Kneeling in the Church of Social Justice

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Over the past several years, a social justice philosophy has arisen that is less a political program than a religion in all but name. Where Christianity calls for people to display their moral worth through faith in Jesus, modern Third-Wave Antiracism (henceforth TWA) calls for people to display their moral worth through opposition to racism. In the wake of the murder of George Floyd, this vision has increasingly been expressed through procedures, routines, and phraseology directly patterned on Abrahamic religion.

America certainly has work to do on race. For one, while cops do not kill black people more than white people, they harass and abuse black people more than white people, and the real-life impact of this is in its way just as pernicious as the disparity in killings would be. If the tension between black people and the cops were resolved, America’s race problem would quickly begin dissolving faster than it ever has. But making this happen will require work, as will ending the war on drugs, improving educational opportunities for all disadvantaged black children, and other efforts such as steering more black teenagers to vocational programs training them for solid careers without four years of college. 

These are real things, upon which we must behold scenes like in Bethesda, where protesters kneeled on the pavement in droves, chanting allegiance with upraised hands to a series of anti-white privilege tenets incanted by what a naïve anthropologist would recognize as a flock’s pastor. On a similar occasion, white protesters bowed down in front of black people standing in attendance. In Cary, North Carolina, whites washed black protesters’ feet as a symbol of subservience and sympathy. Elsewhere, when a group of white activists painted whip scars upon themselves in sympathy with black America’s past, many black protesters found it a bit much.

Such rituals of subservience and self-mortification parallel devout Christianity in an especially graphic way, but other episodes tell the same story. Many conventional religious institutions are now rejecting actual Christianity where it conflicts with TWA teachings. At the Massachusetts Institute of Technology, a chaplain was forced to resign after writing a note exploring the contradiction between roasting the police as racist and the Christian call for love of all souls. Unitarianism has been all but taken over in many places by modern antiracist theology, forcing the resignation of various ministers and other figures.

The new faith also manifests itself in objections to what its adherents process as dissent. A friend wrote on Facebook that they agreed with Black Lives Matter, only to have another person—a white one, for the record—post this reply: “Wait a minute! You ‘agree’ with them? That implies you get to disagree with them! That’s like saying you ‘agree’ with the law of gravity! You as a white person don’t get to ‘agree’ OR ‘disagree’ when black people assert something! Saying you ‘agree’ with them is every bit as arrogant as disputing them! This isn’t an intellectual exercise! This is their lives on the line!”

This objection seems studiously hostile until we compare it to how a devout Christian might feel about someone opining that he “agrees” with Jesus’ teachings, as if the custom were to think one’s way through the liturgy in logical fashion and decide what parts of it makes sense, rather than to suspend logic and have faith.

The religious analogies pile higher by the week. Third-Wave Antiracism even has (metaphorical) sacrificial victims. The New York Times‘ food columnist Alison Roman is on suspension for criticizing in passing Marie Kondo and Chrissy Teigen for going commercial. Her sin? Criticizing not one, but two, people “of color.” (Kondo is Japanese, Teigen half white and half Thai.) Teigen has openly said that she does not think Roman deserves to be canceled for what she said, but no matter. At the Times, the TWA must have its way.

A great many intelligent people clearly consider all of the glowering postures, verbal laceration, and dismissals to be somehow an advance over how social change worked in America in the past. The seismic civil rights victories of the 1960s came about through protest, no doubt. But absent in the annals of how we got from Selma to the election of Barack Obama is this focus on individual psychology as opposed to national social and political structures.

Martin Luther King was under no impression that all white people were going to fully “love” all black people. He spent his time working for gradual change in the world as we know it via endless exchange and consultation with the powers that be, not agitating for a vague utopian conception of a society devoid of any racist sentiment. No matter what evidence people find of King’s fundamental radicalism, radicalism in his day was not centered around this recreationally aggrieved performance art, much less obsessively seeking to excoriate and destroy people suspected of impure thoughts.

The TWA adherent might object that today’s strategy is a second step—that the battle of yore was against overt segregation and disenfranchisement, but today making an even more equal society requires this different approach. 

But why is all of this agitprop and joyous defenestration an advance over forging political change in the ways that have had such effect in the past? Those of us watching incongruously and needlessly acrid media posts and the yanking down of statues cannot help thinking the real motivator of the TWA posture is a simple joy in indignation and destruction, along with the comforts of group warmth. The white TWA adherent cherishes displaying virtue. The black TWA adherent has fallen for the Siren call of the noble victim complex, affording one the status of a Cassandra, a survivor, even the granter of absolution, as we see in some of the protest videos.

TWA people, to be sure, claim that all of this is ultimately about changing society. But in practice, the performance and fury are the main meal while the mundane but urgent work of changing society seems distinctly underplayed. One treatise on white privilege after another gives this away, such as Őzlem Sensoy and Robin DiAngelo’s Is Everyone Really Equal? After almost 200 pages of teaching the reader that being a good antiracist requires bowing down to any claims anyone not white makes about race, we assume that the final chapter might show how this counterintuitive ideology is supposed to change the actual world. Instead, that chapter simply repeats the minatory mantras from the previous chapters.

If TWA were really a political program, it would focus much more readily on making change from the grassroots on up; the psychological cleansing would feel like a prelude cherished by a few but best gotten past as quickly as possible. The idea that political work must be preceded by a massive mental overhaul of the nation is not self-standingly obvious. It is a tragically fragile proposition that reveals TWA as in essence not politics but Sunday school.

