The coming crash and what it portends

If we continue on the present course, we will enter a depression that might make the 1930s a distant competitor. The number of jobless Americans could reach tens of millions.

WSJ: Rethinking the Coronavirus Shutdown:

Yet the costs of this national shutdown are growing by the hour, and we don’t mean federal spending. We mean a tsunami of economic destruction that will cause tens of millions to lose their jobs as commerce and production simply cease. Many large companies can withstand a few weeks without revenue but that isn’t true of millions of small and mid-sized firms. ...

The deadweight loss in production will be profound and take years to rebuild. In a normal recession the U.S. loses about 5% of national output over the course of a year or so. In this case we may lose that much, or twice as much, in a month.

Our friend Ed Hyman, the Wall Street economist, on Thursday adjusted his estimate for the second quarter to an annual rate loss in GDP of minus-20%. Treasury Secretary Steven Mnuchin’s assertion on Fox Business Thursday that the economy will power through all this is happy talk if this continues for much longer.

This is the first time ever that the US Government has deliberately shut the economy down, and the idea that it can just be turned back on like flipping a switch is delusional.

Consider: We will never be able to determine how many lives were saved from the virus. But we will easily know how many people died because of the economic crash to come - just count increased suicides and even some homicides, to say nothing of untold numbers of people thrown into permanent poverty.

The lockdowns and stay-at-home orders are saving lives now. But if they continue much longer, they will cost lives later and cause economic, literal suffering for years and years to come.

Also, The Atlantic, "Suicide and the Economy."

On April 12, 1937, the express train to New York roared across the New Jersey countryside. The train, a Pennsy Railroad electric locomotive the color of bull’s blood, usually passed through the station at Elizabeth at about 50 miles per hour. On this particular morning, it came to an unanticipated stop. As the express rounded the curve, my great-grandfather jumped down from the platform, where witnesses reported he had been pacing for 10 minutes, and lay down across the tracks.

When the engineer was finally able to halt the train 100 feet past the platform, Roy Humphrey had disappeared beneath its wheels. His last act: raising his head to look at the oncoming train.

Roy was one of at least 40,000 Americans who took their own lives that year and the next, the two-year span that suicide rate spiked to its highest recorded level ever: more than 150 per 1 million annually. 

Related: Why we cannot afford 99-cent gasoline.

Update:

"US unemployment could surge to 30% next quarter and GDP might plunge 50%, Fed's Bullard warns"

Also relevant: "The luxury of apocalypticism -- The elites want us to panic about Covid-19 – we must absolutely refuse to do so."

The point is, there is such a thing as doing too little and also such a thing as doing too much. Doing too little against Covid-19 would be perverse and nihilistic. Society ought to devote a huge amount of resources, even if they must be commandeered from the private sector, to the protection of human life. But doing too much, or acting under the pressure to act rather than under the aim of coherently fighting disease and protecting people’s livelihoods, is potentially destructive, too. People need jobs, security, meaning, connection. They need a sense of worth, a sense of social solidarity, a sense of belonging. To threaten those things as part of a performative ‘war’ against what ought to be treated as a health challenge rather than as an End Times event would be self-defeating and utterly antithetical to the broader aim of protecting our societies from this novel new threat. To decimate the stuff of human life in the name of saving human life is a questionable moral approach.

And why cheap gasoline is unaffordable.

Cheap gas, nowhere to drive, and the real pain it is causing

If you like the very low gasoline prices, even though we are not supposed to drive anywhere, get used to it. Oil's spot price may drop some more, yes (it plummeted today after Thursday's highest-rate increase ever in one day). But production is going to drop. Usually, that means gas prices rise. Not this time. And that is actually very bad news.

Cheap gas and nowhere to go. That's bad.

American oil frackers operate at a loss much below $60 per barrel (depending where they are located). The largest such operation, the Permian Basin, needs about $65 per barrel to make a profit. It straddles Texas and New Mexico.

