Honoring the public debt…

It feels like only yesterday that we were last arguing about whether or not the government was going to (or should) raise or suspend the debt ceiling – the legislatively applied limit to the amount the US Government is allowed to borrow in order to keep on conducting business as usual. I’m the first to tell you that Uncle Sam’s hallways and offices are filled to the brim with wasteful spending… but trying to get after that waste by passing a law that says we can only borrow $X unless Congress passes another law to say we can spend $Y more isn’t a recipe to actual limit or reduce government spending. At best, the debt ceiling creates political theater. Now that it’s a thing we have, however, failure to raise the self-imposed limit and drive the federal government into default would result in all manner of catastrophic outcomes. 

I see today that we’re now in the period where the Treasury has begin exercising “extraordinary measures” that should be sufficient to keep us out of default for the time being. The congressional office responsible for making such projections says it’ll probably be October or November before we actually run out of wiggle room. Based on recent history, that will be about the time Congress gets around to doing something. 

Before we go into default and our bond rating collapses, though, we have to get through what’s supposed to be the federal budget season. Given the current state of our politics, I’m not in any way expecting there to be an actual approved operating budget when Fiscal Year 2022 kicks off on the October 1st. Who knows, maybe we’ll end up with a perfect storm of impending default and no functioning bureaucracy simultaneously. That feels like a recipe for good times. 

If anyone needs me, I’ll be over here restocking my supply of beans and spam in case we need to ride out a post-plague economic apocalypse. Given the kind of leadership we have in all quarters it feels like the only reasonable course of action. I mean I’m due for some extra time off… with eventual back pay, of course.

Business versus vanity project…

Over the last few days, I’ve watched a handful of news segments and read several stories all striving to make a common point – that businesses from local mom and pop restaurants to heavy industry are having difficulty filling vacant positions.

Some of these stories cite the “Amazon Effect,” that has entry level new hires streaming to fill openings in warehousing and distribution. Others lay the blame with too much free money passed out in the form of federal stimulus payments and increased unemployment.

It seems to me that the most straightforward way to resolve this particular imbalance between the demand for these workers and their limited supply is to increase wages to the point where there are enough people to fill vacancies. 

Admittedly, I’m not a fancy big city economist, but raising wages feels like a fairly basic, tried and true way to attract people into a particular job or even into an entire segment of the workforce.  Yes, it means in some cases the products and services being offered by those businesses will cost more, but if your business can’t generate the revenue necessary to hire people to do the work, you have more of a vanity project than a business anyway.

Out of place…

I drive around from time to time looking for new places where the next interesting book to add to the collection could be hiding. The invariable part of every new town I pass through is that you can tell a lot about where you are by the kind of businesses occupying prominent or high traffic areas. 

As a general rule, once I hit the part of town where pawn shops, storefront check cashing, and empty buildings predominate, I’ve probably gone too far. The likelihood of finding what I’m looking for seems to diminish with every payday loan processor I pass. Often enough, these are parts of town when I have no business being or otherwise stick out like a sore thumb. If there’s treasure hidden somewhere there, I’ll leave it to someone else. 

Last week I had something of the opposite experience. Returning home from a successful book buying expedition, I found myself driving through a picturesque bit of Delaware – long lawns, gated drives, and the early 20th century impression of old money. Soon enough the residential gave way to the commercial – cheese mongers, wineshops, and a several block stretch of insurance agencies, understated banks, and “wealth management firms.” 

Sure, I felt altogether more comfortable there than I do driving down a block of abandoned and burned-out row houses, but it was still very much a case of being a stranger in a strange land. Less likely to get mugged, maybe, but far more likely to be offered a “can’t lose” investment opportunity, so perhaps they’re not all that different, really.

I don’t suppose there’s anything particularly insightful here… just a musing on the oddities of finding yourself out of place.

What Annoys Jeff this Week?

1. Twitter. I follow a pretty eclectic mix of personalities on Twitter – celebrities, politicians, news outlets, historic buildings, porn stars, military thinkers, military do-ers, and government organizations. With few exceptions, the dumpster fire that is Twitter has turned both more dumpster-y and more fiery over the last weeks and months. It’s become considerably less fun. It may be time to clear out the ol’ Twitter feed with a chain saw to see if we can correct that issue before deciding whether or not platform is hopelessly beyond redemption.

