The Guillotine Mystique

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Last summer, when the short-lived “Capitol Hill Autonomous Zone” in Seattle renamed itself the “Capitol Hill Occupied Protest,” one protester explained to a reporter that the acronym CHOP was a tribute to the Reign of Terror in France more than 200 years ago. “What happened to the people who did not get on board with the French Revolution?” he asked, to which the assembled crowd responded, “CHOPPED!”

This scene was just one manifestation of the guillotine fad that has been sweeping America’s resurgent progressive left. #Guillotine2020 is an actual hashtag on lefty Twitter, mostly (if hyperbolically) dedicated to the malfeasance of Republicans, rich folks, and other baddies. DIY guillotines have been popping up at protests, including ones outside the White House and the Washington, D.C., mansion of Amazon CEO Jeff Bezos. Jacobin magazine, one of the radical left’s most prominent media outlets, has been selling a guillotine poster captioned “Some assembly required”—even though the publication claims its name is a reference to the Haitian Revolution and its “Black Jacobins,” not the French revolutionary faction that perpetrated the Terror in 1793–94.

So far, this revolutionary playacting has been more annoying than terrifying: Much like far-right memes about “helicopter rides,” a reference to extrajudicial executions via helicopter drop, it’s about trolling, not killing, the enemy. But it still signals an embrace of bloodthirsty rhetoric—and of ideological homage to one of history’s bloodier leftist dictatorships.

The new guillotine chic also speaks to the French Revolution’s enduring hold over our cultural imagination. The five-year period from the fall of the Bastille in July 1789 to the fall of the Jacobins in July 1794 has shaped our political language in more ways than we realize. It gave us the terms right and left in their political sense, based simply on the seating of deputies in France’s first National Assembly. It also gave us terror in its political sense, and with it the words terrorism and terrorist. It pioneered violent progressive utopianism and effectively birthed modern conservatism, via Edmund Burke’s Reflections on the Revolution in France. It even influenced fashions, pioneering short haircuts on women in tribute to guillotine victims—who had their hair shorn before execution—in the Terror’s aftermath. (Choker necklaces, apparently, have a similar origin.)

More important, the French Revolution has inspired radical movements for two centuries—notably Russia’s Bolsheviks, who explicitly claimed the Jacobins as their forefathers. Now, a resurgent American left has revived its romance not only with Soviet Communism (even “Uncle Joe” Stalin has a Twitter fan club!) but with Jacobinism—not a good sign for where modern progressivism is headed.

From today’s vantage point, the French Revolution may look like a distant costume drama mostly of interest to history buffs. But look closer, and its relevance to the current moment is striking—whether it’s the paranoid style, the sentimental idealization of the downtrodden, the quest to remake human nature and reset history, or the view that morality is determined by rank in an oppressor/oppressed hierarchy. (“How tenderly oppressors and how severely the oppressed are treated!” scoffed Jacobin leader Maximilien de Robespierre in response to those who deplored the Terror’s cruelty.) One can read a May 1793 letter to revolutionary legend Georges Danton from American citizen and French National Convention member Tom Paine deploring “the spirit of denunciation that now prevails” and think of parallels to current alarm about “cancel culture.”

The stakes in 1790s France, of course, were much higher. Less than a year after that letter was written, the two men met in the Luxembourg prison in Paris—Danton on his way to ultimate cancellation, Paine awaiting the same fate, which he would narrowly escape. But the echoes are undeniable.

Revolution

The French Revolution is often imagined as a broad, simple morality play: A decadent aristocracy and a tyrannical monarchy lord it over downtrodden peasants and commoners; Queen Marie Antoinette dismisses reports of the poor clamoring for bread with “Let them eat cake”; the people revolt and bring down the Bastille’s grim dungeons; royals and aristocrats go to the guillotine; revolutionary leaders become the new tyrants; eventually, they too meet their downfall.

The reality was much more complicated. As Tocqueville later argued in The Old Regime and the French Revolution, revolutions generally happen not when things are at their worst but when there is tangible progress—enough to raise expectations for a better future but not enough to meet those expectations. Toward the end of the 18th century, France was rapidly liberalizing—economically, socially, and politically. The new era was symbolized by Voltaire’s triumphant return to Paris in February 1778, shortly before his death, after 28 years of exile. Even the Bastille was already slated for demolition, and some of its former prisoners had published memoirs about their ordeal to celebrity acclaim. On the minus side, there was the constant crisis. The effects of droughts, poor harvests, and cattle disease were exacerbated by heavy taxes from which the aristocracy and the clergy were mostly exempt. The treasury was depleted not only by profligate spending and Louis XV’s imperial adventurism but by Louis XVI’s aid to America’s rebel colonists. (One underappreciated historical irony is that French involvement in the American Revolution, motivated by the desire to kneecap the British monarchy, helped fuel France’s own revolution—both by popularizing ideas of liberty and by driving the national debt through the roof.) The deregulation of markets spurred innovation but also increased economic insecurity, and fluctuations in the prices of basic goods were commonly blamed on the machinations of wicked speculators.

It’s hardly a stretch to see parallels to America’s present moment, in which turmoil follows several decades of unprecedented strides in civil rights for racial minorities, women, and gays—as well as the depressing reality of pandemic, debt (due in part to foreign wars), and widespread perception that ordinary people’s economic problems stem from being screwed by evil elites.

The clamor for reform and the urgent desire to raise taxes led to the king in May 1789 calling on the Estates-General, an assembly representing the three estates—clergy, aristocracy, and commoners—to compile grievances and make proposals. In June, the delegates of the commoners rebelled, chafing at their inadequate representation compared to the other two estates, and declared themselves a National Assembly representing the entire people. When Louis XVI tried to rein them in by shutting down the assembly hall on the pretext of carpentry work, the mutineers moved to a tennis court near Versailles, joined by most of the clergy’s deputies and by some of the nobles. The king caved.

The events of July 14, 1789—the “official” date of the revolution’s start—began as another episode in this ongoing conflict. On July 11, Louis XVI had fired the popular liberal finance minister Jacques Necker; many worried this was a prelude to a shutdown of the Assembly. The alarm was magnified because, fearing riots, the king had ordered troops into Paris, most of them Swiss and German mercenaries. This sparked quick-spreading rumors that the foreign soldiers were planning a massacre.

The Assembly’s armed supporters headed to the Bastille, wanting both to get their hands on the store of ammunition inside the fortress and to strike at a hated symbol of despotism. The rest is history. (In a weird historical footnote, those anti-Bastille passions may have been further inflamed by a troublesome inmate who was moved to an insane asylum a few days before the rebellion, but who until then had regularly shouted out the window, through an improvised megaphone, that the prisoners in the fortress were being slaughtered. It was the Marquis de Sade.)

In August, the Assembly abolished all feudal privileges, established full legal equality for all adult male citizens (the ladies would have to wait another century and a half), issued the Declaration of the Rights of Man and of the Citizen, and set about writing a Constitution. The monarchy limped along for three more years of push and pull between the increasingly radicalized revolutionaries and the resistant royals. Finally, in August 1792, insurgents invaded the Tuileries Palace, where the royal family had been forced to move from Versailles. The king and queen were placed under arrest. Shortly afterward, the National Convention—having been elected to replace the Assembly—formally abolished the monarchy. (Louis the XVI, henceforth known as Citizen Louis Capet after the medieval French dynasty to which he actually wasn’t related, would be guillotined for treason in January of the following year; Marie Antoinette, or “the widow Capet,” in October.)

September 22, the birthday of the French Republic, would become the first day of Year One in the new revolutionary calendar, which also replaced the old months with new metric-based ones named after nature’s cycles (Thermidor for heat, Germinal for germination, etc.). This dramatic move predated the “Year Zero” of the Khmer Rouge by nearly 200 years—and anticipated the mindset of many American progressives, who, though they may not want to literally reset time, do want to cancel America’s slaveholding Founders.

It was not even Year Two before things got to the point summed up in a famous phrase, apparently first uttered in March 1793 by Convention member Pierre Vergniaud: “Like Saturn, the Revolution devours its own children.” (“The left eating its own”—a phrase often applied these days to purges of alleged racists, misogynists, or transphobes—is a tradition that began as soon as there was a left.)

Two months after Vergniaud spoke those prophetic words, an angry mob organized by Jacobin radicals invaded the Convention to force his expulsion and that of his fellow Girondins, an informal bloc of moderates who mostly hailed from the southern Gironde region. Two years earlier, the Girondins had been the Assembly’s center-left. Now they were the conservatives, hated by Paris militants for rejecting price controls amid a food shortage and for having waffled on the execution of the former king. Power was now in the hands of the hardcore Jacobins (named after their club’s location in the Rue St. Jacques, or St. Jacob Street).

From late July, Robespierre and two close allies, Georges Couthon and Louis-Antoine de Saint-Just, were in full control of the 12-member Committee of Public Safety. Twenty-two Girondins were executed in October 1793, among them the journalist Jacques Pierre Brissot, a onetime prisoner of the Bastille and founder of continental Europe’s first anti-slavery society, Les Amis des Noirs (“The Friends of Blacks”). Other Girondins who had fled Paris were killed or committed suicide while on the run.

Casualties of the anti-Girondin purge included the pioneering feminist and abolitionist Olympe de Gouges, who had penned a bold Declaration of the Rights of Woman and of the Female Citizen. Paine, a Girondin ally who had argued for sparing the former king’s life in recognition of his assistance to the American Revolution, was also arrested.

