Saturday, March 21, 2020

A Modest Proposal

I've been reflecting on our current situation. I think that the President has captured the essence of it: a wartime effort. However, we continue to muddle with a lack of focus and clarity. I believe that by grasping the machinery for past war efforts, we could "defeat" this enemy.

First, during wartime, we repurpose citizenry and companies. We could divide the entire population into two components: active and reserve. The reserves would be people over 70, those with compromised health systems and pregnant women. The actives would be everyone else over 18. All military members would receive monthly or weekly wages. The actives would be divided into two parts: those currently employed in critical areas and those who are available to be repurposed. For example, cable and food and health workers would stay put. Hotel and restaurant workers would be reallocated to other positions. The incomes would be set around prior tax records. Stock options excluded as well as those who are paid according to the following section.

Next, our corporations would be used for the war effort. Software companies would be reallocated to the development as needed. Income for corporations would be the same with the profits to the shareholders limited to prior year's taxable income. Those who haven't been paying taxes (we know who they are) would not receive any profits, but could maintain infrastructure, debt service and employment.

Our wartime provisions are set up for major disruptions to the economy. To fight a full war effort and expect the economy to trudge along with full funding from the Federal Reserve is to do nothing more than highlight the limits of central banking. I don't see the need to invent a new set of structures; let's just repurpose WWII processes. At the same time, we need to maintain preparedness. What if a terrorist attack occurred now?

Wednesday, March 18, 2020

Accepting the Pandemic

I have observed that "acceptance is the answer to ALL my problems." This is different than acquiescence. Acceptance is a core component of mental health, as "sanity is accepting reality at ANY cost." The current responses to the COVID-19 pandemic have revealed a remarkable lack of acceptance and, thus, sanity.

The journey to acceptance are outlined by the five stages of grief and can serve as a good indicator for where we seem to be. As a reminder, the five stages are: denial, anger, negotiating, depression and acceptance. Further, as another reminder, these stages are not directly linear, but more of moving back and forth towards acceptance.

When the pictures showed up of China rapidly building massive hospitals, my journey of acceptance began. I don't trust the Chinese words, but I do trust their actions. Their systemic response started with denial. Quickly their government responded vigorously as they sensed the anger stage. No negotiation in their system. Their rapidly forced journey to acceptance has been remarkably effective.

In our system, the early journey seems similar to China - at some point of infection, the larger population moves to anger. The result seems to be driving some long overdue bipartisanship. Politicians are clear that anger is simmering and the blame process is escalating. If we are fortunate, then perhaps rapid change can occur in our fragile economy. But, we are also clearly in a negotiating stage where monetary and fiscal policies are being tried. The stock market seems to be picking up on these in a back and forth pricing mechanism.

If policies are ineffective, which may occur given our supply chains and delayed response, then we would enter the next stage - depression and would likely see massive government intervention in the provision of basic supplies. This would likely be accompanied by a stock market complete capitulation that is far off from today's prices. (For a view of what this stage would look like, the oil patch provides a much better picture.)