Category: zerohedge

Authored by Patrick Buchanan via Buchanan.org,

“This is the question that is going to dominate the election: How did you perform in the great crisis?”

So says GOP Congressman Tom Cole of Oklahoma in today’s New York Times.

GOP National Committeeman Henry Barbour of Mississippi calls the crisis “a defining moment… The more (Trump) reassures Americans, gives them the facts and delivers results, the harder it will be for Joe Biden.”

Indeed, it is not a stretch to say Trump’s presidency will stand or fall on the resolution of the coronavirus crisis and how Trump is perceived as having led us in that battle. Recent polls appear to confirm that.

Though daily baited by a hostile media for being late to recognize the severity of the crisis, in one Gallup poll a week ago, Trump was at 49% approval, the apogee of his presidency, with 60% of the nation awarding him high marks for his handling of the pandemic.

What was the public’s assessment of how Trump’s antagonists in the media have performed in America’s great medical crisis?

Of 10 institutions, with hospitals first, at 88% approval, the media came in dead last, the only institution whose disapproval, at 55%, exceeded the number of Americans with a favorable opinion of their performance.

The media are paying a price in lost reputation with the nation they claim to represent by reassuming the role of “adversary press” in a social crisis where, whatever one’s view of Donald Trump, the country wants the president to succeed.

If Biden begins to mimic a hostile media, baiting Trump at every turn, pointing out conflicts in his views, Joe will invite the same fate the media seem to have brought upon themselves.

Since that Gallup poll, Trump has been seen daily by millions in the role of commander in chief. He speaks from the podium in the White House briefing room or the Rose Garden just outside the Oval Office. He is invariably flanked by respected leaders in medicine, science, business and economics. All appear as Trump allies, and Trump treats them as his field commanders in the war on the virus.

And Joe Biden? He pops up infrequently in interviews out of the basement of his Delaware home where, sheltering in place, he reads short scripted speeches from a teleprompter.

And Biden’s presence has been wholly eclipsed by daily televised appearances of Gov. Andrew Cuomo, who is at the epicenter of the crisis in New York. Cuomo is taking on the aspect of both rival and partner to Trump.

What Trump is doing calls to mind Richard Nixon’s “Rose Garden strategy” in 1972. Though goaded by the press, Nixon avoided attacking his opponent, George McGovern, and declined to engage him on issues. Instead, Nixon used the Rose Garden to highlight popular initiatives.

Candidate Nixon’s campaign strategy in 1972 was not to campaign.

But if Biden cannot gather crowds to hear him in a time of social distancing, how does he get his message out? How does he attack Trump without appearing to undermine the president in his role as a wartime commander in chief, where America wants Trump to succeed?

How does a basement-bound Biden compete with Trump in the Oval Office, Cabinet Room, East Room and Rose Garden?

Whom does Biden call upon to rival Trump’s instant access to respected leaders eager to come and stand beside the president in the most serious crisis since World War II?

How does Biden recapture the spotlight of Super Tuesday?

Sen. Bernie Sanders wants Biden to come out and debate. But that seems a no-win proposition.

Moreover, when Biden appears on camera, he often seems confused and forgetful, loses his train of thought and doesn’t remember what he came to say. The sense that Biden is losing it is taking hold, and not only on the Republican right.

Biden’s 3-step #coronavirus response plan:

1️⃣“We have to depend on what the president’s going to do right now”
2️⃣“First of all, wait to the cases before anything happens”
3️⃣“The whole idea is he’s got to get in place things we’re shortages of”

Huh⁉️⁉️pic.twitter.com/A9pcoGM1HJ

— Evan Weber 🌅🔥 (@evanlweber) March 31, 2020

Democrats have to be looking closely at Cuomo’s success, as they wonder how Biden will stand up in the debates with Trump six months from now.

And what lies ahead for Democrats when spring turns into summer?

The Tokyo Olympics, scheduled to begin July 24, have been postponed until 2021. The Democratic National Convention, scheduled for Milwaukee even earlier in July, has yet to be postponed.

But if Tokyo recognizes it would be a terrible risk to the health of athletes and spectators to have people come from all over the world to Japan this summer, would it not also be an intolerable risk to have Americans from all 50 states and U.S. territories arrive for a week of mingling in midsummer in Milwaukee?