The drop in oil price was triggered by Russia's refusal to cut production at the Saudis' request. So the Saudis jacked production up to drive the price down and punish the Russians. Well, good luck with that:

After oil prices collapsed in the worst drop in nearly three decades—courtesy of the renewed Saudi-Russia rivalry on the oil market – Russia’s Finance Ministry said on Monday that Moscow had enough resources to cover budget shortfalls amid oil prices at $25-30 a barrel for six to ten years.  

Not coincidentally, both the Saudis and the Russians would like to see America's frackers permanently closed and the United States to return to a major importer of oil, not net exporters as we are right now.

One way or another oil prices will rise - eventually. That seems a cloud but actually it is the silver lining. The cloud is cheap oil. Active-rig counts fell this week in the US by 160, year over year, to 722. On the other hand, US oil production remains near an all-time high at 13.1 million barrels per day. Go figure.

And next month may be even more dramatic.

Analysts say that the month of April could see the largest supply overhang in the history of the oil market.

“We now expect the y/y demand loss to peak in April at 10.4 million barrels per day (mb/d), and annual demand to fall by a record 3.39mb/d in 2020,” Standard Chartered wrote in a note.

In the short run, the oil market surplus could reach a peak of 13.7 mb/d in April, Standard Chartered said, with an average surplus of 12.9 mb/d for the second quarter. The inventory buildup could reach a gargantuan 2.1 billion barrels by the end of the year, “stretching the midstream of the industry to its limits,” the bank wrote. That figure represents an upward revision of 50 percent from the 1.4-billion-barrel inventory surplus the bank predicted…just a week ago.

Other analysts have even more dramatic scenarios. Eurasia Group says demand could fall by as much as 25 mb/d in the next few weeks and months. The historic glut means that the world could run out of storage space. “The combination of weakening demand and excess supply is hardly going to be accommodated by onshore storage,” Giovanni Serio, head of analysis at Vitol, told the FT. “At a certain point…we will need to fill all the boats.”

 So severe is the situation that for practically the first time in long memory, "Texas Weighs Curtailing Oil Production for First Time in Decades."

Texas regulators are considering curtailing oil production in America’s largest oil-producing state, something they haven’t done in decades, people familiar with the matter said.

Several oil executives have reached out to members of the Texas Railroad Commission, which regulates the industry, requesting relief following an oil-price crash, the people said. U.S. benchmark oil closed around $25 a barrel Thursday.

Texas, which hasn’t limited production since the 1970s, was a model for the Organization of the Petroleum Exporting Countries, which has sought to control world-wide oil prices in recent decades. OPEC and Russia were unable to reach a deal on reducing output in response to the coronavirus pandemic, which helped trigger the current collapse in prices.

It is unclear whether regulators will ultimately act to curtail production, but staffers are examining what would be required in such an event, the people said.

Oil prices have always been manipulated by producers. Even so, at the end of the day, demand has always been in control. And now the worldwide demand has dropped like an anvil and will continue to do so. The largest users of petro products - shipping and aviation - are harboring vessels and canceling flights. That will likely accelerate.

That said, oil production is going to plummet because, as stated above, we are running out of places to put it. That does not mean that gas prices will suddenly rise. The huge over-supply will see to that. But cheap gas prices are not going to offset the real pain dropping demand will cause: higher unemployment not only of oil-industry workers, but businesses whose revenues depend on customers using oil just to buy or get to their products or locations, such as hotels, tourist attractions, airline workers, dock workers, gas station owners and workers, the list is very long.

I am not an economist by a long shot, but unless we stop our "insane over-reaction," there is going to be a lot of pain to come that 99-cent gasoline will not pay for.

Update: How low can it go? "How Low Can Oil Go? One Forecast Sees $5 a Barrel." Which means that gasoline will be not much higher than free - and yet it will be also more difficult to find because gas stations will be closing at accelerated rates as oil prices plummet.

The last best hope for America

I came across this post from 2017 by accident and am re-dating it to today. Today was the day that the US House of Representatives voted along strictly party lines to proceed with impeachment proceedings against the president. I make no comment here as to the merits or not of the proceedings. But as much as my colleague's words rang true two years ago, how much more compelling are they today.

