Yearly Archives: 2020

Re-Opening the Economy Won’t Fix What’s Broken

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By Charles Hugh Smith

Source: Of Two Minds

Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt “normal” won’t fix what’s broken.

The stock market is in a frenzy of euphoria at the re-opening of the economy. Too bad the re-opening won’t fix what’s broken. As I’ve been noting recently, the real problem is the systemic fragility of the U.S. economy, which has lurched from one new extreme to the next to maintain a thin, brittle veneer of normalcy.

Fragile economies cannot survive any impact with reality that disrupts the distortions that are keeping the illusion of “growth” from shattering. For the past two decades, every collision with reality cracked the illusion, and the “fix” was to duct-tape the pieces together with new extremes of money-creation, debt, risk and speculative excess.

While the stock market has soared, the real world falls apart. If your region needs a new bridge built, count on about 20 years to get all the “stakeholders” to agree and get the thing actually built. Count on the cost quintupling from $500 million to $2.5 billion. Count on corners being cut as costs skyrocket, so those cheap steel bolts from China that are already rusting before the bridge is even finished? Oops. Replacing them will add millions to the already bloated budget.

Want to add a passenger stop on an existing railroad line? Count on 20 years to get it done. The complexity thicket of every regulatory agency with the power to say “no” basically guarantees the project will never get approved, because every one of these bureaucracies justifies its existence by saying “no.” Sorry, you need another study, another environmental review, and so on.

Need a new landfill? I hope you started the process 15 years ago, so you’ll get approval in only five more years. Every agency with the power to say “no” will stretch out the approval, so they have guaranteed “work” for another decade or two.

Did your subway fares double? Was the excuse repairing a crumbling system? Did the work get done on budget and on time? You must be joking, right? All the fare increase did was cover the costs of skyrocketing salaries, pensions and administrative costs. Repairs to the tracks and cars– that’s extra. Let’s float a $1 billion bond so nobody have to tighten their belts, and have riders pay for it indirectly, through higher taxes to pay the exorbitant costs of 20 years of interest on the bond.

Have you been thrown off your bicycle by the giant potholes in the city’s “bike lanes”? The city reluctantly admits that these streets that haven’t been maintained for decades–yes, decades. The city once paid for street maintenance out of its general budget, but alas, that’s been eaten up by skyrocketing salaries, pensions and administrative costs, so now we need to float $100 million bond to fund filling potholes. If all goes according to plan (ha-ha), we should be able to re-pave the streets that have been crumbling for 20 years in… the next 20 years.

These real-world examples are just four of thousands of manifestations of a broken system. Rather than make tough choices that drain power and wealth from vested interests, we simply borrow more money, in ever increasing amounts, to keep the entrenched interests and elites happy.

There are two “solutions” in the status quo: dump the debt on taxpayers or on powerless debt-serfs–for example, college students. (See chart below of the $1.6 trillion that’s stripmining student debt-serfs.) Who benefits from selling all the municipal bonds, bundled student loans, etc. to investors starving for a yield above 0.1%? Wall Street, of course.

The problem is that while debt has soared, productivity and earned income have stagnated. The statistical narrative has been ruthlessly gamed to hide the erosion of living standards, but even with the bogus “low inflation” of official statistics, wages for the bottom 95% have stagnated for decades.

Measures of productivity have also been gamed to mask the ugly reality that the vast majority of the U.S. economy is stagnating under the weight of interest payments on debt, mal-investments in speculative gambles, higher junk fees and taxes, crushing regulatory compliance, high costs imposed by monopolies and cartels and a well-cloaked decline in the quality of just about everything the bottom 95% uses or owns.

What little productivity gains have been made have been skimmed by the top 5%. Coupled with the Federal Reserve’s single-minded goosing of the one signaling device it controls, the stock market, the top 0.1% in America own more wealth than the bottom 80%.

If productivity stagnates and winners take all, the wages of the bottom 95% cannot rise. Real wealth is only created by increases in the productivity of labor and capital; everything else is phantom wealth.

The only way stagnant incomes can support more debt is if interest rates decline. Presto, the Fed dropped interest rates to near-zero a decade ago. Of course you and I can’t actually borrow millions for 0.1%; that privilege is reserved for financiers and other financial parasites and predators.

Debt-serfs were able to refinance their crushing mortgages to save a few bucks, and so they can afford to 1) take on more debt and 2) pay higher taxes to fund the ballooning public debt.