For Biden to win this election, Trump must lose it.

And the one way Trump can lose it is the perception on the part of a majority of Americans that he has proven an ineffectual president in America’s worst pandemic since the Spanish flu of 1918.

If Trump is seen as the victor over the virus, Biden is toast.

West Texas Intermediate (WTI) spot prices plunged 7.5% to the 19-handle on Sunday evening, hitting lows not seen since 2002. 

WTI has crashed 70% in the last 56 trading sessions amid the COVID-19 crisis triggering a demand bust across the world. As a result, an economic storm risks triggering a shale debt bomb in Texas, jeopardizing the state’s $1.8 trillion economy and may damage crude output from the Permian basin that has more than quadrupled in a decade.

In three weeks’ time, Saudi Arabia and Russia launched an oil price war that has sent WTI prices tumbling 57% and now risks imminent doom for US shale (and its junk bonds). More specifically, Texas accounts for 42% of US crude output and has been hit with twin shocks: one from waning crude demand, and another from the COVID-19 outbreak forcing the state to issue a “stay at home” public health order – restricting the travel of residents.

The collapse in oil prices this time around is more unique than past ones, mostly because demand has evaporated overnight due to a pandemic with no clear timetables of when it will return. A major concern for producers is that the recovery might not be V-shape… 

 “As much a tragedy as the coronavirus is, most states are dealing with one problem. Texas is dealing with two because we’re dealing with coronavirus and the dramatic drop in oil and gas prices,” Dale Craymer, president of the Texas Taxpayers and Research Association and a former state budget director, told Financial Times.

Plains All-American, a pipeline company, was offering WTI per barrel for $17.50 on Friday, a drastic discount from $63 in January. Drillers need about $49 per barrel to stay profitable, a prolonged downturn under $40 for several years could bankrupt 40% of all US shale.  

Texas has been diversifying into other industries such as healthcare, transport, and technology, to make its economy more resilient if oil prices fall. Every $1 decline in WTI price equates to an $85 million loss in tax revenue per year, Craymer’s group estimates.

For the current budget cycle, Texas was expecting oil and gas taxes would generate $5.5 billion, of which $1.6 billion would be transferred to an emergency fund. However, the budget cycle was based on $58 oil prices.

The state is expected to start drawing from its emergency fund as oil and gas taxes plus sales taxes will be significantly lower as the pandemic has likely triggered a depression in the US economy for the second quarter. 

To make matters worse, 155,000 Texans filed for unemployment benefits last week, the most significant increase in a given week in more than three decades.

“As far as the ‘Texas Miracle'” — the state’s oft-touted outperformance of the rest of the US economy — “it’s on ice for the time being,” Craymer said.

Texas oil output is expected to decline in the second half of the year as investments in exploration and drilling contracts are reduced or canceled.

“My outlook on the domestic oil and gas industry has never been bleaker,” one executive told the Dallas Fed. Another grimly joked: “What is the difference between a Texas oilman and a pigeon? The pigeon can put down a deposit on a new Mercedes.”

We noted that Mizuho’s Paul Sankey estimates that the global oil market is incredibly oversupply, and “crude prices could go negative as Saudi and Russian barrels enter the market.”

Authored by Nick Hankoff via The Mises Institute,

The Federal Reserve’s zero interest rate policy and industry bailouts threaten more than just the fragile economy. The very foundation of the social order risks permanent fracturing under this system of moral hazard.

In Human Action, Ludwig von Mises defined society as “joint action and cooperation in which each participant sees the other partner’s success as a means for the attainment of his own.” Without social trust, there is no society. Private property and the division of labor, the hallmarks of a civilization, arise out of cooperation.

In a strictly economic sense, all the malinvestment and capital destruction the Federal Reserve can muster can be overcome in the medium term. Capital gets restructured. However, in the social realm, bad economic policies can do irreversible harm under certain circumstances, especially when money creation is entrusted to a central bank. Yet the Fed is now doubling down on money creation as we see in the recent surprise decision by the Federal Reserve to not only lower interest rates to zero but also enact unlimited QE  — in order to purchase immense amounts of U.S. Treasuries and mortgage-backed securities, among other assets.

