Should patent law function differently during a pandemic? Let’s place aside for now the question of whether research efforts during the pandemic should be entitled to new patents, and focus instead on the argument that previously existing patents should be unenforceable or weaker during a pandemic to improve society’s ability to mobilize against the virus.
Sendhil Mullainathan and Richard Thaler make this argument, citing a case in which producers of 3-D-printed valves needed to replace ventilator parts received a threat of a lawsuit. Meanwhile, an attempt by Labrador Diagnostics LLC to enforce two patents in its portfolio against a maker of COVID-19 testing kits received widespread criticism, and the patent holder ultimately backed down. Separately, Israel has approved importation of a generic alternative to an HIV drug thought possibly helpful against COVID-19, even though the drug remains under patent in Israel until 2024.
The question with greater stakes is what happens if a patented treatment proves to be effective against COVID-19. The maker of remdesivir received orphan drug status for the drug (and thus exclusivity and other benefits) on the ground that it met the statutory definition of a rare disease, based on the number of people currently suffering from COVID-19 in the United States. After criticism, Gilead declined the “rare disease” status. Remdesivir remains under patent, and Gilead will presumably defend its patent rights more aggressively. But will Gilead be allowed to do so? One might think that if the treatment proves successful, Gilead would be among the most valuable companies in the world. Surely, one might think, it would be able to earn a trillion dollars, a fraction of what is at stake in dollars and lives in the United States alone. But Gilead’s market capitalization has risen only around $10 billion since the beginning of December. Perhaps this reflects skepticism about the drug’s prospects, but not that much skepticism. It surely also reflects skepticism that Gilead will be able to price it aggressively. Analysts seem to anticipate a price target of only around $260, a bargain if the drug is really a life-saver.
The argument for allowing robust patent protection is mostly the same as the argument for patent protection generally: Patents encourage innovation. If the rule is that patents are unenforceable when they are most needed, then there will be reduced incentives to create inventions that may be especially needed in some future emergency. When an inventor is considering developing a ventilator part, a diagnostic test, or a treatment, we would like the inventor to consider the full social benefits of the invention, not just the social benefits to be accrued in ordinary times.
Here are some counterarguments, in my view none sufficiently powerful:
Unforeseeability. If the demand for an invention is entirely unforeseeable, then inventors will not have taken that demand into account in deciding whether to invent in the first place. Thus, patent revenues are a windfall, and society would be better off not enforcing the patent rights. A pandemic, one might argue, is unforeseeable. But we know that pandemics are not unforeseeable. Even though remdesivir failed against ebola, Gilead knew that it might work against some later coronavirus, and that might well have factored into its development decisions. Certainly as to drugs for medical treatments, this argument seems especially weak. What about patents on surgical masks or other medical tools? Sure, it’s doubtful that the patentees explicitly took into account the possibility of a pandemic, but a rule that limits patents to explicitly foreseen uses might well lead patentees to expect less revenue. In patent law, inventions are patentable even if they are discovered serendipitously, in part because inventors expect that R&D will sometimes lead to serendipitous discoveries. The same argument applies as to serendipitous uses. Inventors may not know exactly what their inventions will be used for, but they recognize that sometimes they might receive revenue for uses of their invention that they did not precisely anticipate, and the possibility of such uses increases incentives to invent.
Speculative patents. Sometimes patents cover inventions that will not be useful until some later time, when some complementary technology arrives. John Duffy and I argued that such “speculative patents” should be patentable only if they meaningfully accelerate the arrival of technologies. For example, even if I develop a nonobvious idea for using a time-traveling Delorean in some clever way, I shouldn’t be able to obtain a patent in the hope that a flux capacitor is invented, unless I meaningfully accelerate either the invention of time travel or at least my application of time travel. At least, the invention should not be counted as nonobvious on the ground that time travel seems fanciful, if my invention is simply free-riding on the future invention of time travel. Returning to pandemics, suppose that a drug company could quickly and cheaply invent many antiviral drugs that might be useful against future pandemics, depending on what proteins might turn out to be important in the pandemic. If the drug would be nonobvious after the pandemic comes (because any person having ordinary skill in the art could create it), then it should be nonobvious if the drug is developed earlier. Indeed, one might argue, contrary to existing law, that nonobviousness should be measured as of the time when an invention is first useful on the assumption that the invention hadn’t been made, rather than as of the time of invention. But there is little reason to think that remdesivir fits this argument.
Bad patents. Some of the criticism of Labrador Diagnostics’s aborted enforcement effort was based on the ground that the company is a “patent troll” and that its patents were derived from work with now-discredited Theranos. But nonpracticing entities at least sometimes engage in useful R&D that the patent system should reward, and even a company that perpetuated frauds may have legitimate intellectual property. If we should be tougher on nonpracticing entities or if we should have more exacting requirements of utility, that should be true whether there is a pandemic or not. It is doubtful that the category of “inventions for pandemics” is so much more susceptible to bad patents that it makes sense to have a special rule making such patents unenforceable.
Urgency. In ordinary times, one might have leisurely discussions about licensing patents. But we might not want manufacturers to spend, say, a month or two clearing all intellectual property issues before starting manufacturing, because a pandemic demands immediate action. This seems to me a reasonable argument as to whether an injunction should be granted against production, and indeed, under the fourth factor of the eBay v. MercExchange test, one can make a strong argument that the “public interest” argues against both temporary and permanent injunctions. But that does not explain why the patentee should be unable to obtain a damages remedy. The argument might be that people will be unwilling to produce valuable goods when they don’t know what their liability eventually will be, but of course they do so all the time. Moreover, if small-scale producers are worried about liability, they could insist on contracts that indemnify them for intellectual property violations. If inventions are genuinely life-saving, purchasers like hospitals should be willing to take on such risk (and, if not, we may have a problem with the incentives of hospitals rather than a problem with IP).
Maximizing production. We will, of course, have more production if IP rights are suppressed than we otherwise would. And, as I have emphasized previously, generating more production of life-saving medical products may be the single most important policy goal right now (and unfortunately is largely unaddressed in the $2 trillion spending package). But we would also might have better emergency healthcare during this pandemic if states were allowed to commandeer without compensation hotels for housing healthcare professionals and other facilities for building hospitals. Yet we generally assume that even in times of need, healthcare providers should pay for what they consume. That’s true even for goods with low marginal cost; electricity may be mostly fixed costs, but no one says that hospitals should pay less for electricity during times of emergency. If the justification for patents is sound, healthcare providers should be required to pay for the intellectual property they use.
Redistribution. What likely troubles people most about the possibility of strong patent protection for remdesivir or other COVID-19 treatment is that only the relatively rich may be able to afford it. Even though we accept that the wealthy have more purchasing power than the power, we may resist disparities when it comes to purchases essential to life itself. Such arguments, however, apply to all critical healthcare. If these arguments are sound, then the government should pay for health care that it believes is essential, at least for the poor, maybe even for the poor of other countries. Perhaps the government should take patents with eminent domain, paying to the companies what they otherwise would have received from private exploitation. But requiring redistribution from inventors to the poor displaces the government’s responsibility and reduces incentives to invent.
Time inconsistency. We often assume that the correct policy, in patent law and elsewhere, is the one that would be chosen ex ante. A policy is time inconsistent where the best policy ex ante will differ from the best policy ex post. A common suggestion for monetary policy is that the government should tie its policymakers’ hands ex ante to prevent the policymakers from engineering inflation ex post. Similarly, in patent law, if all of the above is correct, we should create rules that make clear that patents are fully enforceable in future pandemics. At the same time, though, the time inconsistency argument implies that when we have failed to tie policymakers’ hands ex ante, and a different policy is preferable ex post, we should adopt the policy that maximizes social welfare ex post. Thus, one might argue, if the stakes of a pandemic are sufficiently high and patent law is vague as to whether patents are enforceable in pandemics, we should do what is best ex post (suppress patent rights). But that argument has two problems. First, this violates a norm in patent culture that we should conceive of the system from the ex ante perspective. This violation will lead to expectations of further cheating off the ex ante optimum in the future. Second, there is no vagueness in patent law here. There is only outrage, misplaced at least as to valid patents.
