Former Tesco supply chain director Bruno Monteyne warns that a large scale outbreak of coronavirus in the UK could lead to “food riots,” requiring the army to be used to guard supermarkets.
Monteyne said that supermarkets would have to resort to drastic measures and revert to “feed the nation status” under a worse case scenario.
He also cautioned that grocery stores would have trouble stocking shelves and delivering goods if their employees decided to self-isolate.
“Yes, it will be chaotic (and expect pictures of empty shelves),” wrote Mr Monteyne, “but the industry will reduce complexity to keep the country fed.”
He said that the army may need to be drafted in to guard stores and prevent disorder.
UK Health Secretary Matt Hancock said he was “confident” food supplies would not run out and that there was “absolutely no need” to panic-buy.
Hancock also claimed that supermarkets could deliver food to coronavirus patients who had self-isolated, although this claim was immediately put in doubt by one supermarket executive, who said he was “baffled” by the suggestion.
“Matt Hancock has totally made up what he said about working with supermarkets. We haven’t heard anything from government directly,” the executive said, adding, “I’m not sure the government can guarantee all food supply in all instances.”
A source at another supermarket told the BBC that there had been no detailed planning involving government departments about “ensuring uninterrupted food supplies.”
Panic buying continued across the UK today, with supermarket shelves of goods like hand sanitizer, toilet paper and medicine.
The number of coronavirus cases in the UK has now reached 163, with two deaths.
* * *
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Expect Up To 40% Of Tehran’s Population To Be Infected In 2 Weeks: Iranian Health Official
With the daily soaring infection rate and death toll inside Iran officially at 124 deaths amid 4747 confirmed cases as of early Friday — though true numbers are believed much higher — all eyes are on the largely unprepared country given it’s the biggest outbreak epicenter outside the virus’ origin country of China.
Health officials worry that Iran could be a sign of things to come in the much of the rest of the world — a deeply alarming prospect given a member of Iran’s National Committee for Influenza and specialist in infectious diseases, Dr. Masoud Mardani, has just issued a stark warning for the capital city of Tehran, brimming with about 9 million people and over 12 million in the greater metropolitan area.
Dr. Mardai said he expects30 to 40 percent of Tehran’s populationto be infected with coronavirus within the next two weeks.
“Coronavirus is rapidly spreading … we estimate that 30 to 40 percent of Tehran’s population will be infected by the end of this (Persian) month.”
The current Persian month is the last month of the Persian calendar and ends on March 20, Al Arabiya English notes.
According to a summary of his statements given to an Iranian newspaper, he said further:
…an infected person could transmit the virus to four people at the same time. Therefore it is expected that 30-40 per cent of Tehran’s population will be infected with the virus by March.
He pointed out that many Iranians visit health centers and hospitals when they have regular flu, believing it is a coronavirus.
Dr. Mardai is urging people who think they’re sick to stay home instead of potentially infecting overcrowding medical clinics and hospitals.
#coronavirus Iran: Population seeking help in hospitals for coronavirus. “We estimate that 30 to 40% of Tehran’s population will be infected with COVID-19 by March 20,” says Dr. Massoud Mardani, member of Iran’s National Influenza Committee. Tehran population: 12 million. pic.twitter.com/vs8kfsm229
Instead, they should receive treatment at home rather than hospitals in these circumstances. He pointed out that if the patient feels the three distinctive symptoms of the coronavirus; then he must be immediately transferred to the hospital and be subjected to quarantine.
This further means that the next two weeks could see overall global numbers of confirmed cases soar, if his predictions are correct.
Tehran, source: Shutterstock.
Even though Iran’s official confirmed Covid-19 cases are in the thousands, it was over a week ago that specialists were already speculating that the true number had already reached 20,000 at that point.
Inability for rapid and effective testing, as well as alleged lack of transparency especially in the early weeks of the outbreak, means we will likely see numbers explode exponentially as has already been happening over the past days.
Greenville, South Carolina, is hemorrhaging food trucks—despite city efforts to promote itself as a food-truck friendly locale. And overbearing regulations are to blame.
This week, the Greenville Newsreported that rules intended “to make food trucks safer have left some parked for good.”
“Some” may be an understatement. According to the News, 22 of the 32 food trucks that were active in Greenville last year are no longer operating there or—in at least some cases—anywhere at all.
The new rules require food trucks to have exhaust hoods, automatic fire-suppression systems, and other tools and systems in place—along with passing annual fire inspections. Those rules have been in place statewide since the beginning of the year.
While food truck owners aren’t complaining about the fire-code rules per se, the way the city has gone about implementing them has led some to suggest Greenville is treating them differently than it would brick-and-mortar restaurants.
Those complaints have merit. According to the News, other cities in the state have given trucks in their jurisdictions time to come into compliance with the law. But not Greenville, where the rules took effect on January 1.
One food truck owner told the News he only learned of the new fire-code requirements from the city in late November—just weeks before the rules were set to take effect.
“Say a major fire code [modification] came about for all restaurants, you can’t tell me they would have done this the same way to every restaurant in the city limits of Greenville,” Eric Edmondson, a truck owner, told the News.
Edmondson is right. But a closer look at the regulatory climate for food trucks in Greenville also suggests these new rules may be nothing more than the straw that broke the camel’s back. That’s because the city already had some awful food-truck regulations in place.
A 2014 Greenville News piece painted the city as patently unfriendly to the handful of food trucks operating there.