2. Government spending. The only time the US Government spent more money than it is right now, we were fighting a war of national survival against Nazi Germany and the Empire of Japan. Now I don’t mean to imply that the Great Plague and its fallout haven’t been bad, but I’m not sure it has been end of western civilization bad. That won’t stop us from collectively throwing absolutely shit tons of money at it though. We seem to have gotten use to throwing around dollar amounts denominated in trillions over the last year, but the reality is the amount of debt we’re collectively financing to pay for short term stimulus versus long term growth is simply staggering. If it’s true that we ended the Cold War, in part, because we spent the USSR into oblivion, I don’t have a hard time imagining the day when we, too, reach the upper limit of our national line of credit. It’ll make what we currently think of as hard times feel like the most welcoming Spring day.

3. Walkers. The warm weather this week, as it does every spring, has brought out the neighborhood walkers in force. This fine. Good on them for wanting to be out stretching their legs at bit. Personally, I prefer taking the air in my own yard and woods, but to each their own. People wandering past all afternoon doesn’t particularly bother me. I’m tucked in to the back of the house with better views than out to the street. The problem, because of course there’s a problem, is that as much as I don’t mind, at least one of my canine residents minds terribly… and shows it by frantically barking at every single thing that moves anywhere within his line of sight. I can’t stop people from walking, but I am strongly considering bricking up every window on the front of the house. 

Thoughts on the death of a pipeline…

I was raised in coal country. My childhood memories are punctuated with the sound of a CSX locomotive and open coal cars rumbling through the center of town. I don’t have to tax my memory to recall its whistle screaming as the engine pulled its load across the level crossing at Union Street. Those trains were as much a part of town as any of the buildings that stood overlooking the tracks. Still, they haven’t run coal south through Midland in a long time. Then again, a lot of those old buildings are gone now, too. 

My home town’s entire reason for being was to support the men who went down the mines in the 19th and 20th centuries. I grew up riding bikes in the shadow of draglines and immense tailings piles carted out of the deep mines a hundred years before I was born. Even those “coal banks,” pressed hard against the backs of the town’s two churches, are long gone following a spate of reclamation and restoration efforts made a decade or two ago. It’s a not-so-subtle reminder that, for good or bad, we’re living in the closing era of the coal industry. Government – and the people – are going to demand “clean” energy options going forward.

You can rage against it all you want.  There’s no silk weaving mill in Coney anymore because it didn’t make economic sense in 1957. There’s no Kelly-Springfield plant in Cumberland because it didn’t make economic sense in 1987. There’s no Bethlehem Steel in Baltimore because it didn’t make economic sense in 2012. Maybe you see where I’m going with this line of thought.

Sure, hang on grimly to your plant or pipeline. Get out of it whatever you can in the time it has left. The oil is still going to flow – by rail or truck or one of the hundred other pipelines crisscrossing the continent. A few mines may hang on for decades yet, but the battle is over. Coal from western Maryland will never again fuel the ships of the Great White Fleet. Oil, over the next few decades, is going to be phased out. The future is ugly ass wind turbines marring every mountaintop and offshore vista and acres of solar panels where there use to be open fields.

The economy has always been built on creative destruction. It sucks when you’re on the “destruction” side of the equation. Ask the men who built wagons what happened after Henry made the car affordable to the masses. I take no pleasure in acknowledging this, because the end of this type of industry is going to have real and lasting negative impacts on my old home town and the people I know there. Pretending it’s not going to happen, or that we can somehow reverse the inexorable march towards the future isn’t going to help them, though. 

Times change. Technology evolves. King Canute couldn’t order the tide to go out and we’ll fare no better trying to resuscitate dead and dying industries and ordering the future to be an exacting continuation of the past. 

That’ll be an unpopular opinion where I’m from, but as a lifelong holder of unpopular or controversial opinions, I’m ok with that. 

Plague economics…

I can’t tell you how many times in the last 6 months I’ve heard or read someone say “Wall Street isn’t Main Street” or “the stock market isn’t the economy.”

That’s usually shorthand for telling your readers or viewers you want them to ignore record setting highs in the market in favor of focusing on more gritty, personal stories about small businesses. Those businesses are important. No one loves their small, local book shops more than I do, but I’m not going to sit here pretending that how the market does is irrelevant to the overall health of the economy or that it’s only “the 1%” who take advantage of its magical power of wealth creation.

