Streetwise Professor

October 19, 2021

Chicken!

Filed under: CoronaCrisis,Economics,Politics — cpirrong @ 12:21 pm

The United States is currently in the midst of a colossal game of chicken. The administration, state and local governments, and their CEO pilot fish at major corporations and hospitals are insisting on vaccinating all employees. Large numbers of nurses, pilots, flight attendants, ground crew, police, firemen, and other working stiffs are resisting. Notably, many in the military are resisting–including most notably special operators.

Who will blink? If neither side blinks, the crack up will be epic. There will be a severe loss of public protection services, and crime will spike. Ironically, given that the supposed justification for all of the various anti-COVID measures has been to protect the health care system, the loss of nurses will lead to a substantial overload on these systems: some hospitals are already cutting down on care, including emergency care. The already strained transportation will crack. Perhaps most ominously, the United States military will be seriously degraded, as the personnel loss is likely to be concentrated among the most highly trained, and disproportionately impact combat units.

Southwest Airlines was red pilled by what transpired over the Columbus Day weekend, and has relented on mandates. Alas, it is the exception, not the rule. (Delta is another exception. American and United are adamantly not.) Virtually all other mandate maniacs have their foot pushed to the floor.

It is beyond doubting that those resisting mandates are in the right, and those insisting are them are in the wrong.

I repeat: beyond doubt.

Even the administration’s politicized scientists at the CDC have acknowledged that vaccines do nothing–nothing–to prevent transmission. There is therefore no externality that can rationalize coercion. (And as I’ve noted before, even if such an externality existed, it does not necessarily support mandates: it is a necessary but not sufficient condition for them.)

Further, the efficacy of the vaccines is becoming more dubious by the day. The clinical trial results represent an extreme upper bound on efficacy, and real world experience is proving them far less robust than promised.

Moreover, although there is much controversy about this issue, the vaccines may have severe negative externalities: that is, they may supercharge the mutation process and lead to the the accelerated evolution of more virulent strains resistant to the existing vaccines. (Cynics will say that from the perspective of the vaccine makers, this is a feature, not a bug.) Here the science is not settled, but that in itself is reason not to proceed full speed with mandates.

Therefore, like virtually all government policy (and not just in the US), coercive vaccination is all pain, no gain.

Yet governments and their CEO collaborators proceed apace, undeterred by reality.

The administration blames everything–everything–currently ailing the country on the unvaccinated. They are the epitome of evil and the scapegoats for everything currently ailing America (the economy especially).

Example: Supply chain problems? THE UNVACCINATED!!! BLAME THEM!!!

And vaccinating everyone will fix everything, according to the “authorities.”

This is pure, 100 percent, unadulturated horseshit. Patent medicine barkers in the 19th century would be embarrassed at the abject dishonesty here.

So why are we here? Why are we in a situation in which government at all levels–with a mendacious administration in the lead–persisting hell bent on such a destructive and apparently irrational course?

Because from their perspective it is not irrational. Yes, it is irrational from a perspective of public health, economic health, and personal liberty. It is not irrational if your true objective is oppression for oppression’s sake. Then it makes perfect sense.

All of the non-pharmaceutical and pharmaceutical interventions make perfect sense if the objective is to compel submission to government authority. All of the unremitting attacks on therapeutic mitigation of COVID make sense if the objective is compulsion.

It’s about control, not health. Then the question arises what is the purpose of exerting such control?, but that’s the subject of future posts.

And governments are so obsessed with control that they appear dead set on steamrolling anyone who resists or objects, even though by doing so they will wreak great havoc on lives, and on the economy (which, of course, also impacts lives).

Many of those resisting mandates appear to be quite strong in their convictions. (When a football coach chooses to forego a $3 million payday rather than submit, he is definitely putting money where his mouth is. So are all the others who are jeopardizing careers and pensions with their refusal.) Governments and companies appear similarly committed. Given that neither appears to be likely to swerve or jump, the outcome is therefore likely to be ugly indeed.

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September 10, 2021

If You Believe “The Worse, the Better” Joe Biden Is the President You’ve Been Waiting For

Filed under: CoronaCrisis,Economics,Politics,Regulation — cpirrong @ 6:35 pm

In my next-to-last post I said Joe Biden gave the worse speech by any president in my lifetime. In his relentless pursuit of perfection, Biden excelled himself and gave an even worse speech yesterday.

Afghanistan last week, COVID yesterday.

As with the Afghanistan speech, the COVID speech was wretched both in terms of atmospherics and substance. The speech dripped with condescension and disdain for large numbers of Americans, notably those who are not vaccinated. (Implicit in most attacks on the unvaccinated is that they are white MAGA Neanderthals: in fact, Biden’s and the Democrats’ most important constituency, low income blacks, are disproportionately represented: why aren’t Biden and his party tarred as racists?)

One line in particular was disgusting: “We’ve been patient, but our patience is wearing thin.” Our patience? Our patience? Who are you? Just who the fuck are you that your patience matters fuck all?

And who is this we/our? You royalty now Joe? Or are you speaking on behalf of those actually pulling the strings.

Biden made two main arguments: it’s hard to decide which is more idiotic and insulting.

The first is that the unvaccinated pose a threat to the vaccinated: “We’re going to protect vaccinated workers from unvaccinated co-workers.”