The Political Fallout of the New Bailouts

Central banks, however, often work to undermine this cooperation. The latest round of social disruption is seen in the recent surprise decision by the Federal Reserve to not only lower interest rates to zero but also enact unlimited QE  — in order to purchase immense amounts of U.S. Treasuries and mortgage-backed securities, among other assets.

The purchase of U.S. Treasuries and mortgage-backed securities amounts to a bailout to investment bankers and the U.S. government, while the rate drop undercuts vulnerable Americans dependent on savings.

If that sounds familiar, it should be noted that the glaring difference between this drastic move and the last comparable one in 2008, is that 12 years ago a recession was already well underway.

During the phone call news conference for the emergency announcement, Fed chairman Jerome Powell assured reporters that negative interest rates aren’t anticipated to be “appropriate” in the future. Even if that is true — which it probably isn’t — much damage has already been done in the form of asset price inflation which has made housing unaffordable to many while mostly inflating the portfolios of the wealthy.

Many see this and will also see how large influential lobbying groups and huge corporations benefit most from the bailouts. 

Undermining Social Trust

Here is when social trust will get hit the hardest. If it’s already plain to see that the top of the financial food chain can’t be trusted, it can be expected that some Americans will see only degrees of difference between the ones responsible for inflation and those they perceive to be unfair beneficiaries of it.

Consider the late 2018 Pew Research Center survey that found 26 percent of American adults feel they’ve been disadvantaged compared to others their own age. The poll found that the lower the household income and education level, the more likely someone would answer that they themselves were disadvantaged compared to their peers.

While this sentiment might be founded in some truth, the survey also concluded that “low trusters,” those who exhibited low social trust levels, said they had fewer advantages in life 37 percent of the time. The higher the social trust level, the more likely the person answered that they had either equal or more advantages than their peers.

Bailouts will contribute to the disintegration of social trust, to the extent that moral hazard is institutionalized. If it weren’t for the state “rescuing” the market, bankruptcies would open up opportunities to competitors and entrepreneurs eager to serve consumers in pursuit of profits. Instead, how well will consumers be served when business losses are paid back by the force of government?

Moral hazard also extends to the individual level, and in this election year, the Trump administration is fearlessly diving headlong in that direction. It’s currently working out specifics of how to send roughly $2,000 to every taxpayer, as relief to the economic slowdown brought on by governments at all levels in the country. These so-called “covid checks” won’t be disseminated in accordance with new value created or any goods or services brought to market. They’ll simply encourage the behavior that preceded the giveaway: social distancing and idleness. Moreover, the covid checks will contribute to price inflation as more dollars chase a tepidly growing — or even decreasing — number of goods.

The Economics of Central-Bank Fueled Inequality

As increasing wages fail to keep up with the cost of living — whether due to asset-price inflation (i.e., housing) of consumer-price inflation — economic populism and social division will increase.

Even if everyone chose to put off their spending for the next crisis, the Fed’s zero interest rate policy will do them no favors. Those with little time to save up would be even worse off.

As conservative and safe methods of saving are closed off by ultra-low interest rates, “Society’s most vulnerable now must enter the stock market or take other kinds of risks just to hold on to their wealth,” Tom Woods writes in his book The Church and the Market.

With the institutionalized moral hazard and political favoritism created by bailouts comes a culture of division that undermines the common good and the prospects of children and their posterity.

Samuel Gregg writes at the Acton Institute blog about why culture matters for the economy, citing David C. Rose’s book “Why Culture Matters Most.”

Rose stresses the importance of “the inculcation of duty-based moral restraint” above other moralistic calls for altruism and the like, because restraint from certain behaviors is what earns social trust. “Restraint,” however is more or less the opposite of what we’ll see from central bankers and government officials in the coming years.

Society overall is likely to follow.

Even before the March market meltdown, the T-Bill market was starting to exhibit symptoms of shortage which was hardly a surprise: after all, as part of its “not-QE” farce where Powell desperately tried to fool the market that he wasn’t engaging in outright QE so as not to spook investors that things are just as bad as they turned out to be (we all know how that worked out for him now that the Fed is monetizing over $100BN per day) the Federal Reserve was buying $60BN in Bills each month to bail out hedge funds somehow “fix” the repo market. It’s also why in mid-January, before anyone had heard of the Coronavirus, we said that as a result of a huge net drain in Bills  (i.e., upcoming shortage) the Fed would have no choice but to expand its QE to coupon securities in just months (which it did with a bang).