The TWA world might raise another objection, one that must be heeded. Without the fever pitch of these voices, and the dread they instill in any white person chilled at the possibility of being outed as a racist in today’s society, Tina Fey would not have pulled a few episodes of 30 Rock out of streaming because they had blackface depictions, the Dixie Chicks would not have renamed themselves The Chicks, there would still be an awful lot of statues of Confederate racists standing, and Rhode Island would not be excising the word plantation from its full name. The TWA message asks whites to look inside themselves to examine the ways they contribute to racism. This is happening to an unprecedented degree.

Yet we can be quite sure that the TWA position on these things, no matter how many and no matter how widespread, will be to dismiss them as mere optics, as if such things weren’t what they seemed to be calling for in their furious policing of psychology. The new line will be that these changes didn’t matter because they left “structures” of society in place. This bait and switch will not be a cynical ploy, but an inevitable outgrowth of the fact that TWA is a matter of ideology and attitude, not progress and pragmatism. Its liturgy requires that America always be a racist snakepit, redeemable only by a mysterious day when the U.S. “comes to terms with” racism. Just what those terms would be is never specified for a reason, which is that if there really were no racism the TWA adherents would lose their sense of purpose. (No, reparations won’t do it. Look under the hood of the most prominent calls for reparations and you’ll see that they say reparations would only be a “beginning.”)

In any case, to be sure, names and icons are just optics. More substantively, TWA has helped create some movement in America’s conversation about the cops, a problem central to black Americans’ sense of discomfort and dismissal in America. But there are two problems. 

One is that truly reforming 18,000 different police departments, as well as the byzantine laws that quietly detour and destroy so many lives, will be a long, hard job of the kind King and his comrades so diligently and patiently forged. TWA activity, so focused on smoking out racist imagery, seems ill-suited to participate meaningfully in actual on-the-ground toil of this kind.

And second, we must ask: Is it necessary, for the cops to reform, that a food columnist be suspended for dissing a half-Thai model or that sincere Unitarian ministers lose their jobs?

Because this is so very much a TWA moment and because its perspective has been creeping into the fabric of educated American society over several years, we are becoming desensitized to how ancillary to civic progress is this peculiar, furious, and fantastical indoctrination. We seek sociopolitical change, yet we find on the vanguards a contingent who have founded a new religion. They insist hotly that they “really are right,” because racism is bad, isn’t it?

Indeed it is. But it is also bad for increasing numbers of Americans, out of fear for their social acceptance in wider society, pretend to subscribe to the semi-coherent tenets of an anti-empirical faith feigning higher wisdom with big words and manipulative phraseology. They see themselves as the heirs of bygone heroes who would actually have been sickened by them. Progressive Americans’ task is not to learn charismatic but purposeless self-flagellational routines, but to fight injustices with sense and logic. Only TWA adherents think the two are the same.

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Trump Said ‘You Don’t Have To Drop Bombs on Everybody.’ He’s Right

Donald Trump

Asked by Fox News host Sean Hannity last Thursday to detail his top priorities for a second term in the White House, President Donald Trump descended into an incoherence remarkable even by his standards. At the end of the ramble, though, he said something interesting: “I have great people in the administration. You make some mistakes. Like, you know, an idiot like [former National Security Adviser John] Bolton. All he wanted to do was drop bombs on everybody. You don’t have to drop bombs on everybody. You don’t have to kill people.”

That bit about Bolton, excised from the babble preceding it, has the seed of an idea that really would make a historic second term: Stop bombing people. Make good, finally, on your promise to end our endless wars.

This idea has three strengths for a second-term agenda. Most important—and likely least appealing to a man who revels in militarism, enthuses about torture, gets giddy over explosives, and both proposes and facilitates war crimes—is that it would be an overdue act of peace.

The United States has been floundering in Afghanistan for 19 years. We have been bombing Iraq since 2003, Pakistan since 2004, Somalia since 2007, Libya since 2011, Syria since 2014, and Yemen since 2015. Smaller U.S. military interventions—it is so difficult to know what to dub a “war” anymore—are ongoing in various African nations. U.S. bases pepper the Middle East, with thousands of troops at the ready to initiate, escalate, or stumble into conflict. These wars do nothing to help the United States and much to harm ordinary people who have the misfortune to live where Washington decides to fight.

American withdrawal from these conflicts would not spell their immediate end. But U.S. exit is a necessary condition for peace, even if it isn’t a sufficient one. The past two decades have made it inescapably clear that Washington’s military meddling cannot resolve the region’s political, religious, and cultural problems. Prolonging these wars only adds to the region’s suffering and chaos.

The second strength of Trump’s anti-bombing comment is its achievability. Speaking of constitutional procedure in Washington is increasingly farcical, but the president’s constitutional role as commander-in-chief does include the authority to end wars. The power to initiate conflict is given to Congress with the intent of slowing reckless rushes to violence, but there are no such barriers to ending military actions once initiated. Trump can stop bombing everybody at any moment of his choosing. He can withdraw troops whenever he likes. He could get started now—why wait for a second term?

That brings us to the idea’s third strength: It would make Trump’s many professions of interest in reforming American foreign policy into truths instead of indefensible lies. Like the three presidents before him, Trump pays lip service to restraint in U.S. foreign policy. He criticizes the length, cost, and humanitarian consequences of our wars. He promises to bring American forces home, to negotiate great treaties, to abandon futile nation-building projects.