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At US Epicenter: NY Parks Bustle, Subway Packed, Social Distancing Defied & Flaunted
New York’s explosion of confirmed coronavirus case numbers over the past several days — with the state’s total at 37,258 cases, with 5,327 currently hospitalized, and 1,290 patients in the ICU — 20,011 among these in New York City alone, is downright scary.
This makes the below scenes of ‘brave’ New Yorkers still willing to go about their daily lives oblivious to the ‘apocalyptic’ surge in hospitalizations from the virus all around them in what’s clearly become the nation’s epicenter all the more stunning and arguably reckless.
Case in point: the New York subway has proudly never completely shut down in the over century of its existence, though it’s this week reduced service as rising numbers of MTA employees catch Covid-19, but maybe it’s time for drastic action given the above scene.
Some took to social media to argue that trains are getting packed because the MTA doesn’t have enough personnel to run more, also as the newly announced 25% reduction in service goes into effect, creating a more dangerous situation.
— socially distant vaper (@victor_mifsud) March 25, 2020
Despite Gov. Andrew Cuomo’s issuing a ‘stay at home’ order for New Yorkers, which further mandates any businesses not deemed “essential” keep their employees at home, there are plenty this week willing and ready to defy those orders.
People have to go to jobs still operating under the ‘essential’ exemption, yet by all appearances there’s still been examples of of deniers and disbelievers gathering around the city, determined to carry on with daily routines.
Hordes of locals apparently took the ‘stay at home’ mandate as an opportunity to soak up the sun at public parks and to catch up on team sports, while often ignoring the 6-feet distance advisory.
New York City is now the center of the worst COVID-19 outbreak in the United States, but @Gothamist reports that it hasn’t stopped people from crowding city parks, even right outside the mayor’s home. https://t.co/mo4nDbXt9v
“The NYPD dispersed crowds of Hasidic Jews who showed up to get free food at a Brooklyn Yeshiva amid the coronavirus outbreak in New York on Wednesday afternoon, police said,” according to The New York Post.
“The free-food offer at the Yeshiva on Keap Street near Division Avenue in Williamsburg drew long lines of people from the community when they opened their doors from 9 a.m. to 11 a.m., police said,” according to the report.
“All of those people, in such a small space, appear to have helped the virus spread rapidly through packed subway trains, busy playgrounds and hivelike apartment buildings, forming ever-widening circles of infections” https://t.co/kFnP2HDxZG via @brianmrosenthal
NYC Mayor Bill de Blasio has so far resisted calls to close public parks, playgrounds, and popular promenades, but said the issue may have to be revisited in coming days.
Image source: Gothamist
“The promenade was more crowded than any other park I’ve been to these last few days: Central Park, Washington Square Park, McCarren Park, Domino Park. More crowded than any street I’ve been to,” Gothamist photographer Scott Lynch said in a Wednesday report.
“Even taking into account couples and families, who naturally are going to bunch together, the six-feet rule was flaunted left and right,” he added of still bustling scenes in the city’s public spaces.
Image source: Gothamist
Farmer’s markets were still bustling as of this past weekend and are still in most states with ’emergency’ declarations and restrictions considered ‘essential’.
Gov. Cuomo at the start of the week slammed what he called “arrogant” New Yorkers for continuing to ignore social distancing guidelines, though generally main streets have largely emptied of traffic since he lashed out with those words.
Brooklyn’s McCarren Park is bustling even as the state goes “on pause” over coronavirus.
“It’s kind of stupid,” a Greenpoint resident said. “I wish people would take it more seriously. Unless they act on closing parks, people will just keep coming.”https://t.co/peRw81tTUE
Twice in the past week, police officers have had to manage the large crowds waiting for delivery and takeout orders outside Major Food Group’s famed fancy restaurant Carbone in Greenwich Village
Image source: NY Eater
“You’re not superman and you’re not superwoman, you can get this virus and you can transfer the virus and you can wind up hurting someone who you love or hurting someone wholly inadvertently,” Cuomo said in the middle of the week.
“It has to be stopped,” the governor urged.
Via The Daily Mail: A farmer’s market at Grand Army Plaza outside Prospect Park in Brooklyn this past weekend.
Now that case numbers are exploding nationwide, expected to reach 70,000 by Friday morning, it’s likely even public parks across New York and elsewhere will begin to thin out.
The average American will tend to brush off numbers in the ‘thousands’ – but with the potential of hitting six figures in terms of confirmed infections in the coming days and weeks, the catastrophic crisis will at that point be impossible for anyone to ignore.
When I was in law school, my Torts professor was Dean (now Judge) Guido Calabresi, affectionately known to everyone as Guido. Each year, Guido gave his class a hypothetical that ran something like this: Imagine an Evil Genius comes to you before the automobile is invented and offers you all the advantages of the automobile, in exchange for killing 50,000 people a year (the rate of deaths in car accidents at the time in the U.S.). If you turn down the offer, society will organize itself in a way that’s not automobile dependent, and, perhaps counter-intuitively, Guido asked us to assume that the 50K lives were not being made up by hypothetical lives saved by the existence of cars. Basically, the problem asks whether one would be willing to kill off 50K lives a year in exchange for the conveniences and pleasures of the automobile.
I objected to the hypo on the grounds that automobiles do in fact save as well as cost lives, but something else bothered me about the problem, and I couldn’t quite put my finger on it until I thought about it again many years later.
I realized that what bothered me about the hypo was that it assumed that the right way to look at the problem was to assume that one is a central planner, and gets to decide for everyone whether to kill off 50K people. When you put it that way, it’s hard to justify killing 50K people for mere pleasure and convenience.
But there is another way to look at it, a more methodologically individualistic way. In a country of 300 million people, 50 thousand deaths a year means you have, on average, a one in six thousand chance of dying each year in a car accident. So an alternative way of approaching the problem is to ask, “would most people be willing to accept an additional one in six thousand risk of dying each year in exchange for the conveniences and pleasures of the automobile.” That might give you a different answer than the Evil Genius hypo.
But wait, there’s more. The risk of dying in a car accident is very much dependent on one’s own behavior. Driving while intoxicated, speeding, driving in ice storms, driving more miles a year than average, driving a less-safe car, and so on, can dramatically increases one’s risk of dying, while the opposite behaviors can dramatically decrease one’s risk. So the question might instead be, “Would the average person, knowing that he can dramatically increase or decrease his own risk depending on his own behaviors, be willing to accept a 1 in 6000 chance of dying in exchange for….” Framing it this way allows the risk-averse to take into account their own risk-averse behaviors, and the non-risk-averse to accept a greater risk.
Turning to Covid-19, let’s say a particular public health intervention is predicted to save 100K lives. If you ask someone if they would be willing to sacrifice 100K people to avoid this intervention, people will be inclined to say no, “I would never put a price tag on human life, much less 100K human lives.” But let’s say you ask the question differently: “Would you be willing to accept a one in three thousand chance of dying this year to avoid this public health intervention?” or “Would you be willing to accept an average of a 3% or so increase in your risk of dying this year to avoid this public health intervention” (given that the background annual death rate in the U.S. approaches 3 million)?
Once you ask the question in one of the latter two ways, then instead of focuses on the raw number of deaths, we can focus on the tradeoffs, and of course the answer will vary both by an individual’s own risk of being one of the victims (the ill and elderly have much greater risk), and the effect that the intervention will have on their own lives. Individualized behavior is going to make less difference than in the automobile example, but the principle of looking at individual or individualized risk, rather than raw numbers of victims, is the same.
So let’s take a simplistic, intentionally skewed example: the government wishes to undertake an intervention that the best economists predict will lead to a permanent reduction in overall wealth of 10%, with vast unequal distribution of burdens, say shutting down all businesses for six months. The same person who would never acknowledge being willing to consign 100K people to death for “economic” reasons may very well be willing to accept, both personally and for the collective, a one in three thousand chance of dying (or a 3% increase in the chance of dying) this year, or even a much higher risk, so that both society as a whole doesn’t become significantly and permanently poorer, and some people (e.g., small business owners) don’t lose everything.