Well, it looks like Dumb and Dumber have a new partner–Dumbest:

Image

The externality argument for mandated vaccinations has always been extremely weak. (Not surprisingly, alas, many economists have pushed this lazy argument because too many economists thinking about externalities is lazy in general.) As Coase pointed out long ago, it takes at least two to have an externality, and it is neither obvious nor relevant who “causes” it. The optimal assignment of a property right (and in the case of vaccination policy, what is involved is property rights in one’s person) depends on who is the least cost avoider.

With vaccines, if you are at high risk of COVID, and/or petrified of it, and/or think that the risk of vaccine is low, you can avoid COVID by becoming vaccinated yourself at lower cost than requiring someone who, for example, perceives the vaccine risk to be higher or incurs some other cost to take it (e.g., a religious objection) to be vaccinated. You can protect yourself at low cost: why force someone else to protect you at high cost?

So vaccinate yourself, and don’t force anyone else to do it–or demand the government force anyone else to do it.

But that argument is really moot now. Biden’s mandate is driven by the Delta variant, and Biden’s own CDC–you know, the experts whom we are supposed to defer to–says that vaccination doesn’t reduce the risk of transmission (though it does reduce the risk of serious illness–supposedly, although experience in Israel and elsewhere is casting doubt on that).

(One aside. This speech and the policies expressed were cast specifically as being a response to Delta. If you follow the data, you will see Delta has crested and is declining rapidly: even the NYT admits as such. As well as representing an unwarranted and unjust exercise of power, this policy is cynical: the administration will take credit for the decline in Delta even though it will have nothing to do with it.)

Further, there is the issue which has been raised by very esteemed (or at least once-esteemed) scientists (e.g., Nobel winner Luc Montagnier, but not just him) that the vaccines have spillover effects. Namely, it is hypothesized, and there is some evidence to support, that the vaccines accelerate mutation and in particular mutations that evade the vaccines. Meaning that there could be negative externality not from avoiding vaccination, but from being vaccinated.

As for the other costs that Biden mentions, namely the higher risk of serious illness and death among the unvaccinated, well that’s internalized: people willingly run the risk, and pay the consequences.

Biden’s other argument was “keeping our children safe and our schools open.” “For the children” is the last refuge of the modern (leftist) scoundrel. There is massive evidence–far more definitive than just about anything related to COVID–that children are at extremely low risk of either contracting or communicating COVID.

So hey, teacher, leave those kids alone.

It is particularly disgusting to see children used as Trojan horses for oppressive government policies given the massive harm that has been inflicted on them by governments at every level, most notably by denying them more than a year of education, as well as isolating them socially.

Not only are vaccine mandates a policy monstrosity, the means by which Biden is attempting to implement them are constitutionally monstrous. He has issued an executive order instructing OSHA to issue an emergency rule requiring all those firms employing more than 100 to make employment conditional on vaccination. As an emergency rule, this will be rushed through without the normal procedural safeguards the can sometimes prevent the promulgation of misguided and destructive policies. Moreover, doing this at the federal level by executive–something Biden said during the campaign he would not do and which his execrable flack Psaki said he could not do as recently as 23 July–runs roughshod over the Constitution and federalism.

But that was then. This is now. The even more execrable White House Chief of Staff, Ron Klain, called the OSHA gambit “the ultimate work-around.” Funny I remember the oath of office being about protecting and defending the Constitution, not “working around” it.

Why do we even have a Congress? That’s a serious question. Why do we have states? Another serious question.

Many parts of the country are strongly opposed to his. Many governors in states in those parts of the country have vowed to fight. To which Biden said: “If they will not help, if those governors won’t help us beat the pandemic, I’ll use my power as president to get them out of the way.”

What powers would those be? Just how, pray tell, can the president get governors “out of the way”? A drone strike? (You know, like the one that killed an Afghan who had helped Americans and his children?)

I’ve said before, and I will say it again: we are hurtling towards a constitutional crisis. Vaccine mandates are bad on the merits, and even worse when rammed down our throats while throwing constitutional and federal principles to the winds.

Not only has Biden given the worst presidential speeches of my lifetime, he has cemented his place as the worst, most destructive president of my lifetime, supplanting–by a mile–the loathsome LBJ. Alas, LBJ’s deficiencies became acute when he was entering the last year of his first full term (and his fifth year in office). Biden’s are manifest mere months after his inauguration. And his abject failings, and stubborn, disdainful refusal to brook any objection, are fanning the flames of civil conflict that could make the Vietnam protests look tame by comparison.

I have considered whether we have reached a stage where “the worse, the better” is a reasonable position. If one does indeed believe that, these are the times for you, and Joe Biden is the president for you.

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August 6, 2021

Dr. Walensky Blowed Up the Case For Vaccine Mandates Real Good

Filed under: CoronaCrisis,Politics,Regulation — cpirrong @ 6:29 pm

The whirling COVID dervishes have taken another spin:

Did you catch that? The “anymore” part?

The “anymore” sticks out like a sore thumb. That implies that once upon a time vax could prevent transmission, but now it can’t. So . . . . what has changed to make vax suddenly ineffective against transmission?

I’m guessing “nothing.” If it can’t prevent transmission now (although it can mitigate symptoms), it didn’t before now.

So why the lie? No doubt to try to explain away the turn in the CDC’s mask recommendation. Before: vax, no mask! Now, vax–mask! Because transmission!

Dr. Walensky apparently doesn’t realize that she has now just totally blown up the rationale for vaccine mandates, or any social coercion for vaccination. (Or maybe she does, but figures that she’ll just come up with another BS rationale later in order to spin her way out of this.)