From July 2017:

From former district superintendent in the Memphis Conference of the United Methodist Church, Sky McCracken:

In my opinion, the most powerful force in Christianity - if it wants to be - is a local church who decides to be a community of faith and discipleship in the manner of Jesus for its neighborhood, instead of a chapel for members who like things "just the way they are." No law, no entity, no politician has any power against such a force. Regardless of the happenings, fear mongering, and media hype of the last few weeks, they pale against the total history of God's presence with His people - which has always been unrelenting and ever-pursuing. I'll quote Bill Hybels:

"For eight years...I went to Washington, D.C., every month to meet in the foremost centers of power with some of the highest elected officials in our country. What I discovered was not how powerful those people are, but how limited their power really is. All they can actually do is rearrange the yard markers on the playing field of life. They can't change a human heart. They can't heal a wounded soul. They can't turn hatred into love. They can't bring about repentance, forgiveness, reconciliation, peace. They can't get to the core problem....I believe that only one power exists on this sorry planet that can do that. It's the power of the love of Jesus Christ, the love that conquers sin and wipes out shame and heals wounds and reconciles enemies and patches broken dreams and ultimately changes the world, one life at a time. And what grips my heart is the knowledge that the radical message of that transforming love has been given to the church. That means that in a very real way the future of the world rests in the hands of local congregations like yours and mine." - In his book, Courageous Leadership.

There is no political solution to the severe dysfunctions of America today because our national illness is not really political. It is spiritual. There will not be a better America until there are better Americans. That is the task for the Church today: to bring more and more people into the fullness of reconciliation to God through Christ so that we can be reconciled to one another. Absent that, our congregations are just religious clubs. 

Ban on driving while using cell phone - just a cash cow?

Last July 1, a law went into effect here in Tennessee that makes it illegal for anyone driving a car to hold a cellular phone in his or her hand. Reports the Knoxville News Sentinel,

The Tennessee law banning hand-held cell phones went into effect July 1. Drivers can eat, drink, converse, sing, look at roadside sights, talk to their kids in the back seat, and it’s all perfectly legal. Pick up a cell phone, however, and you’re a distracted-driving lawbreaker. Law enforcement and first responders, however, are exempt from the safety measure that the legislature and governor determined is required for Tennessee drivers.

The Sentinel is not a fan of the law, mainly because such bans, in effect in some other states for many years, have not once been shown to affect the accident rate at all. They cite a number of such studies.

But it does roll cash into county and state coffers.

At $50 per ticket, the Tennessee Highway Patrol’s cell phone ban enforcement netted, it would appear, a minimum of $21,200 for the 424 tickets the THP wrote in July, Knox News reported. Tickets increase up to $200 depending on the situation.

And yet . . .

Yes, the ban here in Tennessee is really just another way to tax people. OTOH, the worst accident scene I ever got called by the sheriff's dept. to go work was directly caused by a young woman driving on a two-lane state highway in Franklin, Tenn. It was before smart phones were invented. She was trying to punch a number into her cell phone and wandered into the other lane. An oncoming 18-wheeler swerved to miss her, bounced back onto the road and went head on into a Chevy pickup behind the woman's car. 

The impact was so violent that it completely separated the truck's body from its frame, knocking the truck body 20 or more feet away from the frame assembly, which was solely occupied by the driver, married only three weeks, on his way home from work. He had been ripped into three separate pieces. The 18-wheeler's driver was injured.

The woman phone caller was wholly uninjured but when I spoke with her she was not very coherent. She was still holding the phone in her hand, up next to her head, though of course there was no call connected, and basically just walking in a small circle at the rear of her car.

A highway patrol trooper told me that in his 26 years in the THP, this was the most violent accident he had seen. After seeing the truck driver's remains, I could see why. Before the medical examiner's team went to retrieve the remains, I held a time of prayer and Holy Communion for them (I always took my Communion kit responding to sheriff's department calls).

So I cannot argue with Tennessee's law.