“Though [a] city ordinance passed last year was meant to give food trucks a solid place in downtown, many truck owners have found the restrictions actually hurt their business rather than helped,” the Newsreported then. “While the city has the biggest customer demand for food trucks, the cost to operate and restrictions on where trucks can operate hinder business, food truck owners say.”
The Greenville ordinance requires food trucks to operate in a limited number of designated public parking spots and to be at least 250 feet from each and every brick-and-mortar restaurant unless they get approval from those brick-and-mortar restaurants.
That latter requirement is a notorious food-truck killer.
In Chicago, the city’s infamous ban on food trucks operating within 200 feet of a brick-and-mortar restaurant has helped cause the number of trucks operating in the city to fall by half.
Like Chicago lawmakers, who baldly protect the city’s powerful restaurant interests for no legitimate moral, health, or safety reasons, Greenville’s city council has sought to “balance concerns from restaurant owners,” the News reports. This purported “balance,” as it always does, protects brick-and-mortar restaurants and their landlords while harming food trucks and consumers.
“Our primary goal was to develop a plan whereby existing restaurants can continue to be successful, not feel threatened by food trucks, and introduce the growing food truck industry to Greenville in a profound and meaningful way,” then-Mayor pro tem David Sudduth told WYFF in 2013.
When a city has as its “primary goal” to regulate one industry in order to protect another, competing industry, nothing good—nevermind profound or meaningful—will result.
In a piece last week on the purportedly welcoming business climate in Greenville, TheNew York Times discussed how the city’s successful pitch to larger businesses—including automaker BMW—centered on the city’s status as “a cheap, practical place to do business.” That same piece details how Greenville is home to many of the “the hallmarks of a thriving city[,] like food trucks.”
If food trucks are a hallmark of a thriving city—and I also think they are—then impractical city regulations have ensured Greenville thrives a little less every day.
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Greenville, South Carolina, is hemorrhaging food trucks—despite city efforts to promote itself as a food-truck friendly locale. And overbearing regulations are to blame.
This week, the Greenville Newsreported that rules intended “to make food trucks safer have left some parked for good.”
“Some” may be an understatement. According to the News, 22 of the 32 food trucks that were active in Greenville last year are no longer operating there or—in at least some cases—anywhere at all.
The new rules require food trucks to have exhaust hoods, automatic fire-suppression systems, and other tools and systems in place—along with passing annual fire inspections. Those rules have been in place statewide since the beginning of the year.
While food truck owners aren’t complaining about the fire-code rules per se, the way the city has gone about implementing them has led some to suggest Greenville is treating them differently than it would brick-and-mortar restaurants.
Those complaints have merit. According to the News, other cities in the state have given trucks in their jurisdictions time to come into compliance with the law. But not Greenville, where the rules took effect on January 1.
One food truck owner told the News he only learned of the new fire-code requirements from the city in late November—just weeks before the rules were set to take effect.
“Say a major fire code [modification] came about for all restaurants, you can’t tell me they would have done this the same way to every restaurant in the city limits of Greenville,” Eric Edmondson, a truck owner, told the News.
Edmondson is right. But a closer look at the regulatory climate for food trucks in Greenville also suggests these new rules may be nothing more than the straw that broke the camel’s back. That’s because the city already had some awful food-truck regulations in place.
A 2014 Greenville News piece painted the city as patently unfriendly to the handful of food trucks operating there.
“Though [a] city ordinance passed last year was meant to give food trucks a solid place in downtown, many truck owners have found the restrictions actually hurt their business rather than helped,” the Newsreported then. “While the city has the biggest customer demand for food trucks, the cost to operate and restrictions on where trucks can operate hinder business, food truck owners say.”
The Greenville ordinance requires food trucks to operate in a limited number of designated public parking spots and to be at least 250 feet from each and every brick-and-mortar restaurant unless they get approval from those brick-and-mortar restaurants.
That latter requirement is a notorious food-truck killer.
In Chicago, the city’s infamous ban on food trucks operating within 200 feet of a brick-and-mortar restaurant has helped cause the number of trucks operating in the city to fall by half.
Like Chicago lawmakers, who baldly protect the city’s powerful restaurant interests for no legitimate moral, health, or safety reasons, Greenville’s city council has sought to “balance concerns from restaurant owners,” the News reports. This purported “balance,” as it always does, protects brick-and-mortar restaurants and their landlords while harming food trucks and consumers.
“Our primary goal was to develop a plan whereby existing restaurants can continue to be successful, not feel threatened by food trucks, and introduce the growing food truck industry to Greenville in a profound and meaningful way,” then-Mayor pro tem David Sudduth told WYFF in 2013.
When a city has as its “primary goal” to regulate one industry in order to protect another, competing industry, nothing good—nevermind profound or meaningful—will result.
In a piece last week on the purportedly welcoming business climate in Greenville, TheNew York Times discussed how the city’s successful pitch to larger businesses—including automaker BMW—centered on the city’s status as “a cheap, practical place to do business.” That same piece details how Greenville is home to many of the “the hallmarks of a thriving city[,] like food trucks.”
If food trucks are a hallmark of a thriving city—and I also think they are—then impractical city regulations have ensured Greenville thrives a little less every day.
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We are increasingly operating in a hyperpartisan world in which competing camps of partisan politicians, activists and voters yell at each other across an ideological chasm. This is not likely to be good for institutional norms.
Particularly concerning is the possibility that traditional red lines in American politics that responsible politicians understood could not be crossed might no longer be inviolable. Political limits in a democratic system ultimately depend not on the parchment barriers of constitutional texts but on the tolerance of political elites and the mass public for violations of those limits. It is easier to sustain such limits, however, if we share a common political culture that recognizes the same red lines and the importance of holding them sacrosanct, if there are recognized political incentives for staying within bounds, and if there are few political incentives for straying out of bounds.