Specifically, if vaccination does not affect transmission, there is no “externality” from not being vaxxed. Your impact on others is exactly the same, vaxxed or not. Which implies that the benefits of vaccination are fully internalized, specifically, by reducing the severity of symptoms and the risk of death that you incur. Your decision to get vaxxed, or not, has zero impact on anybody else: the risk you pose to others is independent of your decision. Which means that getting vaxxed should be a completely personal choice even under a strict utilitarian calculus.

It should also be noted that if the vax protects one against severe adverse consequences of infection, the externality argument is weak anyways. Under this hypothetical, you can protect yourself against others by getting vaccinated, so you shouldn’t care what they do. You decide to assume the risk, or not. Either way, others are not imposing an external cost on you, so (a) you shouldn’t care what they do, and (b) you have no business or right demanding that they get vaccinated.

The externality argument is also weak (of course) if the vaccine doesn’t work.

To emphasize: the CDC, before whom we are supposed to cower in unquestioning obeisance, has just decreed that there is no justification whatsoever to mandate, coerce, or even suggest that you get vaccinated in order to protect others. But, no doubt, Dr. Walensky, the rest of the CDC, and the administration, will continue to demand, shrilly, that you get vaccinated, and will inch–or lunge–towards imposing mandates. The only justification for this is absolute paternalism, or (similarly) a belief that your body and soul belong to the state, and not to you.

Arguendo ad externality should always be viewed with skepticism in any event (as any close student of Coase should recognize): the concept is frequently sloppily invoked to justify various coercive policies. But here, there is not even an externality fig leaf for a mandate–by the CDC’s own admission.

Too bad John Candy has passed on. Otherwise he could host another Farm Film Report Celebrity Blow Up, starring Rochelle Walensky. It would have been a good’n.

She did it! She blowed it up good! Real good!

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August 4, 2021

Your Property Is Unsafe Because the Executive Never Sleeps

Filed under: CoronaCrisis,Economics,Politics,Regulation — cpirrong @ 6:35 pm

Sometime 19th century judge Gideon John Tucker opined: “No man’s life, liberty or property are safe while the Legislature is in session.”

Mr. Tucker’s opinion is sadly out of date. Now those things are not safe as long as the executive is in session–which is always.

If you’ve been like Rip Van Winkle, and haven’t noticed this, well the “Biden” administration has given you a wakeup call. The CDC–well known regulator of real estate markets–has extended its moratorium on evictions, for 90 percent of the country anyways. Because Covid.

Isn’t everything?

The Supreme Court has already indicated that this is flatly unconstitutional absent Congressional legislation. Which it clearly is. Though the Supreme Court should go further. Any Congressional legislation remotely similar to the CDC ukase should also be held unconstitutional under the 5th Amendment, which states that no person shall be “be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

Preventing someone from evicting them from his/her property is clearly depriving that person of his/her property. The defining feature of property is the right to exclude others from the use thereof. If you can’t keep others from using it, it ain’t yours.

Ironic, no, from a government that is ruthlessly pursuing those who trespassed on the Capitol on 6 January?

The CDC is not providing due process–this is a blanket ban. The CDC is not providing compensation. Any “law” that mimics the features of the CDC order would be a blatant infringement on 5th Amendment rights.

The justification for this given by the CDC’s director, Rochelle Walensky (one of the lying Walenskys?) is utterly appalling: “This moratorium is the right thing to do to keep people in their homes and out of congregate settings where COVID-19 spreads.”

Gee, I missed the “right thing to do” clause in the Constitution. I also missed the “congregate settings Covid” exception to the 5th.

It is particularly nauseating to hear this bilge from the “our sacred democracy” crowd. If unilateral expropriation of property with zero process whatsoever, and no compensation whatsoever, is the hallmark of “our sacred democracy” I say hard pass to democracy. Give me autocracy. Autocracy is functionally the same, but doesn’t add the insults of virtue signaling and preening hypocrisy to the injury of theft.

Biden and Walensky essentially caved to the leftist extreme in the Democratic Party, with the utterly loathsome Rep. Cori Bush (D(uh), MO) leading the charge. Go to Twitter to see the “rationale” advanced by the supporters of this. To summarize: Proudhon said it first (“property is theft,” so stealing it back is fine):

One of my followers asked how could someone so stupid get 480,000 followers. I said

Speaking of stupid, Maxine Waters got in the act, ironically channeling Andrew Jackson (or at least a possibly apocryphal statement attributed to him):

“Who is going to stop them?” That is, “the Supreme Court has made its ruling: now let it enforce it.”

Under the CDC/Biden theory, there are no checks on the government’s authority whatsoever. Say the magic word–“COVID”–and anything is possible.

Which, by the way, is precisely why the ruling class is so hell bent on perpetuating the Covid scare. And which is why, when (if) Covid fades away, another “emergency” will be ginned up to take its place.

To the extent that he is conscious, Biden consciously acknowledged that this action is unconstitutional. But he obviously doesn’t care. Or, he cares more about protecting his political flank than about respecting his oath of office.

The purpose of the compensation clause is to force government to put its money where its mouth is: if a rental unit is more valuable in the hands of its current occupant, who is (allegedly) unable to pay, then go through the political process of appropriating money to pay the property owner to allow said occupant to continue to reside there. The idea is to approximate the outcome of voluntary arms length transactions when some transactions cost (e.g., holdup problems) make such voluntary transactions prohibitively expensive. A compensation requirement, properly implemented, helps ensure that property is allocated to its highest value use.

This process is imperfect, but at least it allows for some element of accountability for those who vote for it. Allow a government to take valuable property, without compensation, without process, and by an agency completely insulated from electoral accountability, and you will see it take and take and take and take. Because it pays no price. When someone pays no price, it consumes to satiation. And governments are never satiated.