I can’t, as a philosophical matter, tell you that looking at average individual risk or individualized risk vs. average individual cost or individualized cost is a sounder way of looking at the problem then the more collectivist, central-planner-type approach that Guido assumed. But it’s certainly an *alternative* way of looking at social trade-offs, and one that appeals more to my own mindset. And to my understanding, the more collectivist approach dominates public health education, and will therefore likely dominate medical advice about Covid-19.
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When I was in law school, my Torts professor was Dean (now Judge) Guido Calabresi, affectionately known to everyone as Guido. Each year, Guido gave his class a hypothetical that ran something like this: Imagine an Evil Genius comes to you before the automobile is invented and offers you all the advantages of the automobile, in exchange for killing 50,000 people a year (the rate of deaths in car accidents at the time in the U.S.). If you turn down the offer, society will organize itself in a way that’s not automobile dependent, and, perhaps counter-intuitively, Guido asked us to assume that the 50K lives were not being made up by hypothetical lives saved by the existence of cars. Basically, the problem asks whether one would be willing to kill off 50K lives a year in exchange for the conveniences and pleasures of the automobile.
I objected to the hypo on the grounds that automobiles do in fact save as well as cost lives, but something else bothered me about the problem, but I couldn’t quite put my finger on it until I thought about it again many years later.
I realized that what bothered me about the hypo was that it assumed that the right way to look at the problem was to assume that one is a central planner, and gets to decide for everyone whether to kill off 50K people, and when you put it that way, it’s hard to justify killing 50K people.
But there is another way to look at it, a more methodologically individualistic way. In a country of 300 million people, 50 thousand deaths a year means you have, on average, a one in six thousand chance of dying each year in a car accident.
So an alternative way of approaching the problem is to ask, “would most people be willing to accept an additional one in six thousand risk of dying each year in exchange for the conveniences and pleasures of the automobile.” That might give you a different answer than the Evil Genius hypo.
But wait, there’s more. The risk of dying in a car accident is very much dependent on one’s own behavior. Driving while intoxicated, speeding, driving in ice storms, driving more miles a year than average, driving a less-safe car, and so on, can dramatically increases one’s risk of dying, while the opposite behaviors can dramatically decrease one’s risk. So the question might instead be, “Would the average person, knowing that he can dramatically increase or decrease his own risk depending on his own behaviors, be willing to accept a 1 in 6000 chance of dying in exchange for….” Framing it this way allows the risk-averse to take into account their own risk-averse behaviors, and the non-risk-averse to accept a greater risk.
Turning to Covid-19, let’s say a particular public health intervention is predicted to save 100K lives. If you ask someone if they would be willing to sacrifice 100K people to avoid this intervention, people will be inclined to say no, “I would never put a price tag on human life, much less 100K human lives.” But let’s say you ask the question differently: “Would you be willing to accept a one in three thousand chance of dying this year to avoid this public health intervention?” or “Would you be willing to accept an average of a 3% or so increase in your risk of dying this year to avoid this public health intervention” (given that the background annual death rate in the U.S. approaches 3 million)?
Once you ask the question in one of the latter two ways, then instead of focuses on the raw number of deaths, we can focus on the tradeoffs, and of course the answer will vary both by an individual’s own risk of being one of the victims (the ill and elderly have much greater risk), and the effect that the intervention will have on their own lives. Individualized behavior is going to make less difference than in the automobile example, but the principle of looking at individual or individualized risk, rather than raw numbers of victims, is the same.
So let’s take a simplistic, skewed example: the government wishes to undertake an intervention that the best economists predict will lead to a permanent reduction in overall wealth of 10%, with vast unequal distribution of burdens, say shutting down all businesses for six months. The same person who would never acknowledge being willing to consign 100K people to death for “economic” reasons may very well be willing to accept, both personally and for the collective, a one in three thousand chance of dying (or a 3% increase in the chance of dying) this year so that both society as a whole doesn’t become significantly and permanently poorer, and some people (e.g., small business owners) don’t lose everything.
I can’t, as a philosophical matter, tell you that looking at average individual risk or individualized risk vs. average individual cost or individualized cost is a sounder way of looking at the problem then the more collectivist, central-planner-type approach that Guido assumed. But it’s certainly an *alternative* way of looking at social trade-offs, and one that appeals more to my own mindset.
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The panic and lockdown state we are just exiting in Dali (southwestern China) has been by far the most intense historical episode I’ve ever experienced. I’ve gone through several deep emotional phase changes throughout this time. If I’d written this email a few weeks ago, it would have been frantic and full of rage. Today I’m calm and have time, and I’m desperate to unload the experience, in the hope that it will be informative to you who are just beginning your journey. I’ll start with broad strokes and get into analysis later, so you can stop reading whenever you’re maxed out.
The most intense historical experience I’d had before this was probably Hurricane Andrew when I was in elementary school. I got out of New Orleans the day before Katrina and watched the fallout on TV from my college dorm room, although I’m not sure even that would’ve been more of a head-fuck. With a hurricane, you freak out mildly for about a week as people don’t know exactly where it will land, then you freak out hard for a day or two, then it’s whoooooooosh for 12-24 hours, and then you come outside, and everything is a goddamn mess, and you hear reports of who died and what’s broken, and school is canceled and the power is out, but at that point, you know the worst is past. Now things will get better. The difference with the virus is that the freak-out sets in gradually, but continuously builds, day by day things getting worse and scarier, yet nobody knowing a damn thing, and tensions rise and people start pointing fingers at each other. The worst is that you don’t know if it will be over in a week, a month, or… after a while … ever.
The first mention I heard of the virus was at jiu-jitsu practice in January shortly after we returned from the US. I’d brought my 4-year old son, who had a cough, and this *very sensitive* girl who comes sometimes freaked out about his coughing, saying she’d spent the entire night before reading about this new, awful disease in Wuhan. I man-splained to her that winter is flu season, and old people die of the flu sometimes, and kids get sick and cough sometimes, so please turn off the emotional geyser because we’re trying to train here! Very quickly, however, mentions of Wuhan and a “new virus” were everywhere. People were starting to show early signs of panic by January 25, when we held my 4-year-old’s birthday party, coincidentally on the day of Chinese New Year. Some friends with kids living in Shanghai had flown into Dali for the holiday, and I had invited them to the party weeks before. My wife tried to convince me to uninvite them the night before, but in the morning I convinced her that it was going to be ok. Most of our good friends with kids came over, except the family of my one friend whose wife had insisted he stop attending jiu-jitsu for fear of the virus (thereby earning my enmity, like a lot of people I considered fear-mongers, although that enmity disappeared as late-onset empathy has grown) and the party was fun, but fear of the virus hung in the air like a hangover fart. With few exceptions, we saw none of those people again for more than a month.
We had heard about the general lockdown in Wuhan before Chinese New Year, with people driving all night to get away before they were shut in. This was surreal the way foreign wars are surreal. You know it’s crazy to be there, but thank god that’s not going to happen where I live! But then slowly but surely, like the little virus panic that could, our own lockdown steadily chugged into place. My primary emotion at the outset was disbelief, maybe denial, and the first blossoming of anger at people who I thought were overreacting. In hindsight it’s clear that everybody reacts to a general panic based on their emotional defaults. I abhor authority and have learned to distrust any mass movement being led by the Chinese government (for all you super-patriots, I don’t trust the American government either). Every fiber of my being told me this was not a big deal, and apparently every fiber of a lot of people’s beings told them “run for your lives!” Things progressed quickly after CNY. First Dali Old Town (roughly our version of the French Quarter) was shut for tourism, a very big deal because tourism is our area’s number one industry, and CNY is a big earnings season. Then more and more businesses started closing in and out of Old Town. Then we started hearing about villages being sealed. First it was Yinqiao, a township 15 km to the north of us where a lot of our friends live, and then it was villages to the south of us, and then, sure enough, it was our village. A lot of villages have only one or a few main roads leading to the highway, making them easy to seal with a few sentries. Our village is like a big hunk of Swiss cheese with streets and alleys leading to major roads to the east and west. Even at the height of the panic, it was always possible to slip in and out of our village, although once out, it was nearly impossible to get in anywhere. A few days after CNY the local police station started blaring an announcement on the loudspeaker on repeat, clearly at max volume on their cheap system, because I couldn’t make out a word of it from my house. I walked down to listen to it, and was immediately approached by some masked cops who asked what the hell I was doing there. Tensions were already high. The announcement was about five minutes of CPC newspeak about doing the utmost to stop the epidemic, and how the politburo was working to help us, blah blah blah. The same message was repeated every day from 9:30-12 and 2:30-5, forcing me to work with earplugs after a while. The only concrete piece of information was that people should wear masks in public places. No information was given on what kind of mask or where to procure them.