By the time the Girondins met their deaths, the revolution had reached its bloodiest phase, known as the Reign of Terror. The Law of Suspects, passed in September 1793, gave local revolutionary committees the power to arrest anyone who “by their conduct, relations or language spoken or written have shown themselves partisans of tyranny or federalism”—i.e., greater regional autonomy—”and enemies of liberty.” At least 200,000 people were arrested around the country; some 17,000 were guillotined, and about 10,000 died in prison. That doesn’t include the tens, possibly hundreds, of thousands massacred in rebellious provinces, especially the Vendée, where some historians believe reprisals were nothing short of a genocide—if that term can be applied to extermination directed at the population of a region, rather than an ethnicity or religion.

In Nantes, suspected counterrevolutionaries, many of them priests, monks, and nuns, were tied up and loaded on barges that were then sunk in the Loire River. In Lyon, the condemned were slaughtered first by cannon grapeshot blasts—which often left mangled, still-living bodies to be finished off with sabers or pistols—and then by more conventional firing squads. Even Robespierre thought that was a bit much and recalled the commissars in charge, Jean-Baptiste Carrier and Joseph Fouché. (Those two, sensing peril to their own necks, would eventually help engineer the anti-Robespierre coup that ended the Terror. Carrier still went to the guillotine. Fouché, the revolution’s ultimate survivor, later served as chief of police under Napoleon and, briefly, under the restored Bourbon monarchy.)

In spring 1794, purges began within the Jacobin ranks. First fell the ultraradicals, known as les Enragés (“the Rabid”), and their ringleader, Jacques René Hébert, who wanted more terror, more de-Christianization, and more war on the rich. Robespierre despised the Hébertistes as amoral atheists with no respect for property or propriety. Their sworn enemies, “the Indulgents,” led by Danton and Camille Desmoulins—onetime radical icons who now wanted a Committee of Clemency to review the cases of detainees—followed in less than two weeks. Desmoulins, whose fiery speech in a Paris café had helped launch the attack on the Bastille, shouted himself hoarse on his final journey, in the frantic hope that he could rouse the people to defend their tribunes. Danton, resigned to his fate, at one point reportedly bellowed, “You’ll follow me soon, Robespierre!” (Narrator: He did.)

Desmoulins, whose famous September 1789 pamphlet, The Lamppost’s Speech to Parisians, excused the summary mob executions of several “enemies” after the fall of the Bastille, was one of the many revolutionaries who discovered the hard way that cheerleading for violence has consequences. (To his credit, Desmoulins shrank back from those consequences before they affected him directly: He was shaken by the lynching of royalist pamphleteer François-Louis Suleau, his ideological adversary and ex–school friend, in August 1792 and was consumed by guilt after the execution of the Girondins, whom he had viciously trashed in a pamphlet.)

Hébert was another. A prototypical “dirtbag leftist” who had ridiculed Terror victims in obscene tirades spiced up with witty euphemisms like “the national razor,” “playing the hot hand,” and “looking through the republican window,” he showed far less fortitude than his targets when it was his turn. (“We thought he’d have more courage, but he died like a fucker,” observed one of the jeering spectators, according to a government agent’s report.) In a Hollywood-worthy postscript, the two men’s widows, Lucile Desmoulins and Marie Hébert, were promptly arrested for a nonexistent plot. They bonded in prison and went to the guillotine together a few days after Danton and Desmoulins.

As summer rolled around, the carnage accelerated—especially after the passage of the Prairial Law, which created a broad new range of vaguely defined counterrevolutionary crimes (such as “slandering patriotism” or seeking to “weaken the purity and energy of revolutionary principles”). Defendants before the Revolutionary Tribunal were no longer allowed to have counsel or call witnesses; jurors were to render verdicts based on their “moral sense,” and the only options were death or acquittal. In about four out of five cases, they chose death.

The guillotine’s toll in Paris spiked from an average of six people a day to an average of 27. The executions were becoming unpopular with the crowds, especially after an 18-year-old working-class girl’s attempt to confront “the tyrant” Robespierre while allegedly carrying two small knives was blown up into an assassination plot for which 53 people were guillotined en masse. The purported conspirators killed that day included a wailing mother with her teenage son and daughter and a young housemaid who looked about 14.

Meanwhile, an actual plot against Robespierre was being hatched within the Convention, spurred by whispers of another big purge coming any day. (The Prairial Law had stripped deputies of immunity, allowing their arrest without impeachment by their colleagues. The Convention had tried to reverse this provision, but Robespierre and Couthon jammed it through.) On July 27—9 Thermidor in the new calendar—a pre-planned mutiny erupted in the Convention, with Robespierre denounced as a tyrant and a murderer. The session ended with the arrest of Robespierre, Saint-Just, and Couthon.

Freed by their supporters and holed up at Paris City Hall, the Hôtel de Ville, Robespierre and his companions hoped that the masses would rise in their defense. But the masses were done with the Jacobins, not only because of the Terror but because of continuing privations: The price controls, or “maximum,” had extended from bread to numerous other goods, leading to rampant shortages and wage freezes. (When the Robespierristes rode the tumbrils to their doom the next day, hecklers in the crowds shouted, “Foutu maximum!“—”Fucking maximum!”)

Troops loyal to the Convention quickly retook the Hôtel de Ville. On 10 Thermidor, Robespierre—his bandaged jaw shattered by a bullet, perhaps from a botched suicide, perhaps from a soldier’s shot—faced the Revolutionary Tribunal with Saint-Just, Couthon, and 19 others. The death sentence was swift.

The new rulers, most of whom were themselves radical Jacobins, had no intention of adopting a more moderate course. While the mass executions stopped, most political prisoners were not released until months later. But the backlash against Jacobin rule had acquired its own momentum. The Reign of Terror was over, and the exhausted Republic descended into a disarray from which, eventually, Napoleon would emerge.

Destruction

Why did the French Revolution go so dramatically wrong?

Burke, who supported the American colonists but took an implacably negative view of the French Revolution early on, argued that while the American cause was rooted in the traditional liberties of Englishmen, the French one championed the abstract, universal, and therefore inherently unworkable “Rights of Man.” But this is a dubious distinction: The Declaration of Independence is just as steeped in liberal universalism as is the Declaration of the Rights of Man, and the Constitution and the Bill of Rights were hardly less radical in sweeping away traditional hierarchies.

But Burke’s disapproval was also driven by the French revolutionaries’ embrace of mob violence, and in that he was much closer to the mark. The revolution’s first acts of barbarism happened on its very first official day. After the Bastille’s surrender, its commandant, Bernard-René Jourdan de Launay, was hacked to death while being led to the Hôtel de Ville; the superintendent of the Paris markets, Jacques de Flesselles—accused of “treason” because the information he gave the insurrectionists about where to get weapons turned out to be wrong—was shot to death on the building’s front steps; and the two men’s severed heads were paraded around on pikes. A few days later, two other officials, Joseph Foullon and Louis Bertier de Sauvigny, accused by the Paris rumor mill of plotting to cause a famine, were dragged from their homes, viciously beaten, and hanged from lampposts.

Perhaps worse than the violence itself was many respectable revolutionaries’ willingness to condone it or explain it away as justifiable anger. After some Assembly members voiced dismay at the lynchings, Antoine Barnave, a lawyer and orator, rebuked his “tender-hearted” colleagues: “Was this blood, then, so pure that one dare not spill it?” (Later, Barnave himself would join the ranks of the “tender-hearted.” His story ends exactly the way one would guess.)

This creepy notion of “impure” enemy blood had a lot of currency. It even made it into the lyrics of “The Marseillaise,” whose refrain ends: “March on, march on, that blood impure/Our fields may irrigate.” From there, it’s only a short step to viewing the counterrevolutionary as Untermensch.

From early on, some of the radicals were openly calling for large-scale bloodshed. In 1790, Jean-Paul Marat, later a Jacobin cult figure, wrote that at one point “five or six hundred heads would have been enough” to save the country, but because the enemy had been given time to plot it would now take five or six thousand. “But even if it need twenty thousand, there is no time for hesitation,” he concluded. Later, Marat reportedly upped the score to 200,000. (He did not live to see the Terror’s peak: In July 1793, a 24-year-old Girondin sympathizer named Charlotte Corday, armed with a large bread knife and with her own ideas of republican heroics, turned the same calculus on Marat himself—later telling her judges that she “killed one man to save 100,000.”)

In Citizens: A Chronicle of the French Revolution, his 1989 history, Simon Schama claimed that “the Terror was merely 1789 with a higher body count.” That has been vigorously debated, but there is certainly a sense in which the revolution’s logic led to what came next. The lynchings of 1789 escalated to mass murder in 1792, when some 1,500 prisoners held in the Paris jails were butchered over three days in the notorious September massacres. The Revolutionary Tribunal was founded in response to these events, ostensibly in the hope of making such extralegal excesses unnecessary by dealing swift and harsh justice—but with procedural safeguards—to the Revolution’s enemies. We know how that worked out.

To some extent, the different fortunes of the American and French Revolutions were the product of the two countries’ very different circumstances. For Americans, King George was across the ocean, and the royal administrators the rebellious colonists had denounced as corrupt usurpers of their liberties were as well. For the French, the monarch and his minions were right there in their midst—and hostile European monarchies were just across the border.