As we divide into hostile and polarized political camps, those conditions start to fray. We hold less in common, including a sense of the appropriate boundaries on political action. Political leaders are increasingly cheered on when they fight the other side, and they are increasingly jeered when they seem to be pulling their punches. The more threatening the other political camp seems, the easier it becomes to rationalize using extreme measures to prevent the enemy from succeeding. Charles Evans Hughes once observed that “the power to wage war is the power to wage war successfully.” In a hyperpartisan world, politics looks much more like war, and the kid gloves come off.
I would once have thought that mainstream politicians would think that standing on the steps of the Supreme Court building in front of a crowd and yelling that individual justices would “pay the price” for voting the wrong way in a pending case was outside the bounds of acceptable political practice. Sharp criticism of judicial behavior is a familiar feature of American political rhetoric. Even presidents have indulged in it, sometimes in particularly provocative ways. Judges have been called wrong, activists, and politicians in robes. They are not normally threatened. That an experienced Senate minority leader would indulge in such tactics, and enjoy the cheering of the crowd for doing so, suggests that the red lines that help protect the independence and authority of the federal courts are not what they once were.
Defiance of federal judicial orders has long been one of those red lines as well. As Alexander Hamilton promised, the courts exercise neither force nor will. They possess only judgment. The strength of the institution depends on the willingness of political leaders to defer to judicial pronouncements. The political leaders of the federal government have generally had reason to be willing to defer to judges, even when they think the judges are wrong and even when deferring to them has costs.
There are those who worry that President Trump, with his notorious affection for norm violations and his unusual willingness to attack judges in personal terms, would be willing to step over the line and actually defy a judicial order. I have thought that unlikely. But worries are not unreasonable. Not only is Trump personally unconventional and unpredictable, but the larger political system itself increasingly rewards unconventional behavior. If Trump defied a judicial order, would the personalities on Fox News and the Republican leadership in the Senate rush in to condemn the president—or would they rationalize or equivocate? Would Republican voters think the president had gone too far and express their dissatisfaction at the ballot box—or would they reluctantly, or gleefully, go along?
It so happens that in the American constitutional culture, congressional subpoenas have carried different weight with the executive branch than judicial orders. Our practices could have developed differently such that defying a congressional subpoena would be a red line, the violation of which would provoke a political uproar appropriate to a usurpation of power. Instead, we treat congressional subpoenas as part of a process of interbranch negotiation and accept some executive intransigence as within the rules of the political and constitutional game.
We have not tended to treat judicial orders so cavalierly. Presidential defiance of a judicial order would raise a specter of lawlessness that would push the system toward a point of crisis. But courts have been appropriately cautious about testing the issue. Judges would prefer to have some confidence that presidents would in fact comply if they were to issue a directive, and judges have frequently found ways to avoid issuing such an order when they did not feel the requisite degree of confidence. Perhaps a panel of the D.C. Circuit was feeling such doubts when it refused to weigh in on whether former White House Counsel Don McGahn had to comply with a subpoena from the House Judiciary Committee. If defiance of a judicial order is no longer a red line that will not be crossed, federal judges would prefer not to expose that fact.
In a hyperpartisan world, the old ways of doing things can no longer be taken for granted. Behavior that was once off limits will come to be tolerated and even rewarded. Politicians on both sides of the political aisle seem to be testing the strength of traditional boundaries, and they may be discovering that the fences are down.
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Over the past week, the number of confirmed cases of COVID-19 outside of China more than tripled once again. Hopefully it is extremely unlikely that such a rapid growth rate will continue, because if it does, there will be more than a million confirmed cases outside of China just a month from now. I don’t even want to imagine the level of fear that would cause, and needless to say that would be absolutely devastating for the entire global economy. Of course if we do get to a million confirmed cases, there won’t be any way to keep it from spreading everywhere on the entire globe, and the ultimate death toll could be unimaginable.
According to the WHO, the current death rate for this outbreak is 3.4 percent, and many experts believe that it will continue to go higher.
That means that a whole lot of people will die if this virus cannot be contained somehow.
Researchers at a major university in Australia modeled seven different scenarios for how a COVID-19 pandemic might go, and in the “best-case scenario” the death toll was 15 million…
New modeling from The Australian National University looks at seven scenarios of how the COVID-19 outbreak might affect the world’s wealth, ranging from low severity to high severity.
Four of the seven scenarios in the paper examine the impact of COVID-19 spreading outside China, ranging from low to high severity. A seventh scenario examines a global impact in which a mild pandemic occurs each year indefinitely.
But even in the low-severity model – or best-case scenario of the seven, which the paper acknowledged were not definitive – ANU researchers estimate a global GDP loss of $2.4 trillion, with an estimated death toll of 15 million.
A pandemic that kills 15 million people would change everything.
I sincerely hope that we don’t see anything like that, but other experts are coming up with similar projections. A Harvard epidemiologist is warning that 40 to 70 percent of the entire global population will eventually catch this virus, and Mike Adams is projecting that more than two million Americans could be dead by July 4th “if domestic travel is not aggressively halted”…
Today I finished tweaking the first draft of a pandemic projection model that simulates the spread of the coronavirus in the United States. The assumptions of the model are explained here, and you will find they are extremely conservative (using R0 value of just 1.82, for example).