Despite the popular press narrative that most people aren’t impacted by the stock market, the opposite is really the case. According to an article released by Pew Research in March 2020, “a majority (52%) have some level of investment in the market. Most of this comes in the form of retirement accounts such as 401(k)s.” If something north of half the people having a vested interest in Wall Street doesn’t count as having a deep influence on Main Street, I don’t know what would.

Yes, how “invested” someone is depends on many factors – age, race, and income, among others – but you really sound like an idiot when you write an article trying to convince me that I should feel badly that the market is booming. I’m never going to be upset by a story that tells me real money is being made by real people. Even when it’s painted as a story of winners and losers, I’d reminded them that there are winners and losers in ever field of endeavor – none of the great -isms of history have managed to change that beyond shifting a bit of who gets what. The wheel turns, but some group is always on top at any given moment – princes of the church, members of the politburo, or heirs to the House of Morgan – and they reap the reward of being in the right seat at the right time. I’ve never felt the need to hate them for that.

The two streets measure (mostly) different aspects of the economy. While I’ve made an effort to support local businesses with my spending during the Great Plague, I won’t for a moment feel bad about seeing growing equity prices. Both sides of the economy are important and while I’d love to see both go like gangbusters in an endless bull market, having half a loaf in this plague-ravaged environment is something to celebrate.

Clawed back…

Looking at the various trackers I use to keep tabs on “money stuff” it appears I’ve clawed back somewhere around 80% of what was lost when the floor fell out from under the stock market during the opening days of the Great Plague. I wish I could take some kind of credit for having a shrewd financial mind. It has far more to do with being willing to just stand there and take a beating without locking in all those losses by fleeing to the safety of cash equivalents… though I suppose sitting around watching the market erode your nest egg day after day after day without screaming “uncle,” is a certain kind of financial bravery of its own.

I’m happy to see a lot less red ink on the page, but I’m not even cautiously optimistic of the market’s ability to hold on to its gains in the absence of the truly massive amount of money the Federal Reserve has pushed into the system. Until I start seeing unemployment numbers normalizing, consumer confidence picking up, and a reckoning about how the foreclosures and evictions that have been held in abeyance for the last few months will be addressed, I won’t be convinced it’s not an aberration.

Call me a pessimist, if you will, but aside from there being a nice blue sky and sunshine overhead I don’t see how or where we’ve really turned a corner – and I’m fairly sure the economy doesn’t turn on how pretty a day it happens to be outside. Then again it’s possible I have completely lost track about what it is that actually does drive the economy. So much seems to have changed since I took my basic classes twenty years ago… or at least we’re pretending they’ve changed right up until the old rules jump up and bite us in the collective ass later this year.

What Annoys Jeff this Week?

1. The NeverEnding Project. If it weren’t for the Great Plague, I’d have had this particular project behind me for almost a month now. Instead, though, it got delayed, deferred, and then converted to an “online experience.” A better man than me might be laser focused on delivering a world class product – or at least be interested in something beyond the minimum acceptable standard… but honestly, my only objective is for this time-sucking vanity project to reach its long-suffering conclusion, regardless of whether it’s good, bad, or mediocre.

2. The market isn’t the economy. A million years ago, when dinosaurs roamed the earth and I was a youth, an obscure southern governor won the presidency on the back of the mantra “It’s the economy, stupid.” Despite the easy money propping up the stock market right now, I have to think that underlying economic conditions driven by our response (or lack thereof) to the Great Plague will be what drives Election 2020 as we draw towards November and people broadly start paying attention to electoral politics. My take, bound to be unpopular in MAGA circles, is that if the Republican Party wants to maintain any relevancy in the next four years, it’s time to focus all our time and money on holding on to the Senate.

3. Complaints. The number of things I do on a weekly basis because “if we don’t, someone might complain” should be disturbing. Doing things just so MaryJane Douchebag doesn’t open her yap just doesn’t feel like a good enough reason to do something that you wouldn’t otherwise do. No one (except me) seems to find it disturbing, though. I have no idea when we became a society that spends so much time worrying that someone might complain, but here we are. It’s dumb, I hate it, and it’s just another example of how the 21st century is absolute trash.

Scorn and Derision or: The Importance of Knowing Your Amendments…

For the entirety of my lifetime, the 1st, 2nd, 4th Amendments* have gotten somewhere around 95% of the total air time of anyone discussing the Constitutional Amendments in any context. The other five percent is given over to the taxation is theft crowd, celebrating the repeal of prohibition, and everything else. The last three years, something of a historical outlier, have also included not insignificant discussions of the 25th Amendment as well. 