The paranoia that spurred revolutionary violence in France was often directly related either to the threat of war or to actual wartime conditions; thus, the frenzy driving the September massacres was whipped up by rumors that the prisoners were in cahoots with the invading forces of the Austrian-Prussian alliance. It should be noted that France was hardly the victim of one-sided foreign aggression: That invasion itself was a response to France’s declaration of war on Austria in April 1792, a move the revolutionaries saw both as a preemptive strike and as a patriotic endeavor that would unify France and export la liberté to other countries. In one of the Revolution’s many tragic ironies, the war’s biggest cheerleaders were the Girondins, later victims of a radicalization partly driven by the war.

Obviously, American independence was forged in war, and there was no shortage of wartime paranoia on these shores, either. (There was also more violence between Loyalists and Patriots than our narratives often recognize.) But by the time Americans were building their system of government, the nascent republic faced no serious external threat—a very different situation from France.

Religion was another factor. America had a history of pluralism and had no dominant church; in France, the revolutionaries ostensibly embraced religious tolerance, but they were also taking on the Catholic Church as a powerful and oppressive institution. A law passed in 1790 on the “Civil Constitution of the Clergy” required priests to swear allegiance to the state and to be elected; it also banned monastic life. Priests refusing to take the oath were subject to increasingly brutal persecution, as were nuns who continued to wear the habits or to maintain secret religious communities (including the “Martyrs of Compiègne,” 16 nuns and lay sisters guillotined in July 1794 and immortalized in Francis Poulenc’s opera Dialogues of the Carmelites). The anti-Christian persecution, which included rampant pillaging and desecration of churches, exacerbated civil conflicts and alienated peasants. It also placed the revolution on the side of religious repression rather than religious liberty.

Add to this the anti-market animus. The Jacobins were not socialists; their ideal citizen was the self-employed artisan or vendor. But Schama convincingly argues that they were anti-capitalist, insofar as they saw wealth as morally suspect and commerce as corrupt; their confiscatory “revolutionary taxes” on the rich reflected not only wartime necessity but hatred of what modern-day revolutionaries would call “the 1 percent.”

There was, finally, a fundamental difference between the French idea of liberty and the American one. In the Declaration of Independence and the Constitution, power flows from the people to the state. In the Declaration of the Rights of Man, “the principle of any sovereignty resides essentially in the Nation,” a superentity that figures prominently in French revolutionary rhetoric. (A few years later, one early political theorist of the Revolution, Emmanuel-Joseph Sieyès, would argue that the sacralization of “popular sovereignty” was an essentially “royalist” idea, “a conception destructive of liberty.”) The French Declaration also states that “the law is the expression of the general will,” invoking the dangerously fuzzy, quasi-mystical, Rousseauist notion of a political hive mind.

Partly because of this outlook, French republicanism never developed a strong commitment to the separation of powers. The Declaration of the Rights of Man mentions it as essential to legitimate government (perhaps reflecting Thomas Jefferson’s input). But once the old executive branch was quite literally decapitated, it was never replaced. And the Constitution of 1793 entrusted judicial review to a Court of Appeals whose members were to be appointed annually by the legislative body. The principle of checks and balances did not mesh with the ideal of national unity.

Rousseauist patriotic mysticism reached its height during the rule of the Jacobins, whose ideology was a mix of sentimentalism, puritanism, and death cult. The Terror may have started out as a practical (or paranoid) response to danger, or as an attempt to channel popular vengeance into a regulated outlet. But it eventually became its own raison d’être: an ideological/spiritual cleansing, a sacrificial shedding of “impure blood.” It was, the Swiss historian Siegfried Weichlein writes in the 2011 book Terrorism and Narrative Practice, “part of a vision for a new society and a new man”—one founded on “virtue, which was to be achieved by terror.”

No one exemplified this mentality more than Robespierre, the archetypal homicidal idealist who had started his career as a staunch opponent of capital punishment. (Memoirist and Terror survivor Aimée de Coigny summed him up in a pithy line in her diary: “Monsieur de Robespierre may have loved the people, humanity, etc., but he did not like men very much, and women not at all.”)

Robespierre’s grand vision was laid out in a February 1794 speech to the Convention titled “The Principles of Political Morality.” The goal of the Republic, he declared, was to fulfill the true human potential that tyranny had warped: Selfishness, frivolity, greed, sensuality, vanity, and social graces would give way to magnanimity, wisdom, reason, and love of goodness, truth, and glory, ushering in “the dawn of the bright day of universal happiness.” Until then, “the despotism of liberty against tyranny” would have to do: “If the spring of popular government in time of peace is virtue, the springs of popular government in revolution are at once virtue and terror. Virtue without terror is fatal; terror without virtue is powerless. Terror is nothing other than justice: prompt, severe, inflexible. It is therefore an emanation of virtue.” Talk of mercy, Robespierre stressed, was dangerously misguided: “To punish the oppressors of humanity is clemency; to forgive them is cruelty.”

Meanwhile, Saint-Just made it clear that the reach of virtuous terror would be very wide: “There is no prosperity to hope for as long as the last enemy of liberty breathes. You have to punish not only the traitors, but even those who are indifferent; you have to punish whoever is passive in the republic, and who does nothing for it.” And, chillingly: “What constitutes a republic is the total destruction of everything that stands opposed to it.”

While the Reign of Terror certainly wasn’t bloodier or more brutal than many earlier episodes of organized violence and repression in European history, it was the first in which people were systematically murdered in the name of a progressive vision, complete with Robespierre’s Orwellian flourishes about the despotism of liberty and the cruelty of mercy. Assessing the French Revolution in 1955, the Israeli historian Jacob Talmon called Jacobinism an experiment in “totalitarian democracy.” The term “totalitarianism” would not come into existence until the 1930s, but in 1795, on the heels of the Reign of Terror, Sieyès uncannily warned that a republic that demanded total devotion from its citizens was no longer a “re-publique” (“common matter”) but a “re-totale.”

Inspiration

The Soviets saw the Jacobins as their forerunners, despite the French rebels’ attachment to deism and private property. Vladimir Lenin referred to Robespierre as a “Bolshevik avant la lettre“; the Russian’s first decree on “monumental propaganda” in April 1918 included Robespierre on the list of 12 great revolutionaries whose statues were to be erected by the October Revolution’s first anniversary. The monument was unveiled on November 3 in a major Moscow park, where a visiting French communist hailed Robespierre as an “honest and devoted revolutionary” slandered by the bourgeoisie.

Three days later, the concrete statue collapsed into a pile of rubble. Some blamed foul play, but the more likely explanation was shoddy construction.

While the Robespierre monument was never rebuilt and a proposed monument to Marat did not happen, the Soviets honored the Jacobins in plenty of other ways. There were Robespierre Streets and Marat Streets in several cities, including Leningrad and Gorky. Later, the Soviet biography series Fiery Revolutionaries, intended for a general audience and especially for young adults, featured the lives of Robespierre, Marat, Saint-Just, and even Danton, though the latter was chided for turning to “counterrevolution” at the end of his life.

In 20th century French historiography, debates about the French Revolution were often a battleground for clashes between pro-Jacobin Marxists such as Albert Soboul and anti-Jacobin liberals such as François Furet—who also argued that treating the Jacobins as a proxy for Bolsheviks was reductive and misleading.

It would certainly be misleading to treat the French Revolution as a mirror for 21st century American politics. Apparent similarities can be deceptive. For instance, when the revolutionaries of 1789 assailed “privileges,” including ones many of them personally possessed, they were talking about very specific legal advantages that could be (and eventually were) abolished by the stroke of a pen. Today, the concept of “privilege” employed by progressives refers to a far more complex and elusive system of benefits.

And yet reading about those events of more than 200 years ago, one cannot help being struck by parallels. The 18th century was its own Information Age, with unprecedented access to media, thanks to strides in printing technology that enabled mass production of cheap newspapers and pamphlets. It was also an era of rapid shifts in social norms. Pre-revolutionary France was plagued by incompetent leadership and polarized between a deeply religious rural population and secularized urbanites. A large portion of its elites flaunted their egalitarian ideas without any intention of giving up their status.

A more disturbing shock of recognition is provided by the key role of paranoid rumors and conspiracy theories in the French Revolution’s events (though, in fairness, paranoia in times of crisis is hardly unique to the French Revolution). In those pre-internet days, rumors—of impending massacres and assassinations, “famine plots,” bandits sent to torch villages—took longer to travel, but a mass panic known as La Grande Peur, or “the Great Fear,” still managed to go viral in the French countryside in July and August 1789, sparking unrest that hastened the abolition of landlord privileges. Social media may not have existed, but a bedraggled man who galloped down the road screaming that armed thugs were burning, raping, and slaughtering in the next village would do just as well—and who needs out-of-context videos when a herd of cows can be mistaken for bandits on the move?

Revolutionary Paris, too, always seemed to be lurching from panic to panic. “Then, the phantom enemy was on the right (those secret gangs waiting to cut the throats of supporters of the National Assembly),” Schama tells me. “The politics are reversed now, with the phantom Satanists, Antifa, etc., conjured up to arm the ultra-right.” But today’s left has its own paranoid tales, starring an assortment of Russians, bots, and missing mailboxes.