And he does none of that. Trump has not ended a single war he inherited from his predecessor. He has escalated the war in Afghanistan, dropping a record number of bombs in 2019 (after setting a previous record in 2018). Afghanistan’s civilian, military, and police casualties are all at record highs as well. In drone warfare, Trump has found a signature Obama administration program he does not oppose; on the contrary, as The American Conservative‘s Daniel Larison reports, his “administration has significantly increased the tempo of drone strikes in a number of countries, and it has relaxed the rules governing the targeting of these strikes.” In Yemen, Trump has pushed past bipartisan congressional and public opposition to keep facilitating the horrific Saudi-led intervention.

This is the opposite of not bombing everybody. More bombs are falling. More innocent people are being killed. 

Trump has always sent mixed messages on matters of war and peace. Part of him sees war as a drain on American resources, a distraction from domestic issues, and an opportunity to showcase his self-declared deal-making expertise in its resolution. This is the Trump who says, “Great nations do not fight endless wars.” But part of him—apparently most of him—is bloodthirsty, self-serving and mercurial, petty and short-sighted, easily swayed by bad advice, and infatuated with the most garish displays of military might.

That Trump, the vengeful Trump who is angry the arch-hawk Bolton has publicly embarrassed him, is the Trump whose jabbering to Hannity accidentally stumbled into a good second-term priority while casting about for something Bolton would not like.

It’s a shame that that’s all his comment appears to be. A president who spent four years not killing people would be an extraordinary president indeed.

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Revenge of the Coronavirus

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America might want to be done with the coronavirus, but the coronavirus isn’t done with us.

Despite promises from Vice President Mike Pence that new cases had stabilized around 20,000 daily, new case numbers surged nationally last week, with 45,255 new cases on Friday, beating daily case counts from April, which hovered around 30,000. 

In response to the spike in cases, governors in Florida, Texas, and California have rolled back re-opening plans, closing bars and warning residents to stop partying and stay home. Speaker of the House Nancy Pelosi and presumptive Democratic presidential nominee Joe Biden, meanwhile, have both backed national mask mandates.

Were states too quick to re-open bars and other businesses? Is testing to blame? What about schools? And how is all of this affecting the 2020 presidential election? On today’s Reason Roundtable podcast, Nick GillespieKatherine Mangu-WardPeter Suderman, and special guest Robby Soave discuss all of this and more.

Audio production by Ian Keyser and Regan Taylor.

Music: “Gain” by Text Me Records / Grandbankss.

Photo: KEVIN DIETSCH/UPI/Newscom.

Reopen the Schools!, by Robby Soave

Florida and Texas Close Their Bars In Response to Surge in New COVID-19 Cases, by Christian Britschgi

As New Lockdowns Loom, How Did We Get Here Again So Quickly?, by Elizabeth Nolan Brown

CDC Antibody Studies Confirm Huge Gap Between COVID-19 Infections and Known Cases, by Jacob Sullum

Trump Worries That More Coronavirus Testing Makes America Look Bad, by Peter Suderman

The Pandemic’s Economic Carnage Looks Worse Than Expected, by J.D. Tuccille

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Reason TV Video on the Case for Letting Hong Kong Refugees Migrate to the United States

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The Statue of Liberty.

Reason TV has posted a video in which I and others make the case for allowing Hong Kongers to immigrate to the United States, in the wake of a recent Chinese law that gravely threatens the relative freedom that has prevailed in Hong Kong until recently. In the video, I also argue for extending the same right to other victims of Chinese government oppression. Taking this step is both the right thing to do in itself, and also likely to provide important economic and geopolitical advantages to the US in its struggle with China. I make both points in greater detail here. The British government’s offer to create a path to citizenship for up to 3 million Hong Kongers is an important step in the right direction, but does not protect all Hong Kongers threatened with oppression, and also does little for the victims of Chinese repression on the mainland, many of whom are suffering far more serious human rights violations.

I discuss expanding protection for refugees from oppressive regimes, more generally, in Chapter 8 of my new book Free to Move: Foot Voting, Migration, and Political Freedom.

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Were COVID-19 Lockdowns Worth the Cost?

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“More than four months into fighting the coronavirus in the United States,” The New York Times says, “the shared sacrifice of millions of Americans suspending their lives—with jobs lost, businesses shuttered, daily routines upended—has not been enough to beat back a virus whose staying power around the world is only still being grasped.” Most Americans, regardless of their views about the lockdowns most states imposed in response to the epidemic, probably would concur with that conclusion. But did the lockdowns fail because they were imposed too late and lifted too soon, or did they fail because they were fundamentally misconceived? On that question there is much disagreement.

Prior to last spring, the idea that the mass quarantine of overwhelmingly healthy, noninfectious people was an appropriate response to a viral epidemic would have struck most of us as highly implausible. During the “Spanish flu” epidemic of 1918, which was far more deadly than COVID-19 has proven to be, many American cities banned large public gatherings, closed schools, and shut down businesses, such as movie theaters and pool halls, where people gathered indoors in close proximity to each other. But the restrictions of that era were not nearly as pervasive or as broad as the measures implemented in response to COVID-19, which closed all but a select few businesses and confined hundreds of millions of people to their homes except for government-approved purposes.