The surgical mask symbolizes everything that has enraged me during this panic. When I first noticed people wearing them, I thought to myself “what a pussy!” I’ve seen grown men alone in sealed cars wearing masks on many many occasions. Now that the panic has mostly ended in Dali, and I see a mask, I still think: “what a pussy!” But you had to have them to go out in public. A friend gave us two bags of some very poor quality masks that I ended up being very thankful for. It felt like women wearing burkas out of respect in an Arab country. At no point have I believed that these are effective at anything, but my beliefs are irrelevant when everybody else views them as magical talismans in the midst of a satanic panic. I was very much reminded of the scapulars my friend’s *very Catholic* mom always had bags full of and insisted insisted we wore when I was a kid, so we were guaranteed to go to heaven if we died. When I realized this trend wasn’t going away, I asked my friend to make me a full-head bandit mask to go to the store and market with, because wearing a little blue mask made me feel like too much of a bitch.
Tensions continued to rise, and the lockdown grew gradually tighter. At some point word went out everywhere that anybody who had left for CNY could not come back. We were registered by the village government and put in good standing. One disturbing incident was that my entire family got sick shortly after CNY, coughing and sneezing and everything, and I was terribly afraid for any of us to leave the house, mostly from fear that a neighbor would hear us coughing and rat us out, although I did have a shadow of a concern that maybe we had gotten COVID from the Shanghai group.
At first village sentries were getting off duty at around 7pm, and lots of roads were left unblocked. At some point blue disaster relief tents began appearing, and sentries were on guard 24 hours a day, and lots of unguarded roads got guards. At the height of the panic, people in many villages and in Old Town were given “permits” to come and go, with permission for only one person per family to make one outing every two days. This was enforced wildly differently depending on the mood of local authorities. We never even got permits. We always had access to our local food market, which never stopped operating, only disallowed killing of chickens and fish (you could still buy these, but you had to kill them yourself at home). After the permits were issued, the new trend was tracking entries and exits, so village sentries at every blockade point and pharmacies and markets and stores were all issued logbooks and QR codes to scan to track where people had been. I first encountered the demand when I went to a pharmacy in Old Town to buy some earache medicine for my 4-year-old. They asked me to scan the code, but at that moment the image of a woman being dragged screaming into a metal box on the back of a truck in Wuhan that a friend had shared popped into my head, and I said, fuck it, I’ll sign the log, which I did under a fake name and number. I pretend-scanned every time after that, because store owners had zero incentive to check to see if you really did it. Three weeks had passed before we hit crescendo of the panic, with people not being allowed to visit each other in other villages. I was getting angrier and more despondent by the day, feeling increasingly powerless and shut in. My only solace was running the gauntlet with my new bike trailer to smuggle playmates into our house for our kids… and drinking. I was driven particularly crazy by knowing that in terms of epidemiology, it would make sense to seal everything hermetically at first and then gradually loosen, but we started loosey-goosey and got gradually tighter. I finally realized that everything had to do with mass psychology, and levels of anxiety, which I’ll get into later.
About four weeks into the panic, after I’d resigned myself to my fate and had given up hope that it would ever end, little positive signs started appearing. The province announced that Dali was a medium-risk zone, and that any zone reduced to low-risk would have to remove all sentries and allow life to return to normal. A few days later the announcement came that we were officially a low-risk zone. Owing to inertia, the local villages dragged their feet, all to varying degrees, but within five days all the blockages were removed. Sentries and blue tents disappeared. We went freely to friends’ houses, and them to ours. On first seeing some friends for the first time in a month, it felt like we’d just been through the Blitz. I could barely believe it would last, but things have continued to loosen up. Now restaurants and cafes are open, although with hardly any patrons, even now, a full two months after the panic started. I can’t know how serious the threat really was, and to what extent the measures taken helped prevent the epidemic from reaching us, but I am sure of one thing: everybody feels like we’ve been through an ordeal, and everybody, even me, is associating the feeling of deep relief with the fact that we’ve been declared a “white” zone, with no confirmed cases in the entire province. If China’s goal was more about convincing people emotionally that the right thing was done, then they accomplished it.
END OF BROAD STROKES.
Now I’m going into some specific anecdotes and lessons learned from the ordeal. Kudos for making it this far. Continue at your own peril, although I assume most of you in the US ought to be long on time these days!
Emotional phase shifts
Before I go on, I have to make careful note of my own emotional states during the ordeal. As I said, I was immediately skeptical, and that mostly comes from my innate disdain for authority. Nobody could convince me that this was anything more than a bad flu. Some might call this state “denial,” but considering I’m still not convinced about the magnitude of the threat, let’s call it “disbelief.” This gradually evolved into rage, especially at the controls we faced from local yokels who clearly had no idea what they were doing. I played this Rage Against the Machine song at full volume many many times, singing along especially enthusiastically with “fuck you, I won’t do what you tell me!” In hindsight I realize that these people were just doing the best they could, but this is what I wrote when I started drafting this email before our village was unsealed:
My greatest challenge during this virus panic has been managing my reactions to the overreactions around me. I know, rationally, that most people don’t question the thoughts that bubble out of their unconscious, and they’re mostly poorly educated, and they’re scared, and none of that is their fault. But I still want to throttle them.
I don’t want to throttle them anymore, thankfully. I’m a lover of humanity again, probably more than before, but it was hard to keep the Incredible Hulk from coming out during the ordeal. The phases of grief kept cycling until I finally arrived at acceptance. I really felt: “this is what life will be like forever, so let’s make the best of it!” Once the restrictions were lifted, I felt relief, a giant weight having been lifted from my psyche, followed by realization of how exhausted the tension had made me. And now I feel cautiously optimistic, seeing as things are actually loosening up, and it’”s spring in Dali, with flowers and new leaves and shorts wearing. Do note that my optimism is very cautious, however, something I’ll talk about in the last section.
Ridiculousness
This is the section I’ve been most looking forward to writing. The reactions of the general public to this panic have been the source of both all my rage and all my cathartic laughter. The title of this email comes from a Chinese social media article that completely reversed my opinion of Chinese humor. It’s worth opening just for the pictures. One line reads: “When the Chinese people began to MacGyver themselves to pandemic safety, the virus flinched.” (Thanks to J. D. for helping me “trans-create” the original). I certainly missed the most concentrated ridiculousness in the big cities, but we had our share! Before the villages sealed, I noticed a woman a few doors down from me spraying her entire gate down thoroughly with disinfectant, the way the ancients spread lamb’s blood on their doorjamb to tell the pestilence “you shall not pass!” I heard of other villages having people with pesticide sprayers walking around spraying every concrete surface with bleach water, and then sure enough, it started happening in my village. I’ll never forget the smell of bleach permeating the entire village.