Today it’s Covid. Tomorrow it will be something else. Legislature in session or no, your property will be unsafe as long as a bureaucrat can conjure up an “emergency” to justify taking it.

Forget the rule of law. We live under the rule of the lawless.

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July 29, 2021

Timmy!’s Back!

Former Treasury Secretary Timothy Geithner–better known as Timmy! to loooooongtime readers of this blog–is back, this time as Chair of the Group of 30 Working Group on Treasury Market Liquidity. The Working Group was tasked with addressing periodic seizures in the Treasury securities market, most notoriously during the onset of the Covid crisis in March 2020–something I wrote about here.

This is a tale of two reports: the diagnosis is spot on, the prescription pathetic.

The report recognizes that

the root cause of the increasing frequency of episodes of Treasury market dysfunction under stress is that the
aggregate amount of capital allocated to market-making by bank-affiliated dealers has not kept pace with the very rapid growth of marketable Treasury debt outstanding

In other words, supply of bank market making services has declined, and demand for market making services has gone up. What could go wrong, right?

Moreover, the report recognizes the supply side root cause of the root cause: post-Financial Crisis regulations, and in particular the Supplemental Leverage Ratio, or SLR:

Post-global financial crisis reforms have ensured that banks have adequate capital, even under stress, but certain provisions may be discouraging market-making in U.S. Treasury securities and Treasury repos, both in normal times and especially under stress. The most significant of those provisions is the Basel III leverage ratio, which in theUnited States is called the Supplementary Leverage Ratio (SLR) because all banks in the United States (not just internationally active banks) are subject to an additional “Tier 1”leverage ratio.

Obviously fiscal diarrhea has caused a flood of Treasury issuance that from time to time clogs the Treasury market plumbing, but that’s not something the plumber can fix. The plumber can put in bigger pipes, so of course the report recommends wholesale changes in the constraints on market making, the SLR in particular, right? Right?

Not really. Recommendation 6–SIX, mind you–is “think about doing something about SLR sometime”:

Banking regulators should review how market intermediation is treated in existing regulation, with a view to identifying provisions that could be modified to avoid disincentivizing market intermediation, without weakening overall resilience of the banking system. In particular, U.S. banking regulators should take steps to ensure that risk-insensitive leverage ratios function as backstops to risk-based capital requirements rather than constraints that bind frequently.

Wow. That’s sure a stirring call to action! Review with a view to. Like Scarlett O’Hara.

Rather than addressing either of what itself acknowledges are the two primary problems, the report recommends . . . wait for it . . . more central clearing of the Treasury market. Timothy Geithner, man with a hammer, looking for nails.

Clearing cash Treasuries will almost certainly have a trivial effect on market making capacity. The settlement cycle in Treasuries is already one day–something that is aspirational (don’t ask me why) in the stock market. That already limits significantly the counterparty credit risk in the market (and it’s not clear that counterparty credit risk is a serious impediment on market making, especially since it existed before the recent dislocations in the Treasury market, and therefore is unlikely to have been a major contributor to them).

The report recognizes this: “Counterparty credit risks on trades in U.S. Treasury securities are not as large as those in other U.S. financial markets, because the contractual settlement cycle for U.S. Treasury securities is shorter (usually one day) and Treasury security prices generally are less volatile than other securities prices.” Geithner (and most of the rest of the policymaking establishment) were wrong about clearing being a panacea in the swap markets: it’s far less likely to make a material difference in the market for cash Treasuries.

The failure to learn over the past decade plus is clear (no pun intended!) from the report’s list of supposed benefits of clearing, which include

reduction of counterparty credit and liquidity risks through netting of counterparty exposures and application of margin requirements and other risk mitigants, the creation of additional market-making capacity at all dealers as a result of recognition of the reduction of exposures achieved though multilateral netting

As I wrote extensively in 2008 and the years following, netting does not reduce counterparty credit risk or exposures: it reallocates them. Moreover, as I’ve also been on about for more than a fifth of my adult life (and I’m not young!), “margin requirements” create their own problems. In particular, as the report notes, as is the case in most crises the March 2020 Treasury crisis sparked a liquidity crisis–liquidity not in terms of the depth of Treasury markets (though that was an issue) but liquidity in terms of a large increase in the demand for cash. Margin requirements would likely exacerbate that, although the incremental effect is hard to determine given that existing bilateral exposures may be margined (something the report does not discuss). As seen in the GameStop fiasco, a big increase in margins in part driven by the central counterparty (ironically the DTCC, the parent of the FICC which the report wants to be the clearinghouse for its expanded clearing of Treasuries) was a major cause of disruptions. For the report to ignore altogether this issue is inexcusable.

Relatedly, the report touches only briefly on the role of basis trades in the events of March 2020. As I showed in the article linked above, these were a major contributor to the dislocations. And why? Precisely because of margin calls on futures.

Thus, the report fails to analyze completely its main recommendation, and in fact its recommendation is based on not just an incomplete but a faulty understanding of the implications of clearing (notably its mistaken beliefs about the benefits of netting). That is, just like in the aftermath of 2008, supposed solutions to systemic risk are based on decidedly non-systemic analyses.

Instead, shrinking from the core issue, the report focuses on a peripheral issue, and does not analyze that properly. Clearing! Yeah, that’s the ticket! Good for whatever ails ya!

In sum, meet the new Timmy! Same as the old Timmy!