And then just as questions started to swirl about an upcoming Bill shortage, the coronacrisis happened and unleashed a once in a generation scramble for the safety of cash-equivalent securities, chief among them T-Bills making the occasional shortage into the bread shelf at a Brooklyn Costco during the coronavirus quarantine. Naturally, after this surge in demand, Bill yields broke below 0% and turned negative through 3 months even though the Fed has sworn it will never go full NIRP.

It wasn’t just the Fed and institutional traders who rushed into the safety of Bills (which as we explained previously, provided a risk free guaranteed profit if purchased at the minimum auction yield of 0.000% and then sold at a negative yield in the open market) – so did retail investors, and the result was a record surge in Money Market Funds investing in government securities, i.e., Bills…

… as investors staged a furious run out of “prime” (which is a delightful misnomer) money markets.

The result was a “perfect storm” of demand for a security that – along with gold – was suddenly the world’s biggest safe haven.

And, in a bizarre twist, today fund giant Fidelity said it would stop accepting new money into three money market funds that invest in US Treasuries, as it sought to protect existing investors from the dramatic decline in interest rates since the outbreak of coronavirus.

As shown in the chart above, with assets in government money market funds exploding, assets in Fidelity’s three funds soared by more than $23BN to $85BN during this month’s clamor for safe assets, and new money has had to be invested in Bills which over the past two weeks have traded with negative yields, assuring losses for anyone who held them through maturity in a few weeks. As a result, new investments into negative yielding Bills could dilute returns for existing investors in the funds, Fidelity said.

In a note to investors seen by the Financial Times, Fidelity said that its Fidelity Treasury Only Money Market Fund, Fidelity Institutional Money Market Treasury Only Portfolio and Fidelity Institutional Money Market Treasury Portfolio would close to new investors from the end of Tuesday.

“Restricting inflows will help reduce the number of new Treasury securities that the funds will need to purchase,” the investor note said. “That’s important because the newer issues generally have lower yields than the funds’ current holdings, and as such they would affect the funds’ ability to continue to deliver positive net yields to shareholders.”

To say that this is ironic is an understatement: whereas most asset managers would kill to have too much demand for a given asset, in this case it’s just the opposite – the fact that there is a relentless surge of demand for Bills which would only push yields even more negative, has made the fund uneconomical and is forcing Fidelity to impose limits for new investors.

“The faster these funds take in new money, the faster returns head to zero,” said Pete Crane, who runs money market fund data provider Crane Data. “The only glimmer of hope is that the torrential flows into Treasury money market funds has some of them looking to shut their doors. Fidelity is doing this to protect existing investors.”

According to the FT, existing holders of the three affected funds will still be able to add more money. The closures to new investors do not affect the rest of Fidelity’s range of money market funds which invest in Treasury and other government debt.

And yet, as we noted last night, all this could reverse instantly and the record deluge into Bills may be about to end with a bang. As we reported last night, “The Flood Begins: Treasury To Sell Over A Quarter Trillion Bills In 48 Hours“, which means that while until now demand dominated, suddenly investors will get concerned about all the supply that is about to be unleashed.

And in a remarkable shift, whereas most of the T-Bill curve yesterday through 3M was negative, just 24 hours later it is again back in positive territory…

… a staggering overnight reversal.

Subadra Rajappa, SocGen’s head of US rates strategy echoed what we said on Monday, namely that an expected deluge of new issuance of Treasury bills, to fund the record $2tn stimulus package agreed by US legislators last week, could change behavior: “Once you start seeing the supply surge, you might start to see money funds more willing to take in extra cash.”

Which again is an understatement: if and when the realization that the Treasury is about to swamp the globe with its debt dawns on investors as they realize that helicopter money, aka Magic Money Tree has arrived for good, not only will gold be the only money-good instrument, but all those money funds that are turning down cash now will be begging for it tomorrow.

