Dear Reader,

It was a tough weekend in Melbourne…it rained for most of it. The coronavirus blues…

There was, however, a brief window of opportunity on Saturday afternoon, so I got my girls (aged 11 and seven) out for a bit.

I said, ‘let’s go for a walk along the Yarra’.

They were hardly impressed, but I pushed them into the car anyway. I needed to get out as much as they did.

We drove towards the city, and parked between the Botanic Gardens and the Yarra. We crossed the road and walked towards the bank of the swollen river. Overnight, the rain was torrential. I can’t remember seeing the river that full.

Almost immediately, I saw two black swans on the bank.

Ahhh, the symbolism…

We walked towards the city, past the famous sporting precinct on the other side of the river, past the private school boatsheds, under the Princes Bridge and onto the Southbank Promenade. There was hardly anyone around. Australia’s most vibrant city (sorry Sydney, but it’s true) was comatose.

As an introvert and someone who isn’t a fan of crowds, I liked it. But there was something very melancholic about it as well. 

I realised the enormity of what is going on. This is the first time in history we have shut the economy down. We have taken away people’s livelihoods. We have destroyed businesses, families and relationships to fight this virus…

A virus that we are told came from bat stew but could well be something far more sinister.   

Who really knows the origins of this thing?

We do know it’s deadly though. Italy, the worst hit country so far, has suffered over 15,000 deaths.

That is horrendous.

But keep in mind the media don’t usually keep a running tab on society’s most lethal killers. A daily tally of road deaths, heart attacks, or cancer victims is morbid. It’s not a ratings grabber.

For perspective though, did you know that Italy suffered 68,000 deaths from flu epidemics between 2013/14 and 2016/17? 

With one of the oldest populations in the world, Italy is very susceptible. And the fact they let COVID-19 get out of control early means it’s been so much worse for them.

Now, I realise that influenza isn’t as contagious as this nasty bat flu. And if we hadn’t shut things down, deaths could be so much worse.

But in our haste to absorb data on infections, deaths, testing and curve flattening, are we forgetting the ‘other’ costs?

What will be the societal impact of a prolonged economic shutdown?

According to the Black Dog Institute, 3,000 Australians died from suicide in 2017. What will these numbers look like in this year and next, with an economy in ruins?

What about divorces and domestic violence?

The cost of this virus is so much more than the daily stats being fed to you by an eager media.

Yes we need to stay at home and stop the spread. But at what cost? There needs to be a cost/benefit analysis to all this.

Thankfully, the government, who has managed this crisis very well, understands this trade off. From today’s Financial Review:

‘The more we are locking down, the more we are slowing the spread. The other side to that is that it prolongs the extent of the economic shutdown.

‘The government, which has already rolled $240 billion out the door for stimulus, income support and health measures, knows the finances are finite and there is very little left to spend.

‘In that sense, after having arrested the rate of growth, it believes its task from here on in is to try to find a managed rate of growth for the virus while not imperilling public health, and at the same time enabling the economic engines to begin cranking up in six months.

‘Take the alternative extremes to their logical conclusion. If you lock everyone and everything down and reduce the rate of the spread of the virus to zero, it will remain that way for 18 months until a vaccine is developed. By then, you will have no economy left and a great deal of civil unrest.

‘Conversely, do nothing and let the virus rip and the whole episode is done and dusted within months but you have hundreds of thousands dead, if not more, and society in chaos.’

Put simply we need to find a balance.

Australia has slowed the growth rate of the virus. For now at least, we have avoided burdening the health system.

While the lockdown will continue for sometime, we must also look to open the economy up again. Get people back into work. As the old saying goes, ‘idle hands are the devil’s workshop’.

The longer the shutdown goes on, the greater the risk that jobs won’t just miraculously return. 

Right now, the market is hopeful. Despite Wall Street’s decline on Friday, the local market looks set to rise today. That could change quickly. There is still so much uncertainty about.

But the fact that isolation is working, and the infection growth rate is low, means we can at least look with hope towards getting back to some sort of normal.

But what will ‘normal’ look like?

As a reader of Rum Rebellion, you’ll get a couple of different views on this. I’m in the more optimistic camp. I think we get back on our feet quicker than many expect. But there will be flare ups as we transition away from ‘lockdown’.