Every one of these extremes has increased the systemic fragility of the American economy. This fragility is reflected in the impoverishment of the bottom 95%, the thin line between solvency and bankruptcy, the decay of public trust in institutions run for the benefit of entrenched interests, and the quickening erosion of America’s social contract.

Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt “normal” won’t fix what’s broken.

 

The Covid-19 Chronicles: USA

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By Gunnar Ulson

Source: Land Destroyer

The US is claimed to be hardest hit by Covid-19 with, at the time of writing, over 80,000 deaths attributed to the virus. The nation is also suffering from socioeconomic disaster as lockdowns have driven millions of Americans into not only unemployment, but predictable poverty and hunger as a result.

The crisis has been pounced upon by special interests to help propel various sociopolitical and economic agendas rather than confront and overcome the crisis, leading many to suspect the crisis itself has been deliberately overblown.

Health Impact

At face value the US would seem to be hit by an unprecedented health crisis. Hysteria spread by the mass media focusing on the numbers of infected and dead are provided to a panicked public without context.

Indeed, over 80,000 people have so far died with infections at nearly 1.5 million (confirmed).

Yet a quick look at basic statistics provided by the US government’s own Center for Disease Control (CDC) shows that Covid-19’s impact on human health including total deaths has not even surpassed recent flu season burdens. For example, according to the CDC’s website, the 2017-2018 flu season (running from December 2017 to March 2018) left anywhere between 46,000 to 95,000 dead.

Deaths attributed to Covid-19 have been recorded for 2 full months longer with questionable methods used to attribute Covid-19 as the cause for death.

The death rate has been reported at anywhere between 1% to as high as 5% to 6%. Missing from these seemingly concerning numbers is the fact that widespread testing has not been undertaken. The few instances where it has been done has shown that the number of infected is many times higher than official reports. This means that the death rate is much lower and more comparable to the annual flu than any sort of novel and particularly dangerous pathogen.

Testing in California and New York have revealed that in these states alone millions are likely to have been infected by Covid-19 and simply showed little to no symptoms.

A CBS article titled, “Study shows 13.9% of people tested in New York state have coronavirus antibodies, Cuomo says,” admits:

New York’s first survey of coronavirus antibodies shows that 13.9% of those tested in the state had coronavirus antibodies in their system, meaning they have contracted and recovered from the virus, New York Governor Andrew Cuomo said Thursday. That suggests that 2.7 million people have been infected statewide.

In other words, there are likely more people infected in New York state alone than infected nationwide according to “official” reports.

If information regarding how widespread Covid-19 actually is and how dangerous it is or isn’t, is not accurate, how can the United States formulate appropriate measures to respond to the outbreak?

Measures

Despite what appears to be nothing more than a bad cold or flu, the US has ground its society to a halt with lockdowns and social distancing measures.

“Non-essential” occupations have been encouraged to work from home or to not work at all. The food and beverage industry for example, the second largest employer in the United States, has been ground to a halt with employees furloughed for what has now been weeks or even months. Many of these employees do not expect to return to work until at least June.

In Los Angeles, county officials have extended “stay at home” measures for another 3 months meaning that people will have been shut in for nearly half a year if and when in late August people are allowed to return to their normal lives!

Social distancing is being enthusiastically enforced by police around the nation. In New York City, in order to “protect” people, those not practicing social distancing have been beaten, tased and even arrested. The physical and legal damage done “saving” the public from Covid-19 appears to be more extreme than the actual threat of Covid-19 itself.

Since most New Yorkers (and most people around the entirety of the United States) likely have been infected by the virus anyway, social distancing and lockdowns are more of a psychological exercise than one of isolating the pathogen and stopping its spread, an exercise aimed at addressing public panic, but public panic deliberately fuelled by the media and the government.

Socioeconomic Impact

For the United States, a nation’s whose economy was already in steep decline and losing ground to emerging economies around the globe, most notably China, these lockdowns amount to a self-inflicted mortal wound no conceivable plan of action can reverse.

Had Covid-19 been the deadly pathogen many may believe it is owed to mass media misinformation, the United States stood ill-prepared for it. This was not merely the doing of the current US administration, but a problem known for well over a decade with US presidents from George Bush Jr. to Barack Obama to current US President Donald Trump taking turns ignoring it.