The model’s predictions are nothing short of apocalyptic if the virus is allowed to spread without restraint across the United States. According to the model, there will be 2.16 million dead Americans by July 4th if domestic travel is not aggressively halted very soon (see the full projections below). This is not a prediction, since I believe that state governments and the federal government will intervene long before July 4th to declare, essentially, medical martial law.
Let us pray that nothing like this ever happens.
But if we all stick our heads in the sand and pretend that this virus isn’t a major threat, that will just make matters a lot worse.
At this point, the truth is that we don’t really know the true extent of the outbreak in the United States because authorities are just now starting to ramp up testing. Vice-President Pence had hoped to get a million testing kits to local communities this week, but that is simply not going to happen…
Mike Pence admitted Thursday that the administration will not be able to follow meet its promise to deliver one million coronavirus testing kits by the end of the week.
‘We don’t have enough tests today to meet what we anticipate the demand going forward,’ Pence said during a visit to a 3M Company plant in Minnesota Thursday afternoon.
Meanwhile, things are really starting to get weird out there.
The number of confirmed cases in the Seattle area has surged to 70, and authorities have transformed an aging EconoLodge into a “quarantine village”…
The EconoLodge in Kent, which is in the heart of the Seattle–Tacoma metropolitan area, will be America’s first Covid-19 quarantine village. As cases and deaths surge in Washington state, officials aren’t constructing modular hospitals in two weeks like China did last month, but rather buying existing commercial properties, such as motels, and stuffing infected people within.
Markovich said another “Covid-19 quarantine village using modular units now underway at 1100 block of 128th St. in North Seattle. There has been no public announcement about this so far.”
I suppose that such facilities will be able to house a few hundred people, but what are local officials going to do if hundreds of thousands of people get the virus?
Once this virus begins to spread in a community, the number of cases can escalate at a staggering rate. If you have any doubt about this, just look at what is happening in France.
We will probably see that sort of a growth rate in certain communities here in the U.S., and that is truly chilling.
In Iran, the number of confirmed cases has now crossed the 3,500 mark, and it is being reported that “dozens of bodies” are piling up in Iranian morgues…
Dozens of bodies sheathed in black bags line the floor of an Iranian morgue, while workers in protective suits and masks busily walk among them.
It’s unclear which, if any, of the people whose bodies lie in the morgue were infected with the coronavirus gripping the country, in this footage from inside Qom’s Behesht-e Masoumeh morgue.
The official death toll in Iran is only 107 at this point, but many believe that the true number is much, much higher.
As usual, the Iranians are blaming their problems on the United States and Israel. In fact, one Iranian general is publicly claiming that this virus is “a manmade bioweapon” that was purposely deployed against China and Iran…
An Iranian military leader has suggested that the coronavirus is not a naturally occurring disease, and that it is a manmade bioweapon cultivated and released against China and Iran by a ‘hostile state’.
Brigadier General Gholam Reza Jalali, an Iranian officer in charge of the country’s Civil Defense Organization claimed Tuesday that “A study of the consequences of the virus in terms of tolls or the extent of the epidemic and the type of media propaganda over this issue that is aimed at increasing fear and panic among people strengthens the speculations that a biological attack has been launched against China and Iran with economic goals.”
Of course the truth is that this virus has created a major crisis for the entire planet.
In the UK, there is so much anxiety about this virus that British supermarkets are actually preparing for “food riots”…
British supermarkets are prepared for food riots if panic buying becomes widespread in the worst-cast scenario of a coronavirus pandemic, a retail expert has said.
Former Tesco supply chain director Bruno Monteyne said a major outbreak of the virus would result in ‘panic buying, empty shelves and food riots’ but that at this stage retailers would revert to ‘feed the nation’ status to avoid anyone going hungry.
If this outbreak continues to rapidly escalate, the way that we live our lives is going to be dramatically altered. So let us pray for mercy, because we definitely need it.
Sadly, many Americans are not getting prepared for a potential pandemic because they have been told over and over again that this virus is not any more dangerous than the flu.
That is definitely not true. As I explained the other day, the flu usually has a death rate of about 0.1 percent each year, and this virus currently has a death rate of 3.4 percent…
“Globally, about 3.4 percent of reported COVID-19 cases have died,” said WHO Director-General Tedros Adhanom Ghebreyesus at a press briefing Tuesday. The rate describes the proportion of deaths among confirmed cases. And it wasgreater than the previous coronavirus CFR estimate (2 percent in China), far higher than the seasonal flu (which kills 0.1 percent of those infected on average), and even worse than the Spanish flu pandemic (which killed 2 to 3 percent of those infected).
Last century, the Spanish Flu pandemic killed somewhere between 50 million and 100 million people, and this virus currently has an even higher death rate.
Are you starting to understand?
This outbreak has the potential to kill millions upon millions of people, and anyone that is not taking it seriously is not being very wise at all.
Swedish Democrat Leader Tells Migrants “Sweden Is Full!” In Turkey
Turkish authorities have been positioning refugees and migrants on the European border in the last several weeks as Turkish President Recep Tayyip Erdogan has said he’s ready to ‘open the gates’ amid the crisis unfolding in Idlib, Syria.
We noted last week that upwards of 30,000 refugees stood ready near the Turkish border, ready to flood Europe. This prompted anti-immigration Swedish Democrats to travel to the Turkey-Europe border, to discourage migrants from traveling to Sweden, explaining that the Nordic country is “full.”
Swedish Democrat Jimmie Akesson arrived in the border region of Edirne, Turkey, on Tuesday to tell migrants and local police that “Sweden is full.”
“So if you want to go to Sweden, it’s a bad idea. We do not have the capacity to help more people,” Akesson said.