During the height of the registration craze, one village government in our cluster of villages went for the gold medal in vigilance. We live in the southernmost of a dense cluster of administrative villages that all manage village-level affairs separately, but with enormous amounts of alleys and little streets joining the villages. The village immediately to our north blocked the eastern and western entrances with sentries, despite none of the other villages doing so, meaning that it was still very easy to get in and out. One day I took that village road down to the store, because it’s closer, and was accosted by a very angry old woman. I explained that I lived in the same village cluster, and she said, “that’s a different village! Walk on your own village’s roads! These are extraordinary times!” I heard that exact phrase about extraordinary times a dozen or so times during the panic, every time when I was being prevented from doing something reasonable by a vigilante, official or self-appointed. In the very last days of the lockdown, our administrative village threw up makeshift barricades in three alleyways that led to one major road, which was mildly annoying because it blocked my dog-walking route, but still in no way kept us from getting in and out!
The funniest incident for us in Dali, however, was the scandal where our local city government impounded a shipment of masks meant for the government of hard-beset Chongqing, distributing them not to hospitals, but to the real estate companies who have been building massive villa complexes in the area for subsequent distribution to villa owners, with some ending up being scalped second-hand on the Chinese version of eBay. There was nationwide and international news coverage, and lots of heads rolled, and trust was further eroded. And most ridiculously, our lockdown got much tighter and stupider immediately afterward, and everybody was sure it was the city government trying to save face at our expense.
The saga of Mr. Yang
This story epitomizes the ridiculousness. I must back up to a few years ago, when, walking home at around 10 pm, I was accosted by a staggering drunk middle-aged man, fat and balding, reeking of baijiu, whom I’d seen around but never talked to. He told me I owed 300 kuai for parking in the village, and insinuated I should just hand him cash in that moment. I asked if the rule applied to everyone, and he said yes, and I asked if it was the village government, and he said yes, and I said, OK, on the day everybody else pays their 300 kuai, I’ll be there too. He muttered something to himself and walked away. He never talked to me face-to-face again, and nobody ever brought up paying for parking. In the last year or so, he seemed to have developed a disliking to me, cursing me for being a laowai every time he encounters me, especially when I’m driving. I figured he was just another village idiot, of which we have a few (one has shown me his penis on multiple occasions), and decided he wasn’t worth fighting with. Then at the outset of the panic, before I realized how stressed out everybody was already becoming (remember: I was in disbelief), out walking my dogs on our regular route, I walked past him. He was an early-adopter of mask-wearing, so on top of accumulated grievances with him I also felt he was a bitch. He pointed at my dogs and said, “you can’t let dogs run around willy-nilly right now! Next time I see these dogs, I’m going to kill them!” I saw red. I cursed at him in English, anger having blocked my access to the Chinese language, and made the international gesture for “suck my dick.” He rolled off without saying more, and I experienced homicidal fantasies for days, centering on the rear naked choke technique I’m very good at. I can’t remember the last time I was that angry at someone not in my family. Days later I noticed him patrolling with several other masked men around the perimeter of our village, when he pointed at my dogs again and muttered something in Bai (the local language that I can’t speak). As I stewed, I realized he must have thought my dogs were virus vectors, and that he was probably involved with the village government, and that it was very very bad to be in an open fight with someone like that.
A few more days later, returning to the village from skateboarding, walking very wide of where he was on guard duty at the rear of the village, he frantically gestured for me to come over. Against every fiber of my being, I forced myself to walk over and try to find a resolution. First he pointed madly at my face and his masked face, at my face and his face, over and over. When I asked him to use his words, he said “you need to wear a mask!” I said: but that guy behind you isn’t wearing a mask, and he said: “he’ll be fined for that!” The unmasked man laughed. I forced myself to be polite, despite visions of squeezing him lifeless still flashing before my eyes, and found out that he was indeed in the village government. I asked if we had any beef, and he said, in the tone you’d use to address your best friend, “no, but you need to wear a mask!” I gritted my teeth and promised to wear my mask, and he was elated.
Several days later, as I was going out to skateboard, I saw a lot of smoke above our village and people gathering. It was a brush fire! I ran home and grabbed our two buckets and zipped back, and yes, I was doing this largely in part to ingratiate myself with the village, but also because it seemed wrong to ignore something like a spreading fire. By the time I got back, there were at least 15 men with hoses and basins already working on putting it out, more than enough for the task and the only two sources of running water nearby, but they did appreciate the buckets. The man, surnamed Yang, like 90% of the village, was there barking directives in an angry tone, but clearly in charge, and garnering respect. I was glad to have been seen by him and everyone else helping. The fire was out in about 30 minutes. and I met a few more of my neighbors.
Toward the end of the lockdown, we were invited to dinner at our neighbors across the street, the people we’re closest to in the village. After getting drunk on their baijiu for the first time ever (I’ll talk about social capital in a second) I broached the subject of Mr. Yang. The daughter’s husband implied that he has something like Tourette’s syndrome and says awful blunt things all the time, but the villagers think he’s hilarious because he constantly tells everybody he’ll fine them. He said that other than his low EQ and being a drunk, he’s an OK guy. When I said our tensions got high because of my dogs, the father of the family said: “why didn’t you just walk your dogs somewhere else then!?” Village wisdom!
The good things
There were a few upsides to the panic. For one, I got extremely close to my kids, being shut in with them all the damn time. My 4-year-old and I developed a passion for paper airplanes. My infinite gratitude goes out to “The Paper Airplane Guy” and “Foldable Flight” on YouTube. Our house is now never not littered with dozens of models of airplanes. I even find myself often folding planes with a drink to relax after a work day. I also got an incredible amount of translating work done, finishing my massive book project (coming in at 549 pages, single spaced, 10.5 point font) ahead of schedule, along with my US-based work, putting us in great financial shape for the new baby and the next year. I was one of the few people making money this whole time, in fact, but I’ll get into the economic stuff in the last section. The most fun part of the panic was that I got decent at skateboarding. I’d bought a skateboard right when we got back from the US, intending to learn it as my 4-year-old learns his scooter, but once I lost all other exercise outlets, an hour out in the mostly empty streets on my “cruiser” became my daily routine. Now I’m pretty decent even at high speeds ripping down Dali hills. Just yesterday I went out to practice on roads now abysmally full of Chinese drivers, and I found myself wistful for the lockdown.
Jiu-jitsu & booze
I’ve gotten into jiu-jitsu with the fervor of a born-again Christian in the last year. It is the best sport I have ever practiced, and I plan on doing it until my body falls apart. Right after the panic started but before I had caught up emotionally, our group went to our gym, located inside a hotel, for routine training. Halfway through the session, the hotel owner, a very nice woman who is terribly generous with us, appeared at the gym door wearing a mask, startled that we were even there. She said we could finish for the day, but she’d received an order from the government to shut down, with no idea when she could reopen. Undaunted, we planned to meet in my friend A’s house to train, but then his landlord, part of his village government, said no visitors. Our friend whose house is in Yinqiao, 15 km to the north, has a small dojo in it. A ride past on his bike during the day and was told by the sentries to fuck off. So we went at 7:30 one night, after the sentries were off duty, and were let in by the American and Spaniard kung fu guys, who’d planned to just spend the CNY holiday in Dali but got stuck. We managed about five sessions there that way, drinking a little with the other foreigners afterward because we had no other social outlets, before I got a message from the Spaniard that he’d been visited by the village chief and told not to let anybody else in. A few days later the village chief showed up again with some cops and just kicked them out, forcing them to stay in a hotel in Old Town. This is when the depressive part of the lockdown started for me. I have great trouble motivating myself to exercise by myself in the house, yet without vigorous exercise my crazy moodiness comes out. And this is why it’s both a blessing and a curse to be a large-scale brewing and distilling hobbyist during a lockdown, with 5 beers on tap and hundreds of bottles of gin, rum, absinthe, pastis, and all kinds of other liquors sitting around. There were days that I’d start drinking at noon, have to stop working from insobriety at 3 or 4, and watch movies with the kids until everybody went to bed. Besides the drinking I was eating way more than usual from boredom. Thanks to my wife and our giant stash of food, our eating standards didn’t decline at all. My wife came out of the lockdown being in fact 8 months pregnant, and me looking 3 months pregnant. Then a week and a half ago we finally got to practice jiu-jitsu at A’s house, on his roof under the Himalayan sun, which symbolized ultimate defeat over the lockdown for me. A few days later we got our proper gym back. Now I’m rededicated to the healthy life and look only 2 months pregnant!