The New York Times reported that things like ventilator shortages were known for at least 13 years and instead of rectifying the problem, large biomedical corporations were allowed by the US government to buy out small contractors tasked with fixing the shortage and ending programs to develop cheap ventilators in order to maintain artificial scarcity and the high prices (and profits) associated with it.

While Covid-19 appears to be far less dangerous than claimed by the mass media, the impact of measures taken by the US government and local state governments has created what is a disaster now being compared to the Great Depression.

Rather than rectifying it by simply rolling back lockdowns and social distancing measures, or even finding ways to aid the millions left unemployed, special interests are taking turns exploiting the crisis by blaming political opponents or even international competitors (like China). They are also looking for ways to cash in, with America’s deeply corrupt pharmaceutical industry being the most prominent example already teeing up massive profiteering by offering “vaccines” to solve Covid-19 fears.

The US, rather than uniting and overcoming whatever Covid-19 actually is, be it a pathogen or an unprecedented wave of widespread panic, has instead allowed itself to become divided and distracted, as well as exposed to the very worst sort of socioeconomic predators lurking amid America’s economic and political landscape.

It is difficult to predict what will happen in the weeks, months and even years to come regarding the state of America socioeconomically considering just how widespread and deep the damage being done now is. A nation as large as the United States plunging so quickly has never historically boded well for that nation nor the world it finds itself free falling in. The US already faced many challenges regarding its decline both at home economically and abroad geopolitically.

Covid-19 has simply exposed and accelerated the process, compounding an already uncertain future with a new degree of damage, danger and desperation.

Get Ready for an Unacceptable New Normal

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By Stephen Lendman

Source: StephenLendman.org

At times like now, ideas lying around dormant on the shelf become reality.

Economic and other crisis conditions are times when most people can be convinced to accept unacceptable policies they’d likely reject otherwise.

During and after 2008-09 economic crisis conditions, Americans were brainwashed to accept force-fed austerity, frozen wages, and loss of benefits when economic stimulus and other government help were needed.

Economic recovery was for the nation’s privileged class exclusively. 

Ordinary Americans experienced protracted hard times that may become much worse today looking ahead, the same true in other Western societies.

In his 1995 book titled, “The Rotten Heart of Europe,” noted euro expert Bernard Connolly said the following: 

“The true story of the ERM (Europe’s Exchange Rate Mechanism) has been one of duplicity, skullduggery, conflict; of economic harm done to every country and in the caste interests of the elite; of the distortions of economic logic and the dilution of political accountability,” adding:

“The implication is that increasing globalization of economic activity and mobility of production has been purposely implemented in such a way as to render already destroyed ‘nation-state(s)’ meaningless entit(ies) in economic terms.”  

Protracted “austerity will lead to social unrest” in Europe, the US or elsewhere. Hard times are fertile ground for revolutions and fascist dictatorships.

Censorship is the new normal in the US and West — speech, press, and academic freedoms at risk. Without them all other rights are threatened.

Social and conventional media, Google, and other tech giants are complicit in a campaign to suppress content conflicting with the official narrative.

Controlling the message is the hallmark of totalitarian rule. Anything conflicting with the official narrative on vital issues is considered “inauthentic behavior.”

The US already is a police state. Is martial law the next shoe to drop? Will Trump declare it if current conditions worsen?

While not included in the Constitution, Article 1, Section 9 mentions suspension of habeas, saying the following:

“The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it.”

Will Trump invoke “public safety” or another pretext to take this action?

Article 1, Section 8 empowers Congress to call “forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions.”

The US military and National Guard are today’s “militia.”

Martial law suspends civil rule, replacing it with military authority under the president as commander-in-chief of the nation’s armed forces — including the National Guard when activated.

During the Civil War, Lincoln assumed dictatorial powers.

He suspended the Constitution and habeas corpus, forcefully closed courts, arbitrarily ordered arrests, conscripted US citizens without congressional consent, and closed newspapers opposing his policies.

His Emancipation Proclamation didn’t free a single slave. He wanted them deported at war’s end to maintain America as a white supremacist society.

History taught in the US at all levels of education conceals the nation’s dark side.

What happened before can happen again by presidential diktat.

According to Constitutional Law Professor Bruce Ackerman, US presidents can institute policies by executive orders, military orders, national security and homeland security presidential directives, along with other ways of circumventing Congress and the courts.

