Millions Won't Die, But Things Will Never Be the Same

Millions Won't Die, But Things Will Never Be the Same
Scott Applewhite)
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In 1931, as the Great Depression tightened its grip on the world, Irish playwright George Bernard Shaw accompanied Lady Nancy Astor on a highly publicized trip to the Soviet Union. Their prospective hosts were eager to show off the contrasts between the failing capitalist world and the disappointments of universal democracy, as they all saw it, and the sparkling new future committing to “pure” science and “equality” would surely bring in its wake.

Shaw was a devoted admirer of Stalin, a notable blot on his legacy which had been built largely on his ability to convincingly advertise the earnestness of human tragedy and suffering. And yet, there was something alluring in the Communist dictator to where GBS could only see the promises of rewriting the world’s luridly awful and unfolding history.

The Western world was on the brink of catastrophe and starvation; the Soviets were busy remaking everything however they wished, pledging equality while they did in big and small ways. Or at least that was the narrative presented. As Shaw once wrote:

“Mussolini, Kemal, Pilsudski, Hitler and the rest can all depend on me to judge them by their ability to deliver the goods and not by ... comfortable notions of freedom. Stalin has delivered the goods to an extent that seemed impossible ten years ago.”

Arriving in Moscow, the pair were greeted by a military guard of honor, crowds cheering “Hail, Shaw!” as they traveled. Factory tours and visits to prestigious museums and “people’s” works punctuated by an elaborate, overflowing 75th birthday feast for the Irishman. Leave it to Winston Churchill, observing the whole ironic spectacle from afar, to employ his typical cunning in pointing out the glaring disparities:

“The Russians have always been fond of circuses and travelling shows. Since they had imprisoned, shot or starved most of their best comedians, their visitors might fill for a space a noticeable void…Commissar Litvinoff, unmindful of the food queues in the back-streets, prepared a sumptuous banquet; and Arch-Commissar Stalin, ‘the man of steel,’ flung open the closely guarded sanctuaries of the Kremlin and, pushing aside his morning’s budget of death warrants and lettres de cachet, received his guests with smiles of overflowing comradeship.”

For Lady Astor, the trip was an opportunity to win over her enthusiasm. American born, married to one of the wealthiest capitalists in the world, she might not yet have been sold on this “new” way of ordering society. Having achieved her own political successes, the first woman to serve in the British Parliament, she was more than sympathetic especially to the plight of the downtrodden.

Still, there was something unnerving lying underneath, in the same way you begin watching a horror flick knowing full well its first act is all just a setup for the depravity revealed later on. Potemkin, they’d once called it.

The two celebrities in Russia were granted an almost two-hour personal interview with Stalin, unheard of for anyone else. It was clear the dictator was in the mood to sell his way of “delivering the goods” to a couple of luminaries who would go a long way toward spreading and verifying the Soviet system. Sympathetic already, now was the time to close the deal.

Part of that deal was, as Churchill masterfully described, an entire budget of death warrants wielded with capriciousness stamped by the imprimatur of the “greater good.” The greater good, though, as only the “great” Josef Stalin saw it at any given moment.

But, as Shaw recalled, Lady Astor would not be so easily swayed. Having barely exchanged opening pleasantries, not yet fully seated, she reportedly blurted out, “Mr. Stalin, how long are you going to continue killing people?” To which he was said to have immediately replied, “As long as it is necessary.”

Necessary for what? The ends justify the means, Lenin had answered in his bloody revolt. And to those ends, Stalin is also reported to have said if only one man dies of hunger, that is a tragedy; if millions die, that’s only statistics.

There is truth to what he said, just as there was no truth in the Soviet Union presiding over some contrasting economic colossus. It was all a lie – except the depressing human capital statistics. Thus, even the mighty Josef Stalin needed his useful idiots in the West and elsewhere to sell his fantasy.

From Stalin in the thirties to America at the dawn of these twenties, it’s not yet so harsh and one-dimensional. But the direction we’re all being herded into taking cannot be denied. One man forced into unemployment by the “greater good” is a tragedy; 1.877 million is a statistic.

