Sunday, May 31, 2020
written 24 May 2020
published 31 May 2020
I enjoy reading histories of financial disasters. Money is a powerful concept, a socially agreed upon symbol of value, allowing greater versatility in trade than the limits of straight barter. But being only concept, it is inherently divorced from experiential reality. For instance, if you are dying of thirst, water will save you. That is the real value of water, independent of how much money you have. Money could buy you water, if water is available, at a price you can afford, and the seller is willing, but money itself will not quench your thirst because it is only concept. Because the value of money is disconnected from reality, there are no intrinsic limits on how the value is assigned, opening the door for corruption and distortion. The most persistent distortion is the constant drive for increased return on investment decoupled from any change in reality.
"Enron: The Smartest Guys In The Room": McLean and Elkind (2003). Enron Energy Services began in 1985 by providing energy, but grew to become a powerhouse trading energy stocks. The key to their success was an accounting trick called "mark to market", which allowed them to claim all the future profits from a project in the fiscal quarter the deal was initiated, without ever being adjusted by subsequent reality. That this is legal points up the disconnect between concept and reality. To cover growing losses, offshore shell companies were created to warehouse the bad debt, keeping it off Enron's published balance sheet. This subterfuge helped Enron appear profitable and some people made millions. With the stock price growing every quarter, Wall Street loved Enron, and it was named the "most admired" corporation by Fortune magazine for six years in a row. Reality eventually prevailed and the dot-com crash revealed the sham. By November 2001 the stock had dropped to zero, wiping out billions in "shareholder value". All but a few lost everything, and a couple of people even went to jail.
"The Big Short": Lewis (2010). In the 1990's, driven by desire for increased returns, the mortgage industry began pooling thousands of home loans into financial products, which were sliced up into portions with varying risks and return rates, which were then sold to investors. This was very profitable, and therefore popular, and the pool of good mortgages was soon repackaged and sold. Then banks started using more questionable loans to satisfy continued investment demand.
The market expanded to the point where mortgage originators didn't even pretend to verify that a borrower could afford repayment. Bad loans were immediately sold up the financial food chain, and became "someone else's problem". Many loans were written with very low "teaser" interest rates, allowing anyone to qualify, which reset to higher rates several years later. When that began to happen in 2007-8, the housing mortgage market collapsed and whole regions went into default. The financial products based on these garbage loans had been rated investment grade by for profit agencies and sold globally. Nobody knew exactly what was junk, so trust was destroyed everywhere, and the global economy almost froze up. Trillions of dollars were pumped in by central banks and it took years for the economy to recover. Nobody went to jail, so no lessons were learned.
"Dark Towers": Enrich (2020). In the 1990's the staid Germany Deutsche Bank decided it wanted to join the high return activity generated by Wall Street, and began building an aggressive investment group, with a goal of 25% annual return. To get this kind of return required creative bookkeeping, very risky deals, and a willful disregard for the international law. A large percentage of their business involved laundering questionable Russian money into the western banking system. One of their high value clients was Donald Trump and his family, even though no other western bank would lend to them because of their poor credit record. Russian economic leverage over Trump runs through Deutsche Bank. The 2008 crash, combined with increased international scrutiny, has now forced a complete restructuring of Deutsche Bank.
The seduction of increased fiscal return inflates the inherent separation between reality and money, generating self-destructive bubbles within the monetary system, which inevitably collapse, causing lasting damage in the real world. When fiscal values trump human values, society suffers.
Sunday, May 24, 2020
written 17 May 2020
published 24 May 2020
In recent weeks, we have seen shelter-in-place protesters: a mingling of alt right, neo-Nazi, tea party, and Trump supporters. Some hold signs demanding we "thin the herd". Perhaps inspired by Ayn Rand and the concept of the superman, they believe in the supremacy of the individual over the whole. From a unity perspective, this is lethal foolishness.
Bumper sticker Darwinism boils down to "survival of the fittest", but that summary is misleading. When a herd is attacked by a predator, everyone tries to run away. While the fittest individual does survive, so does most of the rest of the herd. What happens in nature is the "demise of the least fit", not focusing on the individual, but evaluating the whole herd.
A May 12th Washington Post article, by Bernstein and Cha, reported "New Ways the Coronavirus Attacks the Body". "In the initial days of the outbreak, most efforts focused on the lungs. “No one was expecting a disease that would not fit the pattern of pneumonia and respiratory illness,” said David Reich, of Mount Sinai Hospital. Today, there is widespread recognition the novel coronavirus is far more unpredictable than a simple respiratory virus."