Authored by Mac Slavo via SHTFplan.com,

This is irony at its finest.

The United States Surgeon General used twitter to tell the public to NOT use face masks to protect against the coronavirus because they don’t work, they only work for health care workers. Now, the Centers for Disease Control and Prevention is considering a recommendation that people wear masks when in public.

We all remember this – when Surgeon General Jerome Adams tweet said it all “Stop Buying Masks!”:

Seriously people- STOP BUYING MASKS!

They are NOT effective in preventing general public from catching #Coronavirus, but if healthcare providers can’t get them to care for sick patients, it puts them and our communities at risk!
https://t.co/UxZRwxxKL9

— U.S. Surgeon General (@Surgeon_General) February 29, 2020

He was not alone.

World Health Organization officials Monday said they still recommend people not wear face masks unless they are sick with Covid-19 or caring for someone who is sick.

“There is no specific evidence to suggest that the wearing of masks by the mass population has any potential benefit. In fact, there’s some evidence to suggest the opposite in the misuse of wearing a mask properly or fitting it properly,” Dr. Mike Ryan, executive director of the WHO health emergencies program, said at a media briefing in Geneva, Switzerland, on Monday.

“There also is the issue that we have a massive global shortage,” Ryan said about masks and other medical supplies.

“Right now the people most at risk from this virus are frontline health workers who are exposed to the virus every second of every day. The thought of them not having masks is horrific.”

We were told that face masks weren’t effective at preventing a coronavirus infection unless we are a healthcare worker, but now the CDC is saying otherwise.

There’s still no consensus (meaning someone from the government hasn’t made a decision yet) on whether widespread use of facial coverings would make a significant difference, and some infectious disease experts worry that masks could lull people into a false sense of security and make them less disciplined about social distancing, according to a report by The Washington Post. 

But studies done by doctors in the medical field have shown properly fitting N95 face masks to be about 80% effective.

They are certainly better than nothing and could be used to get people back in public and the economy on a roll again. It’s an “ongoing discussion” however, and nothing has been finalized. The official, who asked to remain anonymous, said the new guidance would make clear that the general public should not use medical masks – including surgical and N95 masks – that are in desperately short supply and needed by health-care workers. So once again, the guidelines would be to “cover your face” not use a respirator that could actually stand a chance at protecting you.

Nassim Taleb had strong feelings about the bullshit…

This is the strongest statistical association I’ve seen w/ respect to the virus. Wear a mask, mandate others to wear masks, & remember that @WHO is criminally incompetent. To repeat:@WHO is criminally incompetent.

PS-Don’t get into elevators, buses, etc. unless your mask in N95 https://t.co/ZCkl3hql9K

— Nassim Nicholas Taleb (@nntaleb) March 31, 2020

At the daily White House briefing Monday, President Trump was asked if everyone should wear nonmedical fabric masks.

“That’s certainly something we could discuss,” Trump said, adding, “it could be something like that for a limited period of time.”

It seems like the government can’t make up their mind on just about anything.  But the one thing they have been doing is expanding their power and getting the docile population in a constant state of fear.

Airbnb CEO Brian Chesky wrote a letter to all hosts informing them that the company is committed to a $250 million bailout to cover some of the cost of COVID-19 cancellations. The canceled check-ins are for March 14 through May 31, Airbnb will pay hosts 25% of what they would’ve received via their cancellation policies, and the “payments will begin to be issued in April.”

Chesky said a separate $10 million Superhost Relief Fund would be designed for “Superhosts who rent out their own home and need help paying their rent or mortgage, plus long-tenured Experience hosts trying to make ends meet. Our employees started this fund with $1 million in donations out of their own pockets, and Joe, Nate and I are personally contributing the remaining $9 million. Starting in April, hosts can apply for grants for up to $5,000 that don’t need to be paid back.”

And here’s where the story gets interesting… 

Of the four million Airbnb hosts across the world, 10% are considered “Superhosts,” and many have taken out mortgages to accumulate properties to build rental portfolios. 

With the travel industry crashed, many of these Superhosts have seen their rental incomes plunge in March and risk missing mortgage payments in the months ahead. Chesky was forced to bailout Superhosts because some of these folks have overextended their leveraged in building an Airbnb portfolio and risk imminent deleveraging.