“Everyone wants to go to Europe, primarily in northern Europe. They [migrants] mention Germany and Sweden. I met someone who wants to go to the Netherlands. It’s our part of Europe they want,” Akesson said.
The Swedish Democrat’s Facebook channel said Erdogan “is now flooding Greece and Bulgaria with migrants.”
On Wednesday, Akesson said, “I think it’s important to get your own picture of what it looks like. We have walked around here talking to many people asking where they are going. There are a lot of people who want to go to northern Europe and they mention Sweden and Germany primarily.”
The Swedish Democrat’s Facebook posted Thursday, “In a big interview with Expressen, Migration Minister Morgan Johansson (S) says that Sweden has “one of the tightest refugee legislation in the EU” and “no longer serves as a magnet for refugees “.”
Here’s a video of Akesson on the Turkish-Europe border:
“We need to provide support to Greece to secure the EU’s external border, but also to maintain our own border in Sweden,” he told Swedish Public Broadcaster SVT1, adding that EU border was tested and collapsed back in 2015.
Meanwhile, Turkish Interior Minister Suleyman Soylu announced Thursday the deployment of 1,000 special operations police officers to ensure migrants stay in Europe.
We are increasingly operating in a hyperpartisan world in which competing camps of partisan politicians, activists and voters yell at each other across an ideological chasm. This is not likely to be good for institutional norms.
Particularly concerning is the possibility that traditional red lines in American politics that responsible politicians understood could not be crossed might no longer be inviolable. Political limits in a democratic system ultimately depend not on the parchment barriers of constitutional texts but on the tolerance of political elites and the mass public for violations of those limits. It is easier to sustain such limits, however, if we share a common political culture that recognizes the same red lines and the importance of holding them sacrosanct, if there are recognized political incentives for staying within bounds, and if there are few political incentives for straying out of bounds.
As we divide into hostile and polarized political camps, those conditions start to fray. We hold less in common, including a sense of the appropriate boundaries on political action. Political leaders are increasingly cheered on when they fight the other side, and they are increasingly jeered when they seem to be pulling their punches. The more threatening the other political camp seems, the easier it becomes to rationalize using extreme measures to prevent the enemy from succeeding. Charles Evans Hughes once observed that “the power to wage war is the power to wage war successfully.” In a hyperpartisan world, politics looks much more like war, and the kid gloves come off.
I would once have thought that mainstream politicians would think that standing on the steps of the Supreme Court building in front of a crowd and yelling that individual justices would “pay the price” for voting the wrong way in a pending case was outside the bounds of acceptable political practice. Sharp criticism of judicial behavior is a familiar feature of American political rhetoric. Even presidents have indulged in it, sometimes in particularly provocative ways. Judges have been called wrong, activists, and politicians in robes. They are not normally threatened. That an experienced Senate minority leader would indulge in such tactics, and enjoy the cheering of the crowd for doing so, suggests that the red lines that help protect the independence and authority of the federal courts are not what they once were.
Defiance of federal judicial orders has long been one of those red lines as well. As Alexander Hamilton promised, the courts exercise neither force nor will. They possess only judgment. The strength of the institution depends on the willingness of political leaders to defer to judicial pronouncements. The political leaders of the federal government have generally had reason to be willing to defer to judges, even when they think the judges are wrong and even when deferring to them has costs.
There are those who worry that President Trump, with his notorious affection for norm violations and his unusual willingness to attack judges in personal terms, would be willing to step over the line and actually defy a judicial order. I have thought that unlikely. But worries are not unreasonable. Not only is Trump personally unconventional and unpredictable, but the larger political system itself increasingly rewards unconventional behavior. If Trump defied a judicial order, would the personalities on Fox News and the Republican leadership in the Senate rush in to condemn the president—or would they rationalize or equivocate? Would Republican voters think the president had gone too far and express their dissatisfaction at the ballot box—or would they reluctantly, or gleefully, go along?
It so happens that in the American constitutional culture, congressional subpoenas have carried different weight with the executive branch than judicial orders. Our practices could have developed differently such that defying a congressional subpoena would be a red line, the violation of which would provoke a political uproar appropriate to a usurpation of power. Instead, we treat congressional subpoenas as part of a process of interbranch negotiation and accept some executive intransigence as within the rules of the political and constitutional game.
We have not tended to treat judicial orders so cavalierly. Presidential defiance of a judicial order would raise a specter of lawlessness that would push the system toward a point of crisis. But courts have been appropriately cautious about testing the issue. Judges would prefer to have some confidence that presidents would in fact comply if they were to issue a directive, and judges have frequently found ways to avoid issuing such an order when they did not feel the requisite degree of confidence. Perhaps a panel of the D.C. Circuit was feeling such doubts when it refused to weigh in on whether former White House Counsel Don McGahn had to comply with a subpoena from the House Judiciary Committee. If defiance of a judicial order is no longer a red line that will not be crossed, federal judges would prefer not to expose that fact.
In a hyperpartisan world, the old ways of doing things can no longer be taken for granted. Behavior that was once off limits will come to be tolerated and even rewarded. Politicians on both sides of the political aisle seem to be testing the strength of traditional boundaries, and they may be discovering that the fences are down.
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via IFTTT
The EU and euro face a sudden deterioration in economic conditions due to the coronavirus, which seems certain to widen the differences between Germany and the spendthrift Mediterranean members. But a more immediate problem is the increasing likelihood that the ECB will lose control over financial asset prices, particularly those of government bonds.