They wage illegal wars without Security Council and congressional authorization.

White House lawyers justify the unjustifiable. “They serve as authoritative judges for the executive branch, providing a legal framework for millions of civilian and military personnel as they implement executive decrees,” Ackerman explained.

Checks and balances don’t work, new ones needed, he stressed — enforced to restrain executive power-grabbing.

Following Japan’s December 1941 Pearl Harbor attack, Hawaii, not a US state at the time, was placed under martial law.

After Hurricane Katrina in August 2005, martial law was declared in New Orleans.

Throughout US history, it’s been imposed by federal or state authorities numerous times on the pretext of public safety, restoring order, or another reason.

Will Trump impose it if the US economy is reopened too soon, as apparently planned, and COVID-19 outbreaks increase greatly?

Will larger-scale outbreaks than already if occur be used as a pretext for hardening police state rule, including suspension of the Constitution and imposition of martial law?

Most of the population is locked down. Will Trump by presidential diktat order the extrajudicial arrest and indefinite detention of targeted individuals on the phony pretext of public safety and security?

This type harshness is what fascist tyranny is all about.

Is it coming ahead to the US full-blown in the form of presidential national emergency powers? 

The USA Patriot Act was written before 9/11. Is other draconian legislation on the shelf — ready to be rolled out by congressional action or presidential decree?

Is America the way it was pre-COVID-19, warts and all, to be replaced by hardened rule?

If COVID-19 abates and more greatly flares up this summer or fall will November elections be suspended or cancelled?

Whatever may unfold ahead most likely was planned by the nation’s ruling class.

It happened pre-and-post-9/11. It may be happening again now for ill, not good — including draconian mass surveillance more intensive than before, along with other police state policies.

Is a dystopian future coming for ordinary Americans, resisters subject to harsh repercussions — constitutional rights declared null and void?

What’s unthinkable may be planned and inevitable. 

Virus of Mass Destruction

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Medical personnel arrive to perform COVID-19 coronavirus infection testing procedures at Glen Island Park, Friday, March 13, 2020, in New Rochelle, N.Y. (AP Photo/John Minchillo)

By CJ Hopkins

Source: Consent Factory, Inc.

There comes a point in the introduction of every new official narrative when people no longer remember how it started. Or, rather, they remember how it started, but not the propaganda that started it. Or, rather, they remember all that (or are able to, if you press them on it), but it doesn’t make any difference anymore, because the official narrative has supplanted reality.

You’ll remember this point from the War on Terror, and specifically the occupation of Iraq. By the latter half of 2004, most Westerners had completely forgotten the propaganda that launched the invasion, and thus regarded the Iraqi resistance as “terrorists,” despite the fact that the United States had invaded and was occupying their country for no legitimate reason whatsoever. By that time, it was abundantly clear that there were no “weapons of mass destruction,” and that the U.S.A. had invaded a nation that had not attacked it, and posed no threat to it, and so was perpetrating a textbook war of aggression.

These facts did not matter, not in the slightest. By that time, Westerners were totally immersed in the official War on Terror narrative, which had superseded objective reality. Herd mentality had taken over. It’s difficult to describe how this works; it’s a state of functional dissociation. It wasn’t that people didn’t know the facts, or that they didn’t understand the facts. They knew the Iraqis weren’t “terrorists.” At the same time, they knew they were definitely “terrorists,” despite the fact that they knew that they weren’t. They knew there were no WMDs, that there had never been any WMDs, and still they were certain there were WMDs, which would be found, although they clearly did not exist.

The same thing happened in Nazi Germany. The majority of the German people were never fanatical anti-Semites like the hardcore N.S.D.A.P. members. If they had been, there would have been no need for Goebbels and his monstrous propaganda machine. No, the Germans during the Nazi period, like the Americans during the War on Terror, knew that their victims posed no threat to them, and at the same time they believed exactly the opposite, and thus did not protest as their neighbors were hauled out of their homes and sent off to death camps, camps which, in their dissociative state, simultaneously did and did not exist.

What I’m describing probably sounds like psychosis, but, technically speaking, it isn’t … not quite. It is not an absolute break from reality. People functioning in this state know that what they believe is not real. Nonetheless, they are forced to believe it (and do, actually, literally, believe it, as impossible as I know that sounds), because the consequences of not believing it are even more frightening than the cognitive dissonance of believing a narrative they know is a fiction. Disbelieving the official narrative means excommunication from “normality,” the loss of friends, income, status, and in many cases far worse punishments. Herd animals, in a state of panic, instinctively run towards the center of the herd. Separation from the herd makes them easy prey for pursuing predators. It is the same primal instinct operating here.