And even without guillotines, observers of the American left in 2020 will see themes reminiscent of the French radicals of the 1790s—from the romanticization of the violent mob to the sentimental belief in the fundamental innocence of the oppressed to the speed with which yesterday’s heroes can become today’s reactionaries. Substitute “progressive” for “republican,” and Schama’s description of the Jacobins rings true today: “They remained obsessed by the holy grail of republican purity. Since it would, by definition, remain forever out of reach, its paladins would constantly see themselves confronted by impure soldiers of darkness and crime who stood between them and their prize and who had to be cut down if the Reign of Virtue were ever to be realized.” Saint-Just’s declaration that indifference equals treason is echoed today in the rhetoric of activists like Ibram X. Kendi, who says that it’s not enough to simply not be racist; if you’re not actively anti-racist—an ally in their cause—then you’re complicit in white supremacy.

This doesn’t mean that social justice activists, or even the guillotine-toting revolutionary wannabes in Portland and D.C., are Saint-Justs and Robespierres in waiting. But the Jacobins’ story should be a timely reminder of the dangers of romanticizing righteous violence, demonizing enemies, and fetishizing ideological purity.

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COVID-19 Didn’t Break the Public School System. It Was Already Broken.

covid-19-didnt-break-public-school

We are witnessing an exodus from public schools that’s unprecedented in modern U.S. history. Families are fleeing the traditional system and turning to homeschooling, virtual charters, microschools, and—more controversially—”pandemic pods,” in which families band together to help small groups of kids learn at home.

The result has been an enormous backlash. A recent New York Times opinion article claimed that families forming pods is “the latest in school segregation.” Denver Public Schools issued a formal statement in August urging parents not to unenroll their children—even though the district is not reopening its schools in person—because it is “deeply concerned about the pods’ long-term negative implications for public education and social justice.” Falls Church City Public Schools in Virginia issued a similar statement the next day, pressuring families not to withdraw their children. Administrators were concerned about “pandemic flight” and worried that “an exodus of students” would cause schools to lose money.

The vast majority of students have been out of the classroom for nearly half a year because of the K-12 school closures brought on by the coronavirus pandemic. Although it’s technically back-to-school season, millions of children won’t actually be returning to school buildings. About three-quarters of the nation’s 100 largest public school districts decided not to reopen with any in-person options this fall, which has left families scrambling for alternatives.

We now have substantial data suggesting that the public school system will likely lose millions of students this school year. An August nationwide survey from Gallup suggests that the proportion of students enrolled in traditional public schools might drop by seven percentage points, with a random sample of 214 parents telling pollsters what type of education option they will choose for their oldest child this year—whether that be a public, charter, private, parochial, or homeschool option. Because around 50 million children were enrolled in public schools pre-pandemic, this finding implies that about 3.5 million students may leave the system.

While the direct cause of this wave of departures is the pandemic, the exodus didn’t come out of nowhere. Many families simply realized the school system wasn’t going to be there for them. Some expected the remote learning disaster from the spring to repeat itself. Others didn’t like what they saw going on when they got a closer look at their child’s curriculum at the end of last year. And being offered slightly less poorly choreographed Zoom lessons—or nothing at all—wasn’t enough to keep the skeptics around. For many, COVID-19 was the final push they needed to leave a system that was already barely meeting their needs.

The education establishment is panicked, but there is little it can do to stem the flow once families determine to take matters into their own hands. What remains is the task of restructuring the underlying funding mechanisms to attach money to students instead of institutions, so that more families are empowered to escape a system that isn’t working for them.

The Exodus

As COVID-19 started to spread domestically and schools began to close in the spring, many families struggled. But some discovered that they really liked homeschooling. The pandemic-induced test drive of home-based education gave millions of parents a chance to reassess the factory model. Some families reported that their children were less anxious, more engaged with learning materials, and learning more in a fraction of the time. Other families realized that they could actually make homeschooling work—and decided never to turn back.

In fact, national polling from EdChoice has found each month since March that families are growing more positive about homeschooling as a result of COVID-19. A survey from July found that 74 percent of parents reported having a more favorable view of homeschooling, whereas only 15 percent reported having a less favorable view.

A Google Trends search reveals that public interest in homeschooling reached a peak in mid-July, as it dawned on millions of families that their public schools weren’t necessarily planning on reopening in person.

The August poll from Gallup estimated that the proportion of homeschoolers—defined as students who are not enrolled in a formal school—would double this school year. And a survey conducted in May and June by EdChoice found that 15 percent of families reported they were “very likely” to make the switch to homeschooling full-time this year.

Another national survey by Civis Analytics found that nearly 40 percent of families have disenrolled their children from the school they were supposed to attend because of reopening plans. Notably, this survey suggests that some of these changes could last. About 17 percent of the families who withdrew their children reported that they would not place their children back in the original school even after it’s considered safe to do so.

These indications aren’t limited to surveys. We also now have hard evidence of actual public school enrollment declines across the country. Arizona’s largest school district reported a 5.6 percent decrease in enrollment from last year. Clark County, Nevada, reported a 3.4 percent drop. In Florida’s Orange County, enrollment is down about 9 percent from projections. In Nashville, it’s down 4.5 percent from projections. And as of August 28, over 3,000 students—about 1.6 percent of total enrollment—had filed to withdraw from Virginia’s Fairfax County Public Schools and switch to homeschooling or a private school.

Each of the reported enrollment reductions has been larger for elementary students than for higher grade levels. The drop in Mesa Public Schools in Arizona is around 10 percent for elementary schools and 17 percent for kindergartens. The drop in Dallas Independent School District is about 8 percent for elementary schools. Each of these districts reporting enrollment reductions has announced that they do not plan to reopen with any in-person instruction.

Homeschool filings are also through the roof in many states. Nebraska reported a 21 percent increase from the same time last year. In Vermont the rise is 75 percent; in Wisconsin it’s 128 percent. These spikes have been as large as 175 percent in the biggest school district in Utah, 229 percent in Maricopa County, Arizona, and 288 percent in the state of Texas. So many families filed to homeschool in North Carolina that they crashed the government website.

Pods and Microschools

Pods and microschools are a midway point between modern private schooling and homeschooling. “Microschool” is a broad term to describe groups of around five to 10 children together, often in a home, with a teacher or “guide” to facilitate learning. Many families are now applying the microschooling approach to the current situation and creating “pandemic pods.” These groups allow families to pool resources to cover the costs of private tutors or just to share supervision responsibilities to make home-based education more efficient and affordable. Put differently, microschools and pandemic pods allow families to economize by outsourcing the process of homeschooling. Although many families forming pods are unenrolling their children from the public school system altogether, others are banding together to offset child care costs while their children receive instruction from their traditional public school teachers virtually. In states like Arizona, eligible families can even use a portion of their children’s K-12 education dollars to cover the costs of microschools. One private Facebook group helping families form and find these pods has picked up 41,000 members since it started about a month before the beginning of the school year.

While some families are using pods to administer the virtual curriculums provided by the schools where their children are still enrolled, others have opted out entirely. This trend, perhaps more than any other, is what spooks the public education bureaucracy.

Given that the U.S. spends about $15,000 per public school student per year—and given that districts are partly funded based on enrollment counts—the departure of 3.5 million kids could drain up to $52 billion from the public school system.

The public school monopoly is afraid of this exodus—and for good reason. Arizona’s Chandler Unified School District, for example, already estimated that its expected loss of 1,656 students would lead to a funding shortfall of around $21 million.

Denver Public Schools in August issued a statement noting that “the district loses approximately $10,600” for every student who withdraws. It urged families not only to “stay enrolled in your school!” but also to “reject the notion of school vouchers and stipends,” arguing that allowing public dollars to follow children to the educational setting of their choice would “siphon funds from public education.”

The reality is that the public school system siphons funds from families; school choice returns that funding to its rightful owners.

Private and Charter Schools

A nationally representative survey conducted by Ipsos Public Affairs found that private and charter schools adapted to the lockdown better than did district-run public schools. The survey found that private and charter school teachers were more than twice as likely to meet with students each day—and about 20 percent more likely to introduce new content to their students—than were teachers at traditional public schools. Parents of children in private and charter schools were also at least 50 percent more likely to report being “very satisfied” with the instruction provided during the lockdown than were parents of children in traditional public schools.

Special interests, hoping to protect their monopoly, have been fighting hard to prevent families from having access to these alternatives. Oregon’s teachers union successfully lobbied to make it illegal for families to access virtual charter schools back in March. The Pennsylvania Association of School Administrators likewise pushed to block families from switching to virtual charter schools, and California passed a bill that prevented funding from following children to public charters. One charter school in the Golden State reported that the legislation forced it to put 500 already-admitted students back on the waitlist. The teachers union in Alaska opposed the state’s move to partner with a virtual school that had been successfully providing remote education for decades.

A coalition of 10 teachers unions and the Democratic Socialists of America called for a ban on new charter schools and private school voucher programs, and the Los Angeles teachers union called for a ban on all charter schools.

Families are hitting other government-imposed roadblocks as well. Officials in Montgomery County, Maryland; Dane County, Wisconsin; Sacramento County, California; and Oregon have ordered private schools not to reopen in person, even though day care centers are permissible in each of those places. A private school in Sacramento rebranded as a day care, going so far as to retrain its teachers as child care workers, in an attempt to get around the regulation, but the county ordered it to close anyway.

Massachusetts now requires pandemic pods with more than five unrelated students to be licensed—and paying a private instructor is forbidden. New Mexico is currently under pressure from the U.S. Department of Justice for unconstitutionally limiting private schools to 25 percent capacity while public schools are limited to 50 percent capacity and day cares are permitted to operate at 100 percent capacity.