In the short-term, it seems likely the euro will rise against the dollar as currency and financial distortions, principally in the fx swap market, are unwound. However, the eurozone faces a developing financial crisis comprised of the following elements: a collapse in economic activity, escalating payment failures, a drastic contraction of bank credit and a collapse in bond prices, as well as the medium used to buy them (the euro).
Eventually, Germany will go it alone by introducing a gold-backed mark, which will only happen after the European Project is finally abandoned.
Introduction
Brexit came as a shock to the political bureaucracy that comprises the European Union. They had, and still have an ostrich-like stance with their heads in the sand and their rear ends exposed to passing dangers. Their economic incompetence has been exposed for all to see as well as their political ineptitude.
Professional politicians with any semblance of a democratic mandate do not work in Brussels but run the nation states that comprise the union. We can criticise national politicians for their ignorance on what makes their electorates wealthier and happier. They are elected by the ignorant for their own ignorance, but soon learn the political ropes that keep them in power. Or they fail and are rapidly ejected, often ending up in Brussels.
The EU is divorced from the need for realistic political representation. It is the collective dustbin for the power-seekers who have either been ejected by their own national electorates, or who are simply unelectable. It is heaven for power wannabes unwilling to face the consequences of their actions. And as the body of these dangerously inept individuals has grown, they have ensured a bureaucratic cancer has spread into national administrations. You can’t do this minister, because Brussels over-rules it. A bureaucratic statis has spread throughout the administrations of member states.
This was what Brexit challenged and exposed. The establishments in Whitehall and Westminster have become full-on eurocrats, dismissive of Britain’s own parliamentary democracy and remain fully committed to the European project.
Our dictionaries tell us that a moral statis is a condition where things do not change, move or adapt, which is definitely true of the EU’s economic policies. Other than the one change, which is its relentless acquisition of power to intervene and distort, this describes Brussels to a tee. The Eurocrats despise free markets, the source of external change, and seek to control them through mountains of suffocating regulations. As arch-protectionists they find it impossible to permit free trade except under duress. The overwhelming majority of the EU’s free trade agreements are with small insignificant states which are immaterial to the bigger picture. As an entrepôt, Britain’s escape will show by comparison just how much the EU has become a socialising command economy. It has too much in common with the old, centralising USSR and its satellites, a lighter touch perhaps and without the gulags.
However, change is a fundamental part of the human condition, and it is coming from a wholly unexpected direction. The spread of the coronavirus is shutting down the European economy. In increasing numbers people are no longer travelling. The spread of the virus, whether through fear or fact, is sharply reducing both production and demand. Indebted businesses will not have the cashflow to pay debt interest and supply chains will be riddled with payment failures. Previously acceptable debt is becoming junk. Banks will need to be rescued from defaulting customers and the euro’s future will be increasingly questioned.
For the moment, eurocrats might be able to get tables in their favoured restaurants more easily while national governments take it on the chin. But this is a temporary situation, which could easily evolve into a threat against the union, serious enough to either end or emasculate it when diametrically opposed interests are enhanced by the course of events and become unreconcilable.
Following Britain’s exit, the squabbling will now begin. Germany, with some commonality with the Netherlands, Austria and Finland has suffered the pain of unsound money to see its citizens’ savings taxed by negative interest rates and having them recycled into supporting bad debtors in the Mediterranean states. The Mediterranean states will demand even more money, taking their debt-to-GDP ratios into the stratosphere. The new boys in the East, Poland, Hungary, the Czechs, Slovaks, Bulgarians, and Romanians, who still think they can change Brussels will realise that as the subsidies from Brussels dry up, they have been sold a pup.
The eurocrats in Brussels lunching on their langoustines will conclude nothing need change and the ECB can deal with it.
If only it was so simple.
The euro – can it survive?
A dusty concept called the regression theorem suggests the most fragile of the major currencies is the euro. This states that in the users’ collective mind its validity as money is derived through experience. The fact it was money yesterday, and in the days, weeks, months and years in the past confirms its status: the longer the better. For the fiat currencies with the longest history, their status as money was derived from their role as a gold substitute, linking their credibility to sound money in the distant past.
In the euro’s case, it derived its original status from the fiat currencies it replaced and is only twenty-one years old. In a generally stable economic and monetary situation the lack of a longer history of regression may not matter, but it could be more easily destabilised than a more established currency at a time of crisis. Despite the Lehman catastrophe, the subsequent banking crisis in Europe and negative interest rates, the euro has so far survived intact.
The fact it has done so is in large measure due to the lack of any alternative for the 340 million eurozone residents. Perhaps its survivability has been enhanced by the convenience of non-cash transactions. In any event, a population mandated to use a state issued currency finds it is in its interests to accept its validity as a circulating medium and only abandons it as a last resort. It is when approaching that point that the regression theorem will matter.
That is a consideration for domestic users of the euro. Meanwhile, foreigners have voted with their feet, driving the rate down in recent years from $1.60 in 2008 to $1.05 in 2016, and from $1.24 in 2018 to $108 recently. It has been the principal counterpart to a rising dollar expressed in the latter’s trade weighted index. Behind these moves there is the net effect of trade balances and speculative flows.
In 2019 the Eurozone’s balance of trade was a positive $175bn, while the US trade deficit was $667bn. The sharp difference between the two economies represented a strong headwind in favour of the euro and against the dollar, but since 2018 it was more than overcome by the pull of interest rate differences. While the ECB maintained a negative deposit rate, US-based hedge funds through the fx swap market shorted the euro and bought dollars to benefit from interest rate differentials.