Those orders, which entailed enormous economic and social costs, were never sustainable over the long term. And once they were lifted, we were bound to face the challenge that confronts us now: how to deal with a virus that poses a negligible risk to most of the population but a serious risk to many people with preexisting medical conditions, a virus that people often carry without realizing it because it can be transmitted before symptoms appear, when symptoms are so mild that they cause little concern, or when symptoms never show up at all.

Lockdown advocates understood that the virus would still be with us after the sweeping restrictions on movement and economic activity were removed. But they argued that lockdowns would prevent local health systems from being overwhelmed by COVID-19 patients, which would endanger not only their lives but the lives of people with other illnesses. That was a scary prospect, although it was probably exaggerated even in places that were hit especially hard by the epidemic. New York City, for example, ended up with more ventilators and hospital capacity than it actually needed.

Even if lockdowns merely delayed COVID-19 cases rather than actually preventing them, supporters of the policy also said, the restrictions would buy time for treatments that could make the disease less deadly. If you knew that you were going to catch the virus at some point, Johns Hopkins surgeon Marty Makary asked during a recent Soho Forum debate, wouldn’t you rather get it later in the epidemic, after doctors had a chance to figure out which treatments worked best? That strikes me as a pretty good argument, although the benefit Makary imagines has to be balanced against the medical cost of restrictions that delayed potentially lifesaving diagnosis and treatment of other diseases.

Lockdown supporters also emphasized that slowing transmission of the virus would buy time to develop the testing capacity required to identify carriers, trace their contacts, and quarantine them. We missed that opportunity early in the epidemic, thanks largely to a government-engineered testing fiasco. Having learned from that mistake, it was thought, states could use the breathing space provided by lockdowns to expand their testing and tracing capabilities. But as the Times notes, even states that were relatively well-prepared on that score are doing a pretty pitiful job of testing and tracing, a mission that seems daunting given the enormous gap between total infections and confirmed cases.

All of these arguments assumed that lockdowns would have enough of an impact on virus transmission to justify the huge burdens they imposed. But it is by no means clear that they did.

Cellphone data show that Americans were already moving around less before they were legally required to do so. Nationwide, driving, walking, and use of mass transit fell precipitously in early March, before any of the lockdowns. That downward trend continued until late March, when Americans started moving around more, even as they were still subject to lockdowns. The same basic pattern was apparent even in states, such as Arkansas, Iowa, Nebraska, North Dakota, South Dakota, and Wyoming, that never issued stay-at-home orders. Foot traffic data show similar trends: a sharp decline beginning in early March, followed by an increase beginning in late March and early April.

It is possible that lockdowns accelerated the downward trends in mobility and delayed or attenuated the upward trends. But the data suggest that the trends were driven mostly by voluntary changes in behavior. It is also possible that foreclosing certain options when people ventured outside their homes reduced virus transmission even when they started doing that more. In states with broad business closure orders, many people were not going to work, and no one was allowed to go inside bars or restaurants for drinks or food. It seems reasonable to expect that such restrictions would reduce virus transmission to at least some extent.

Yet in Texas, where a statewide lockdown was imposed on April 1, that order had no obvious impact on the number of new COVID-19 cases reported each day, which continued to trend upward through April. And after the stay-at-home order expired on April 30 and businesses began to reopen, more than a month went by before there was an explosion in cases, even though the median incubation period for COVID-19 is four or five days.

Houston writer Mimi Swartz, in a New York Times op-ed piece published yesterday, blames Phase 3 of Gov. Greg Abbott’s reopening plan, which “allowed many businesses to reopen at 75 percent capacity on June 12.” The timing seems right, since daily new cases began to rise precipitously four or five days later. The number jumped more than threefold between June 16 and June 25, from 2,622 to nearly 6,000, before falling slightly to 5,357 yesterday.

A longer view shows that newly identified cases had already risen dramatically since late May, from 589 on May 26 to more than 2,500 on June 10—a fourfold increase. That increase may have had something to do with gatherings on Memorial Day weekend and the mass protests against police brutality that followed soon after.

But let’s say Swartz is right that increasing the number of people businesses are allowed to serve—a decision that Abbott reversed for restaurants on Friday, when he also ordered bars closed—transformed what might have been a one-time jump into a persistent upward trend. Doesn’t that imply that letting restaurants operate at 50 percent of capacity (the limit to which Abbott reverted) rather than 75 percent is consistent with keeping the epidemic under control? And doesn’t that imply that the original order, which prohibited all restaurant dining, went farther than necessary?

I honestly don’t know the answer. But this is the sort of question that politicians conspicuously failed to ask when they shut down the economy in the name of flattening the curve.

Texas, according to lockdown supporters, did pretty much everything wrong: It closed businesses too late, allowed them to reopen too soon, and failed to develop testing and tracing capacity enough to make a real difference. But what about California, which led the nation in ordering businesses to close and telling people to stay home and has been only gradually lifting those restrictions? Newly confirmed cases are also rising dramatically there, from 2,108 on June 15 to 7,149 on June 23—a more-than-threefold increase similar to what Texas saw during the same period, although that number had dropped to 4,810 as of June 27.

California began allowing dine-in restaurants to reopen on May 8. The state has not imposed a hard cap on occupancy, focusing instead on physical distancing requirements. Some local governments are being more cautious. In San Francisco, for example, restaurants were allowed to reopen on June 15, but only for outdoor dining. The state allowed bars, wineries, breweries, hotels, bowling alleys, and miniature golf courses to start reopening on June 12 in counties that met specified epidemiological targets.