Mass psychology & social capital
My biggest lesson from this crisis has been the importance of properly dealing with mass psychology. Even though compared to something like Ebola or a war, the threat to our lives was minuscule, the thinking patterns of people around us immediately receded far down their brain stems. It took a lot of willpower to accept that people were acting from fear, and that means irrationally. I can extrapolate what level of thinking would be prevalent during something actually dangerous like a war. God willing, I never forget this lesson: never poke an angry bear; go around him! Americans today say they can’t imagine what drove us to round up Japanese into prison camps in WW2, but let me be clear: having seen what I just saw, I have no doubt that I’m getting rounded up, to wide social approval, with all the other round-eyes if shots are fired between the US and China.
I’m the only foreigner in my village, and there aren’t a lot of “outsider” Chinese here either, which I imagine is why I didn’t feel any overt resentment during the panic. Lots of other places, however, especially around Yinqiao, are “overrun” by “outsiders,” mostly well-off Chinese escaping big cities for a more rural life. There have been widespread reports of locals fucking with outsiders throughout the crisis, with people driving cars with non-local plates being frequently targeted. Interestingly, Han Chinese, who tend to be aloof and condescending to the local Bai, seem to have been targeted more than foreigners, many of whom are gregarious and warm. One French friend living in Yinqiao, who has actively maintained friendships with a lot of his neighbors, reports he was never hindered from coming and going during the lockdown, but an entire family of Beijingers in his village were told they were welcome to leave, but they would not be readmitted.
That leads me to my next point, about social capital. Our social strategy in Dali has centered on “outsiders,” foreign and Chinese, people more like us. We have a broad social network, but it’s scattered geographically around Dali, and we were largely cut off from them during the crisis. We actively chose to eschew the local social system because we convinced ourselves it would be a hassle being invited to everything and having to reciprocate. So despite having lived here for six years, we are not at all incorporated into the village’s social fabric. I don’t know the vast majority of people’s names (despite the fact that you’re right 90% of the time saying “Mr. Yang”). I now realize just how crazy and dangerous this is. It’s especially nuts that I didn’t know that “I’ll fine ya” Mr. Yang was in the village government! Large gatherings are still technically forbidden, but as soon as something approaching normalcy returns, I”m going to throw a big shindig and invite all the neighbors, and learn as many names as I can, and try to figure out the local government hierarchy!
The nature of local government
Although I knew this before, the adage that my friend Louis heard from his dad has been cast into sharp relief: “never try to separate a functionary from his function.” Village government officials are tasked with very menial jobs and not paid well, and so only bossy people without prospects for real advancement in the world (or otherwise people who plan to profit from the office, like one village chief who got canned for scalping masks during the lockdown) are attracted to the job. My big lesson here has been to figure out what their area of jurisdiction is, and what they care about, and to either avoid their area or pander to them if I must wander through their area. They should be directly confronted only in cases of dire need. If you know what they care about, it becomes extremely easy to avoid their controls so long as you appear to be doing what they want. Some of my friends, mostly Chinese ones, got into screaming matches with local officials during the crisis for irrational measures, which God knows I wanted to do, but thankfully I walked myself off that ledge every time. Leave them their functions! It’s all they have!
Blame
I’m getting sick of hearing all the blame being thrown out in every direction for this virus. I’ve heard urban yuppie types complain about the barbarous habit of eating wildlife, introverted types who were happy reading books the entire crisis complain about the gall of some people for coming out to socialize, Americans freaking out at China for not controlling the virus, Chinese freaking out at the rest of the world for not imposing Chinese-style authoritarian measures in their countries and putting the rest of the world at danger, and so on and so on. None of it is helpful. I’m sure that reams of paper got spent producing Chinese government reports after SARS, and some of them probably said in font so big you could read it from the cheap seats: do not cover up information in the event of potential epidemic. And yet information silo’ing is the beating heart of the political system here. Their political system could no more help acting the way it did than ours can help acting the way it does. Shit happens sometimes, people. Instead of flipping out about why the world isn’t configured according to your preferences, adjust to the current reality, and focus on what’s within your control! On one last ranting note, get ready for everybody to use the virus panic to “prove” what they’ve believed all along. We need strong nationalistic leaders like Xi Jinping! We need socialism! We need more investment in this and that and everything else that now suddenly seems so important! *Disclaimer: in my case, what I have believed all along is objectively true.
Going forward
If you made it this far, wow. As I said, my current feeling is cautious optimism. Yunnan went white on the China epidemiology map yesterday, meaning no confirmed cases in the province, but this morning a new case was confirmed having flown in from Spain. We felt the regulations go slack for about a week, but now they’ve begun focusing on people returning from abroad. People returning from “high-risk” countries, including the US now, are being quarantined at their expense in government-chosen hotels. Our friend with the dojo returned from France and spent 9 days going about his business before he was whisked into an ambulance and rushed to the quarantine hotel retroactively, to spend 5 days there, thereby meeting the standard for a 14-day quarantine. He was released yesterday. Beijing just announced anybody returning from anywhere is going to be quarantined for 14 days. If everything we’ve heard so far about the virus is true, it will spread everywhere in the world. Nobody has been able to stop it so far. The UK has announced that they’re not doing anything at all to stop it. That policy sounds harsh, but realistic. If this virus is as contagious as it’s purported to be, it’s only a matter of time before it gets everywhere. China is working overtime to stop the virus from being reimported, but as the virus spreads, this task will grow and consume resources like a cancer, and still some cases will inevitably come through anyway. Given the nature of our globalized economy, there’s just no way to stop international flows of people like this indefinitely, short of going all “closed country” like Edo Japan, which would be national suicide. The UK seems to acknowledge that in advance, and is willing to take a hard blow now, also saving the resources a general quarantine would consume, so that when the virus inevitably comes back with a vengeance this winter, they won’t have to shut down their entire economy. China will eventually be forced to recognize this fact too.
What I’m particularly concerned about is the social fallout that will start appearing after a lot of people have gone many months without income. A lot of people don’t have savings and are renters. Here in Dali I’m already seeing “looking for work” signs posted. Tourism shows no sign of rebooting any time soon. I expect a crime spike in the coming months. The positive is that policies are already appearing encouraging massive relaxation of regulations on new “medium, small, and micro enterprises” as the government surely realizes that only grassroots efforts will get money circulating. My Small Is Beautiful fantasy seems poised to sprout to some degree. As for the US, I keep on hearing a statistic about 40% of American households being unable to put together $1000 in an emergency. Then there’s our utter dependence on globalization for survival, as well as China’s and everybody else’s. In terms of economic survival, I get the feeling that the UK’s policy of “ripping off the band-aid” is going to prove sage in the long run.
That said, I’m happy to be in China right now. Ideally I’d own a self-sufficient farm somewhere in the US with lots of chickens and bullets, but short of that, the one thing I’m sure they won’t allow in China is a breakdown in social stability, unless the entire system goes down, in which case the virus will be the least of our concerns. Thankfully I don’t anticipate that just yet. I’m not all gung-ho nationalism across-the-board, but you do have to admit the system’s merits, and the possibility for disaster stemming from America’s “devil may care” attitude about the masses of people who were already sliding out of the middle class. Time shall tell.
And for the record, we’re not fully back to normal. I’ve been re-registered twice in the last week, every time wondering if they might suddenly change policy and put all foreigners in a camp. My 4-year-old’s kindergarten still doesn’t know when it will open, and there are still guards at entrances to the mountain trails turning people back for God knows what reason. The answer they give now, the same answer we’ve gotten this whole time when we ask any question about a return to normalcy, is “we’re waiting on notice.”
I’ll be waiting on notice from you in the US. I love the hell out of all of you, and I hope to hell the virus isn’t nearly as big a deal as they’ve made it out to be. Just remember: it will end eventually!
