims and others from entering the United States (even though these will fail in the courts, the objective will be punishment, not implementation).
9. Cutting off all federal funds for all “Blue” cities immediately.
10. Closing all federal offices in “Blue” cities, except for “police” who will be tasked with…
11. …imposing close to martial law on “Blue” cities, including federalising the National Guard and putting them on the streets.
12. Fire much of the cabinet, with the objective of further slowing and collapsing the economy, and in retribution for a lack of adequate outward adulation.
13. Imposing immediate 100% tariffs on all imports, regardless of source (why? To destroy the stock market and economy, leaving a ruin for the new administration).
14. Firing hundreds if not thousands of federal civil servants who are identified as disloyal, either by having been accused of not being adequately compliant, or who are actively attempting to enact a peaceful transfer.
15. A war somewhere? A unilateral strike on China in the South China Sea? The only thing we can be certain of is that there will be no war with any country in which Trump has business interests, because
16. The flow of Presidential Pardons will be fast and furious, focusing first on his family, then on those who directly support his businesses. He will assert an ability to pardon for state crimes, though these pardons will fail in lower courts in 2021.
17. The only pardon he will hold back until the 20th of January will be Melania’s pardon, to make sure that she does not abandon him (which will happen in early February).

The list goes on. If it is possible, it will be on his list. He will not care about the economy, after all, the country rejected him, and especially New York and the markets will have rejected him, and that will make it personal. 

He has been compared with Hitler too often, and in most ways the comparison is completely wrong. He never served, and never held his Volk, his People, or his Nation to be anything greater than himself. He has never had a higher cause, and while Hitler may well be the very image of evil, Hitler did have a cause, however much the cause and the man were conjoined.

Trump is Trump, alone and only. And those that have sold their soul to Trump will find the bill coming due. Will they revert and put “Country first”, or will they believe that by staying loyal they will be able to seize the reins of the Trumpist “movement” and somehow command the loyalty of the Trumpist cult? Some certainly will take that route, and they will, perhaps, survive the culling that he will make even of those closest to him. 

Will those still around him be willing to stand up to him in those last days? I very much doubt it.

There will be senators who will have lost their seats and will be looking for some redemption in the history books. They might, but only might stand up to him. That of course will make things even worse, as they will only have proven themselves to be treasonous and disloyal. 

However this ends, it does not look good from here. There will be years of rebuilding ahead. The economy will be a shambles, and the incoming government will spend its first two years getting that back on course, all the while fighting against the Trumpist "Dead-enders".

The myth of the "Stab in the Back" will persist for years, and will be stoked by those who want to claim his mantle. 

Market Doom Delayed?

Why haven't the (equity) markets crashed yet, and will they?  After being convinced that we are on the edge of the precipice for the markets, I no longer think that. I think the markets have probably six or more months of happy days ahead. 

From Worldometer.org 23/7/2020

Cases around the world are surging. Yesterday’s was the biggest jump in cases globally to date, with something like 280,000 new cases, up from 240,000 the day before. The global death rate is increasing again, after its earlier peak in April. The seven-day trend lines are not looking good. The US of Amerika continues to lead the world (“USA, #1, USA, #1” I can almost hear them chanting) with over 70,000 new cases, again. Not a record for the US, but still a strong showing. This from the country that was listed as the top, best, first in the world, ready to deal with a pandemic. I think it is time to acknowledge that decades of self-delusion about Amerika’s standing in the world rankings of almost anything other than money and bombs has been a fiction.

Still, back to the pandemic for a moment. Cases are surging, and the US count of 4 million cases, as horrible as that may be, is still ‘only’ ~1+% of the population. And if the numbers are “10x higher” as some are projecting, then that is still only ~10+%, out of a “herd immunity” requirement in the 60% - 70% minimum. So we are looking at a 6x in cases and deaths before the US reaches “herd immunity” (if this is even possible based on the potential weakening of antibody loads after a few months).

Now, the case mortality rate as measured by the ratio of deaths to resolved cases is falling, at least in the developed world, and that is a very good thing. It tells me two things; that there is better identification of cases, many of which will be ‘mild’, and that therapeutics and medical responses are improving as the virus is better understood. That’s the good news.

The UK is an interesting counterpoint to the US of Amerika. The total cases count is at about .3% of the population, officially based on testing. And the number of people tested is running at almost 20% of the population. So I suspect that we can rule out a 10x infected rate because it should have shown up pretty clearly by now.

Conversely, the US of Amerika, where Trump continues to say that “if there were fewer tests, there would be fewer cases”, the percentage of people tested is actually lower than in the UK. This suggests that the US infection rate is higher than the UK (a former #1 shit-show in the Covid stakes) regardless of the number of tests.