That’s how it has become. For the first time since GFC2 began, weekly jobless claims have dropped below 2 million per week, but at 1.877 million are these really cause for the full-throated celebrations right now taking place? The thing about victory laps is you have to first make sure you’ve finished the race.

The absolute worst week during GFC1, the so-called Great “Recession”, saw but 665 thousandweekly jobless claims. The highest ever recorded before was 695 thousand the week of October 2, 1982, at the bottom of another absolutely nasty contraction. Even converting this to a percentage basis (0.4% of the civilian non-institutional population filed for unemployment during that particular week in ’82, while 0.7% did last week), the current level is still nearly double the prior record.

And that’s after eleven relentless weeks of absolutely brutal employment destruction. The reason 1.877 million might seem good to some is the 6.8 million who were forced to file the final week in March. From unbelievable to twice the prior record is only a measure of success to the deliberately blind.

Continued claims, the total number of former American workers whose filings have been approved and are still being paid, peaked three weeks ago at 24.9 million. That number dropped to 20.8 million as local economies are being (far too) slowly reopened. But then continued claims rose last week, too, back up to 21.5 million.

What jobless claims continue to show, however, is that despite the reopening, businesses by and large, big and small, are still taking the axe to the ranks of their workers. These are not careful cuts, surgical choices born out of determined tactical reallocations; these are broad-brush survivalist maneuvers whereby everyone and anyone is let go regardless of any other factor besides cash preservation.

The final week of May, still ongoing.

The Federal Reserve’s Jay Powell has tried his best to sell you his vision of recovery. He’s been all over the place, as have his minions, enlisting each and every mainstream useful idiot that can be found in order to project a solid recovery from the bottom.

And it’s true, this one part, the likely bottom has been put in. The economy almost certainly registered and marked its lowest point if not during April then certainly early in May.

The whole thing now is about recovery; or, not recovery.

Chairman Powell is playing up the contrast for all he can, counting on what amounts to “survival euphoria” to muddy what should be a shockingly clear disparity. For all of postwar economic history, the end of recession had meant, without fail, the beginning of recovery. The “V.” Even the disaster of 1981-82 gave way to some of the best economic growth in our national history.

Once you had survived the recession, that was the end of the clinching uncertainty and devastating worries. This was the finish line, the final end of the grueling marathon. If you actually made it all the way to the bottom, huge, immediate sigh of relief because it could only get better from there.

Thus, Powell is structuring his whole narrative surrounding what is a basic, intuitive concept which requires no special knowledge to appreciate and understand. We’ve managed to make it through this thing, so congratulations everyone! End of contraction means recovery. No exceptions.

Except 2008.

The lack of recovery following the Great “Recession” (or, as officials today put it, the sluggish recovery) is a template from which is causing enormous hidden worry. And for two reasons: one the Paul Krugman treatment; and, two, that the recovery had been, at its best parts, a sluggish “L.”

The Paul Krugman treatment refers to the neo-Keynesian Economists like Krugman who complained (and then complained again) that both fiscal and monetary “stimulus” were too small. Way too small. Furthermore, the Japanese corollary to the Krugman treatment, they didn’t project nearly enough confidence in it.

This is taken from lessons pieced together having gone over the earliest Japanese experience with QE. Back in June 2003, the FOMC zeroed in on what its members had believed were the Bank of Japan’s flaws in executing what should have otherwise been a marvelous bit of psychological manipulation (what QE really is, as opposed to actual money printing):

“MR. KOHN.  We don’t need to be very specific; but before we begin to use nontraditional techniques, I think we need to talk about them publicly and create a sense of continuity and confidence in our policymaking, which I believe was absent in Japan… They kept saying things were getting better, but they didn’t. To me that underlines the importance of our public discussion of where we think the economy is going and what our policy intentions are.”

The ABC’s of QE: Always Be Closing.