Unions

Even now, the outflow of students could be staunched if schools reopened. But public schools, especially those in major cities, have been deeply resistant to in-person instruction. Eighty-five percent of the nation’s 20 largest school districts decided not to offer any in-person instruction this fall. New York City’s part-time in-person reopening plan was met with fierce opposition. Teachers groups poured into the streets to protest with props such as fake tombstones and body bags. Amid threats of a teacher strike, Mayor Bill de Blasio pushed back the reopening date to September 21. After more discussions with union officials, he further delayed the reopening of schools until September 29 for elementary schoolers and October 1 for the rest of the student body.

The American Federation of Teachers, which boasts 1.7 million members, threatened “safety strikes” over fall reopening plans. An Arizona school district had to cancel classes in August at the last minute because of a teacher “sick out” that left families out to dry. Families in Kenosha, Wisconsin, found out after 10 p.m. on a Sunday night that public schools weren’t going to be there for students the next morning because 276 teachers called in absent at the last minute. And after pushback from the teachers union for voting to reopen schools in person, the Ft. Worth Independent School District board voted again, at around 3:30 a.m., to delay reopening for two more weeks.

The latest data suggest that these reopening decisions have more to do with union influence and politics than safety. Using Education Week‘s data on the reopening decisions of 835 public school districts, researcher Christos Makridis and I found that districts in places with stronger teachers unions are much less likely to be offering full-time in-person instruction this fall. Even after controlling for several county-level demographic variables, including age, gender, marital status, race, political affiliation, and household income, we found that a 10 percent increase in union power was associated with a 1.3 percentage point reduction in the probability of in-person reopening. In Florida, 79 percent of the 38 school districts included in the dataset are planning to offer full-time in-person instruction. In California, a state with much stronger teachers unions, only 4 percent of the school districts included in the dataset are planning to do the same.

We did not find evidence to suggest that reopening decisions were statistically related to health risk as measured by recent COVID-19 cases or deaths per capita in the county.

These results make sense. Stronger unions are in better positions to get the policies they want. And keeping public schools from reopening in person minimizes any safety risks for union members while keeping benefits for teachers, in terms of job security and wages, about the same.

Yet teachers aren’t the only stakeholders in this debate. Reopening schools without any in-person instruction ignores the needs of families.

Some public school districts in Arizona, California, Wisconsin, North Carolina, Virginia, and Michigan have reopened otherwise-closed public school buildings as “day cares” and started charging families for the service—in addition to what they already pay in property taxes. But if public schools can reopen as day cares, why can’t they reopen as schools?

The answer is that one group of workers is willing to supervise children in person while another group is refusing to do so. Day care workers are watching students at schools while teachers provide remote instruction from their homes. This may be a great deal for teachers, but families and taxpayers are getting the short end of the stick, since they now have to pay two people for the job of one.

Teachers unions also pushed to limit requirements for virtual instruction. In the spring, the Los Angeles teachers union struck a temporary deal with the district to require just four hours of work each day. Some public school districts even attempted to use language from the federal Individuals with Disabilities Education Act as an excuse, in the name of equity, to not provide any virtual instruction to any students. These districts reasoned that they would be contributing to inequality if some students had better access to remote learning than others. Instead of stepping up to the challenge presented by the pandemic, they decided to shut down learning for all children.

In fact, an analysis by the Center on Reinventing Public Education found that only one in three school districts required teachers to deliver any instruction this spring—and less than half of districts expected teachers to take attendance or check in with students on a regular basis. A national survey conducted in August by Common Sense Media found that 59 percent of teens reported online learning was worse than in-person learning. Only 19 percent reported the opposite.

Although the five largest school districts in Massachusetts aren’t reopening with any in-person instruction this fall, the state’s teachers union successfully reduced the 180-day school year by 10 days for “planning purposes.” And The New York Times has reported that “many teachers have expressed anxiety about how they and their homes would look on camera during live teaching.”

At least one public school in Indiana in August even conducted a nonsensical “virtual fire drill” for students to participate in from home.

Fix the System

Families are getting a bad deal, and they know it. Hopefully, they’re reevaluating the structure of K-12 education funding and realizing that there’s no good reason to fund institutions instead of students. As with many other taxpayer-funded initiatives, from Pell Grants to food stamps, the money should go directly to students, and families should be able to use it on the provider of educational services that works best for their children.

This has always been obvious to supporters of educational freedom, but it’s now becoming clear to others as well. Schools aren’t even reopening, yet the system is still getting our children’s education dollars. And in most cases, none of those dollars follow the child when they switch to a private school or homeschool. That doesn’t make any sense.

Even if a school does reopen, families should still be able to take their child’s education dollars elsewhere. The money should be for educating children—not protecting a government monopoly.

More and more families are starting to understand this. A national poll from August found a 10 percentage point jump in support for school choice (from 67 percent in April to 77 percent now) among parents with children in public schools.

Although educational freedom isn’t the norm right now, there are at least five proposals that have been recently introduced in Congress—in addition to legislation in states such as North Carolina and Pennsylvania—that would allow more funding to follow children instead of institutions.

Families are waking up to the fact that they have been powerless when it comes to K-12 education for far too long. This realization is already pushing parents to unenroll their children from the public school system. It could also push them to demand their children’s education dollars back from that system. In this sense, the public school monopoly’s latest failure to meet the needs of millions of families just might be the straw that breaks its own back.

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UK Brings In Army To Help With First ‘China-Style’ Mass COVID-19 Testing In Liverpool

UK Brings In Army To Help With First ‘China-Style’ Mass COVID-19 Testing In Liverpool

Tyler Durden

Tue, 11/03/2020 – 05:45

Following in the footsteps of China and tiny Slovakia, the UK is embarking on its first “moonshot” mass-testing campaign in the city of Liverpool, known to most people outside the UK as the hometown of the Beatles. According to the Guardian, up to half a million people in the city are set to be tested this week, and if the system proves successful, it will be used again.

With the self-isolation period for those who test positive set to be reduced, up to half a million people are due to be tested in Liverpool in the government’s first attempt at mass testing and tracing, with the goal of tracing the infection of every individual who tests positive during the drive.

The scheme is part of the government’s attempt to meet the demands posed by local officials, who have demanded more money for both test-and-trace programs, as well as more funding for the government’s furlough plan for workers.

To help carry out the program, the British army will be deployed for “logistical support”.

The operation’s success, or failure, could determine whether another similar mass-testing campaign in another one of the worst-hit areas in the UK.

PM Boris Johnson recently rolled out a system of coronavirus restrictions with three standalone tiers. Liverpool and Greater Manchester are both in the third tier, which imposes harsh restrictions that mirror the springtime lockdown, with the main difference being school is still in session.

A variety of test types will be employed during the campaign, which starts Friday, roughly a week after the new measures took effect. The testing campaign comes as Downing Street struggles to find a way to boost compliance with the new restrictions.

“Those who have been contacted need to self-isolate,” Johnson told MPs in the Commons on Wednesday. “We’ll be making a big, big push on that. Because, I must be candid with the house, alas the proportion of people who are self-isolating in response to the urges of NHS test and trace is not yet high enough.”

Though it’s a favorite of epidemiologists, contact tracing has largely failed in the West, as officials struggled with noncompliance in the US and Europe. In the UK, the government’s test-and-trace system has been a notable blemish for BoJo, despite pouring more than $15.5 billion into it. Perhaps BoJo has finally discovered ‘the secret’ for why these tactics were so effective in Asia: It’s much easier to test and trace when mandatory means mandatory.

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“There Is Something Winding Up To Punch The Market In The Mouth”

“There Is Something Winding Up To Punch The Market In The Mouth”

Tyler Durden

Tue, 11/03/2020 – 05:00

By Mark Orsley, head of Macro Strategy at PrismFP

  • Costanza in November – markets are going into major event risk full of reflation hopes

  • Technical indicators are flashing warning signals that new good news is needed to avert a sharp correction

  • What could be the drivers of a risk asset correction – yields rising reinvigorates our debt cycle talking point

  • Central banks will step in with updated purchase plans in December to stabilize rates market, risk assets – could mean substantial pain to the reflation trade in Nov. but setting up the opportunity to reengage in Dec.

Regular readers will know at year end we do a tongue in cheek, jab at street research in our year end “Costanza” piece. It is meant to push back at consensus and historically the Costanza trades has had a success ratio greater than 70%.

Today’s piece is not supposed to be tongue in cheek but serve as a warning that the market is perhaps too consensus going into a fragile fundamental and technical period for the markets.

To put it succinctly, the market is in a precarious position where the slightest rate of change bad news could mean a substantial correction for reflation. In other words, there better be some good news QUICK.

We hope you have seen that we have been an early call on reflation, both asset price and economic, coming out of the initial COVID scare. We now view that narrative that we have held for many months as too consensus into event risks which could temporarily derail reflation.

The “precarious position” starts with positioning where market participants are fully bought into one or more of the following ideas:

  • The “blue wave” is reflationary

  • There was fiscal failure, but it will come eventually

  • Vaccine news can only be positive

  • COVID is Europe’s problem

  • The strong economic rebound in the US coming out of the spring will continue unabated

Thus, the market has piled into reflation trades and continue to hold them, in some cases to historic extremes:

VIX Spec positioning / Aggregate Open Interest – short equity vol is near 10yr extremes…

In similar vein, S&P “spec” positioning is going into November’s fragile period at 1yr highs for longs and building…

The net spec $ positioning across the eight most liquid currency futures is still near 5-year shorts…

By far the trade du jour for October, shorting the long end of US rate curve, has built into historic short positioning…

(We know the COT data is a few days old and we saw in Fixed Income for example, the largest day of short covering risk since March as well as the largest day of long unwinds on Friday. So, positioning perhaps a bit cleaner but not enough to change the overall picture.)