It is the goal of every official narrative to generate this type of herd mentality, not in order to deceive or dupe the public, but, rather, to confuse and terrorize them to the point where they revert to their primal instincts, and are being driven purely by existential fear, and facts and truth no longer matter. Once an official narrative reaches this point, it is unassailable by facts and reason. It no longer needs facts to justify it. It justifies itself with its own existence. Reason cannot penetrate it. Arguing with its adherents is pointless. They know it is irrational. They simply do not care.

We are reaching this point with the coronavirus narrative. It is possible that we have already reached it. Despite the fact that what we are dealing with is a virus that, yes, is clearly deadly to the old and those with medical conditions, but that is just as clearly not a deadly threat to the majority of the human species, people are cowering inside their homes as if the Zombie Apocalpyse had finally begun. Many appear to believe that this virus is some sort of Alien-Terrorist Death Flu (or weaponized Virus of Mass Destruction) that will kill you the second you breathe it in.

This is not surprising at all, because, according to the official narrative, its destructive powers are nearly unlimited. Not only will it obliterate your lungs, and liquidate all your other major organs, and kill you with blood clots, and intestinal damage, now it causes “sudden strokes in young adults,” and possibly spontaneous prostate cancer, and God knows what other medical horrors!

According to all the “scientists” and “medical experts” (i.e., those that conform to the official narrative, not all the other scientists and medical experts), it is unlike any other virus that has ever existed in the history of viruses. It certainly doesn’t follow the typical pattern of spreading extensively for a limited period, and then rapidly dying down on its own, regardless of what measures are taken to thwart it, as this Israeli study would seem to indicate.

Also, “we have no immunity against it,” which is why we all have to remain “locked down” like unruly inmates in a penitentiary until a vaccine can be concocted and forced onto every living person on earth. Apparently, this mandatory wonder vaccine will magically render us immune to this virus against which we have no immunity (and are totally unable to develop immunity), which immunity will be certified on our mandatory “immunity papers,” which we will need to travel, get a job, send our kids to school, and, you know, to show the police when they stop us on the street because we look like maybe we might be “infected.”

Germany (where I live) is way out in front of this. According to the Süddeutsche Zeitung, the federal government plans to introduce a coronavirus “immunity card” as part of its “Infection Protection Law,” which will grant the authorities the power to round up anyone “suspected to be contagious” and force them into … uh … “quarantine,” and “forbid them from entering certain public places.” The Malaysian authorities have dispensed with such niceties, and are arresting migrant workers and refugees in so-called “Covid-19 red zones” and marching them off to God knows where.

Oh, yeah, and I almost forgot … the germ and chemical warfare researchers at DARPA (i.e., the U.S. military’s Defense Advanced Research Projects Agency) have developed some new type of fancy blood test that will identify “asymptomatic carriers” (i.e., people who display no symptoms whatsoever). So that will probably come in handy … especially if the “white supremacists,” “Red-Brown extremists,” and “conspiracy theorists” keep protesting the lockdown with their wives and kids!

And these are just the latest additions to a list of rather dystopian examples of the “brave new normal” official narrative that GloboCap is rolling out, right before our very eyes (which the OffGuardian editors have streamlined here and here, and which continues on Twitter). It’s all right there in black and white. They aren’t hiding the totalitarianism … they don’t have to. Because people are begging for it. They are demanding to be “locked down” inside their homes, forced to wear masks, and stand two meters apart, for reasons that most of them no longer remember.

Plastic barriers are going up everywhere. Arrows on the floor show you which way to walk. Boxes show you where to stand. Paranoid Blockwarts are putting up signs threatening anyone not wearing a mask. Hysterical little fascist creeps are reporting their neighbors to the police for letting their children play with other children. Millions of people are voluntarily downloading “contact tracing applications” so that governments and global corporations can monitor their every movement. In Spain, they bleached an entire beach, killing everything, down to the insects, in order to protect the public from “infection.” The Internet has become an Orwellian chorus of shrieking, sanctimonious voices bullying everyone into conformity with charts, graphs, and desperate guilt-trips, few of which have much connection to reality. Corporations and governments are censoring dissent. We’re approaching a level of manufactured mass hysteria and herd mentality that not even Goebbels could have imagined.