Can that last decision be blamed for the recent surge in cases? It seems unlikely, given how gradually these businesses are actually reopening. In any case, it is hard to put much stock in the argument that Texas has been exceptionally reckless when even a super-cautious state like California is seeing similar increases in newly identified infections.

As in Texas, the number of new daily cases in California rose steadily during the lockdown, although supporters of that policy presumably would argue that the number would have risen more otherwise. According to Youyang Gu’s estimates, California’s reproduction number—the number of people infected by the average carrier—was 1.71 in early February. It began falling significantly before the statewide lockdown was imposed on March 18 and continued falling until mid-April, when it settled around one—the threshold for a growing epidemic. The number started rising in mid-May, about a week after California began to reopen, and now stands at 1.09. Those estimates are consistent with the idea that the lockdown helped reduce virus transmission, if only by reinforcing a preexisting trend.

In Texas, by contrast, the decline in the reproduction number happened almost entirely before the statewide lockdown, and the number began rising before the lockdown was lifted. Gu’s estimate puts it at 1.08 today, slightly lower than California’s number. If California was more successful at reducing virus transmission because it imposed a lockdown earlier and began to lift it later and more carefully, that success is not reflected in these estimates.

It is certainly plausible that lockdowns helped slow the spread of COVID-19 by limiting the choices of people who were not inclined to follow social distancing guidelines. But the size of the policy’s marginal contribution is uncertain, and it is clear that government action is only part of this story, which is largely about how people voluntarily responded to the threat posed by the epidemic.

The evidence suggests that Americans initially changed their behavior in striking ways, then recalibrated their reaction as it became clear that we would be living with this virus for a long time. Many people—especially those whose own risk of dying from COVID-19 is very low—probably would have become increasingly impatient with pandemic-inspired limits on their lives even if politicians had never deprived them of their livelihoods and ordered them to stay home. But the bitter experience with sweeping and frequently arbitrary government-imposed restrictions seems to have left many Americans less willing to take even relatively modest precautions.

“There was ‘real hubris’ on the part of public health officials at the very start,” the Times says, quoting Vanderbilt University infectious disease specialist William Schaffner. Those officials, according to the Times, believed “the United States could lock down and contain the virus as China had,” and “that futile hope helped create an unrealistic expectation that the shutdown, while intense, would not be for long, and that when it was lifted life would return to normal.”

Now that we have emerged from lockdowns with no real confidence that they actually reduced the ultimate death toll, many people are understandably asking what the point was. “Many Americans started in the pandemic with a strong feeling of solidarity, not unlike the days after Sept. 11, 2001,” the Times observes. “They closed their businesses, stayed inside, made masks and wiped down their groceries. In a country often riven by politics, polls showed broad agreement that shutting down was the right thing to do. But months of mixed messages have left many exhausted and wondering how much of what they did was worth it.”

They are right to wonder.

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Wilbur Ross Says US Revokes Hong Kong’s Special Status

Wilbur Ross Says US Revokes Hong Kong’s Special Status

Tyler Durden

Mon, 06/29/2020 – 17:17

While it was just a formality at this point, after the US revealed several weeks ago that it would strip Hong Kong of its special trade now that China’s is set to impose its new security law as soon as tomorrow, moments ago US Commerce Secretary Wilbur Ross, issued a statement advising China that Hong Kong’s special status is officially revoked.

“With the Chinese Communist Party’s imposition of new security measures on Hong Kong, the risk that sensitive U.S. technology will be diverted to the People’s Liberation Army or Ministry of State Security has increased, all while undermining the territory’s autonomy. Those are risks the U.S. refuses to accept and have resulted in the revocation of Hong Kong’s special status.”

As a result, the Commerce Department said that “regulations affording preferential treatment to Hong Kong over China, including the availability of export license exceptions, are suspended.” Ross also said that “further actions to eliminate differential treatment are also being evaluated” and urged Beijing to “immediately reverse course and fulfill the promises it has made to the people of Hong Kong and the world.”

Needless to say, and have said it many times in the past, China will not be happy, but so far both sides have shown a willingness to contain themselves to merely jawboning and verbal fireworks instead of escalating and jeopardizing the fragile economic truce between the two nations. That, however, may change in the coming months as the November elections approach.

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How CBL’s Journey To The Brink Lays Bare The Risks To Malls

How CBL’s Journey To The Brink Lays Bare The Risks To Malls

Tyler Durden

Mon, 06/29/2020 – 17:08

Authored by Ben Unglesbee of Retail Dive,

On March 9, CBL & Associates Properties filed its annual report with the SEC that included a word that wasn’t there the year before: “pandemic.”

It was included on a list of factors beyond the company’s control that could affect shopping at the malls it operates and owns. In a bullet point, CBL said that pandemic outbreaks, or the threat of, could “cause customers of our tenants to avoid public places where large crowds are in attendance.” 

The week after that language appeared in a regulatory filing, retailers began rushing to close their stores en masse as it became apparent that the COVID-19 pandemic was making its way through the U.S. with deadly consequences. The closures would go on for months, and as retailers tried to ensure their survival by raising and maintaining cash, retailers of all sizes and financial profiles skipped their rent payments.

Those skipped payments are still reverberating throughout the ecosystem. And CBL could become the first large landlord to crack and file for bankruptcy, as the system undergoes a shock unlike any other it has faced.