"It attacks the heart, weakening its muscles and disrupting its rhythm. It savages the kidneys so badly some hospitals have run short of dialysis equipment. It crawls along the nervous system, destroying taste and smell and occasionally reaching the brain. It creates blood clots that can kill and inflames blood vessels throughout the body. An exaggerated response from the body’s own immune system can attack the body’s own cells along with the virus. It harms men more than women. It picks on the elderly, people weakened by previous disease, and, disproportionately, the obese."
The combination of diminished immune function due to age and the likelihood of other health issues tend to make the elderly "least fit". The protesters, who are mostly young, are willing to sacrifice others to get the economy going again and help Trump's re-election chances.
But obesity, a particularly "unfit" category in terms of the virus, is not limited to the elderly. In 2018, a higher percentage of Americans were rated as obese than any other country in the world, over 40%, and a fifth of them were morbidly obese. Obesity puts stress on the heart, making it more vulnerable to the virus.
A strong immune system is critical during this pandemic. Almost 10% of Americans have diabetes, often induced by diet, which reduces immune function, and another 20% of Americans are pre-diabetic. 9% of Americans have asthma and reduced lung function. Chemical contamination of our bodies reduces immune system function, as does increased stress. Stress increases with economic inequity and poverty, lack of access to health care, and soul deadening work. Poor anger management is another stress factor, dramatically on display in the lock down protesters.
Consider what "most fit" might look like. Certainly, improved diet and exercise would help, as would universal access to health care. Fittest should also consider how and where we work and live. Robust health and safety regulations in the workplace, and rigorous attention to the chemical contamination of our air, food, and water, would be important.
In addition to healthy physical conditions, examine what kind of behavior would be "most fit". Media exposure has honored the compassion exhibited by the front-line health care workers. Shelter in place is the individual restraining themselves for the benefit of the larger society: compassion in action. Contrast that to Trump's every move.
A "most fit" economy would reward skills necessary for survival: the ability to grow and process food, working in the food supply chain, keeping the basics of life functioning, such as water works, sanitation, trash, electricity, and education. These essential services are often poorly paid while we lavish money on the top of the corporate structure. Millions are unemployed and the stock market increases: indication of a "least fit" economy.
People should be wary of rooting for "thinning the herd". Our poor diet of chemically contaminated agribusiness food, distorted economy, fractured health care system, toxified environment, and incompetent "leadership" has produced a death count higher than any other country, and the epidemic still rages out of control. On a global scale, all of America is ripe for thinning.
Sunday, May 17, 2020
written 10 May 2020
published 17 May 2020
Crisis is a breakdown of the "normal" order, but provides opportunity to learn about weaknesses of that order. COVID-19 is rich with learning opportunities, which some people embrace and others stubbornly ignore.
We have learned that a highly contagious disease that infects humans anywhere is a threat to the rest of the world due to globalized transportation. There are indications that the virus was already spreading undetected in the US in early January. What happens anywhere doesn't stay there. Reality is profoundly interconnected.
We have learned that trying to hide a fact about reality is a short-term solution which guarantees a bigger mess later. The first outbreak in Wuhan, China, was kept quiet by local officials afraid that reporting poor performance would look bad to their superiors, hurting them politically and economically. Eventually the case load and body count rose to unavoidable national attention, and the rest of the world was alerted, but the virus had already spread.
This lesson about facts still escapes the Trump administration. He denied the severity of the problem for weeks, ignoring increasingly dire reports. His eventual moves were tentative and inadequate, allowing conditions to worsen. He has fired people who told him inconvenient truths, replacing them with sycophants soothing to his fragile ego.
While blaming China for lack of timely transparency, he repeats the mistakes. He hides bad news, canceled the virus task force, forbids public CDC updates, allows corporations to keep testing results secret, and prohibits medical testimony before Congress, as if nobody will notice the rising death toll. Such magical thinking by a "leader" is lethal. America has the largest outbreak in the world, 33% of global cases, 28% of global deaths, with only 4% of the global population, and Trump's son-in-law calls that a wonderful accomplishment.