And if we accept the premise that case mortality rates are declining due to earlier identification and treatment, then any delays through lower testing rates will actually directly lead to higher mortality rates. Trump is saying that he would rather have more dead people and a lower number of identified cases.

Meanwhile, the US markets continue to coast along and even edge upward, defying fundamentals and any expectation that markets are actually engaging in meaningful ‘price discovery’.

In the past month, I have completely changed my mind. I no longer think there will be the market crash that I’ve (and not me alone by any stretch of the imagination) been predicting. Every morning I look at the markets from yesterday and look at the futures for the coming day. Nothing seems to hurt these markets.

So in changing my mind completely, I’m becoming more convinced and confident in my thinking that the markets will not go down. Certainly, there will be blips, but I think the Covid-Crash is behind us, and that markets will now continue to hover for some time to come.

The Amerikan, and therefore world, markets are bifurcated. There are the equity markets (and luxury goods and property), and there are the corner shop and coffee shop markets.

The equity markets are the place that the Fed induced inflation is happening, with too much money chasing too few goods and services (equities and luxury goods and property). The money that the Fed has created to purchase corporate bonds is not stimulating the economy, it is propping up share prices and balance sheets, most of which are sham constructs waiting for reality to arrive, however slowly.

Government unemployment benefits are propping up the ‘real’ economy and ensuring that rent can be paid (and even then the amount of unpaid rent is staggering), groceries and coffee bought, and the flow of consumer goods and services can continue. That stimulus is keeping enough new money in the system to avoid deflation due to too little money chasing too many goods and services. Supply and demand still rules, and when the stimulus ends, the supply of money in the ‘real’ economy will fall like a stone, and the bottom of the economy will see real price deflation.

But at the top of the economy, the ‘market’ economy, there will still be bucket-loads of money with no purpose and nothing to purchase. So inflation will continue at that end of the market. So as people begin to starve, the markets will stay high, and the Wall Street and Executive Suite bonuses will continue to flow – for some time anyway.

And the Fed will keep pumping. It has little choice. It has limited tools, and cannot tell companies to take the money and spend it on the ‘real’ economy; only the Federal Government can do that. And patience at the Federal Government level is wearing thin. So even if the stimulus continues, it will be at a reduced level, and that will start the process of deflation in the ‘real’ economy.

The rest, well, I’m guessing that the ‘market’ economy will do just fine. For another six months or so? Forever? Who knows? But I’m not betting on it falling any time soon.

Trump's strategy; childishly inane or cunningly evil?

I do not know what Trump’s strategy is, but it is either very childishly inane or cunningly evil. As he is surrounded by smart (but unethical) people, I’m worried about the cunningly evil option. Is the pivot to White Supremacism an intentional mechanism to retain a disillusioned base who would otherwise stay home? Is White Supremacy the natural backstop belief system for those who originally voted for (and still support) Trump with his "drain the swamp" message to the otherwise left behind?

When a belief system is undermined, it is natural to fall back on another. Why not capitalise on that, especially if it keeps the base voting?

The people around Trump are cynical enough to implement such a program. People like Kelly-Anne Conway, who is a very smart person, but seems devoid of any motivation that does not include self-aggrandisement and accumulation of power and through that a modicum of wealth.

She knows that she is lying and spinning half-truths, and she does it directly and with purpose. She knows very well that what she says will lead to people dying, but she does not care as long as it cements Trump’s hold on power. And through his hold on power, she continues to be in the public eye and retains or increases her access to power. Once Trump is ejected, something she certainly does not want but is ready for, she will pivot to making money as a pundit and former insider. She might even write a book.

If she does not write a book, she certainly will have positioned herself as indispensable to whoever dreams next of taking the White House (from the Republicans or the Extreme Right). Her ability to pick up the phone and ring anyone with money will make her a valued asset, and that will fill her bank account nicely. And who knows, maybe she will back another winner and be back on the White House lawn telling lies for someone else.

And that’s the way it works, for almost all of them. A few, a very few, believe that they are serving the best interests of the nation as they define those interests (that strangely always also seem to fit nicely with their own interests).

Across the rest of Amerika, schools are asking if and how they can open in the face of a pandemic that will not only endanger their students, it will endanger the teachers, and ultimately the virus will be taken home to un-infected families.

Another wonderful example is Kayleigh McEnany, Trump’s spokesperson since the end of April 2020. She quite openly and without the least hint of irony, told her first lie as spokesperson when in her first briefing, she said “I will never lie to you, you have my word on that” and then promptly started to do exactly that. This is the woman who, in July 2020 said “Science should not stand in the way of" opening schools. (Yes, she really said it. No, she wasn't taken out of context.)

So the White House has now said that even if scientists and epidemiologists are saying this is a bad idea, it should be done regardless. And in that one statement we have a summary of the entire Amerikan response to Covid-19; one ‘faction’ saying follow the science, and another saying that they do not care about the science, because this is a political decision and a political argument.