Since April 2018, when it became clear that President Trump’s tax policies would stimulate the US economy the fx swap trade was on. There can be no knowing the true size of it, but it was significant enough to force the Fed to intervene in the repo market to provide extra liquidity from last September to this day.
The Fed has now reduced its funds rate by fifty basis points to 1.0-1.5% and the 13-week T-bill is leading the way to yet lower yields by yielding only 0.675%. Given that prime brokers fund their inventory at the fed funds rate, they are still losing money, so the Fed will be forced to lower the FFR again to 0.5%-0.75% to avoid disrupting the T-bill market. Even that assumes no further fall in T-bill discounts, but it does mean that interest differentials between dollars and euros will fall again, with consequences.
The declining profitability of fx swaps out of both euros and Japanese yen and into dollars plus increasing liquidity and counterparty risks means hedge funds should be aggressively unwinding their positions. Already, in recent days we have seen the yen rise from 112 to the dollar to 106.9 (note that a decline in the rate signals a stronger yen). And the euro against the dollar has gone from under 1.08 to 1.1175. The effect on the dollar’s trade weighted index has been dramatic, as shown in Figure 1 below.
The start of the fx swap trade for hedge funds is highlighted by the solid arrow, when in April 2018 it became clear that President Trump’s fiscal policies would lead to higher dollar rates and bond yields relative to both those of the euro and the yen, but particularly against the euro due to the index’s weighting in favour of it. While the bull market persisted, for most of the time it has been in the form of a weak broadening top delineated by the pecked lines. It is in this context we can see the impact of the coronavirus on dollar exchange rates, with the TWI suddenly falling by about 2½%. If it breaches 96.5, we will have technical confirmation the dollar is due to fall significantly, possibly quickly, against the euro.
In the short term, the unwinding of fx swaps combined with the relative trade imbalances with the dollar are the reason their closure could drive the exchange rate for the euro higher, likely to provoke the ECB into attempts to offset it. Policymakers enamoured of the Taylor rule will argue for deeper negative rates, a move that favours spendthrift governments but does nothing for the real economies in the EU. Worse, it comes at a time when overleveraged eurozone banks will be reducing outstanding bank credit, as loans reflecting dollar swaps positions taken out by both hedge funds and commercial entities are being wound down. And they will also be trying to reduce their loan exposure to businesses whose cashflows are being undermined by the coronavirus. In short, bank credit faces an imploding pull.
The walking shadow of Credit Anstalt returns
Not only will the ECB be trying to kick life back into a dead beast of burden, but commercial banks will be caught in the vice of rising payment failures, bad debts and falling collateral values. It will be read as a highly deflationary situation. To counteract it will surely be a massive expansion of base money by the ECB.
Today’s proxy for an earlier crisis, the Credit Anstalt bank failure in 1931, could be any one of dozens of banks today, significant and less so, throughout the eurozone. What the Austrian banking crisis of eighty years ago showed was the banking system can hide insolvency behind liquidity for considerable periods. In other words, so long as they are not forced to write off non-performing loans and central banks continue to provide them with liquidity banks can continue to trade regardless, which is what eurozone banks and the ECB have been doing for the last ten years.
For this reason, the ECB is should favour forms of quantitative easing, rather than expanding its outright purchases, as the principal means of strengthening bank balance sheets while funding fiscal deficits. It is bank reserves that now need bolstering as well as maintaining bond prices. This assumes it can run a steamroller over any legal challenges from inflation-averse German litigants; if not it will be snookered.
We can be reasonably sure that this forms the basis of contingency plans currently being discussed behind closed doors by the ECB’s panjandrums. They are certain to assume they can still control market prices of national government debt, And until the coronavirus spread, they were even encouraging member states to run yet greater deficits to provide the ECB with feedstock for what has become a monetary system out of control.
There do not appear to be independent estimates of price inflation to guide us as to how remote bond yields have become from reality. No matter. Instead we should note the interdependence between the expansion of the quantity of euros in circulation and asset inflation particularly with respect to government bonds. The future of bond prices has become bound up with the future for the euro itself because purchases of them have been by issuing raw money through the ECB’s asset purchase programmes. One collapses, they will both collapse.
Frenchmen with a sense of history may care to note the similarities between the ECB’s support scheme for eurozone government bonds by buying them with newly minted euros and that of John Law three hundred years ago. Law set up his own bank, which became the government’s bank, and he printed livres, which had become the government’s currency, to buy shares in his Mississippi venture. When his scheme began to falter in late-1719 his Mississippi venture subsequently collapsed, and his livres became valueless by the following September. There is nothing to say that once it commences, a collapse of the euro need take any longer that Law’s livres, particularly given their common provenance in the context of the regression theorem.
The sudden collapse of a fiat currency’s purchasing power is a difficult concept to comprehend, because we naturally think of price volatility to come entirely from the goods and services we buy, and not the money. We automatically assume that higher prices are the consequence of increased demand relative to supply and falling prices the reverse. So how can we say that prices will rise in a recession, or slump, which appears to be in prospect?
The key to understanding this conundrum is that money has an objective value for the purpose of individual transactions only. Its efficacy as a store of value is a separate issue. If the collective users of a currency see it as a poorer store of value today than they perceived yesterday, they will alter their preferences against it accordingly. It is in that context we must understand that a fiat currency can lose the public’s faith in it over a short period of time. But first, we must address changes emanating from the foreign exchanges.