After listening to President Trump’s claim that “When somebody is president of the United States, the authority is total,” it appears that we’re going to spend some amount of time in the near future pondering the Tenth Amendment.

The president is right that we do need to develop a plan for putting the country back to work. Sooner or later, we’re going to have to start opening up the economy. Great Plague or not, there’s a limit to how long people are going to tolerate sitting home, watching their livelihoods crumble, and seeing no obvious end in sight. Beyond the statement of fact that the economy needs to be opened, his argument that it’s a decision to be made by the federal executive branch alone is, in a word, wrong. Other words that could have been used here are: asinine, nonsense, bunk, hokum, or bullshit.

Just as the timing and decision to curtail all but essential business was made by state governors across the country, the governors will also establish the timing and criteria by which business is allowed to reopen. It may be done in conjunction with advice from the federal government, it may be backed up with federal resources, but the decision on timing and “how to” resides with the governors.

Given the 10th Amendment’s reservation of powers not delegated to the federal government to the states, there simply isn’t a lawful mechanism by which the president may issue a blanket decree that state and local government, businesses, and educational institutions are open for business. Anyone who tells you otherwise is lying. Anyone who insists that the president does, in fact, have this authority, is attempting to empower the executive branch far beyond anything envisioned under the Constitution – and deserves the scorn and derision of those who have grown and prospered under that protection of that great charter. 

Constitutional Amendments Quick Reference Guide:

  • 1st Amendment – Freedom of speech, religion, and the press
  • 2nd Amendment – Right to keep and bear arms
  • 4th Amendment – Freedom from unreasonable search and seizure
  • 10th Amendment – Reserves powers not granted to the Federal government to the states or the people
  • 16th Amendment – Allows Congress to levy a national income tax
  • 21st Amendment – Repeals prohibition
  • 25th Amendment – Clarifies the rules of presidential succession

Taking it on the chin…

A few months ago I, somewhat tongue in cheek, told a coworker the best thing that could happen for my hopes of eventual retirement would be a few years of a bear market to suppress prices and let me “back up the truck” to buy shares at deep discount prices. As long as I can keep working and manage not to drop dead of the Andromeda Strain or whatever the appropriate name for this bug is, I suppose I’m technically not wrong… but boy is it a great big case of be careful what you fucking ask for.

The US economy is currently suffering through a system-level shock the likes of which almost no one alive has personally experienced. For those of us above a certain age, the closest we’ve come is listening to grandparents or family elders tell their stories – and wonder uncomprehending about why all those years later they still saved their soap slivers in a mason jar or insisted on getting three cups of tea out of each bag.

I like to think this isn’t the start of Great Depression 2.0. The fact that the economy was roaring along at breakneck speeds just a couple of weeks ago gives me enormous faith that it can be resuscitated… eventually. Once they’ve exhausted all other options, Congress will push through bailout plans to pour trillions of dollars through the front door of the Treasury. The Federal Reserve has committed to buying government debt with reckless abandon.

Even with herculean efforts, a host of businesses will fail. No economic recover package ever passed through government can prevent that. Cash flow is the life’s blood of business and with that flow stopped, even temporarily, many won’t have the deep reserves it will take to emerge once we’ve arrived at the new normal. The best we can manage in the moment is likely following a “harm reduction” strategy – of propping up what we can and finding as soft a landing as possible for those in the workforce who are displaced.

It seems that President Trump is determined to take a short cut through the amount of time science says we need to keep the clamps on the economy. That’s a foolish and stupid take, but in some ways, I can understand the instinct. Even those who get through the pandemic with little or no ill effects will feel the unnatural consequences of an economy gone to hell in a handbag.

There’s a point where declaring business as usual will make sense. I don’t think that’s this week. I don’t think it will be next week. If you believe science, and you should, it’s not even likely to be in the next month.

As you know, I despise the media obsession with calling this the “war against COVID-19.” Even so, I take a degree of comfort in knowing that historically, the United States almost always loses the first battle of every war we’ve ever been in. We take a punch right to the chin, get knocked down, and then get up off the ground angry and looking for payback.

Today we’re still on the ground, but we’re going to get up, and when we do, we’re going to be collectively pissed the hell off and ready to do what needs to be done.