CFI.co Blog

Idle hands are the devil’s workshop and so is an idle mind. Being cooped up at home is an open invitation to bodily harm and unhinges the mental balance as well. The wielding of potentially lethal tools to craft do-it-yourself hobby objects that usually offend any lingering sense of aesthetics is bad enough, but the proliferation of idle time is even worse and leads to spooked minds ready to believe just about anything.

Some people eager to identify and eliminate a culprit have taken to setting transmission towers alight in the belief, both sincere and pathetic, that 5G signals somehow cause a potent virus to emerge out of the aether. In an ironic touch, most torched towers had no 5G transmitters installed. The only thing the arsonists manage to accomplish were localised outages of the 4G mobile network, hampering the work of emergency responders.

Earlier this week another bit of fake news went viral when it transpired that the novel corona virus had supposedly escaped, or was released on purpose, from the den of evil scientists in China. That nugget of misinformation was attributed to Professor Tasuku Honjo, a Japanese immunologist who in 2018 received the Nobel Prize for Physiology or Medicine in recognition of his discovery of the programmed cell death protein (PD-1). Prof Honjo, it was said, had studied the corona virus whilst working in China. His conclusion: the virus is man-made.

None of it was true. Anyone bothered enough to google the professor’s name would have been able to dismiss the story in a heartbeat.

However, millions of believers couldn’t be bothered the check the facts but did manage to find the time to retweet or share the story. When faced with the truth, many instantly detected a cover-up and expanded on their conspiracy theory.

There is nothing strange in people searching for explanations to strange phenomena that transcend their understanding of the world. Every major event, from the assassination of JFK and the death of Elvis to 9/11 and now the pandemic, births a number of wild theories that seems inversely proportional to the impact and importance of the occurrence.

Though there is nothing new in this, the internet does speed up the dissemination of fake news and widens its reach considerably. The velocity and ferocity with which alt-truths propagate undermine the confidence in both science and politics – the two pillars that must provide guidance and comfort to societies cowed by the pandemic. Once the trust in authority is gone – and it is slowly going – only cacophony remains whilst people are cast adrift rudderless and clueless. Fake news going viral represents, in fact, a danger greater than any real virus.

Disconcerting new from Germany. The corona reproduction rate (R) has crept back up from 0.7 to 1, meaning that every person carrying the virus, knowingly or otherwise, on average infects one other person. The news, not entirely unexpected after last week’s easing of the lockdown restrictions, prompted Dr Lothar Wieler of the Robert Koch Institute to call on Germans to stay at home ‘as much as possible’. The federal research institute is charged with disease control and prevention.

Dr Wieler also revealed that the mortality rate of German covid-19 patients has been rising steadily and now stands at 3.8 percent, higher than the global average estimated by the World Health Organisation (3.4%), but well below the rates reported by neighbouring France and Belgium. The discrepancy can be attributed, in part, to differences in the way corona deaths are tabulated. In its tally, Belgium includes deaths recorded in care homes of patients who had not been tested for the virus. Many other countries, including Germany, only include deceased hospital patients diagnosed with covid-19.

A much more telling set of data is being supplied by national statistics institutes that crunch vast volumes of historical data to extract a specific and remarkably precise ‘normal’ number of deaths for each week of the year. Using this data, an excess number of fatalities can easily be obtained and expressed in absolute and relative terms. The numbers also serve to reveal ‘hidden deaths’: suspected corona deaths who passed away without having been formally diagnosed.

Statistical data show that between 11 March and 25 April, the number of deaths recorded in New York City was 309 percent higher than what might have been expected in normal times. The discrepancy between the ‘excess deaths’ and the reported number of covid-19 deaths amounts to about 4,000.

Over roughly the same period, Spain experienced a mortality 67 percent higher than the statistical normal with 9,100 excess deaths not officially accounted for. In Belgium those numbers are 34 percent and 600 respectively. Much criticised for its apparently relaxed attitude to the pandemic, Sweden records a relatively low 18% peak in the number of excess deaths. However, the country’s actual corona mortality rate is amongst the highest in Europe.

This is perhaps a good time to remember Mark Twain and his timeless observation that ‘there are lies, damn lies, and statistics’. The numbers are, for the most, incomparable and only hint at a trend. Used to compare the performance of national authorities in their battle against the virus, statistics are of limited use and may even promote alt-truths. For now, there is no magical bullet and each country fights the pandemic as best it can.