Changes in the euro’s purchasing power are likely to be bound to what happens to the dollar, at least initially. When they unwind, the speculative flows out of the dollar and into euros and yen will give both latter currencies a temporary boost. As noted above, this is likely to encourage the ECB to become more aggressively expansive with respect to monetary policy than it would be otherwise. Deeper negative deposit rates may or may not be introduced. When the speculative flows have unwound, the euro will then face an adjustment to EU bond prices informed by the American experience, with markets then realising that the only buyer is the ECB, funded by the expansion of the quantity of euros while the banks are trying to aggressively reduce their balance sheets. It is similar to the problem John Law faced in January 1720, when his scheme was overwhelmed by sellers.
If, as postulated in an earlier Goldmoney article, the Fed loses control over the pricing of US Treasuries, then the ECB will face similar unsurmountable difficulties. And if, as seems very likely, the ECB responds initially by accelerating its bond price support programme, it will merely succeed in undermining its currency relative to sounder currencies, and particularly gold.
With every passing day, this outcome becomes less remote. The only way it can be stopped is for the ECB to mobilise its own gold reserves and those of its national central banks to return to a gold standard, while ceasing to fund EU governments’ deficits. Apart from wondering if there is some salvation in its gold reserves, it is unlikely the ECB will abandon easily its role in funding government spending.
EU banks at the end of the road
Since the EU’s debt crisis over Greece in 2009 and the subsequent problems with Italy, Spain and Portugal eurozone banks have dedicated their balance sheets to financing government deficits. At a cost to the commercial banks’ own cash flows, negative deposit rates at the ECB have ensured no material losses have arisen from holding short-term government bonds on their balance sheets. And the only other beneficiaries have been the large corporations which through bond issues have managed to lock in zero or even negative interest rates on their debt.
Officially, this has not been the reason behind the ECB’s monetary policies. The stated objective has been to kick-start the EU’s non-financial, non-government sector into economic growth, a policy that has not succeeded and has merely increased unproductive debt at the expense of predominantly German savers. But the problem ahead will now be the ECB’s ability to sustain the government bond bubble.
The coronavirus will make this more or less impossible, because productive output in the real economy is now collapsing. The implications for government borrowing are extremely worrying. All those debt problems of eleven years ago will resurface. This time, Greece’s debt to GDP starts at over 180%, compared with 146% in 2010; Italy at 135% (115%); Spain at 95% (60%); Portugal 122% (96%); and France 98% (85%). And that’s what is on balance sheets. The situation is simply unsustainable, given the combination of a new systemic crisis coupled with likely shut-downs due to coronavirus.
Not only will banks face a rapid escalation of non-performing loans and payment failures, but the bland assumption that the Eurosystem with its TARGET2 imbalances guarantee that the debt rating for Italy or Greece is similar to that of Germany is sure to be challenged. That being the case, not only the commercial banks but the ECB itself will have to contend with substantial losses on their bond holdings from widening spreads.
Nor is the eurozone immune to developments elsewhere. US Treasuries are wildly overpriced when a realistic rate of price inflation is taken into account, instead of the goal-sought 2% approximation of the CPI. With foreigners and the hedge funds liquidating dollar exposure as the Fed begins to lose its grip on the US’s financial markets, US Treasury bond prices are set for a significant derating and eurozone bond markets are sure to be adversely affected.
The scale of banking difficulties already in the pipeline but catalysed by the coronavirus are immense. There are bound to be squabbles over whether to bail in, as the law now requires, or to bail out. The possibility of bail-ins is bound to scare bank bondholders into selling out of all bank-issued bonds and preference shares, spreading a systemic crisis more effectively than traditional bail-outs ever could, where bond holders are protected.
Whichever way you analyse these dynamics, the eurozone’s bond bubble with its negative yields has almost no further upside, and like Icarus is bound to crash, taking not only the Eurosystem and the TARGET2 settlement system with it, but the currency as well.
The demise of the EU
The euro is not the only currency whose future is tied to financial asset bubbles. As described above the first to fail is likely to be the dollar, because the US Government’s finances are more obviously linked to a twin bond and dollar bubble. A more detailed analysis of the dollar’s problems is available here.
For a brief period, the euro should rally against the dollar, if only because foreigners and speculators are up to their necks in dollars and short of euros, positions that will be reversed as the fx swap market implodes. It will be after that imbalance has worked its way out that the euro will be in freefall against sound money, which is gold, and to everyone’s surprise its purchasing power measured in basics, such as food, energy and commodities, will begin to slide.
For now, the Brussels machine is ploughing on regardless. As the nation states take the brunt of their economic collapses on the chin, they will begin to realise that the EU super-state is little more than an obstructive and costly irrelevance. Brexit will increasingly be seen as the precedent for others to leave the sinking ship.
One needs to have little sympathy with the spendthrift member states, whose finances will irretrievably collapse. The former members of the Soviet Union which are now EU members will have lost their subsidies and observe comparative monetary stability in a gold-centric resource-rich Russia and conclude that for them it has been out of the frying pan and into the fire. But the greatest disappointment will be in Germany, suffering their third currency wipe-out in a hundred years.
It is very likely Germany will seek to restore its own currency, utilising her gold reserves in some way. Doubtless she will attempt to reclaim the gold she re-allocated to a failed ECB, but none of it is located in Frankfurt. But even without it she has sufficient gold reserves at home in Frankfurt to turn a future mark into a proper gold substitute. And importantly, there are a few old-school operators at the Bundesbank who understand the importance of an enduring monetary reset.
That will be primarily for Germany, but some other EU member states in the north who have reasonable fiscal control could join them, establishing a new Hanseatic League based on sound money. But it cannot happen while they remain members of a failed European project.