Bankrupt Oil Company Trolls Its Banks, Says They May Fail Too
With US shale companies facing a tsunami of defaults, some companies took the initiative and filed for bankruptcy ahead of the (viral) curve, so to speak, well before of the current corona/crude chaos.
One such company is EP Energy, an El Paso Corp spinoff which filed for bankruptcy in 2019 as a result of the shale sector’s renewed slump (and this was when oil was still above $50). So with its its fate already in limbo after a busted rescue deal, and potential liquidation looming as a result of oil prices that just insultingly low, the company added a new possibility of what could go wrong next: the company’s bankers may follow it down the bankruptcy abyss.
In its latest annual report filed late on Wednesday, Bloomberg uncovered that among EP’s list of risk factors the company also included the future of its debtor-in-possession loan which is EP’s primary source of cash, and – in an a delightful case of suicidal snark, the company wondered if that might be cut off, along with funds that would enable it to exit bankruptcy, if its banks were themselves to fail.
“Our primary source of liquidity beyond cash flow from operations is our debtor-in-possession, or DIP Facility. At February 28, 2020, we had $130 million outstanding under the DIP Facility. We have also received an underwritten commitment from the DIP Lenders to convert their DIP Loans and their remaining claims under the RBL Facility into an approximately $629 million exit senior secured reserve-based revolving credit facility.” EP Energy wrote.
“Although we believe that the banks participating in the DIP and Exit Facilities have adequate capital and resources, we can provide no assurance that all of those banks will continue to operate as going concerns in the future, or continue to participate in the facility.“
In other words, it’s gotten so bad even bankrupt shale companies are now mocking their own banks.
While EP didn’t name which banks it was trolling, a quick look at the company’s DIP loans reveals the following cast and crew of usual DIP lending suspects, including JPM, Citi, BMO, RBC, Credit Suisse and several other banks. And since companies – even bankrupt ones – tend to be very careful in what statements they put in their public filings, one almost wonders what EP knows that others don’t.
Even more amusing, this mini soap opera is taking place as EP tries to put together a new plan to exit from Chapter 11 after creditors Apollo Global Management and Elliott Management backed away from a court-approved plan that would have cut more than $3 billion of debt from its balance sheet; a plan that would need the blessing of its current bank syndicate whose appreciation for such “suicidal snark” may be overestimated.
Chicago Mayor Warns, Those Who Go Outside To Exercise Risk Arrest
Chicago Mayor Lori Lightfoot threatened to shut down public areas on Wednesday after becoming increasingly frustrated with people disobeying the COVID-19 stay-at-home order. The mayor’s warning also made clear that anyone breaking the new measure would be fined or even possibly arrested, reported CBS Chicago.
“Stay at home. Only go out for essentials. You have to readjust your thinking. Be smart,” Lightfoot said at a Wednesday afternoon press conference. “Not only will our police be deployed to shut them down if you are not abiding by these orders we will be forced to shut down the parks and lakefront. The situation Is deadly serious and we need you take it deadly seriously.”
Lightfoot said the public is forbidden to spend long periods outdoors amid a virus crisis that is sweeping across the state.
“You cannot go on long bike rides. Playgrounds are shut down. You must abide by the order. Outside, is for a brief respite, not for 5Ks. I can’t emphasize enough that we abide the rules.”
By Wednesday evening, it was unclear if the mayor directed the police to shut down part of the Lakefront Trail community park. A YouTube video surfaced on Wednesday night, showing the incident, where officers told people on the trail to turn around.
Doctor Allison Arwady from the Chicago Department of Public Health said the mayor’s social distancing measures serve as a means to flatten the pandemic curve and slowdown infections in the region.
“We don’t have a vaccine. We don’t have a treatment. Chicago has an A for preparedness. But we are planning for some real worst-case scenarios,” Arwady said. “The next two to three weeks will be the most important time to do everything we can to flatten that curve. Doing that is what will keep our hospitals going.”
As of Thursday morning, Illinois has 1,870 confirmed cases and 19 deaths. Across the US, cases have just hit 69,197, with 1,046 deaths, as the pandemic curve is now exponential.
We noted on Tuesday that the US is still in the acceleration period of the curve, which means things will get uglier in the coming weeks before they get better.
Interim Police Superintendent Charlie Beck said, “the public health order is not an advisory. It is a mandate. If you violate it, you are subject to a fine of $500. If you continue to violate it, you will be subject to arrest.”
No longer three warnings. Interim #CPD Supt. Charlie Beck says people at large gatherings will now only get one warning to disperse. Then – a ticket. @cbschicago pic.twitter.com/WBDUp1S3ni
Last night, the U.S. Senate unanimously passed a $2 trillion “Phase III” emergency aid package to help America recover from the coronavirus lockdown. Previous phases provided funds for testing and paid family leave.
Not one U.S. Senator voted against the legislation: 96-0. Twice during the first hour of Senate debate, two “final” versions were distributed. No one had time to read the final language.
Our organization at OpenTheBooks.com posted an official summary of the legislation’s supplemental $340 billion surge to emergency funding here.
The Republican majority Senate and Leader Mitch McConnell (R-KY) introduced their 250-page version of this coronavirus aid relief and economic security act a week ago. It eventually became the $2 trillion, 883 page CARES Act – Coronavirus Aid, Relief, and Economic Security Act (H.R.748).
Two days ago, in the ramp up to negotiations, House Democrats and Speaker Nancy Pelosi introduced the “Take Responsibility For Workers and Family’s Act” (H.R.6379) – a $2.5 trillion, 1,404 page coronavirus response.
Our auditors dug deeply into McConnell’s Senate bill and compared it to Pelosi’s House bill. While half the nation was “sheltered in place,” here’s what lawmakers — in both parties — considered “essential spending” for coronavirus recovery:
$25 million in the Senate bill went to the John F. Kennedy Center For The Performing Arts in Washington, D.C. During the past ten years, the center received $68.3 million in federal grants (2010-2019). The Kennedy Center has total assets of $557 million. The Pelosi bill earmarked $35 million.
$75 million in the Senate bill funded the Corporation For Public Broadcasting. Why does National Public Radio and Big Bird get a coronavirus subsidy? The Pelosi bill allocated $300 million.
$1.2 billion in the Pelosi bill to require airlines to purchase expensive “renewable” jet fuel. It was $200 million per year in grants (2021-2026) to “develop, transport, and store sustainable aviation fuels that would reduce U.S. greenhouse gas emissions.” The Senate bill eliminated this provision.
People of good will can debate each of these goals, but is it truly emergency spending? For example, what is the public purpose for the Smithsonian Institute receiving an additional $7.5 million in this time of crisis? Both bills provided these funds.
While governors begged for vital medical supplies, the spending packages each contained massive increases even in obscure, small agencies.
An earmarked $1.1 billion in the Pelosi bill would have more than doubled the budgets of The Institute of Museum and Library Services and the National Endowment of the Arts and the Humanities. The Senate bill provided funding of $200 million.
$500 million in the Pelosi bill to The Institute of Museum and Library Services (FY2019 budget: $230 million). This agency is so small that it doesn’t even employ an inspector general. The Senate bill provided $50 million.
$600 million in the Pelosi bill to National Endowment of the Arts and the Humanities (FY2019 budget: $253 million) – In 2017, our study showed eighty-percent of all non-profit grant-making flowed to well-healed organizations with over $1 million in assets. The Senate bill provided $150 million.
Many projects included in the Pelosi bill were stripped in the Senate bill: a $25 billion bailout of the Post Office; requiring federal agencies to use minority banks; and expanded collective bargaining rights for federal employees.
However, even the Senate bill significantly strengthened private-sector unionizing. If a business takes a coronavirus stabilization loan, then they must “remain neutral in any union organizing effort for the term of the loan.”
A quick spotlight on agencies receiving coronavirus recovery in the Senate bill includes:
$88 million to the Peace Corps for “evacuating volunteers and U.S. direct hires from overseas.” The agency just fired all of their 7,300 volunteers working in 61 countries on March 15. The Pelosi bill allocated $90 million.