Bottom line, while not as extreme in some cases as February reflation positioning, the market is very clearly tilted to one side of the proverbial reflation boat. Participants are expecting higher equities, higher rates, lower $, lower vol, and lower vol of vol.

Combining with broad sentiment, the market believes that either (a) there is a ton of positive news coming, and/or (b) we will be able to look through any near-term negative news.

The positioning and sentiment dynamic above can also be noted in the equity gamma landscape. We have made this a major talking point over the last couple weeks as it has done an impressive job predicting short-term market direction.

The main point to consider is the wall of calls at 3500. That is another example of extreme reflationary positioning which will act as a resistance level to the market. Meaning, good news will be capped as delta hedgers sell into the rally. The amount of calls at 3500 is extreme compared to any other strike, whether calls or puts.

The good news for the equity market is that, like Fixed Income, there was some position squaring on Friday. Namely, puts between 3250-3500 were closed as the market sold off last week. That takes off a bit of the delta selling pressure of the gamma hole we have spoken about at length recently. In option geek terms, the vol trigger has moved from above the market to below the market (from 3370 to 3265). Thus, the market is neutral right here in terms of gamma.

Bottom line on equity gamma, the gamma hole will not be a major risk over the election (barring substantial new positioning today), but a positive market outcome will be capped by the Nazare Portugal like (for you surfing aficionados) wall of calls (meaning, there is a 100ft wave of calls in front of us).

Those calls coupled with other positioning makes profiting from reflation increasingly difficult.

* * *

Turning to the technicals, simply said, the charts are the clearest indication and warning sign that a reflation hiccup could occur if either (a) good news turns neutral, or (b) bad news develops. Charts foretell that good news better come quick.

Semiconductors – broken uptrend, momentum about to flip negative, and the possible development of the most classic head and shoulder topping pattern you can find. One scenario is perceived positive election outcome forms the right shoulder, and then negative news into crowded positioning causes the flush lower. A strikingly similar setup to March…

John Deere – no this is not a tech chart; this is a construction equipment company founded in 1837 that has a PE multiple of 23. As like tech charts, Deere (as a read through to “value”) has broken its uptrend, potentially forming a classic head and shoulder top, with momentum about to flip negative (historically, Deere doesn’t hold >20 PE for very long)…

Transports – Dow Theorist should be concerned by the uptrend breakdown and another potential head and shoulder topping pattern…

Housing – the darling of the US economy and our leading indicator back in the spring of reflation. Another broken trend and potential head and shoulder top with momentum loss. The chart is telling us the good news in housing is now fully priced until there is a fresh driver…

Momentum (think Tesla) –double top, broken trend, and MACD about to flip negative. 140 MUST hold or momentum equities will break down. Makes sense as these liquidity fueled stocks have lost its fiscal tailwind they “jones” for…

Look, we can go through 100 more charts like these, but the point is there is coordinated signaling across all sectors of potential topping patterns developing.

Bottom line on the charts: all reflation uptrends are over. That means previous fundamental narratives will not drive price action going forward. There needs to be new positive news, or else the slightest rate of change towards negative news means the bearish technicals play out swift and sharp, especially when coupled with positioning indicators.

* * *

The obvious question becomes, what are the potential negative outcomes or less positive news that could cause the positioning unwind that fills the negative technicals above? Besides the unknowns we can’t predict, it would be things like:

  • While Biden winning the presidency may lead to fiscal stimulus in 2021, the market would have to sit through a painful period of (can pod shops with risk managers looking over their shoulders hold out that long?)….

    • 1) No fiscal in the lame duck session – phase 4 fiscal failure will be a major policy mistake

    • 2) Potential for tax loss selling into year end, especially of tech stocks that are up significantly YTD and facing increased regulatory scrutiny. Even if you think Biden delays tax increases, the probability of higher taxes in 2021 are not zero and thus investors may unwind bullish positioning in December.

  • Biden + GOP Senate – the worst election outcome for risk assets. GOP blocks stimulus not only in lame duck but in 2021.

  • The vaccine news that will come soon is delayed and/or negative (no success).

  • COVID (real) wave 2 hits the US causing a spike in hospitalizations and forces shutdowns like we are seeing all over Europe (Spain, Portugal, Greece, Austria, Germany) and the UK – an eventuality in our estimation as the data is already suggesting wave 2 is building in the US.

    • WTI weakness is signaling the COVID risk is increasing

    • This would be the rate of change hit to growth that would pain reflation positioning

  • MOST IMPORTANT – YIELDS GO TOO HIGH

    • Risk Parity funds could de-risk if equities aren’t rising concurrently (recall last week’s price action)

    • Higher mortgage yields coupled with increased home prices due to higher demand + input costs would hit the housing market (the leading driver of US growth) – something lumber is signaling to us

    • Economic cycles have been replaced with a debt cycle – a big talking point here, when nominal yields rise above the level of growth; it creates risk asset volatility. Every. Single. Time.

More on that last point…

When UST interest payments + entitlements become greater than tax receipts, the US fiscal ponzi situation becomes unsustainable. The level of growth right now (smoothed YoY not QoQ) is unknown but the fiscal phase 4 failure creates a lower growth environment for at least the next quarter to two quarters.

Thus if the market prices in a Blue Wave which forces a Risk Parity liquidation, for example, yields could climb too high in the near-term as there is a liquidity void right now with the Fed on the sideline until December and no fiscal until March 2021 at the earliest that puts growth estimates lower for now.

Recall our “economic cycles have been replaced by a debt cycle” flow chart that helps guide us through the various regimes. Right now, we are coming out of “Fed neutral”, COVID risks increasing (like March), which has moved the world into the “Negative debt dynamic” regime. The obvious next step is for the Fed to take easing to the next level (increase purchases and extend WAM).

Thus, November could be extremely poor for risk asset performance if yields climb too high. This would be similar to January 2018 (reflation breaks equity volatility shorts) and December 2018 (Fed hikes breaks equities).

We then believe that the new ECB + Fed actions will stabilize markets in December. That means we should get indications of coming easing policies from Fed officials a few weeks before the blackout period, likely reacting to higher yields.

Putting this all together…

  • Positioning, sentiment, technicals all jibes with the idea that the market is more susceptible to negative news flow/less positive news flow, or a regime change. The old narrative won’t be a driver to additional positive risk asset returns.

  • We highlighted several reasonable fundamental scenarios that could cause a significant reflation correction. The main ones being that fiscal is now put off longer than most can hold positioning for, and the prospects of higher yields which has historically caused equity volatility (which positioning has reached historic levels of shorts).

  • The new positive news needs to come quick as charts are sitting on the proverbial cliff. A surprise Trump win

  • could be the savior to the market as that bring s forward fiscal prospects , and n o new taxes or regulations.

  • Anti-consensus positioning now warranted either as stand-alone trades or hedges (trade idea piece coming tomorrow)

  • We do not think this is March 2.0. Any correction will be shallower as positioning is slightly less extreme (VIX is 35 now vs. 15 in Feb.), central banks are ready to act, and the world is better placed to deal with COVID.

You may be trying to hold onto reflation positioning over the election and into 2021 until fiscal arrives. Seems like a prudent plan.

However, as the great Mike Tyson once said, “everyone has a plan until you get punched in the mouth.”

There is something winding up to punch the market in the mouth. Hopefully this note serves to help duck, dodge, and be ready to throw the counter punch. There is a good reflation setup developing, it just may not be here.

More to come tomorrow….

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“The Worst Isn’t Behind Us” – These Are The World’s Most At-Risk-Of-Insolvency Airlines

“The Worst Isn’t Behind Us” – These Are The World’s Most At-Risk-Of-Insolvency Airlines

Tyler Durden

Tue, 11/03/2020 – 04:15

It’s no secret by now the worldwide airline industry will lose more than a hundred billion dollars this year because of the virus pandemic that has caused an unprecedented crash of the travel and tourism industry in nearly every country. Unless governments increase financial aid, at least eight major airlines are at risk of bankruptcy. 

Using the Z-score method to predict bankruptcy, Bloomberg’s new analysis outlines which commercial airlines are the “most prone to financial strife.” 

“Versus the same analysis done in March, when the virus was just starting to spread beyond China into parts of Asia and Europe, rapidly cutting off international travel, the results show a clear swing to the West. At least four of the 10 airlines named back then have restructured in some fashion, and all but one were in Asia. 

“The list now is populated more by carriers in Africa and Latin America, where some have already folded or entered administration. Representatives from Medview Airlines Plc, Precision Air Services Ltd., Grupo Aeromexico SAB and Gol Linhas Aereas Inteligentes SA didn’t immediately respond to requests seeking comment.”

According to Bloomberg, the Z-score utilizes five variables measuring liquidity, solvency, profitability, leverage, and the latest financial performance in a model with an accuracy rate of 80-90% a year prior to insolvency. As shown above, eight airlines have scores below 1.8, which indicates the danger of bankruptcy within two years. 