We have learned that corporate America is willing to risk killing their employees for profit. This lethal parasitic economic model, enabled by Republican policies, is on stark display in the meat processing facilities within the heartland. People are forced to return to work, despite the plants making no provisions to reduce the risk of infection, because Trump refused to force any safety changes and granted the companies legal immunity. The "job killing" workplace health and safety regulations Republicans have been trying to remove for decades are really regulations against "jobs that kill" for greater profit.
We have learned that Republicans are more concerned with packing the court system with conservative judges with questionable experience than addressing the economic crisis. Because Republicans have loudly claimed for decades that "government is the problem", they have no respect for public service and willingly choose incompetent and/or corrupt individuals who see public service as an opportunity for political gain or personal enrichment at tax payer expense.
We have learned the human cost of uncoordinated, incompetent national leadership during an emergency. Months into this, there are still inadequate levels of reliable timely testing, made more acute by the drive to "reopen the economy" to aid Trump's hope for re-election.
We have learned that access to adequate, affordable health care, not insurance, is critical in the middle of a health crisis, helping control the spread of the virus. Yet the government under Trump is still trying to eliminate health insurance plans created by Obama, just as tens of millions of Americans have lost their jobs, and probably their health insurance.
We have learned that a robust public health system is as important to national security as a robust military. Both must be maintained at high levels of readiness, even when there is apparently no immediate need, yet we support the Pentagon with taxes and privatize the health care industry for profit.
We have learned that the extreme economic inequity in our country amplifies the misery of this pandemic. The economic harm to our society is prolonged without swift financial support to all individuals. Our economic model for supplying food lacks resilience, as farmers go bankrupt and destroy food, while millions go hungry.
If we don't recognize these lessons, and transform our society and economy in response, we will waste an opportunity, and be less prepared next time. Life is relentlessly patient. If we don't learn the first time, the problems just keep coming back until we do.
Sunday, May 10, 2020
written 3 May 2020
published 10 May 2020
Last week I was in communication with a friend who expressed the opinion that humans don't deserve to survive. While I don't agree, it isn't hard to find justification for that perspective.
What can you say about Trump's suggestion, during a press briefing on COVID-19, that people might drink or inject bleach to cure coronavirus? This kind of comment can get his gullible followers killed. The next day he tried to walk it back as a joke, but poison control hotlines got increased calls and the manufactures of Lysol and Clorox put out special notices saying their products were NOT meant for internal use. His crass disregard is reflected in other recent policies.
Everyone wants the economy running again, but people also want to minimize the risk to themselves, their families, and to the health care system they may need. Trump knows that a bad economy makes his re-election more difficult, so he is rushing to "reopen America". In the Guardian, Robert Reich summarized Trump's plan, which prioritizes economic coercion over medical realities.
"Step 1: Remove income support, so people have no choice but to return to work. Trump’s labor department has decided that furloughed employees “must accept” an employer’s offer to return to work or forfeit unemployment benefits, regardless of Covid-19."
"Step 2: Hide the facts. No one knows how many Americans are infected because the Trump administration continues to drag its heels on testing. Dr. Fauci, the administration’s leading infectious disease expert, warns that reopening poses a significant risk without more testing. The White House has blocked Fauci from testifying before the House."
"Step 3: Pretend it’s about “freedom”. Weeks ago, Trump called on citizens to “LIBERATE” states with strict stay-at-home rules. Attorney general William Barr has directed the justice department to take legal action against any state or local authorities imposing lockdown measures."
"Step 4: Shield businesses against lawsuits for spreading the infection. The Senate majority leader, Mitch McConnell, insists that proposed legislation giving state and local governments funding they desperately need must include legal immunity for corporations that cause workers or consumers to become infected."
Trump activated the Defense Production Act on March 27th, giving him emergency powers. He refuses to use this power to organize increased production of test kits or personal protection equipment, despite ongoing shortages of these essential materials. But last week he prohibited the public health closures of meat processing facilities, overriding governors and health officials. Center for Disease Control reports, defining specific deficiencies in the plant design, were weakened from mandatory changes to simple suggestions. Occupational Safety and Health Administration, which can also demand workplace changes, has refused to step in. The irony is that these plants are in the heart of Trump supporting states.
America is beginning a grand experiment: will the expected economic profits of rushing to renew economic activity justify the increased deaths and public health costs?