Meanwhile, they’re striking the mostly empty “field hospitals,” and the theatrical “hospital ship” is now gone, and despite their attempts to inflate the Covid-19 death count as much as humanly possible, the projected hundreds of millions of deaths have not materialized (not even close), and Sweden is fine, as is most of humanity, and … just like there were no WMDs, there is no Virus of Mass Destruction.

What there is, is a new official narrative, the brave new, paranoid, pathologized “normal.” Like the War on Terror, it’s a global narrative. A global, post-ideological narrative. It’s just getting started, so it isn’t yet clear how totalitarian this show will get, but, given the nature of the pilot episode, I am kind of dreading the rest of the series.

Private gain must no longer be allowed to elbow out the public good

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By Dirk Philipsen

Source: aeon

Adam Smith had an elegant idea when addressing the notorious difficulty that humans face in trying to be smart, efficient and moral. In The Wealth of Nations (1776), he maintained that the baker bakes bread not out of benevolence, but out of self-interest. No doubt, public benefits can result when people pursue what comes easiest: self-interest.

And yet: the logic of private interest – the notion that we should just ‘let the market handle it’ – has serious limitations. Particularly in the United States, the lack of an effective health and social policy in response to the coronavirus disease (COVID-19) outbreak has brought the contradictions into high relief.

Around the world, the free market rewards competing, positioning and elbowing, so these have become the most desirable qualifications people can have. Empathy, solidarity or concern for the public good are relegated to the family, houses of worship or activism. Meanwhile, the market and private gain don’t account for social stability, health or happiness. As a result, from Cape Town to Washington, the market system has depleted and ravaged the public sphere – public health, public education, public access to a healthy environment – in favour of private gain.

COVID-19 reveals a further irrational component: the people who do essential work – taking care of the sick; picking up our garbage; bringing us food; guaranteeing that we have access to water, electricity and WiFi – are often the very people who earn the least, without benefits or secure contracts. On the other hand, those who often have few identifiably useful skills – the pontificators and chief elbowing officers – continue to be the winners. Think about it: what’s the harm if the executive suites of private equity, corporate law and marketing firms closed down during quarantine? Unless your stock portfolio directly profits from their activities, the answer is likely: none. But it is those people who make millions – sometimes as much in an hour as healthcare workers or delivery personnel make in an entire year.

Simply put, a market system driven by private interests never has protected and never will protect public health, essential kinds of freedom and communal wellbeing.

Many have pointed out the immorality of our system of greed and self-centred gain, its inefficiency, its cruelty, its shortsightedness and its danger to planet and people. But, above all, the logic of self-interest is superficial in that it fails to recognise the obvious: every private accomplishment is possible only on the basis of a thriving commons – a stable society and a healthy environment. How did I become a professor at an elite university? Some wit and hard work, one hopes. But mostly I credit my choice of good parents; being born at the right time and the right place; excellent public schools; fresh air, good food, fabulous friends; lots of people who continuously and reliably provide all the things that I can’t: healthcare, sanitation, electricity, free access to quality information. And, of course, as the scholar Robert H Frank at Cornell University so clearly demonstrated in his 2016 book on the myth of the meritocracy: pure and simple luck.

Commenting on how we track performance in modern economies – counting output not outcome, quantity not quality, prices not possibilities – the US senator Robert F Kennedy said in 1968 that we measure ‘everything, in short, except that which makes life worthwhile’. His larger point: freedom, happiness, resilience – all are premised on a healthy public. They rely on our collective ability to benefit from things such as clean air, free speech, good public education. In short: we all rely on a healthy commons. And yet, the world’s most powerful metric, gross domestic product (GDP), counts none of it.

The term ‘commons’ came into widespread use, and is still studied by most college students today, thanks to an essay by a previously little-known American academic, Garrett Hardin, called ‘The Tragedy of the Commons’ (1968). His basic claim: common property such as public land or waterways will be spoiled if left to the use of individuals motivated by self-interest. One problem with his theory, as he later admitted himself: it was mostly wrong.