Highly leveraged Superhosts could be the first domino to fall that triggers a housing bust this year. Superhosts can have one property and or have an extensive portfolio, usually built with leverage. So when rental income goes to zero, that is when some have to make the difficult decision of missing a mortgage payment or having it deferred or liquidate the property to raise cash. These decessions are all happening all at once for tens of thousands of people not just across the world but all over the US and could trigger forced selling of properties into illiquid housing markets in the months ahead.

Some of the horror stories are already playing out on Twitter: 

AirBnB Bubble pic.twitter.com/8Hekb2Y3jp

— Will Meade (@realwillmeade) March 30, 2020

It is hard to feel sympathy for AirBnb superhosts with multiple properties. In the UK at least, house prices are hugely inflated out of the reach of regular incomes and are due a correction.

— Matt Stratford (@mattstratford) March 31, 2020

i know many with downtown Chicago condos overlooking the lake. AirBnB’d out to high end business travelers.

$700-$1000 HOA fees on top of ridiculous property taxes. so even if they do a mtg deferment…. these people are still screwed.

— AGTrader (@ag_trader) March 31, 2020

And just like in 2008, when the rent payments stopped, landlords also felt the crunch and went belly up. What’s happening with highly leveraged Airbnb Superhosts is no different than what happened a decade ago. Again, no one has learned their lesson. And we might have discovered the next big seller that could ruin the real estate market: Airbnb Superhosts that need to get liquid. 

If you’re an @Airbnb Superhost and pay a mortgage on that property, you’re about to take the financial hit of a lifetime.

— rmt2295 (@rmt834) March 24, 2020

Authored by Elias Marat via TheMindUnleashed.com,

We’ve all seen the jokes on social media about how nine months from now a new generation will be born that will eventually be dubbed “Coronials” – and once they come of age, “quaranteens.”

After all, if we’re stuck working from home or self-isolating along with our partner or significant other, it’s only natural and healthy for us to seek solace through sexual activity – and the increase in baby-making activities can naturally result in a miniature “baby boom.”

But as it turns out, the joke may have some basis after all – especially because a global shortage of condoms could deprive couples staying at home from one of the more popular birth control methods.

Reuters reports that Malaysia’s Karex Bhd, a company that is responsible for producing one out of every five condoms globally, spent over a week without producing a single condom at its three factories after the government imposed a lockdown to halt the spread of the coronavirus.

This has resulted in a shortfall of 100 million condoms which normally would be marketed worldwide under such brands as Durex, distributed through aid programs like the United Nations Population Fund, and the U.K.’s National Health Service (NHS).

On Friday, the company was granted permission to resume production under a special exemption for critical industries but with only half of its workforce.

Chief Executive Goh Miah Kiat said:

“It will take time to jumpstart factories and we will struggle to keep up with demand at half capacity.

We are going to see a global shortage of condoms everywhere, which is going to be scary.

My concern is that for a lot of humanitarian programs deep down in Africa, the shortage will not just be two weeks or a month. That shortage can run into months.”

The news comes as condoms rank among toilet paper and hand sanitizer as one of the most sought-after items during the CoViD-19 crisis, reports Highsnobiety.

Earlier this month, sex product retailer Promescent’s CEO Jeff Abraham confirmed that the company saw surging condom sales all month.

Speaking to Business Wire, the executive said:

“In fact, we’ve seen a 54 percent increase in our online sales since the beginning of the pandemic.

With the tremendous effort put forth by so many government and local organizations, we want to do our part to ensure people are continuing to practice safe sex and have adequate access to birth control in a time of social distancing and self-isolation.”

In times of uncertainty and isolation, it’s natural to seek physical and emotional intimacy https://t.co/ybAyWkzgF6

— Jeff Abraham (@JeffAbraham111) March 19, 2020

Condom factories in China, India, and Thailand have also faced disruptions in their operations. Similar problems have also been faced by regional manufacturers of critical protective gear like medical gloves in Malaysia.

A Durex spokesman reassured Reuters that operations would continue as normal, and no supply shortages are anticipated. They added:

“For our consumers, many of whom will be unable to access shops, our Durex online stores remain open for business.”