I am writing this on the third of May. As of noon today, Johns Hopkins University site lists total cases in America at 1,148,004, with a daily increase of 30,025, and total deaths of 68,489 (more deaths in 2 months than in 11 years in Vietnam) for a death rate of 5.8%. These numbers are probably an undercount. America has administered over 7 million tests so far, only 2% of the population, but health experts estimate that we must test 5-10 million people every day to know where the virus is. With renewed social activity and inadequate testing, the virus will spread undetected and a week or two from now newly infected people will begin to hit the hospitals and death rates will increase.
Our lack of coordinated national response, combined with inadequate testing, has allowed US daily infection rates to steadily average 30,000 since April 1st, while other countries show sharp peaks, which then decline toward zero. We have 4% of the world population, and 33% of the cases with no sign of decreasing intensity. Republicans have long favored profits over people, forgetting that it is people who make up the society and support the economy. This pandemic, taking place under the "leadership" of a president least suited to the task, will change the US for decades. I don't think Trump intends to destroy America, that is just collateral damage.
Sunday, May 3, 2020
written 26 April 2020
published 3 May 2020
I was educated in engineering and physics and worked in university research. I respect science. While scientists are subject to the foibles of ego, and politics and economics can distort or hinder understanding, science as a whole is driven by a sincere curiosity to comprehend experienced reality. Verifiable truth matters. Science, and the technology that comes from it, has transformed the planet.
Anti-science resistance, to the point of execution, was first rooted in religion. The dominant spiritual world view was threatened by the demonstrable material truth coming from science. In the last 70 years resistance in America has come from economic orthodoxy, which is just as dogmatic and lethal in their belief structures.
Beginning in the 1950's, the American Petroleum Institute (API) attacked Caltech research showing Los Angeles basin smog resulted from a photochemical reaction of the exhaust from automobiles and industrial fossil fuel combustion. API hired their own scientists to highlight alleged uncertainty in the research. The goal was to confuse public opinion on the subject by creating "alternative evidence", and sow doubt. This successful strategy was quickly applied elsewhere.
In response to magazine articles reporting links between smoking and lung cancer, cigarette makers created the Tobacco Industry Research Committee to counter the bad publicity. Press releases challenged the science, casting doubt on studies and calling for more research, insisting there was no proof that cigarettes cause cancer, intentionally misleading the public about the dangers of smoking.
The same tactic has been used by the chemical industry to delay regulation of chemicals with known dangers, such as formaldehyde, arsenic, and hexavalent chromium. Corporate-funded scientists write medical journal articles, testify in court and before regulatory agencies, claiming their clients’ chemical products pose little or no health risks. Monsanto has been found to falsify testing to continue marketing RoundUp, fighting the growing evidence of its carcinogenic effects.
In the late 1970's, Exxon researchers told the company that burning fossil fuels would harm the planet and endanger humanity, warnings repeated 11 years later by NASA's James Hansen during congressional testimony. By then Exxon had disbanded their internal research group, and began funding an industry-wide campaign that focused on what was still unknown about climate change. The pro-industry Global Climate Coalition and the Global Climate Science Team sowed doubt and asserted that it wasn't even clear that climate change was occurring.
Significantly, in each of these cases the truth of harm to their customers was suppressed to protect profits, demonstrating not only the corporate priority, but the fact that these very profitable businesses are dependent on killing their host population. This is the economic model of a lethal parasite.
Decades of corporate attack on inconvenient science, and even science in general, has created a political divide. Science represents an intention toward truth, so now truth itself is suspect. Trump lies constantly, normalizing a disregard for even the concept of truth. By political inclination and personality disorder, President Trump can't admit that anyone knows anything important, and labels anything other than his opinion of the moment as "fake news"; he distrusts all science.
Which brings us to COVID-19.
The virus highlights the partisan division as different states react to the medical advice on social distancing from CDC. Those that have been most diligent are largely Democratic strongholds, and those most lax have been red states. With no medicine, no vaccine and no testing, shelter in place is the only way to prevent exponential spread crashing the health system, causing massive deaths. Places that started early have managed to "flatten the curve", but that doesn't mean the virus is gone.
There are very specific steps, rooted in medical science, which can allow more economic activity to proceed. The very first one is widespread, and repeated, testing. If we don't know where the virus is right now, we can't apply targeted isolation and care. Opening the economy without testing capacity is like speeding on the freeway in a white out fog.
Months into this America still has nothing close to the testing capacity needed due to Trump's corruption and anti-science mania. Under these conditions, opening the economy will kill more Americans, but make Trump look good in the polls for a brief moment. This passes as Republican leadership. America must do better.