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July 25, 2021

Anglosphere RIP

Filed under: CoronaCrisis,Politics — cpirrong @ 3:45 pm

Post-911, the idea of the “Anglosphere” gained some traction. The English speaking nations, the UK, US, Australia, Canada, and New Zealand, were held out as the last bulwarks of liberty in the world.

This idea has not aged well. In the Age of Covid, the Anglosphere is now the cutting edge of repression and fascism and active hostility to the ideals of individual freedom that were allegedly its hallmark.

Look at them.

Australia: entire states are locked down–hard–in response to single digit “case” numbers. People who protest are set upon by truncheon and club wielding police.

Canada: adopting a panoply of highly restrictive policies and restrictions on free speech.

New Zealand: locked down hard for months. And recently, the Skeletor-resembling PM instructed the proles that the government was the “sole source of truth.” Oh thank you so much Big Sister! Governments have been so so so omniscient in the past 20 months!

UK. Locked down until just recently. The “Freedom Day” (19 July) is a simulacrum of real freedom because numerous restrictions remain, and even that has freaked out the establishment, including most notably the Orwellian-named “SAGE.” Even though case numbers have declined since the lockdown was eased, SAGE is issuing dire warnings. No doubt because they have been wrong so often that they need to cover their sorry asses by keeping up the scare.

US. There are some bright spots, including Florida and Texas, but the “elite” is panting to reimpose mask mandates (to make us pant) and forced vaccination and lockdowns because Delta variant. Or something.

I’m not anti-vax. I’m vaccinated. But the externality argument is so abused. The costs and benefits of vaccination are almost completely internalized.

(Although ironically I bet dimes to donuts that Jim Carey and Jeff Daniels (a neighbor for several years) would love to mandate vaccines.)

Australia is particularly sad, and almost inexplicable to me. It used to be a bad ass, fuck-it-all kind of place. A similar ethos to Texas. But not now. Incredibly authoritarian, with a largely craven and submissive populace. Crocodile Dundee? Watching that is like Charlton Heston finding an almost completely buried Statue of Liberty. A relic of a dead era.

Continental Europe–the supposed antithesis of the Anglosphere–has actually demonstrated more of the spirit of liberty than any English-speaking country. Check out today’s protests in Paris.

A la Bastille! (And note that in Louis XVI fashion, Macron is doubling down. I hope the past is prophecy.)

No. The vaunted Anglosphere has proved to be ruled by authoritarians and populated by submissive and insanely risk averse cattle. It would be wrong to say that the ideal of freedom is dead. It is more accurate to say that the ideal of freedom is reviled, at least by the elites–and far too many of the non-elite have proved to be ovine in their submissiveness to their soi disant (but not really) betters.

Speaking of things that did not age well. This from a decade ago is a (sick) laugh:

I do not mean that English speakers act any less extravagantly than speakers of other tongues, but rather that English generally acts to tether thought to the empirical world. This is something Bishop Thomas Sprat dilated on in his History of the Royal Society (1667): “The general constitution of the minds of the English,” he wrote, embraces frankness and simplicity of diction, “the middle qualities, between the reserv’d subtle southern, and the rough unhewn Northern people.”

English, Bishop Sprat thought, is conspicuously the friend of empirical truth. It is also conspicuously the friend of liberty. 

If there is one thing that is conspicuous about the events of the past 19 months it is that for all of the strident commands to “follow the science!” public policy has been completely untethered from “the empirical world.” Instead, an arrogant priesthood has imposed a cultish, unscientific, evidence-free orthodoxy and branded as heresy any skepticism–even after the skeptics have been proved right time and again. Empirical reality is not just ignored–it is anathematized.

Perhaps you can explain the collapse of the Anglosphere to its infection by Continental ideas (Derrida, Foucault, etc.). But that is merely by way of a post mortem. The fact is that practically speaking, the Anglosphere is as dead as Hector. Perhaps “palimpsests of freedom” (to use Paul Johnson’s chapter title from Modern Times) still exist in the English speaking world, but they are under siege and definitely not in command. Enemies of freedom–the antitheses of traditional “English liberties”–are in the saddle and wielding the whip.

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May 30, 2021

Intelligent Design vs. The Missing Link (or the Virus Gnomes)

Filed under: CoronaCrisis,Politics — cpirrong @ 5:50 pm

The raging debate over the covid lab leak theory reminds me of the Intelligent Design vs. Evolution debate, with the lab leak theory playing the role of ID and the natural origins theory playing that of Evolution.

There is a huge difference, however. Here we have a strong candidate for the Intelligent Designer: “Bat Woman” Shi Zhengli, and her team at the Wuhan Institute of Virology. Madam Shi has both capability and opportunity. She has a long history of engaging in the genetic engineering of viruses, with the specific goal of increasing and evaluating their virulence in humans (“gain of function research”). As her monicker demonstrates, this includes a specialization in modifying viruses found in bats, which even the evolutionists acknowledge is the original source of covid. There is recent evidence that she had (almost certainly uniquely) access to the raw material (bat viruses from a cave 1000+ miles from her lab) that a modern day Dr. Frankenstein could combine with other genetic material to produce covid.

There are reputable scientists who have recently released a paper claiming that covid-19 was created in a lab. I do not have the expertise to evaluate their claims, but I think it is beyond cavil that Shi had the ability to do what they claim.