Doctor shortages and medical-school loan payoffs

The LA Times reports, "California doesn’t have enough doctors. To recruit them, the state is paying off medical school debt."

Federal, state and local governments have increasingly turned to loan forgiveness programs as the competition for doctors has become more aggressive nationwide. Two-thirds of physicians finishing their training said they’d been contacted more than 50 times by job recruiters, according to a 2019 survey by physician staffing firm Merritt Hawkins.

California will spend $340 million paying off doctors’ debts using Proposition 56 tobacco tax revenue. This month, the state offered its first awards — 40 dentists received $10.5 million in debt relief while 247 physicians received $58.6 million.

California’s program is aimed at increasing the number of doctors who see Medi-Cal patients in a state experiencing a shortage of healthcare providers. The number of physicians who accept Medi-Cal patients — and the low reimbursement rate that comes with them — hasn’t kept pace with the rapid expansion of the state’s healthcare program for the poor, which covers 1 in 3 residents in the state.

One of my son's medical degree was paid by the US Air Force. He owes them years of service for the payoff. He is presently an Air Force surgeon, and by the time his years of payback are done, he will have 13 years on active duty - more if he elects to pursue a medical fellowship certification.

The states' doctor shortage (California is not the only one) was fully predictable. I even predicted it 10 years ago in my essay, "Doctor shortages and health-care price controls." (I have to say, though, that I was far from the only voice saying this.)

However one might describe the economic system of American health care, "full free market" ain't it. Probably the best description of how we get medical care is that it is brokered to us: "Health care does not equal health insurance."

The costliness of health care rests largely on the fact that its provision became brokered long ago by insurance companies. We buy "coverage" from insurance companies instead of medical care from providers. The insurance company is intermediate between the consumer and the provider. Unlike say, stock brokerages, which have to compete with each other for consumers and so lower both costs and price, health insurance companies operate in monopolistic fashion. The competition between health-insurance companies is so low that there are no competitive pressures to reduce price, only internal costs. The result? Lower reimbursements to providers and higher premiums to consumers.

We have almost a doubling effect of price controls in play here. First, the government, command rations medical care by controlling the prices its insurance programs will pay, especially Medicaid but also Medicare. Then we have health-insurance companies effectively price controlling medical care because they often, if not usually, tell doctors that they won't pay more (or much more) than the Medicare rate. As Healthsymphony.com puts it, Medicare is such an important part of the health-care economy "because of the precedence set by its claims payment practices."

The inevitable result of price controls, no matter by what mechanism implemented, is shortage of the price-controlled good or service. That doesn't mean that the service is scarcer, that is, physically rarer. Medicaid's low payments schedules have not reduced the total number of doctors. It has produced a shortage of medical care available to patients by halving the number of doctors who will accept Medicaid payments.

We are in the mess we are in because we make two (at least) critical errors of understanding. The first is that health care is a resource that is simply available for those who need it, or that can be made mostly-equally available through proper legislation and regulation. The second error is that medical care and access to it can be rationed by command more equally, economically and fairly than by demand.

But health care is not a resource to be exploited. Medical facilities and doctors are not phenomena of nature, like water or petroleum are. Hospitals don’t just appear. They are produced. Medical care is not a resource that can be "mined" through more regulation to be more plentiful. Medical care is a contracted, individual service.

Hence, before we uncritically head-nod to the claim that health care is a human right, we might ponder what commentator Philip Niles observed: the real question is not whether health care is a human right, but "How much health care is a human right?" Good question, since health care is finite.

Medical care is always going to depend on these three things:

1. Availability -- Can you see a doctor reasonably quickly and reasonably near?
2. Quality -- Will you receive good, appropriate, and effective medical care?
3. Price -- Can you afford to pay for it, either through insurance or through the massively-higher taxes that, for example, candidate Bernie Sanders said would have to be enacted?

Basically, pick two. Because no matter how medical care is structured, all three will not operating at the same time, and it may not even be two of the three.

Git yer tinfoil hat on, folks

Ok, this is going to be a very unusual post for me because the topic is UFOs. So get your tinfoil hat on and take a ride.