However, it is still slightly disconcerting that as lockdowns are eased, the virus’ reproduction rate promptly creeps up. Though that may have been expected, it also stresses already frayed nerves.

The global cost of the corona pandemic now approaches the $10 trillion mark. This is the price of the handouts, tax deferrals, and loan guarantees extended by governments trying to nurse their societies back to health. Only a fraction of that money may, in the fulness of time, be recouped. Since the depth of the recession that the virus thrust upon the world is still an unknown quantity, nobody knows for sure who and what is able to survive the pandemic. In Europe, most governments guesstimate that only about 65 percent of the deferred taxes will get paid. Up to 20 percent of the loan guarantees extended may be invoked at some point.

Budget deficits are quickly rising to levels not seen outside times of war. Debt burdens keep pace, limiting the financial wiggle room of states as preparations are made to slowly resuscitate economies. Though most economists agree that states had no choice but to act decisively, some begin to wonder who is going to pay for the enforced largesse.

Absent a global debt jubilee, the piper must be paid – eventually and presumably. This crisis has no winners, apart from a few billionaires who somehow managed to add to their fortune whilst sipping drinks aboard mega yachts anchored within swimming distance of a welcoming tax haven. Earlier recessions were local or regional in nature and could count on strong growth elsewhere to find a way up.

Not so this time around. China sputters and nears its own day of post-corona reckoning with a regime increasingly lashing out at any and all forms of dissent in a rather sorry display of gutted self-confidence. To paraphrase Karl Marx, China’s current posturing at home and abroad masks the inherent weakness of its system. Despite the unbelievable antics of its president, the United States will be fine. The country still holds the master key to the global financial system. As always, the US dollar rules supreme in a troubled world. Not even President Trump can scare investors away from the mighty dollar – and that’s saying something.

Europe is not nearly so lucky and will be hard-pressed to come up with novel solutions to remain an economic power of note. Were it not for the almost pig-headed refusal of the Frugal Four to engage in acts of creative bookkeeping, solutions could be found such as the Spanish suggestion to issue consols – perpetual bonds that pay interest but are redeemed at the issuer’s convenience. Consols are an interesting tool to kick the proverbial can not just down the road, but into interstellar space.

The idea that the debts incurred by the pandemic must be paid, and the vast volumes of credit injected into the Eurozone economy since 2015 must be taken out (i.e. the money destroyed) seems ludicrous. Such a rigorous approach to financial management will most likely result in a very long period of lacklustre growth, high unemployment, and political turmoil. Deflation also remains a distinct possibility. Business as usual is probably not on offer for the foreseeable future. To navigate the post-corona era without creating another politically volatile lost generation, out-of-the-box thinking is needed. That’s not something to expect from Europe’s Frugal Four.

In the good old days, the likes of Fidel Castro and Hugo Chávez entertained their people with seemingly unending ramblings about nearly every topic under the sun. Both rulers are dead now, but a few presidents still cling to notions of omniscience and feel the need to shine their light on issues they know virtually nothing about.

Sometimes it just cannot be helped, and one must take US President Donald Trump to task over his increasingly bizarre behaviour during the daily Coronavirus Task Force briefings staged at the White House. On Thursday, the event descended to a new and painful low as the mightiest man on earth, sporting his signature fake tan, took leave of whatever senses he had left to suggest sunlight and Lysol as possible cures for covid-19.

Whilst President Trump kept blabbering, oblivious to the ridicule he sparked, renowned scientists such as task force coordinator Dr Deborah Birx barely managed to hide their disbelief and stupefaction at so much nonsense being spouted by a single person. Taking to the lectern, President Trump philosophised at great length about cleansing the insides of the human body with some sort of disinfectant and later suggested covid-19 patients could be bombarded with bright light to kill off the virus.

Immediately after he was done, Washington State emergency authorities rushed out a tweet, warning citizens not to try out any of the president’s suggestions. Reckitt Benckiser, the British maker of Lysol, warned that its disinfectants under no circumstance should be administered into the human body.

The very event that means to reassure the American public that the federal government is doing all it can to contain the virus and battle the disease, has now become a stage for the dissemination of crackpot solutions and dangerously silly ideas. It is a daily show lasting up to two hours that features an emperor without clothes, sycophants too afraid to point out the obvious, and a few scientists trying to make the best of a very bad situation.

We should all be exceedingly grateful to the many thousands of dedicated civil servants and professionals who keep the United States federal government on an even keel by ignoring to the best of their ability any instructions from above. They must try and keep this up for another 271 days until the inauguration of the 46^th president when a sense reason may resurface in the White House. Donald Trump may then replace that poor man James Buchanan as the worst president in US history – a full 44 notches down from Honest Abe. The other possibility does not bear thinking about.