Against this we have the evolutionists, who at this stage remind me of the South Park Underpants Gnomes:

  1. Bats.
  2. ????
  3. Covid-19!

Or to use an evolutionary metaphor, they have a huge missing link problem. Despite intense efforts, they have yet to identify the intermediate species between bats deep in a cave and humans in Wuhan. They have hypothesized such a link (or links) and asserted that their hypothesis is truth. This is unscientific. Absence of evidence is not evidence of absence, but unless and until the chain of transmission can be demonstrated, the hypothesis remains only that, and the longer we go without identifying the chain the less likely it is that it ever existed.

In stark contrast, the entire possible causal chain in the lab leak hypothesis is known, and extremely plausible, and there is circumstantial evidence that it indeed operated.

Right now, in my opinion the burden of proof is on the Evolutionists. They have far less evidence on their side than the Intelligent Designers.

I of course use the term “Intelligent Design” sarcastically, but not in the way that you might think (to cast aspersions on the lab leak hypothesis, given the low scientific standing of Intelligent Design Theory). No, the sarcasm relates to what Shi (and other scientists around the world) are designing: these are smart people, but how intelligent is it to create deadly pathogens that can escape into the human population–as even defenders of that research acknowledge is a possibility?

And of course, one of those defenders is none other than Dr. Anthony “The Dervish” Fauci. In 2012 he said thus:

In an unlikely but conceivable turn of events, what if that scientist becomes infected with the virus, which leads to an outbreak and ultimately triggers a pandemic? Many ask reasonable questions: given the possibility of such a scenario – however remote – should the initial experiments have been performed and/or published in the first place, and what were the processes involved in this decision?

Scientists working in this field might say – as indeed I have said – that the benefits of such experiments and the resulting knowledge outweigh the risks. It is more likely that a pandemic would occur in nature, and the need to stay ahead of such a threat is a primary reason for performing an experiment that might appear to be risky

What are these supposed benefits? Well, the Underpants Gnomes again come to mind: ???

Supposedly the idea is that we can get ahead of nature by creating deadly things that nature might produce through evolution and create cures in advance.

OK. I’ll bite. Name one cure produced by this type of research. Just one.

I have never seen a defender or advocate of this research point to a single example.

And indeed, it seems wildly implausible that this is very likely at all. What are the odds that nature would produce something so similar to what is produced in the lab by Dr. Shi or anybody else that a hypothetical vaccine for the Frankenstein creation would work on the evolved virus? Look at flu vaccines. They are frequently useless because the specific strains of virus they target happen NOT to be the one that crops up in a given year. Vaccines are not like hand grenades or horseshoes. Close is not good enough. A miss is as good as a mile.

Covid vaccines are very specifically targeted. The hysteria over covid variants is due in large part to concern that a vax that works on one variant won’t work well on other, very closely related ones.

But we are to believe that a vaccine (which again, has never been developed in reality) to treat a lab-created virus will be efficacious against another one that evolved independently?

So maybe GOF research creates the most deadly strain of pathogen, could–in theory–give us a defense against that specific or very closely related strains. But what good is that if other really deadly (if not quite so deadly) pathogens evolve, against which the unicorn vax is useless? And what are the odds that the most deadly pathogen would evolve naturally?

That is, how can (in Fauci’s words) you really “get ahead of the threat”? This is an especially valid question for evolutionists (whose ruling model is one of random variation plus natural selection): what are the odds that a threat that is created in the lab will help deal with a threat that evolves by a random process? Gain of Function seems to presume some sort of viral teleology. Which is to say, that nature acts by intelligent design that mirrors what is done in the lab. Human Intelligent Designers can “get ahead of” nature’s Intelligent Designer.

Ironic, eh?

So, GOF basically means create something really deadly that is unlikely to evolve naturally and which is also unlikely to permit developments of vaccines against what evolves naturally. This means that the odds of GOF research producing something that will protect against naturally occurring pathogens is vanishingly small.

But the risk of a lab leak is real, and non-trivial–as historical experience demonstrates and even Fauci acknowledges.

So how is this risk-reward trade-off intelligent?

This whole line of research seems to represent exactly the kind of scientific hubris that Mary Shelly wrote about two centuries ago. The “get ahead of the threat” rhetoric seems like propaganda intended to gull people into accepting Dr. Frankensteins pursuing their hubristic ambitions.

I am open to persuasion, which would have to take the following form. A rigorous calculation of the probability that a given GOF research effort will make it possible to accelerate meaningfully the development of a vaccine or therapy against a naturally evolved pathogen vs. a calculation of the probability that the pathogen created by this given effort will escape the lab.

Until I see such a demonstration, I will conclude that GOF should be banned, and its Dr. Frankenstein practitioners relegated to other, more benign tasks.

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May 27, 2021

Dr. Tony Dervish

Filed under: CoronaCrisis,Politics — cpirrong @ 6:43 pm

I have despised and distrusted Dr. Anthony Fauci from the very onset of the Covid crisis. I was aware of his dubious–to put it mildly–role in the AIDS issue in the ’80s. But my extremely negative priors were based more on the fact that he has been at the top of the bureaucratic food chain in DC for decades, which can only mean that he is a apparatchik who cultivates power and seeks rents, rather than a man who cultivates science and seeks truth.

I think I was very early to the game. When I tweeted something critical about him in March, a couple of friends chided me for dissing “Dr. Fauci.” They are now staunch Fauci foes.

If anything, events have shown that my priors were far to generous: my posteriors are unbounded from below.

The man has pirouetted on virtually every covid-related issue. Masks. Means of transmission. Vulnerability of children. Lockdowns. He has always taken the politically expedient position of the moment. Pre-November, moreover, his words and deeds were almost invariably calculated to damage Trump. And no wonder, given the mutual antipathy between Trump and the bureaucratic establishment in DC.