Fellow editor, Vern Gowdie, on the other hand, sees this as just the start. Economically, he thinks our debt burden is just too great to escape this virus with only a 30–40% decline in the market.

In his view, we’re only halfway there.

You’ll be hearing more on this from Vern soon…

In the meantime, you can check out an interview Vern did recently with our own Bernd Struben. Click here to view.

Regards,

Greg Canavan, Editor, The Rum Rebellion

We’re All Socialists Now!
By Bill Bonner

‘Our economy is the greatest it has ever been.’

Donald Trump, 20 January, 2020

‘Bloomberg Economics sees global growth slowing to 1.5% year on year.’

Bloomberg, 9 February, 2020

‘There is no systemic risk. No one is even talking about that.’

Goldman Sachs conference call,
mid-March, reported by Marc Faber

SAN MARTIN, ARGENTINA — The initial jobless claims are the worst-ever recorded in America.

Bloomberg: ‘US Jobless Claims Soar to Once-Unthinkable Record 6.6 Million’.

The figure topped all analyst estimates and compared with a median projection of 3.76 million.

Putting that 6.6 million number in perspective…this is 10 times the previous all-time high, set back in 1982. And putting that in perspective is this from Alex Danco:

‘This is closer to real Black Swan stuff. This week’s unemployment filings, compared to the last half-century, are considered by frequentist statistics as a 30-sigma event: less likely to happen than if you had to select one atomic particle at random out of every particle in the universe, and then randomly again select that same particle five times in a row.

‘A 30-sigma event should be outrageously unlikely, at universe-scale. But they happen. And when they do, they warn us: the problem is not that the universe didn’t behave correctly. The problem is that we were wrong.’

We watched the tape. The US economy is in freefall. Stock market dip-buyers should be running scared.

But wait…no! Bad news is good news…up is down…dumb is smart. They bid up the Dow more than 400 points.

Big and bold spending scheme

Go figure. The worst economic news ever received…and the stock market goes up? Have investors completely lost their minds?

Well…yes…and no.

The other big news was that the federales are on the move. Far from letting the crisis go to waste, they are making it far, far worse. The deadly coronavirus molecule has little to do with it.

Hardly had Donald Trump passed out the pens — souvenirs of one the most reckless, foolhardy, and downright asinine pieces legislation of all time…

…a $2.2 trillion boondoggle designed to get Democrats and Republicans re-elected…

…then the numbskulls came out with yet another $2 trillion scheme. Nancy Pelosi was on the case. RealClearPolitics reports:

‘House Democrats want to enact a massive infrastructure package upgrading the nation’s broadband, road and water systems, Speaker Nancy Pelosi said Wednesday, in the next installment of Congress’ effort to help the country weather the destructive blows inflicted by the coronavirus outbreak.’

Donald Trump was right there with her:

‘With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4.’

Yes, Democrats and Republicans have gotten together…Trump and Pelosi…the fools and the knaves…and they’ve agreed to put an end to the way America does business.

No more give and take…no more win-win…no more getting and spending. No more honest prices. No more free markets.

Now, the Feds are in charge. The government will soon be spending over half GDP. And they’ll destroy the rest in good time.

How? The old-fashioned way…a stark-naked, third-world-ish, sh*thole country, money-printing lollapalooza.

We’re all socialists now

Yes, Dear Reader…

The MMT-ers…the big spenders…the dreamers and schemers…the Hillarys, the Sanders, the big government lovers…all the jackasses in the DC metropolitan area — lobbyists, cronies, policy wonks.

They all have their pulses revved up, their mouths slobbering…and their illusions in Full Retard mode…because…

… We’re all socialists now!

‘What with the war an’ all… y’know? You know… that virus thing…’

Did an Uber driver miss a car payment? The Feds will make it for him.

Does Boeing need a little cash to tide it over during this rough patch? C’mon over.

Is a city in trouble since it failed to lay aside enough money to pay its pensions? No problem; the Feds will set up a fund.

Every heart will beat with hope and hallucination. Every soul will soar on free-money fantasies. And even hard-boiled cynics are bluffed and bullied in the panic.

It’s all fake money, of course. What else do the Feds have?

But fake money is good enough for investors. They calculate, perhaps correctly, that a lot of it will end up in the stock market.

Dow 50,000! A cup of coffee $25!

More to come…

Regards,

Bill Bonner, For The Rum Rebellion