Just like a particle accelerator produces a string of strange phenomena, a pandemic-stressed economy churns out elements that do not comply to long-standing theories. Negative interest rates and oil prices are but two of the curios that breeched the walls of convention. The former already existed in the pre-corona era, whilst the latter represents an event never observed before.

Another economic law that ended on the scrap heap of busted myths is the inverse correlation between inflation and unemployment as evidenced by the Phillips Curve, named after the New Zealand economist who studied centuries’ worth of economic data to prove his point: when inflation creeps up, unemployment numbers ease and vice versa.

To crunch the numbers and illustrate the effects of shifting spending priorities, ‘Bill’ Phillips in 1949 designed and built a hydraulic computer that used coloured water and an intricate web of pipes, sluices, and reservoirs to mimic the path travelled by money as it trickles through society.

The MONIAC (Monetary National Income Analogue Computer), also known as Bill’s Financephalograph, provided its builder and others with the insight that a trade-off exists between a strong economy and low inflation. The consensus is that Mr Phillips would have won a Nobel prize had he not passed away, aged 60, in 1975.

According to prominent economists, the Phillips Curve no longer seems to reflect or predict present-day reality. Actually, its elegant path was first broken in the 1970s when stagflation reigned supreme and economies suffered both high rates of inflation and unemployment. This gave latter-day monetarists such as Milton Friedman the courage to dismiss Mr Phillips’ research as irrelevant to longer-term economic trends.

Although both sides of the debate presented vast volumes of evidence to support their stance, it looks as if facts on the ground have created another reality altogether: just before the pandemic struck, most advanced economies shared a set of similar, yet historically unique, features: low growth, low inflation, and low unemployment. This was not supposed to be possible.

Thus, we unknowingly may have entered the realm of the bizarre years ago. The threshold seems to have been the banking crisis of 2008 and the Great Recession that followed in its wake. This is when strange phenomena first appeared, perhaps reflecting the bewildering patchwork of solutions implemented to keep weakened economies on life support. The patient never fully recovered and has now been returned to intensive care.

Most news cycles only last a few days. Major events may capture the readers’ attention for perhaps a week or two before they are demoted to the inside pages only to drop out altogether a few days later. The intensity of news coverage is also inversely proportional to the distance of the unfolding story. A major crisis in a faraway place usually merits the same amount of column inches as a minor local hiccup.

Those editorial facts of life no longer seem to apply. Nearing its seventh week, the corona pandemic’s news cycle shows no signs of fizzling out. Its global nature and many vectors push out most other topics. Suddenly it seems that all other news is either inexistent or irrelevant. Surveys ordered by major newspapers show that readers have not yet reached their saturation point. In fact, consumers demand more coverage of the issue that will undoubtedly come to define a new era.

Quality papers such as The Times and The Guardian in the UK, and the New York Times in the US, report large spikes in the number of online visitors. Many newspapers have also seen a significant increase in the demand for online subscriptions. However, most industry analysts agree that, rather perversely, the virus may turn out to be the last nail in the coffin of newsprint.

Publishers may derive some solace from the fact that the death of the printed newspaper has been prematurely announced a great many times before. Radio was supposed to have finished them off. When that didn’t happen, television was identified as the undertaker. It was only the arrival of the internet, and the advent of ‘free’ news, that managed to chip away at the throne newspapers had occupied for centuries.

In times of trouble such as these, most consumers instinctively turn to newspaper for the real story. The medium, often ridiculed and dismissed as a throwback to former times, still boasts the largest newsrooms that are invariably inhabited by the most talented journalists, writers, and editors available.

The welcome increase in the volume of paid subscriptions is probably not enough to compensate for the loss of advertising revenue. As the Corona Recession deepens, newspapers, whilst still standing at the pinnacle of the Fourth Estate, need help. Mindful of conflicts of interests, governments should probably not want to directly subsidise the industry. They can, however, put legislation in place to force social media freeloaders to pay properly for content generated by news organisations.

Australia is doing just that. The country’s Competition and Consumer Commission is putting the finishing touches on a code of conduct that will force Facebook, Google, and other tech giants to pay for content they now either nick or acquire for pennies. France is set to follow the Australian example ‘tout suite’. The preservation of industries that are deemed vital to the functioning of society is currently much in vogue. The news business is such an industry.