$250 million to the Internal Revenue Service (IRS). The subsidy would cover “taxpayer services,” “enforcement,” and “operations support.” The Pelosi bill provided $602 million.
$350 million to the State Department for “migration and Refugee Assistance.” This funding would help minimize the virus spread in vulnerable populations. The Pelosi bill earmarked $300 million.
$400 million to the federal Election Assistance Commission to assist the states with “election security grants.” The Pelosi bill provided $4 billion.
$30.8 billion to the Department of Education for “state Fiscal Stabilization Fund” that provides grants to support of elementary and secondary education ($13.5 billion), Higher Ed ($14.25 billion), and State flexibility grants ($3 billion). The Pelosi bill asked for $50 billion.
We reached out to Leader McConnell and Speaker Pelosi for comment.
“The coronavirus epidemic endangers every aspect of American life, and Democrats believe that this historic emergency requires a full-spectrum response to protect our economy and our democracy.”
– Spokesperson Henry Connelly on behalf of Speaker Nancy Pelosi
During the past three years, Republicans and Democrats have helped drain the U.S. Treasury from the left and the right. Our national debt increased from $10 trillion (2008) to $19.6 trillion (2016) to $23.6 trillion (2020).
Coronavirus responses will drive the national debt much higher.
Now, leaders in both parties must honor the sacrifices of American workers and families in a lockdown and safeguard the fiscal health of the country.
Disaster Looms As Millions Of Americans Set To Lose Employer-Sponsored Health Insurance
With a record 3.3 million people filing for unemployment due to the Chinese coronavirus pandemic – the largest number of claims ever recorded in a single week since October, 1982 – millions of Americans stand to lose their employer-sponsored health insurance when they might need it the most, according to Bloomberg.
According to the Kaiser Family Foundation, almost half of Americans receive healthcare coverage through their employer – forcing those who have been laid off to scramble for alternatives. Anyone suffering from a lack of income who has been covering their own plans, including small business owners and self-employed individuals, are also undoubtedly feeling the heat right now as well.
A test is required to determine whether a person has Covid-19, the disease the new coronavirus causes. Serious cases can send people to the emergency room and in some cases to the intensive care unit, a costly out-of-pocket expense.
There are fallbacks for people who find themselves out of work. A program known as Cobra allows some to continue to purchase the insurance they had through their employer, though typically at a much higher out-of-pocket cost. Some may be eligible for Medicaid. And the Centers for Medicare and Medicaid Services is considering reopening the Affordable Care Act exchanges; generally, those health plans can be purchased only during an open-enrollment period late in the year. –Bloomberg
The sword cuts both ways as well – as private insurers who carefully calculate premiums based on anticipated annual expenses are about to get slammed with a spike in expenses out of left field, according to the report.
CVS Health Corp, which acquired insurer Aetna in 2018, described the oncoming train in a Thursday regulatory filing – saying that the situation is developing rapidly and that the damage to their business will depend on the severity and duration of the pandemic, as well as its effect on the economy and how state and local governments respond.
“Those primary drivers are beyond our knowledge and control, and as a result, at this time we cannot reasonably estimate the adverse impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition, but the adverse impact could be material,” the company said.
Meanwhile, Blue Cross Blue Shield Association and America’s Health Insurance Plans sent recommendations to Congress last week aimed at boosting enrollment and covering costs which insurers currently don’t handle. The proposal was not included in Wednesday’s stimulus bill.
Since Federal Reserve resources were barely able to prevent complete collapse in 2008, it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet.
That’s exactly the situation we’re facing right now.
The specter of a global debt crisis suggests the urgency for new liquidity sources, bigger than those that central banks can provide. The logic leads quickly to one currency for the planet.
The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of special drawing rights (SDRs), and this monetary operation will effectively end the dollar’s role as the leading reserve currency.
The Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out.
The IMF could function like a central bank through more frequent issuance of SDRs and by encouraging the use of “private SDRs” by banks and borrowers.
What exactly is an SDR?
The SDR is a form of world money printed by the IMF. It was created in 1969 as the realization of an earlier idea for world money called the “bancor,” proposed by John Maynard Keynes at the Bretton Woods conference in 1944.
The bancor was never adopted, but the SDR has been going strong for 50 years. I am often asked, “If I had 100 SDRs how many dollars would that be worth? How many euros would that be worth?”
There’s a formula for determining that, and as of today there are five currencies in the formula: dollars, sterling, yen, euros and yuan. Those are the five currencies that comprise in the SDR calculation.
The important thing to realize that the SDR is a source of potentially unlimited global liquidity. That’s why SDRs were invented in 1969 (when the world was seeking alternatives to the dollar), and that’s why they will be used in the imminent future.
At the previous rate of progress, it may have taken decades for the SDR to pose a serious challenge to the dollar. But as I’ve said for years, that process could be rapidly accelerated in a financial crisis where the world needed liquidity and the central banks were unable to provide it because they still have not normalized their balance sheets from the last crisis.
“In that case,” I’ve argued previously, “the replacement of the dollar could happen almost overnight.”
Well, guess what?
We’re facing a global financial crisis worse even than 2008. That’s because each crisis is larger than the previous one. The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.
This means a market panic far larger than the Panic of 2008.
SDRs have been used before. They were issued in several tranches during the monetary turmoil between 1971 and 1981 before they were put back on the shelf. In 2009 (also in a time of financial crisis). A new issue of SDRs was distributed to IMF members to provide liquidity after the panic of 2008.
The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. With no issuance of SDRs for 28 years, from 1981–2009, the IMF wanted to rehearse the governance, computational and legal processes for issuing SDRs.
The purpose was partly to alleviate liquidity concerns at the time, but also partly to make sure the system works in case a large new issuance was needed on short notice. The 2009 experience showed the system worked fine.
Since 2009, the IMF has proceeded in slow steps to create a platform for massive new issuances of SDRs and the creation of a deep liquid pool of SDR-denominated assets.
On Jan. 7, 2011, the IMF issued a master plan for replacing the dollar with SDRs. This included the creation of an SDR bond market, SDR dealers, and ancillary facilities such as repos, derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market. A liquid bond market is critical.
The IMF study recommended that the SDR bond market replicate the infrastructure of the U.S. Treasury market, with hedging, financing, settlement and clearance mechanisms substantially similar to those used to support trading in Treasury securities today.
In November 2015, the Executive Committee of the IMF formally voted to admit the Chinese yuan into the basket of currencies into which an SDR is convertible.
In July 2016, the IMF issued a paper calling for the creation of a private SDR bond market. These bonds are called “M-SDRs” (for market SDRs) in contrast to “O-SDRs” (for official SDRs).
In August 2016, the World Bank announced that it would issue SDR-denominated bonds to private purchasers. Industrial and Commercial Bank of China (ICBC), the largest bank in China, will be the lead underwriter on the deal.
In September 2016, the IMF included the Chinese yuan in the SDR basket, giving China seat at the monetary table.
Over the next several years, we will see the issuance of SDRs to transnational organizations, such as the U.N. and World Bank, to be spent on climate change infrastructure and other elite pet projects outside the supervision of any democratically elected bodies. (I call this the New Blueprint for Worldwide Inflation.)
The SDR can be issued in abundance to IMF members and can also be used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world’s largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell.
So the international monetary elite has been awaiting the global liquidity crisis that we’re facing right now. In the not-too-distant future, there will be massive issuances of SDRs to return liquidity to the world. The result will be the end of the dollar as the leading global reserve currency.
SDRs will perhaps never be issued in bank note form and may never be used on an everyday basis by citizens around the world. But even such limited usage does not alter the fact that the SDR is world money controlled by elites.
But monetary resets have happened three times before, in 1914, 1939 and 1971. On average, it happens about every 30 or 40 years. We’re going on 50.
So we’re long overdue.
You’ll still have dollars, but they’ll be local currency like the Mexican peso, for example. But its global dominance will end.
Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years.
A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much.
Individuals will not be allowed to own SDRs, but you can still protect your wealth by buying gold — if you can find any.