Slow-motion decline

CBL, according to analysts, operates mainly B-class malls, exposing it to all the struggles of that class of shopping center. It has middle-tier stores in middle-tier markets, in a world where the middle is getting hollowed out by income stratification, as consumers break left and right for value or luxury and experience. 

When Moses Lebovitz, his son Charles Lebovitz (today the chairman of CBL) and Jay Solomon started developing shopping center real estate in 1961, launching a business partnership that would eventually lead to the creation of CBL, they were part of a thriving market. 

“Let’s not forget that malls were a central part of the U.S. retail system in the 1960s, 70s and 80s,” Nick Egelanian, president of retail development firm SiteWorks​, said in an interview. Malls then were a one-stop destination that revolved largely around everyday goods.

The ensuing decades changed that, as discounters, big-box stores and strip centers disrupted department stores and other mall retailers, and the malls themselves started to shift toward fashion, which brought higher margins for retailers and higher revenue for mall operators. 

The drift toward apparel and fashion within the entire mall reshaped the business, creating a bifurcation among shopping centers themselves. While other real estate companies such as Simon Property Group bought up other REITs and malls, or conversely sold themselves to others, CBL plugged along with a portfolio that was diminishing in value. 

“You started to have this class of super valuable, super premium fashion malls. If you were not getting Nordstrom, Neiman Marcus, Saks, Bloomingdale’s or a really good Macy’s, you were going backwards,” Egelanian said. “What was a good business for CBL … started to see declines.”

“Companies like CBL really didn’t understand it,” he added. “It was happening in slow motion.”

But the decline is plenty apparent today. Dozens of retailers have gone bankrupt, including major anchors like Sears, Bon-Ton and J.C. Penney, as well as numerous fashion and mall-based specialty retailers. The upheaval in retail shows in CBL’s numbers. It’s revenue has declined for each of the past five years and the company has recorded sizable net losses for the past two years.

Looking at the list of CBL’s most important retail tenants, in terms of the revenue they bring in, few are without troubles right now. L Brands tops the list, with 128 stores at CBL properties and accounting for more than 4% of the REIT’s revenue. L Brands, with its Victoria’s Secret banner wrestling with a years-long decline, is looking to close some 250 stores in the near future. Second on the list is Signet Jewelers, which plans to close nearly 400 stores and turn to an e-commerce focus after major sales and profit losses.

Going down in terms of revenue, some other names on the list include Ascena, The Gap, Finish Line, Express, Forever 21, J.C. Penney, Barnes & Noble, Hot Topic, The Children’s Place, Claire’s and Macy’s, among others — all of which have experienced business struggles of varying degrees, from periodic sales declines to open or exited bankruptcies.

Unpaid bills

In mid-April, deep in retail’s unprecedented physical shutdown around COVID-19, CBL announced it was cutting spending on maintenance and executive salaries, and furloughing employees. 

The majority of CBL’s properties closed because of government mandates. CEO Stephen Lebovitz said in late May that for the month of April, CBL had received just 27% of billed cash rents, with the rate for May not looking much higher. (By late May, the majority of the company’s properties had reopened.) The company’s rental revenue fell 15.6% year over year in the first quarter. 

“The majority of our tenants requested rent relief, either in the form of rent deferrals or abatements,” Stephen Lebovitz said in a statement. “We have placed a number of tenants in default for non-payment of rent.” He added that “a significant portion” of April and May rent that was deferred would be collected later in 2020 and into 2021. “However, negotiations are ongoing, and it is premature to estimate a recovery rate at this time,” Stephen Lebovitz said.

As rent payments slowed to a trickle, the company negotiated payment deferrals on secured debt, but Stephen Lebovitz said that “[s]ecuritized lenders in general have shown minimal flexibility in amending loan payments.”

On June 1, CBL skipped an $11.8 million interest payment on a set of unsecured bonds, not due until 2023, setting in motion a 30-day grace period. As it negotiated with debtholders, it skipped another $18.6 million payment on another group of unsecured bonds, which came with its own grace period. Earlier, in March, the company breached a covenant in its senior secured credit facility after making a draw on the credit line, giving lenders the ability to accelerate its maturity. (They haven’t yet done so, and CBL said its seeking a waiver.)

In announcing the first missed payment, the company raised the possibility that it might not be able to survive over the next year. 

“Given the impact of the COVID-19 pandemic on the retail and broader markets, the ongoing weakness of the credit markets and significant uncertainties associated with each of these matters, the Company believes that there is substantial doubt that it will continue to operate as a going concern within one year after the date these condensed consolidated financial statements are issued,” the company said in its quarterly securities filing in June. 

A system disrupted

CBL’s troubles in the post-COVID world are not unique. Only about 29% of April mall rents were paid, according to data compiled by Jefferies analysts. (The figure is closer to 26% if you toss out Seritage Growth Properties, which had relatively high payment rates compared to its peers.) For office space, by comparison, 94% of rents were paid, and even strip center rents were nearly 64% paid, according to Jefferies data, which was emailed to Retail Dive. 

The early figures for May showed 30% rent collection at malls. 

Mall owners and operators, of course, have their own obligations to pay — mortgages, interest, employees and so forth. So as retailers pull back on rent to stay alive, the pain is felt throughout the system. So far, creditors are giving landlords some wiggle room. 