In October, the International Air Transport Association (IATA) warned that airlines are on track to lose nearly $130 billion this year – significantly more than June’s estimates of $84 billion. Without financial aid from governments, some airlines with Z-scores below 1.8 could be at risk of near-term failure. 

IATA has already said the virus-induced downturn has resulted in 30 or 40 airlines having failed or restructured in bankruptcy.

IATA analysis shows airlines have about three-quarters of cash on hand at the current burn rate. With airline passenger volumes still down 65% in October from last year, airline ticket prices have crashed, increasing worries that airlines’ revenue streams won’t be enough to service existing debts. 

h/t Wolf Street

Bloomberg reached out to AirAsia Group Bhd. and Azul SA, a few of the high-risk airlines of insolvency via the Z-score, declined to comment about their financial situation. However, Thai Airways International Pcl said a reorganization plan could be possible by the end of the year. 

Pakistan International Airlines Corp. said their liabilities exceed assets by around four times, “in reality it’s different because those liabilities are extended on sovereign guarantees and servicing is done through the government budget. In that sense, the situation isn’t as it shows. Pakistan International has been managing its resources. We’re comparatively doing okay.”

AirAsia X Bhd. is restructuring more than $15 billion of debt, though the airline’s future remains highly uncertain as international air travel remains muted. It’s Z-score is -1.41, meaning insolvency risks are elevated. 

In the meantime, airlines have parked thousands of commercial jets, slashed rates, and eliminated spending, along with cutting tens of thousands of workers. Some airlines are tapping into capital markets to take advantage of cheap loans. 

“The worst isn’t behind any airline,” said Akbar Al Baker, chief executive officer of Qatar Airways Ltd., which has already received $2 billion in state aid. “Airlines need to be supported by their governments to survive.”

With most European countries have reported a resurgence in new virus cases, leading to a second wave, the US is experiencing more of the same. This all suggests airlines with low Z-scores could experience an insolvency event as air travel is expected to remain depressed through 2021. 

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Brickbat: Sign of the Times

trumpsign_1161x653

A federal judge has granted Tyler Maxwell, 18, a restraining order allowing him to keep parking his truck at Florida’s Spruce Creek High School. The principal rescinded Maxwell’s parking pass after he refused to remove a pro-Trump display, including a large elephant statue, from the truck. “The school board has obligation to provide politically neutral campuses,” Volusia County Public Schools said in a statement. “We allow political expression by students in the form of a T-shirt or a bumper sticker. But large signage is a different situation. A passerby could interpret a large sign in a school parking lot to be an endorsement by the school district.” Maxwell’s attorney says the school’s actions violate his client’s free speech rights. The judge’s decision allows Maxwell to park with the display until the case is resolved.

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Brickbat: Sign of the Times

trumpsign_1161x653

A federal judge has granted Tyler Maxwell, 18, a restraining order allowing him to keep parking his truck at Florida’s Spruce Creek High School. The principal rescinded Maxwell’s parking pass after he refused to remove a pro-Trump display, including a large elephant statue, from the truck. “The school board has obligation to provide politically neutral campuses,” Volusia County Public Schools said in a statement. “We allow political expression by students in the form of a T-shirt or a bumper sticker. But large signage is a different situation. A passerby could interpret a large sign in a school parking lot to be an endorsement by the school district.” Maxwell’s attorney says the school’s actions violate his client’s free speech rights. The judge’s decision allows Maxwell to park with the display until the case is resolved.

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Why Is Europe Courting Revolution?

Why Is Europe Courting Revolution?

Tyler Durden

Tue, 11/03/2020 – 03:30

Authored by Alastair Crooke via The Strategic Culture Foundation,

All eyes remain on the U.S. election, and on fathoming its consequences. But in the shadow of ‘The Election’, there are other ‘moving parts’: Germany just offered Washington ‘a sweetheart deal’ in which, Europe – with Germany leading – accepts to leverage America’s full-spectrum strategy of isolating and weakening Russia and China. And in return it is asking the U.S. to acquiesce to German leadership of a ‘power-political’, European entity that is raised to parity with the U.S. That, bluntly, is to say, Germany is angling for ‘superpower’ status, atop an EU ‘empire’ for the new era. Putin recognised such a possibility (Germany aspiring to be a superpower) during his recent speech to Valdai.

But the other ‘moving parts’ to this bid are very much in motion, too: Firstly, Germany’s ploy is contingent on their hopes for a Biden win, which may, or may not, occur. And then, too, President Macron seeks for himself, and for France, the leadership of Europe – with this latter – to an extent – being contingent on a ‘no deal’ Brexit taking place at the end of the year, that would further weaken a dis-animated and fading Merkel. France rather, plots the ‘Great Reset’ of Europe: A regulatory and values enforced ‘space’, underpinned by a common fiscal and debt regime that would rebuild France’s economic infrastructure.

All this raises many questions: Should Trump win, he can be expected to puncture any German (or French) aspiration to drain away some of America’s power, however nicely the German FM wraps it, as the U.S. not so much losing power, but as gaining “a strong partner on equal terms”. Huh!

The idea that Europe can leverage this partnership through sweet-talking Germany’s commitment “to the West as a system of values”, which is “at risk in its entirety”, and which, only Germany and the U.S. together can keep strong – does seem a bit of a daydream. Even when sugar-wrapped with “defending against the unmistakable Russian thirst for power, and Chinese ambitions for global supremacy”. Firstly, there is still Trump, and secondly —

China and Russia clearly see the game. Yet European leaders seem to expect that the former will continue as if nothing is awry. Annegret Kramp-Karrenbauer seems to think so (she is both Defence Minister, and Chair of the CDU, Merkel’s own party). In terms of containing “China’s aggressively controlled state capitalism”, she suggests creating a European trade sphere that is open only to those who want to strengthen and support the liberal, rules-based order – and to which other states must ‘submit’ (Macron’s words). These are the bones to how Brussels proposes to achieve ‘strategic autonomy’ (Charles Michel’s term).

Here are some extracts of Annegret Kramp-Karrenbauer’s ‘deal’ given in a 23 October speech:

“… Most of all, America has given us what we call ‘Westbindung’ … Westbindung, to me, is and remains, a clear rejection of the historic temptation of equidistance. Westbindung anchors us firmly in NATO and the EU and ties us closely to Washington, Brussels, Paris and London. It clearly and rightly positions us against a romantic fixation on Russia – and also against an illiberal corporative state that rejects parties and parliaments [i.e. China] … Westbindung is the answer to the famous “German question”, the question of what Germany stands for … Only America and Europe together can keep the West strong, defending it against the unmistakable Russian thirst for power and Chinese ambitions for global supremacy … To be the giver [in a process of ‘give and take with the U.S.] would require us to take a firm power-political stance. To ambitiously play the geopolitical game. But even looking at all this, there are still some Americans who are not convinced that they need NATO. I understand that. Because there is one thing still missing: That is for the Europeans to take powerful action themselves, when push comes to shove. So that the United States can see Europe as a strong partner on equal terms, not as a damsel in distress. As you can see: the German dilemma is a European dilemma as well. We stay dependent [on the U.S.], but at the same time, we must come into our own. In strengthening Europe like this, Germany must play a key role … enabling it to operate more independently of, and more closely with, the United States at the same time …”.

Three major geo-political issues here are intersecting: Firstly, Germany is metamorphosing politically, in a way that holds disturbing parallels with its transition in the pre-WW1, European setting. In short, the ‘German Question’ is surfacing again (but not in AKK’s way): When the Berlin Wall fell, Russia supported the reunification of Germany and pinned hopes on Germany being a partner for the wider unification project: the construction of a ‘Greater Europe’.

It proved to be a chimaera: Germany, far from supporting Russia’s inclusion, instead, favoured the expansion of Europe and NATO to Russia’s borders. The EU – under U.S. pressure – was forming a Greater Europe that would eventually include all the states of Europe, except Russia.

But in so doing, West Europe absorbed into the EU the tumour of East European neuralgia on Russia. Berlin, all the while, has played on America’s visceral hostility towards Russia – more as a tool to build out its European space up to the Russian border. Germany thus has prioritised assuaging Eastern European ancient antipathies, above any real attempt at a relationship with Russia. Now Germany wants to ‘play it again’: In a July interview, Annegret Kramp-Karrenbauer said that the Russian leadership must be “confronted with a clear position: We are well-fortified, and in case of doubt, ready to defend ourselves. We see what Russia is doing, and we will not let the Russian leadership get away with it”.

Well: Fool me once … but fool me twice …? The Navalny episode was the last straw. It was a blatant lie. Merkel and Macron knew it to be a lie. And they knew that Moscow knew it, too. Yet they both preferred to toss the Russophobes another ‘bone’. Moscow gave up with them.

The real puzzle is why Moscow put up with this play for so long. The answer perhaps, lies with the Russian two-headed eagle, whose heads face in opposite directions: one toward Europe, and the other toward Asia. Merkel’s obvious deceit is stretching and testing social trust in Russia, just too far. The Russian élites may lean towards Europe, but their base looks East. Navalny was the humiliating straw that broke the camel’s back

Now Macron – still energised, but himself politically weakened – hopes to drain further Merkel’s strength (in mercantilist terms), through engineering a UK no-deal Brexit that would damage Germany’s huge trade surplus with Britain, at the very moment that Germany is losing markets in Russia (and now possibly in China); and when America, if Trump is re-elected, would likely embark on a trade war with Europe.