But Dr. Dervish’s most disgusting spin has been from heaping scorn on the Wuhan lab leak theory to his recent acknowledgement that gee, yeah, it’s a plausible hypothesis that needs to be investigated.

Who knew? Really? Well knock me down with a feather.

Like many of the government party and ruling class (e.g., Glenn Kessler of Pravda on the Potomac), Fauci (survivalist that he is) was forced into this spin by facts. But this is little excuse. The circumstantial case for the culpability of the Wuhan Institute of Virology was always quite strong. Strong enough that it should not have been dismissed out of hand–let alone characterized as conspiratorial (and racist) lunacy as a justification for not investigating. But some recent facts of the barking dog and non-barking dog variety have only strengthened it. The illness of 3 WIV employees immediately prior to the outbreak. The connection between WIV and a bat-infested cave 1000+ miles away where (a) several individuals had contracted covid-like symptoms, and (b) the WIV had dispatched researchers to collect samples. The failure to find any animal intermediaries between the bats and people (again–who were separated by 1000+ miles).

So like a cornered cockroach, Fauci has had no choice but to admit the obvious.

And Fauci comes to this with very dirty hands indeed. He has bobbed and weaved for weeks about his role in funding WIV. He almost certainly lied about it in Congressional testimony. When forced to tell the truth slowly, he acknowledged the funding but claimed it was impossible to know whether it had gone to “Bat Woman’s” “gain of function research.” His latest spin is that it would have been a “dereliction of duty” not to cooperate with WIV on coronavirus research–all the while expressing ignorance as to whether this institution was engaged in GOF research.

WELL WHY THE HELL DON’T YOU KNOW? This is your excuse, Sergeant Schultz? “I KNOW NUTHINK?” Really? For this you are the highest paid employee in the U.S. government?

Very few in Washington have been willing to challenge this superannuated elf. Only Rand Paul has had the stones to shirtfront Fauci time and again. Other Senate Republicans (and most in the House), you ask? Surely you jest. Worthless and craven governing uniparty POS almost without exception.

As a result, there is little doubt that, like Blattella germanica, this bureaucratic cockroach will survive, and even thrive. Rand Paul, on the other hand, should rightly fear assassination.

This is where we are.

After terminating a Pompeo-initiated effort to investigate the lab leak theory, whoever has his/her hand up the back of Joe Biden’s/Charlie McCarthy’s shirt has ordered the intelligence community to investigate.

Yeah, that inspires confidence, don’t it?

Can you say “whitewash” these days? If you can, I guarantee that’s what this “investigation” will be.

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April 30, 2021

If You Woke Up With Wood . . . You’re Rich!

Filed under: Commodities,CoronaCrisis,Derivatives,Economics — cpirrong @ 6:33 pm

Especially if it’s lumber. Not so much if it’s timber or logs.

Lumber prices have been on a tear recently. The CME lumber futures price has risen inexorably for weeks:

The softwood lumber PPI has increased 73 percent from April of last year, when Covid cratered all markets (including all commodity markets in particular) to March of this year. As the graph above shows, the price increase in the last month alone will add almost 100 precent to that. The plywood PPI is up 43 percent. The PPI for logs, timber, and pulpwood has not risen nearly as much over the April 2020-March 2021 period–only 7 percent.

So what’s going on? This podcast has a pretty good explanation, which comports with the analysis that follows. My main objection is that it repeatedly refers to the market as “broken.” No. A market is broken when it sends the wrong price signals. It is not broken if it sends the right signals, even if you don’t like them. That’s what’s going on here. Prices are signaling a major change in demand patterns that is straining a productive capacity oriented to the old patterns.

The podcast claims that log and timber prices are down. That’s not consistent with the PPI data, which does demonstrate some uptick in log/timber prices. I have also seen reports that timber/log prices are firm in western Canada. But it is obvious that the spread between lumber and timber has widened dramatically.

Which provides a perfect opportunity to apply what I teach in my commodities classes: Find the bottleneck. In a reasonably competitive market, the spread between two commodities, one that can be transformed into the other, equals the cost of that transformation. Sawmills transform logs into lumber, so if the spread between the prices of these things blows out, that shows you where the bottleneck is–at the mills.

The podcast largely confirms that. The sawmill sector has contracted and consolidated in recent years for a variety of reasons. The Covid-induced economic shock of last year also led to the idling of capacity. Now demand has come roaring back. There is a building boom, driven by an exodus from cities and a substitution of things for services. The turnaround has been so abrupt that sawmill capacity has not been able to adjust to keep up. It of course takes a long time to build new mills, and the decision to do that depends on expectations about long-term demand. It is quicker and more economical to restart idle mills, and to add shifts, and that is happening. But it can’t happen overnight.

A transportation bottleneck is exacerbating the problems. Shortages of railcars and trucks are limiting the ability of sawmills to satisfy demand. These shortages reflect in part a commodities boom generally. Chinese demand for US ag products (which has sent corn prices soaring) is contributing to that, but the transportation sector has been robust generally since its doldrums of a year ago. In that time the Dow Jones Transportation Average is up 128 percent off its Covid bottom, and is 40 percent above its pre-Covid collapse level.

Transportation bottlenecks tend to widen spreads at all levels of the value chain, from timber farm to mill, and from mill to lumber yard.