Goh added that while condom production may face interruptions, the demand for the contraceptive remains stronger than ever. He said:

“The good thing is that the demand for condoms is still very strong because like it or not, it’s still an essential to have.

Given that at this point in time people are probably not planning to have children. It’s not the time, with so much uncertainty.”

In an astounding plea for help, the captain of the nuclear aircraft carrier USS Theodore Roosevelt has urged top command of the US Navy to take drastic action after more than 100 sailors aboard the ship have been infected with the coronavirus.

More than a week ago it started with a handful of COVID-19 cases, which by the end of the week spiked to 36, causing the West Pacific-deployed carrier to dock at a naval station at Guam, ordering infected crew members out of the some 5,000 total into makeshift quarantine facilities, including a basketball gym hastily transformed for that purpose. The San Francisco Chronicle has obtained and published excerpts of an unprecedented plea for help written by the USS Roosevelt’s Captain Brett Crozier to Pentagon leadership:

“This will require a political solution but it is the right thing to do,” wrote Capt. Brett Crozier, a Santa Rosa native, from Guam where his 1,092-foot carrier Theodore Roosevelt docked following a COVID-19 outbreak. “We are not at war. Sailors do not need to die. If we do not act now, we are failing to properly take care of our most trusted asset — our Sailors.”

In the letter Capt. Crozier warned that “Due to a warship’s inherent limitations of space… the spread of the diseast is ongoing and accelerating.” The SF Chronicle described that the letter was issued Monday as the captain fears there will be possible deaths among crew under his command if more resources aren’t immediately allocated. 

It is unclear as yet how many of the crew have been quarantined on land at Guam, and how many still remain aboard the docked carrier. But it appears the ongoing attempts at quarantine and containment are not going fast enough, with less than necessary resources employed. Previously General John Hyten, the vice chairman of the Joint Chiefs of Staff, said testing of the entire crew is expected to take a week minimum.

Crozier further urgently requested “compliant quarantine rooms” on shore in Guam for his entire crew “as soon as possible”. He added, “Removing the majority of personnel from a deployed US nuclear carrier and isolating them for two weeks may seem like an extraordinary measure… this is a necessary risk.”

He outlined specific dangers of large amounts of the crew remaining on board the ship as follows, according to the SF Chronicle: 

The tight quarters on the carrier are “most conducive to spread,” he wrote, including large amounts of sailors in a confined space, shared sleeping quarters, restrooms, workspaces and computers, a common mess hall, meals cooked by exposed personnel, and movement constraints requiring communal contact with ladders and hatches.

The criticisms are aimed at the current strategy of merely moving the numbers of infected and immediate exposures off the ship, while increasing social distancing and disinfecting measures for the majority still on the ship, which he called “ineffective”.

I’ve never seen anything like this.

Captain of Theodore Roosevelt pens a four-page letter pleading for resources, says the situation is rapidly spinning out of control as nearly 200 sailors test positive: https://t.co/OZuJwAQi46

— David B. Larter (@DavidLarter) March 31, 2020

And in perhaps the most unexpected and stunning section of the letter, the captain takes the unprecedented step of pointing out to top brass that focus on battle-readiness in this case will actually lead to potential significant loss of life:

If the Navy focuses on being battle ready, it will lead to “losses to the virus,” Crozier said. The second option, the captain recommended: “Achieve a COVID-free TR.” Methodically clean the ship, while isolating the crew in port with a massive amount of individualized lodging equipment.

The captain’s recommendation is to instead keep only 10% of the crew on board at any given time in order to initiate deep sanitization procedures and crucially to operate the reactor plant, according to the letter.

No doubt the captain’s letter was not meant to go public, especially given America’s enemies and rivals are surely watching very closely. After all it took an ‘invisible enemy’ in the form of a virus infecting over 100 sailors to essentially knock out of commission an entire nuclear aircraft carrier. 

Authored by Ted Dabrowski and John Klingner via Wirepoints.org,

The depth of the financial and economic impact of the Coronavirus is impossible to predict since we don’t know how far the virus will spread or how long the economic shutdown will last. But we do know that pension shortfalls will jump, borrowing will increase and the state budget hole will widen dramatically. Unfortunately, it will take months before all those numbers are reported and summed up.