Weakening Merkel’s hand – that is – in opposing an European joint debt instrument, together with a common fiscal policies, is the aim, so that France might draw down on German fiscal resources placed within a ‘common pot’, and then deployed to revamp the French economy.

The Brussels plan for a ‘Great Reset’ – transforming the European economy, and the social sphere – through automation and technology is, as Tom Luongo has noted delusional: “[W]hat’s been pretty clear to me is Europe’s delusions that it can subjugate the world under its rubric, forcing its rules and standards on the rest of us, including China, [whilst] again allowing the U.S. to act as its proxy – [as Europe] tries to maintain its [‘power-political’] standing is delusional”.

Why?

‘Delusional’, as although China may be an “aggressively controlled state capitalism” in Euro-speak, it is also a major ‘civilisational state’, with its own distinct values. Brussels may call their regulatory space ‘open’, but it is clearly exclusionary, and not multilateral. The action of this politics is only pushing the world towards a separation of distinct regulatory spheres – and toward deeper recession.

On the practical plane, whereas first phase Covid tended to provide support to Europe’s incumbent governments, this present infection spike is shredding support for incumbents. Protests and riots are increasingly taking place across Europe. Episodes of violence have been met with horror by the authorities, which suspect that organized crime and radical groups are at work to spark a political wildfire. And that potential is very much there.

To the structural unemployment already incurred in phase one, now must be added another wave of possibly irreversible unemployment, (again) in the services sector. For small businesses and the self-employed, it is a nightmare. Not surprisingly, the anger grows as those losing their means of living observe that civil servants and the middle classes more generally, are passing through this episode, virtually unscathed.

European governments have been caught off-guard. There is absolute confusion as governments try to square keeping the economy alive, with containing the infected from overwhelming hospitals – achieving neither. This represents the cost of the ‘summer opening’ to save the tourist season. No one is on their balcony these evenings banging cooking pots in communal solidarity. Today, protests and riots have taken their place.

Into this mounting anger is inserted dark suspicion. Some may view Covid as pure conspiracy; others will not. Yet it is not ‘conspiracy’ to believe that European governments may knowingly have used the pandemic to increase their tools of social control, (despite ‘distancing’ being a genuine medical containment strategy). Was this concerted in anticipation of the changes implicit to the ‘Great Reset’? We do not know. Yet, from the outset, western governments couched their measures as ‘war’ – and as war that required war-time state-directed economics, and war-time public compliance.

Rightly or wrongly, it is becoming a culture war. Overtones of the anger on U.S. streets. Again, dark suspicions that cultural life is being closed down in order to prepare Europeans for the drowning of their cultural identities into a big Brussels-made, melting-pot. These fears may be misplaced, but they are ‘out there’, and viral.

It is Europe’s political fabric and societal cohesion that is in play – and its leaders are not just confused: They fear.

It would indeed be hubristic delusion then, were European leaders to proceed with the automation ‘Great Reset’, and add yet more structural unemployment to a pile, already threatening to topple, under its growing weight (into mass protest). Do they want revolution?

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Goldman, Deutsche Order UK Staff To Stay Home As European COVID-19 Outbreak Explodes

Goldman, Deutsche Order UK Staff To Stay Home As European COVID-19 Outbreak Explodes

Tyler Durden

Tue, 11/03/2020 – 02:45

Just days after Capital One announced that all of its ‘call center’ workers would be allowed to work from home permanently if they so desired, Goldman Sachs and Deutsche Bank have ordered all of their staff in London (and for Deutsche, all staffers in the UK) to work from home until they hear otherwise.

Goldman Sachs said only ‘in-office essential’ employees would be allowed to work from its London office after UK PM Boris Johnson announced the new lockdown measures. 

This represents a remarkable shift from where the bank stood in September, when it started to quietly move staff back to the office.

To be sure, Goldman in-office essential employees represents a tiny fraction of the bank’s 5,000 workers in London. Deutsche Bank, on the other hand, has said that employees who are eligible to continue working from DB’s UK offices will receive an email Monday evening with instructions.

An internal memo obtained by Bloomberg said only essential workers will be permitted to come to GS’s Plumtree Court building, according to an internal memo. Deutsche Bank also informed staff that only essential employees can work from all the bank’s offices in the UK. Gyms will remain open, for another day, but they will be closed by Wednesday,

Goldman, DB and other banks paused plans to bring bankers back to the office in September after outbreaks were discovered on trading floors owned by JPM, Goldman and Deutsche in both New York and London. 

Before that, JPM CEO Jamie Dimon publicly leaked research from the bank criticizing working from home as a drain on “creative intelligence” displayed by the bank’s younger analysts.

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“Vikings To The Rescue”: United States Reveals Its Peace Plan For Armenian-Azerbaijani War

“Vikings To The Rescue”: United States Reveals Its Peace Plan For Armenian-Azerbaijani War

Tyler Durden

Tue, 11/03/2020 – 02:00

Submitted by SouthFront,

The diplomatic process surrounding the ongoing Armenian-Azerbaijani war in the Nagorno-Karabakh region has reached an expected stalemate. The Armenians do not want to surrender. The Azerbaijani-Turkish bloc does not want to drop its chances for a military victory.

On October 30, the sides tried to reach another humanitarian ceasefire brokered by the Organization for Security and Co-operation in Europe and once again agreed to exchange prisoners, dead bodies and not strike civilian targets. This agreement collapsed as expected a few minutes after it was reached. Speculations of US National Security Adviser Robert O’Brien about the possible deployment of some mysterious Scandinavian peacekeepers looks like wishful thinking.

In these conditions, the pro-Western government of Armenia started to suspect that its NATO allies will not help it in the war with Azerbaijan which is supported by another NATO member state. So, Prime Minister Nikol Pashinyan opted to write an official request to Moscow complaining that the Armenian pro-Western policies do not help and it is time for Russia to rescue it. In the letter to Russian President Vladimir Putin, Pashinyan remembered that Armenia is formally a Russian ally and asked to ensure the security of Armenia under the existing defense treaties between Moscow and Yerevan. In response, Russia announced that it will provide all necessary assistance to Armenia, if the war comes to Armenia’s territory. Russia still remains the only real guarantor of Armenian territorial integrity.

As to the Nagorno-Karabakh question, Armenia itself does not recognize this territory as an independent sate or as a part of Armenia. Furthermore, after a month of war, Armenia has not officially entered the war in Karabakh and avoided the decision of officially sending its regular troops there.

The situation on the frontline remains critical for the Armenians. Azerbaijani forces continue their pressure in the direction of the Lachin corridor and the second largest town in the region – Shusha. Baku insists that these offensive actions are just a response to the ceasefire violations by Armenia. The Azerbaijani Defense Ministry also says that all reports about the usage of white phosphorus munitions by Azerbaijani forces are just Armenian provocations and such munitions can be used by the Armenians themselves to fake the evidence.

The Armenian vision of the situation is expectedly quite different. It says that Armenian forces do not shell civilian targets while the forces of Azerbaijan intentionally target civilians. The Armenian Defense Ministry also reported that the Azerbaijani military has suffered even more casualties after their attacks on Lachin and Shusha. Thus, the alleged number of Azerbaijani casualties reached 6,947. At the same time, Azerbaijan allegedly lost 656 armoured vehicles, 6 rocket launchers, 25 military planes, 16 helicopters and 239 UAVs.

Despite these claims, the Turkish-Azerbaijani bloc keeps the initiative in the conflict. The long frontline and attempts of Armenian forces to protect all of what they currently have instead of concentrating thier main forces on the key positions contribute to the strategic advantage of Azerbaijan because it has an upper hand in manpower, military equipment and it dominates the skies. In general, the Armenians have more motivated infantry but this appears to be not enough.

In these conditions, there are two main hopes for the Armenian leadership:

  1. A permanent ceasefire and return to the negotiations process with Azerbaijan due to the increasing international pressure on Baku (through diplomatic channels and sanction threats);
  2. A military intervention by some third party in the conflict on the side of Armenia.

For the second scenario, the main candidate is Russia. Currently, Moscow demonstrates that it is not going to intervene in the conflict militarily if it remains in the territory of Karabakh. At the same time, Turkey and Azerbaijan are also not interested in expanding the territory of the conflict further because this will likely lead to the involvement of some third party in the war that would lead to the military defeat of Azerbaijani forces. Thus, in some scenarios, the Armenians could be directly interested in a Turkish-Azerbaijani attack on Armenian sovereign borders, especially in the area where Russian forces are deployed. Shelling of Armenian territory by Azerbaijan has already taken place and Azerbaijan accused Armenia of using weapons deployed near Karabakh in the conflict. However, now, Yerevan could even more actively involve its troops deployed inside Armenia to strike Azerbaijani forces in Karabakh. For example, Armenia can use its artillery units deployed near the border area. This as well as the public employment of regular troops could become the last try of the Armenians if they really aim to win the war.

At the same time, the actions of the Pashinyan government in the previous years and since the start of the war raise concerns that he and his Soros-linked circle are not really interested in Nagorno-Karabakh. First, they created diplomatic conditions for the Azerbaijani-Turkish advance there and now the Pashinyan government is just playing a propaganda hand as it allows Azerbaijan to recapture the area. In general, this will allow the current political regime in Armenia to make an ever more dramatic turn towards ‘Western integration’ and resolve the ‘territorial issue’ that prevents its further formal cooperation with NATO.

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