Lumber inventories are at barebones levels, as one would expect in such circumstances. When the supply-demand balance is tight today relative to what is expected in the future, the efficient thing to do is to draw down inventories and to consume everything that is being produced. This is leading, exactly as theory would predict, to a pronounced backwardation in lumber prices:

Note there’s an almost 30 percent backwardation going out six months. That’s very steep. Very Although I wouldn’t put too much weight in the distant deferred prices (given the absence of volume and open interest) one, it appears that the curve flattens out after the six month point.

So what’s going on is commodity economics 101. A surge in demand after a sharp fall (which led to reductions in transformation capacity) caused the lumber market to hit constraints–constraints in the amount of available inventory, and constraints in the capacity to transform a raw product (timber) into a consumable one (lumber). This in turn caused spreads (calendar spreads and the spread between finished and raw prices) to blow out. Market participants are responding to these price signals. The backwardation suggests that the constraints will ease by the end of the year. That of course is a forecast based on current information. Things could change.

So things ain’t broke. Indeed, what is happening in the lumber and timber markets is a symptom of a robust economic recovery, at least in the housing and goods sectors. It also reflects an apparent ongoing structural shift post-Covid (and post urban disturbances of the last year), namely, a desire to move out of cities driven by the recognition that more people can work remotely, and the declining amenities of cities (largely the result of lockdowns and their aftermath, and an upsurge in crime). Such an abrupt and seismic shift inevitably bumps up against constraints determined by past investments tailored to accommodate the old consumption patterns. That affects prices, and prices signal the need for new investments to alleviate the bottlenecks. This too shall pass, and within some months the bottlenecks will ease, as. participants all along the value change respond to the extraordinary price signals we see today.

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April 24, 2021

Why Is Proof of Efficacy Required for Pharmaceutical Interventions, But NOT Non-Pharmaceutical Ones?

Filed under: China,CoronaCrisis,Economics,Politics,Regulation — cpirrong @ 11:43 am

Under Federal law, a pharmaceutical intervention must be proven safe and effective before it is marketed to the public. If after introduction it proves unsafe or ineffective, the Food and Drug Administration can rescind its approval.

Note the burden of proof: the manufacturer must prove safety and efficacy. Safety and efficacy are not rebuttable presumptions.

Would the same be true of non-pharmaceutical interventions (NPIs). This neologism (neoanacronym?) is used to describe the policies that have been imposed during the Covid Era–most particularly, lockdowns and masks.

Neither had been proven safe or effective prior to their wholesale–and I daresay, indiscriminate–use. Lockdowns in particular had never been subjected to any clinical experiment or trial. Indeed, the idea had been evaluated by epidemiologists and others, and soundly rejected. But a policy first introduced in a police state–China–spread just as rapidly as the virus to supposedly non-police states despite it never having been proven efficacious or safe.

A year’s experience has produced the evidence. Greetings, fellow lab rats!

And the evidence shows decisively that lockdowns are NOT effective at affecting any medically meaningful metric about Covid. This American Institute of Economic Research piece provides an overview of the evidence through December: subsequent studies have provided additional evidence.

Furthermore, lockdowns have been proven to be unsafe. Unsafe to incomes, especially for those whose jobs do not permit working from home. Unsafe for physical health, in the form of inter alia deferred cancer diagnoses and treatment for heart attacks and strokes and greater substance abuse (with higher incidence of overdoses), as well as delayed “elective” surgeries that improve life quality. Unsafe for mental health. Unsafe for children, in particular, who have experienced debilitating social isolation and profound disruption in their educations. (Although given the trajectory of American public education, especially post-George Floyd/Derek Chauvin, feral children might be better off than those subjected to the tortures of a CRT-infused curriculum and CRTKoolAid drinking “educators.”)

Masks are not as devastating as lockdowns, but they have also been shown to be ineffective and also unsafe, especially for those who must wear them for extended stretches–which includes in particular children at school.

(Remember “For the children”? Ah, good times. Good times.)

Drug regulation was one of the first major initiatives of the Progressive Era, and the 1962 FDA Amendments that imposed the efficacy requirement were also driven by progressives. My assessment of the economic evidence (especially the literature spawned by my thesis advisor, the great Sam Peltzman) is that the efficacy requirement in particular has been harmful, on net, because it delayed and in some cases prevented the introduction of beneficial therapies.

But even if–especially if–you accept the progressive-inspired conventional wisdom regarding pharmaceutical intervention regulation, you should be dismayed and even furious that the same logic that has NOT been applied to NPIs. The underlying principle of drug regulation has been “show me”: show me something works. The underlying principle of Covid Era ukases has been: “Evidence? Evidence? I don’t have to show any stinkin’ evidence.” Indeed, it’s been worse than that: those who demand evidence, or even politely point out the lack of evidence, are branded as heretics by the very same “progressives” who believe religiously that requiring proof of efficacy of drugs is a good thing.

How to square this circle? How to explain this seeming contradiction?

I think it is as plain as the nose on your face. Power. In particular, power exercised by progressive technocratic elites. The FDA acts empower a progressive technocratic elite. Lockdowns and mask mandates empower a progressive technocratic elite–far beyond the wildest dreams of the most zealous FDA bureaucrat. (They also empower idiot politicians who imagine themselves to be part of some elite.) They are both premised on the belief that individuals are incompetent to choose wisely, and must be coerced into making the right choice. Coerced by credentialed elites who are better than you proles.

So an apparent logical inconsistency–proof of efficacy for thee, but not for me–is in fact no inconsistency at all. They are both who, whom. A soi disant elite (ha!) always pushes the alternative that gives them the most power, and deprives you of the most choice. Who (the progressives): Whom (you).

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