In the meantime, one number Illinoisans can keep an eye on is the state’s unpaid bill backlog, which currently stands at just over $7.5 billion. The state has been notorious for not paying its bills on time since 2005 and its backlog jumped to $17 billion in 2017.

As the Coronavirus crisis deepens, don’t be surprised if unpaid bills begin rising again.

Keep in mind that the unpaid bill number can be manipulated in many ways – we’ve covered that in detail – so the state can make the backlog look better than it really is. However, the backlog can serve as a limited gauge, in conjunction with other numbers, for how the state’s finances are holding up under the shutdown.

Illinois pols have constantly overpromised pension benefits, passed unbalanced budgets and hiked spending, all of which have left the state with a chronic bill backlog.

There’s a real human cost to that backlog, which has long been an indicator of Illinois’ deadbeat status. Those billions should have already been paid to thousands of contractors across the state, many of them small businesses and social service providers which are among the hardest hit by the shutdown.

The pressures on the state are going to be intense as sales and income taxes and a host of other revenues shrink along with the economic freeze. The Commission on Government Forecasting and Accountability expects revenue losses of over $8 billion for the state over the next few years. Unless the government reduces its operating costs in line with the shutdown – which it shows no signs of doing – expect the backlog to jump.

Unpaid bills reached a high of over $16 billion in 2007, but the state government borrowed $6 billion via long-term bonds to bring the backlog down to just over $9 billion in November of 2017. This time around, unless the federal government steps in, borrowing money will be much more difficult. Barring some type of bailout, it’s easy to see the bill backlog rising again.

For sure, other numbers will eventually reveal the true depth of just how unprepared Illinois was for this crisis. But in the meantime, just follow the unpaid bills.

Read more about the impact of the Coronavirus on Illinois:

• Bad Public Pension Bailout Ideas Now Surfacing

• What next for Illinois?

• State of Illinois provides first look at possible revenue impact from downturn

• Focus On Chicago’s Immediate Crisis, Mayor Lightfoot, Not Political Grandstanding

• ‘Act of God’: Illinois Teachers Get Full Pay, Pension Accrual While Schools Are Closed

• Will Recession Revive Discussion of Municipal Bankruptcy and Bankruptcy-for-States?

• Stock market meltdown, collapsing bond rates will wreak havoc on Illinois’ weakest pension plans

Italy’s 10% mortality rate has been one of the most disturbing mysteries of the global pandemic. Italy’s mortality rate is roughly 20x Germany’s (a relatively benign 0.4%), and many multiples of China’s (roughly 2.5%) rate.

As scientists puzzle over the reason, researchers have proposed a theory that’s being vetted by peers: Italy’s mild flu season left a larger victim pool for COVID-19. This would suggest that the US, which has struggled with more lethal flu seasons, won’t have as large a pool of potential high-risk victims, especially as testing suggests the virus is more widespread than many had expected.

A report by the Italian Ministry of Health found that elderly people and those with chronic diseases who were spared death by the flu from November through January are “outsize” targets for the more lethal novel coronavirus in March.

But thanks to the fact that there were fewer flu deaths , this “led to an increase in the pool of the most vulnerable,” according to the report, which analyzed data from 19 Italian cities through March 21. In other words, when taken alongside flu season deaths, the bump in deaths would be much beyond what would normally be expected for a developed country struggling with a COVID-19 outbreak.

COVID-19 has been spreading in some parts of Italy since early February. In the northern cities that have borne the brunt of Italy’s more than 12,000 deaths, flu mortality among people age 65 and over was 6% below a baseline from previous years. In the cities of central and southern Italy, flu deaths were 3% off the baseline.

Could this account for enough deaths? It’s possible that it could account for at least some of the discrepancy.

A chart shows how deaths among the 65-plus population during the coronavirus outbreak through March 21 has already reached the levels of the previous two flu seasons, and were still below the total flu season deaths from three seasons ago (the 2016-2017 season).

Mild temperatures were credited with the drop in flu deaths.

Understanding the history of Italy’s flu outbreaks could hold the key to explaining its outlandish mortality rate from COVID-19. Italy has reported more than 105,000 confirmed cases, along with 12,428 deaths.