“The lease says you have to pay it, and the loan says you have to pay it, but if you pay it you’re going to go out of business.”

Nick Egelanian; President, SiteWorks

“I think a lot of landlords have been able to get forbearance on their loans,” Linda Tsai, a senior equity analyst with Jefferies, said in an interview. “Lenders understand this is an extraordinary situation. For the most part they’re willing to give the assistance mall owners need to see how it plays out.”

But the system, where more or less every retail tenant pays their rent on time except for the occasional retailer in distress, was not built for a shock of this scale. And thus there is no playbook for dealing with it. 

In this environment, landlords are suing retailers for unpaid rent, retailers are suing landlords to get out of rent, and retailers are filing or contemplating bankruptcy to seek shelter from rent or because they’re facing lockouts and default notices from their landlords. Bloomberg reported in late May that landlords had sent out “thousands” of default notices to retail tenants. 

“Retailers in the best case got some forgiveness, and in the worst case deferred everything,” Egelanian said. “And they’re not going to pay all that rent.”

Which means more mall operators, already struggling before COVID-19 with a decline in the sector, could fall short on funds to pay their own obligations. Retailers and landlords and mall operators are making stark choices about rent and debt payments, and more could come. “The lease says you have to pay it, and the loan says you have to pay it, but if you pay it you’re going to go out of business,” Egelanian said. “Public companies now have to start looking out for themselves.”

What has been a “well-oiled system of interlocking gears” is at risk of becoming “a system of dominoes to knock each other down,” according to Egelanian. “It’s just unsustainable right now,” he said. “You’re going to see landlords fall, retailers fall, REITs fail in the market.”

via ZeroHedge News https://ift.tt/3igLqkU Tyler Durden

Hugh Hendry Urges Massive Dollar-Devaluation, Wants Joe Rogan To “Radicalize” The Fed

Hugh Hendry Urges Massive Dollar-Devaluation, Wants Joe Rogan To “Radicalize” The Fed

Tyler Durden

Mon, 06/29/2020 – 16:45

“Chaos is coming… The mood of the nation is what unleashes the inflationary genie...it is not a monetary phenomenon.

The world is “suffering from propaganda” according to former hedge fund manager Hugh Hendry, who explains to BloombergTV’s Jonathan Ferro that, despite what we are told every day about a “tsunami of money” flooding the world, “The Fed is not printing money, it is simply increasing central bank reserves.”

How can one explain, he asks, how the dollar has strengthened so much while The Fed’s balance sheet has exploded…

What the global economy needs, Hendry explains, is more dollars and in lieu of The Fed’s “responsible” actions, it should abrogate responsibility to The Treasury and focus attention on the FX markets (not the fixed income markets).

The dishevelled Scot reflects on our Ayn-Randian world and says The Treasury should stand up and proclaim that the Dollar Index should trade at 60 (about a 40% devaluation from here).

“Kaboom! Can you imagine the pandemonium… but what would they do,” he asks himself rhetorically, “they would print their currency and use that to buy dollars to stop their currencies appreciating.”

They would be like the Swiss, Hendry smiles, “buying Facebook regardless of the news.”

The hardest thing, he adds, is that “The Fed has to promise to be something they desperately don’t want to be – irresponsible.”

It’s an impossible task, Hendry notes, for The Fed to be so radical, and that’s why Hendry believes “we need someone like Joe Rogan” to run The Fed.

As Hendry explains in his “Dawn Of Chaos” paper,  Bankers aren’t listening to the Fed any longer…

It’s like watching a poker game. The Fed keeps wagering its QE bets to give the impression that it holds a strong hand. It needs to convince the banks to fold and lend more. Once upon a time the Fed bossed this game; it was the grand master in the art of deception. Back in the chaotic 1970s, the Fed had an Ace it could play, Paul Volker, whose determination to raise interest rates in the teeth of a recession – I don’t think you would call it recklessly irresponsible? But still… – could instil fear into this game of poker.

Volker wanted the banks to fold and to contract their expansionary lending. He needed them to believe that inflation was set to fall and that they would be better off in Treasuries yielding more than 12% than lending to an economy that was set to be pushed over a cliff by the Fed.

Several games and a few bad hands later, the banks finally got the message and took his posturing for real. They changed their risk behaviour, and in doing so they changed the course of history: by buying those cheap Treasuries and lending less, inflation was thus expunged from the credit system. But first the credit markets had to be brought on side. You get it?

You want a solution? Change the mood music

How to do it this time?

Today, the Fed’s challenge is arguably much harder: it must pivot from order to chaos. The Fed needs someone willing to act out of turn, an angle shooter perhaps? The banks have made all the running and have had the upper hand in this parlour game. They keep calling the Fed’s bluff.

“What you got? Really? More reserve printing? I see you and I raise you…” The Fed’s gotta start thinking outside the box!

Of late they’ve shown some signs of understanding this dilemma. Fed chairman don’t dare loosen their ties or remove their jackets. But even so, Fed chief Jerome Powell has been on prime-time morning TV – this almost never happens. Credibly reckless? “I’ll give you credibly reckless,” he declares. He’s been fibbing, arguing that he is really printing money. Fed chiefs never say that. What is more, he says that he’s plenty ready to do more! While housewives across America cower behind their sofas, the bank and the credit markets, his real audience, continue to yawn…

…So, something’s got to be done and it has to be unorthodox. If people can’t bear higher interest rates, then let’s give them something else. CHAOS, anyone? If I were at the Fed, I would appoint podcast-superstar Joe Rogan.