It is as if gravity was a political issue and not a scientific issue. We don’t believe that gravity holds us down, and if you believe that, then you must be supportive of abortion also. The linkages are extreme and pointless. Science is. Belief is different, and relies on a rejection (in some cases) of science.

Of course, this is an argument that humans have been having for millennia; probably as long as there has been any creature we can ‘human’. The earliest authorities were those who could convince others that the spirits spoke through them, or that they understood the will of the spirits. “Do as I command or you will be putting yourself against the God(s)”. And said with conviction, enough of the people will either believe, or will see an opportunity for themselves in supporting the spirit-speakers.

And throughout history, there has been a tug-of-war between the shamans and charlatans and those who look at the sky and see stars and not gods, and who let the trees talk to them instead of listening to what the shamans and charlatans say for the trees.

Science progress though, and with each passing century more was learned, more investigated and explores, and with the written word, more was passed from generation to generation. Eventually scientific ‘facts’ catch up with the shamans, whose continued defence of non-science becomes untenable.

In the case of Galileo, it took the Roman Catholic Church only 359 years to admit that he was right, and their suppression of these ideas was the suppression of scientific fact. In 1992 the Church finally admitted that he was right.

In 1633, the Inquisition of the Roman Catholic Church forced Galileo Galilei, one of the founders of modern science, to recant his theory that the Earth moves around the Sun. Under threat of torture, Galileo – seen facing his inquisitors – recanted. But as he left the courtroom, he is said to have muttered, ‘all the same, it moves’. (The New Scientist, 7 November 1992; https://www.newscientist.com/article/mg13618460-600-vatican-admits-galileo-was-right/)

In the case of the charlatans in the White House, it takes all of a few days or even a few minutes to know that they are telling lies, and that their attacks on science are baseless and political.

But these attacks were and are greeted approvingly by 35% of the Amerikan people; Trump’s loyal base. Even when they know that it is lies, they would rather support the liar than have to accept that there are other choices. It is taking an overwhelming level of deceit and duplicity by Trump and his apostles to eventually drive people away, even at the margins.

His 35% needs something to believe in. Before the pandemic, they needed to believe that there was someone “anti-Washington” and “anti-New York Finance” in charge, looking out for them. They needed to believe that they were not left behind. We can discuss all day if they were left behind, or if they took the easy path and left themselves behind, but that is a different discussion. What is clear is that they believed that Hilary and the Democrats were responsible for their being left behind, and nothing can shake that belief.

Mixed with that is the belief (for they must believe or there is nothing left for them) that Trump, for all his bling and worship of wealth, is actually looking after their interests in the swamp of Washington.

To actively un-believe is a difficult thing to do, especially when surrounded by those who, at least out loud, continue to believe. To un-believe requires reflection and acceptance that you were wrong. And in this case, it requires an acceptance that you supported a conman, and that you were conned. This is not easy. In fact is it probably one of the most difficult things that any of the un-believers will have had to go through; to accept that not only were they wrong, but that they and those they love and share common ideal with are also wrong, and that they too have been conned.

Anger and depression are probably the most common reactions, with anger taking the fore.

And much of that anger then spills over into a lashing out in a final attempt to prove that they were right all along, that they were not conned, and that their ideal and beliefs are indeed correct. That anger feeds off the anger of others like them, and it boils over.

Eventually, acceptance and reflection might happen. But only might.

More likely there will be retreating into a backup belief system, one that may be even more radical than the previous. White Supremacy is a good example. Take away the belief that Trump is actually representing the needs and wants of those left behind, and for many the next backup belief system is one of that supports their victimhood while affirming their individual worth.

So it is reasonable and logical that Trump is now all-but overtly supporting White Supremacy today. It is the logical refuge for his base who are un-believing in the “drain the swamp” narrative.

And here is the "cunning plan" part of the Trump program. If he (and his people) can see that one of the primary fall-back belief systems combines that victimhood of being left behind by Washington and the Democrats, and victimhood of a racial suppression (theirs, not other racial groups) then what better way to ensure that base remains engaged? Cater to their need for inclusion and to be 'heard', without too overtly supporting a philosophy of oppression; dog-whistle loudly and continually.

Confederate generals and monuments serve the purpose of confirming that Trump is indeed the protector of their alternative beliefs. Confederate symbols have little to do with the underlying values of actual of the confederate states. They are symbols now not of slave ownership and oppression, but symbols of a dis-association with the concept of Amerika. Therefore, promises to protect those symbols are equally a promise to uphold the cause of the rejected and the left behind.

He is never going to convert voters to his cause, so he needs to ensure that his existing base continues to be engaged. It really may be his only chance. 

And so all that we see and hear is about engaging that base, whatever it takes. It is a cunningly evil plan.