This all started when I was searching YouTube for national-security related vids when a search result caught my eye, entitled, UFO Alien Disclosure by Canadian Minister of Defense May 2013. (Apparently this video is not embeddable.)

The former Canadian defense minister in question is Paul Hellyer, who served in that role (equivalent to the US secretary of defense) in the 1960s. In this and other videos, he states unambiguously that UFOs are non-terrestrial craft, directed by extra-terrestrial, highly intelligent beings. That makes Mr. Hellyer the most senior person I have ever heard of who claimed this.

(I personally lean toward the side of the scientists who say that the odds of human beings having come into existence are so incredibly remote that concluding homo sapiens is alone in the universe is quite reasonable.)

Without offering here any opinion of whether Hellyer's claims have merit, in a different interview he gave he made reference to a book written by someone named Corso, an American colonel. Hellyer said that an American Air Force general told him that every word of the book was true. Hellyer said he had no way to assess the veracity of the book's claims personally, except that being a defense insider the language of the book rang true and that the contexts of the book were convincing.

It was easy to find the book on Amazon, especially since it is the only book that the late Lt. Col. Phillip Corso wrote. It's called The Day After Roswell. Since it was only $6 on Kindle, I downloaded it.

Again, I am not here affirming or debunking Corso's claims (he died in 1998 at age 83). But I kept  Hellyer's observations in mind about how the book read like it was written from an "inside baseball" perspective. And Hellyer is right.

Corso served as a White House member of the National Security Council in the 1950s and as deputy of the US Army's Foreign Technology Office in the Pentagon from 1960-1963. He claims in the book that his personal office in the Pentagon held the cabinet in which was stored the Army's files of what really happened at Roswell and some actual artifacts from the UFO that crashed there. Exploiting alien technology for mass production for military and later civilian use was his main job there.

At any rate, Corso says that all the services distrusted the CIA (Corso says that as an intelligence officer he knew the CIA was well penetrated by the Soviet KGB). But the part that stuck me as absolutely authentic and from someone who had truly "been there" was this passage:

This is so cogent, so authentic that it is what makes me think that whether Corso's UFO claims are objectively true, Corso was relating what he believed to be true. Accounts I have read by former Soviet spies confirm what Corso says about the deep suspicion the KGB and the Communist Party had of each other. (In fact, the Party, the Soviet army and the KGB were all highly suspicious and extremely competitive of each other.) Corso spends a lot of time explaining the politics of the multiple duchies inside the Pentagon and the strategies they all employed to "steal the bacon" from one another - much like their Soviet counterparts except without the Soviet's level of hostility. It was no different in Corso's years at the Pentagon than it was during mine there, 30 years later.

Final point. Here is what Corso says are the main exploitations the United States gained from the Roswell crash.

Project Horizon was the Army's plan for a permanent moon base that never got farther than the drawing board. HARP, despite its tinfoil-hat status today, was nothing more than a concept to send base materials to the moon cheaply. It did move from drawing board to testing, but no farther.

Not all these technologies were derived directly from alien technology. Depleted uranium was no alien invention, it was (and is) produced by nuclear-power plants as spent fuel. Army R&D realized that because of its extremely high density, solid projectiles made of DU, traveling at hypervelocity, would be devastatingly powerful at impact. This was ultimately affirmed during the Gulf War of 1991 and again in Iraq and Afghanistan by US tanks firing such rounds at a mile per second. But the reason DU was developed as a weapon, Corso says, was to shoot down UFOs.

Same with particle-beam weapons that work by focusing beams of electrons against a target. It was not a technology found on the Roswell craft. Hypothesizing that the craft was likely brought down by a lightning strike, which is a high-energy electron beam, research was oriented toward, basically, generating our own lightning. The whole point of President Reagan's Strategic Defense Initiative, in fact was to develop anti-UFO weapons for which defense against Soviet ICBMs was a happy bonus.

Whether you consider Corso credible or not, it is fascinating reading, especially if you already have some familiarity with the military or political subcultures of Washington, D.C.