But to close the sale first you better have something worth selling. That was partially Krugman’s point; you don’t have that great a product, so make sure your magical QE number, the one you pull out of the thin air, is so inconceivably large it makes this easier to pawn off on the malleable public. If the point is to dazzle, then dazzle damn it!

If you hadn’t noticed, that’s just what central bankers have been attempting since late March (forget early March, haven’t you seen the latest add-on to QE?) Out in full force, enlisting every media member and pliable portfolio manager, all intended with one word implanted at every juncture within their scripted speeches and stories.


They are selling you a story and given how things are turning out it’s already a much more appealing story than the alternative. Millions, no tens of millions of layoffs are the very heart of deflation, the worst monetary and economic evil as John Maynard Keynes stated perfectly so very long ago. To defeat this requires its opposite, Economists believe.

Pay no attention to the jobless claims. Forget about GDP. It doesn’t matter the tidal wave of bankruptcies about to be unleashed. The Federal Reserve has got it all covered with its even more impressive, massive flood of money printing. Don’t even think about selling your stocks (again). Go out and spend reckless like you did before COVID-19. All you got left is a “stimulus” check from Trump? Blow half of it right away and then use the rest to buy penny stocks with the Robinhood app!

Potemkin, they’ll be calling it.

This is the recovery fiction they are selling. If everyone believes in the fantasy, if Jay Powell and Christine Lagarde can sell it in enough households and corporate boardrooms, the fantasy will become reality and, self-fulfilling prophecy, that is what will see us through the darkest times. Belief.

It’s not a “V” at all, a mere hologram of one.

The sales pitch from official quarters has been ratcheted up to a fever pitch – because it doesn’t contain any actual quarters (or 20 cent euro coins, for those in Europe). You don’t actually have to sell money if that’s what you’re really offering, especially in these kinds of deflationary circumstances where real, effective money is at an enormous premium.

Effective monetary policy, as Montagu Norman observed long ago, doesn’t need an accompanying press release and lengthy TV interview schedule. It works because it is.

QE is the art of performing with at most quasi-money equivalence – and then hoping everyone is too distracted by some provocative part of it to notice the difference. In the general public, that’s a much lower standard. In the ranks of corporate managers, more difficult. In the bond market, it’s become near impossible.

This is one big reason why, yesterday, the ECB further escalated its already-escalated latest emergency QE program (the PEPP, running alongside the re-started PSPP). Doubled it, did Christine Lagarde even after mere weeks ago assuring the same assembled reporters that the last one was definitely going to be inflationary and therefore 100% guaranteed to lead to recovery.

Instead, she admits this week:

“Market-based indicators of longer-term inflation expectations have remained at depressed levels. While survey-based indicators of inflation expectations have declined over the short and medium term, longer-term expectations have been less affected.”

All that money printing. The monetary flood the mainstream can’t talk enough about. The bond market, like the corporate world, just isn’t buying her nonsense. So, her choice, like Jay Powell’s, is incredibly simple and daunting all at the same time: sell something better; or, stick with the same and try to sell it better.

They’ve opted for the latter – yet again. In just her prepared remarks, Lagarde referred to inflation 16 times despite - because of - the market’s continued rejection.  

The world’s aspiring technocrats in 2020 don’t even care, apparently, if they can actually deliver the goods. They are more than willing to keep up the fiction, to continue killing jobs, for as long as it takes.

I know, I know; it’s a long way from murdering millions of humans to the “murder” of millions of jobs. And it’s become lazy and cliché to complain about how everything from net neutrality to the repeal of Obamacare (to whatever Cause célèbre du jour) is absolutely going to make people die. Reductio ad absurdum is oftentimes just an unimaginative substitute for substantive argument.

We’re not all going to die, but if this keeps up things will never be the same. I don’t mean different as in, let’s get some new central bankers in there who are technically proficient in things like capitalism and understanding how markets actually work in practice. I mean never the same as in thirties-style. And that’s just what the 21st century’s Stalinists are selling.

It's the only way in which QE has been effective.


Jeffrey Snider is the Head of Global Research at Alhambra Partners. 

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