…Can you imagine the poker game with Joe at the table? I’m not so sure the credit market would be so convinced that the “suit” running the Fed was any longer so “stiff”.

We would be running up the speedometer of nominal US GDP and dialling down the ratio of debt to GDP. And with all these new and potent dollars emanating from the high velocity base of the commercial banking system, we could at last address the elephant in the room and the dollar issue.

“I would rather we radicalize The Federal Reserve than radicalize the political economy,” and that Hendry says, is the real danger.

“If no one is brave enough to do something crazy like this then the political class will get crazier and crazier” which leads us, Hendry says, “staring into this horrible period going into the election where we are fomenting anger with the virus releasing lots and lots of pent-up frustration at the injustice of how the present system distributes wealth.

“The system is broken,” and a “mad, angry political system is something that I fear most.”

If they don’t install a radical Fed chief, like Joe Rogan, Hendry warns:

“prices will ebb and flow but generally go higher until society snaps… and when we get angry and I wanna fight you to the death, then we are talking about a lot of inflation.”

So what is the “unbound by other people’s money” Hendry doing with his money?

I am long gold, I’d be long equities, and I would be long FX volatility… the Saudi peg’s not gonna last, Hong Kong’s peg’s not gonna last…because the world is gonna change.

Hendry concludes on his most ominous note:

“If The Fed doesn’t change then the world’s going to snap.”

Interestingly, the dollar (in gold) appears to be pricing in a significant devaluation of the reserve currency – while the rest of the world’s fiat friends desperately keep order…

If we see markets going higher and volatility going higher with it, as Hendry suggests we saw a snapshot of in April, “then you know the world is going to change… this is the dawn of chaos.”

“50 years ago the world was chaotic and we were asking authorities to impose order and it’s been fantastic for the creditor class. The challenge today is we’ve had enough of order and we certainly can’t take higher interest rates, so give us chaos,” but Hendry ends this wondrous 10 minutes of macro malaise by noting that “the hardest thing is for The Fed to promise to be credibly irresponsible… and we need the monetary system to be irresponsible so that our society remains together.”

Download The Dawn Of Chaos paper here.

What about hyper-inflation?

“I don’t see that happening in America; elsewhere perhaps, but the US does enjoy some spoils from having the reserve currency after all.”

Unless… A public baying for action – any action, and to-hell-with-the-consequences kind of action, the mood that gripped Germany in 1921, Japan in 1935, and which we catch glimpses of with the pandemic of 2020… this is commonly regarded as the classic symptom of collective hysteria. Hysteria is a huge red flag if you are looking for signs that our monetary system will fail.

via ZeroHedge News https://ift.tt/2ZpyFMi Tyler Durden

Revenge of the Coronavirus

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America might want to be done with the coronavirus, but the coronavirus isn’t done with us.

Despite promises from Vice President Mike Pence that new cases had stabilized around 20,000 daily, new case numbers surged nationally last week, with 45,255 new cases on Friday, beating daily case counts from April, which hovered around 30,000. 

In response to the spike in cases, governors in Florida, Texas, and California have rolled back re-opening plans, closing bars and warning residents to stop partying and stay home. Speaker of the House Nancy Pelosi and presumptive Democratic presidential nominee Joe Biden, meanwhile, have both backed national mask mandates.

Were states too quick to re-open bars and other businesses? Is testing to blame? What about schools? And how is all of this affecting the 2020 presidential election? On today’s Reason Roundtable podcast, Nick GillespieKatherine Mangu-WardPeter Suderman, and special guest Robby Soave discuss all of this and more.

Audio production by Ian Keyser and Regan Taylor.

Music: “Gain” by Text Me Records / Grandbankss.

Photo: KEVIN DIETSCH/UPI/Newscom.

Reopen the Schools!, by Robby Soave

Florida and Texas Close Their Bars In Response to Surge in New COVID-19 Cases, by Christian Britschgi

As New Lockdowns Loom, How Did We Get Here Again So Quickly?, by Elizabeth Nolan Brown

CDC Antibody Studies Confirm Huge Gap Between COVID-19 Infections and Known Cases, by Jacob Sullum

Trump Worries That More Coronavirus Testing Makes America Look Bad, by Peter Suderman

The Pandemic’s Economic Carnage Looks Worse Than Expected, by J.D. Tuccille

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Reason TV Video on the Case for Letting Hong Kong Refugees Migrate to the United States

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The Statue of Liberty.

Reason TV has posted a video in which I and others make the case for allowing Hong Kongers to immigrate to the United States, in the wake of a recent Chinese law that gravely threatens the relative freedom that has prevailed in Hong Kong until recently. In the video, I also argue for extending the same right to other victims of Chinese government oppression. Taking this step is both the right thing to do in itself, and also likely to provide important economic and geopolitical advantages to the US in its struggle with China. I make both points in greater detail here. The British government’s offer to create a path to citizenship for up to 3 million Hong Kongers is an important step in the right direction, but does not protect all Hong Kongers threatened with oppression, and also does little for the victims of Chinese repression on the mainland, many of whom are suffering far more serious human rights violations.

I discuss expanding protection for refugees from oppressive regimes, more generally, in Chapter 8 of my new book Free to Move: Foot Voting, Migration, and Political Freedom.

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