Our real problem, instead, might be called ‘the tragedy of the private’. From dust bowls in the 1930s to the escalating climate crisis today, from online misinformation to a failing public health infrastructure, it is the insatiable private that often despoils the common goods necessary for our collective survival and prosperity. Who, in this system based on the private, holds accountable the fossil fuel industry for pushing us to the brink of extinction? What happens to the land and mountaintops and oceans forever ravaged by violent extraction for private gain? What will we do when private wealth has finally destroyed our democracy?

The privately controlled corporate market has, in the precise words of the late economics writer Jonathan Rowe, ‘a fatal character flaw – namely, an incapacity to stop growing. No matter how much it grew yesterday it must continue to do so tomorrow, and then some; or else the machinery will collapse.’

To top off the items we rarely discuss: without massive public assistance, late-stage extractive capitalism, turbocharged by private interest and greed, would long be dead. The narrow kind of macroeconomic thinking currently dominating the halls of government and academia invokes a simpleminded teenager who variously berates and denounces his parents, only to come home, time and again, when he is out of ideas, money or support. Boeing, Goldman Sachs, Bank of America, Exxon – all would be bust without public bailouts and tax breaks and subsidies. Every time the private system works itself into a crisis, public funds bail it out – in the current crisis, to the tune of trillions of dollars. As others have noted, for more than a century, it’s a clever machine that privatises gains and socialises costs.

When private companies are back up and running, they don’t hold themselves accountable to the public who rescued them. As witnessed by activities since the 2008 bailouts at Wells Fargo, American Airlines and AIG, companies that have been rescued often go right back to milking the public.

By focusing on private market exchanges at the expense of the social good, policymakers and economists have taken an idea that is good under clearly defined and very limited circumstances and expanded it into a poisonous and blind ideology. Now is the time to assert the obvious: without a strong public, there can be no private. My health depends on public health. My freedom depends on social freedom. The economy is embedded in a healthy society with functional public services, not the other way around.

This moment of pain and collapse can serve as a wakeup call; a realisation that the public is our greatest good, not the private. Look outside the window to see: without a vibrant and stable public, life can quickly get poor, nasty, brutish and short.

Saturday Matinee: Project Nim

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“Project Nim” (2011) is a British documentary film directed by James Marsh focusing on a research project commenced in the early 1970s to determine whether a primate socialized by humans could communicate using a language based on American Sign Language. The subject of the experiment was a chimpanzee named Nim Chimpsky, who was taken from his mother at birth and adopted by a human family in a brownstone on the upper West Side of New York. Project Nim documents Nim’s challenges throughout his forced immersion in human society and the lasting impact he makes on the people in his life.

Watch the full film on Kanopy here.

Why Assets Will Crash

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By Charles Hugh Smith

Source: Of Two Minds

This is how it happens that boats that were once worth tens of thousands of dollars are set adrift by owners who can no longer afford to pay slip fees.

The increasing concentration of the ownership of wealth/assets in the top 10% has an under-appreciated consequence: when only the top 10% can afford to buy assets, that unleashes an almost karmic payback for the narrowing of ownership, a.k.a. soaring wealth and income inequality: assets crash.

Most of you are aware that the bottom 90% own very little other than their labor (tradeable only in full employment) and modest amounts of home equity that are highly vulnerable to a collapse of the housing bubble. (The same can be said of China’s middle class, only more so, as 75% of China’s household wealth is in real estate, more than double the percentage of wealth held in housing in U.S. households.)

As the chart illustrates, the top 10% own 84% of all stocks, over 90% of all business equity and over 80% of all non-home real estate. The concentration of ownership of assets such as vintage autos, collectibles, art, pleasure craft and second homes in the top 10% is likely even greater.

The more expensive the asset, the greater the concentration of ownership, as the top 5% own roughly 2/3 of all wealth, the top 1% own 40% and the top 0.1% own 20%. In other words, the more costly the asset, the narrower the ownership. (Total number of US households is about 128 million, so the top 5% is around 6 million households and the top 1% is 1.2 million households.)

This means the pool of potential buyers is relatively small, even if we include global wealth owners.

Since price is set on the margins, and assets like houses are illiquid, then we can anticipate all the markets for assets owned solely by the wealthy to go bidless–yachts, collectibles, vacation real estate–because the pool of buyers is small, and if that pool gets cautious due to a drop in net worth/unearned income, there won’t be any buyers except at the margins, at incredible discounts.

As we know, in a neighborhood of 100 homes currently valued ar $1 million each, when a desperate seller accepts $500,000, the value of the other 99 homes immediately drops to $500,000.

Since few of the current bubble-era asset valuations are supported by actual income fundamentals, then the sales price boils down to a very small number of potential buyers and what they’re willing to pay.

Houses have a value based on rent, of course, but rents will drop very quickly for the same reason: prices are set on the margins. The most desperate landlords will drop rents and re-set the rental market from the margins. If demand plummets (which it will as people can no longer afford rents in hot urban markets once they lose their jobs), then vacancies will soar and rents will crash as a few desperate landlords will take $1200/month instead of $2500/month.

Due to the multi-year building boom of multi-family buildings in hot job markets (which inevitably leads to an over-supply once the boom ends), there are now hundreds of vacancies where there were once only a few dozen, and thousands where there were previously only hundreds.

As millions of wait staff, bartenders, etc. who made good money in tips find their jobs have vanished, all the urban hotspots will see mass out-migration: Seattle, Portland, the S.F. Bay Area, L.A., NYC, Denver, etc. as demand for rentals will evaporate and rents will be set on the margins by the most desperate landlords. Everyone holding out for the previous bubble-era rent will have $0 income as their units are vacant.

Tech start-ups and Unicorns are melting like ice cubes in Death Valley, and tech-sector layoffs are already in the tens of thousands. This wave of highly paid techies losing their jobs will become a tsunami, further reducing the pool of people who can afford rents of $2,500 to $3,000 for a studio or one-bedroom apartment.)

The concentration of ownership generates a self-reinforcing feedback that further depresses prices: since the top 10% own most of the assets of the nation, they are most prone to a reversal of “the wealth effect.” As their assets soared in value, the top 10% felt wealthier and more confident in future gains, enabling them to borrow and spend freely on second homes, pleasure craft, new vehicles, collectibles, luxury travel, etc.

Once even one class of assets plummets in value–for example, the recent decline in the stock market– the wealth effect reverses and the top 10% feel poorer and less confident about future gains, and thus less enthused about borrowing and spending. The demand for other costly assets quickly evaporates, further reducing the wealth of the “ownership class,” which further reduces their desire and ability to buy bubble-era assets.

The high-priced assets owned by the top 10% will be the assets least in demand due to their high cost and potential for enormous losses: nothing loses value faster in a recession that narrowly owned assets such as vintage cars, art, vacation homes, yachts, etc.

Once assets start sliding in value, the reverse wealth effect quickly dries up demand for all asset classes with narrow ownership. Since these assets are illiquid–that is, the market for them is thin, with buyers few and far between–the prices are set by a very shallow pool of buyers and desperate sellers.

Consider a pleasure craft that retails new for $120,000. In the boom era of rising stocks and housing, a used boat might fetch $65,000. But as the wealth of the small pool of households able to buy and maintain a costly craft evaporates, the number of qualified buyers evaporates, too.

The seller might be aghast by an offer of $35,000 and reject it angrily. Six months later, he’s praying someone will take it off his hands for $15,000, and in another six months, he’ll accept $500 just to get out from underneath the insurance, slip-rental and licencing fees.

This is how it happens that boats that were once worth tens of thousands of dollars are set adrift by owners who can no longer afford to pay slip fees, and vacation homes are abandoned and auctioned off for overdue property taxes: the market for these luxuries dries up and blows away, i.e. goes bidless–there are no buyers at any price.

Once housing and real estate valuations fall, that will trigger a decline in the value of all other costly, narrowly owned assets, which will reinforce the reverse wealth effect.

This is the systemic payback for concentrating ownership of assets in the hands of the few: when their bubble-era priced assets plummet in value, the bottom falls out of all assets with narrow ownership. The price of superfluous assets such as boats, vintage cars, collectibles, art and vacation homes can quickly fall to a fraction of bubble-era valuations, destroying much of what was always fictional capital.

(For more on the intrinsic fragility of a system that concentrates ownership in the hands of the few, please read Our Inevitable Collapse: We Can’t Save a Fragile Economy With Bailouts That Increase Fragility May 1, 2020.)

The Federal Reserve reckons it can “save” the bubble-era valuations of junk bonds by being the “buyer of last resort,” but it will end up being the “only buyer,” effectively making the system even more fragile and prone to collapse.

The public will eventually have to decide if the nation’s central bank should be bailing out assets owned by the financial elite while the upper-middle class watches its assets collapse in value.