Who Could Have Known!

Last night Roland, a school teacher, admitted he thought I was crazy when I told him in January that the schools would soon be shut down for the rest of the year. We had just come back from Thailand. I had been wearing a mask in crowded situations-- like on the BTS (train), even though no one had heard the word "coronavirus" in December. On the way home I wore my mask on the Korean airline that took us home. Roland said that I was frightening the other passengers. I laughed. He was sitting behind a passenger who sneezed and coughed his way across the Atlantic after our long layover in Seoul. When we got home Roland get really sick. We figured it was the flu. He had never been that sick. Meanwhile I had begun listening to Chris Martenson's daily podcast and republishing them on DWT. I started moving equities in my portfolios into cash equivalents and property, much to the chagrin of my financial advisors who, like Roland, thought I was crazy. By the end of January, I had all the brown rice, buckwheat, lentils, chickpeas and various other dried beans, celery root, potatoes, pasta, daikon, carrots, yams, etc to last into the summer. Roland laughed. He was horrified when i started wearing my N-99 mask whenever I went out and wondered if I has lost my mind.

I "knew" what was coming. It was clear as day to me and I was horrified too-- horrified that he wasn't wearing a mask and that none of my fryiendseven had masks. Now Roland never leaves the house without a mask and all my friends have bought them for themselves and their families.

Over the weekend David Lynch wrote for the Washington Post something I had known for a couple of years: the downturn was exposing the reality of the U.S. economy: it was never as strong as it seemed. It never seemed all that strong to me. It seemed like Trump hot air. I knew the stock market was just waiting for a spark to explode. Could anyone in their right mind not see that anything Trump touches turns to shit? "In the last month," wrote Lynch, "the $21 trillion U.S. economy endured a remarkable and disorienting reversal, plunging from prosperity into an unprecedented deep freeze. The coronavirus has left businesses from giant corporations to the corner bar struggling for survival. But along with dealing millions of Americans an unexpected blow, the pandemic exposed vulnerabilities that had accumulated during a record-long expansion and years of ultralow interest rates-- and which now could make it harder to recover from a recession, economists said. The $2 trillion financial rescue legislation President Trump signed Friday is intended to patch the economy’s gaping wounds with urgently needed loans for companies and checks for American families. Never before has the federal government tried to rush so much aid out the door so quickly. As February drew to a close, few could have imagined such an emergency." They should have been listening to Chris Martenson's podcasts, the way I had been.

Many companies “were having the best years they’ve ever had these last few years,” Trump said Wednesday. “And then, a little bit less than a month ago, they went into a position that they haven’t seen because of the hidden enemy, the virus... It’s not their fault. It’s not their fault.”

Federal Reserve Board Chair Jerome H. Powell agreed, telling NBC: “There’s nothing fundamentally wrong with our economy.”

In hindsight, however, the economy had blemishes. The record-high stock prices the president routinely touted became disconnected from companies’ underlying value, obscuring warning signs such as excessive borrowing, according to economist Michalis Nikiforos of the Levy Economics Institute of Bard College. Total corporate debt surged past $10 trillion, equal to nearly one-half the nation’s annual output.

“This shock does not come at a time when the economy is otherwise healthy,” he said. “There are very significant fragilities in the U.S. economy and elsewhere.”

On the eve of the crisis, one-quarter of the country’s largest companies had more cash going out than coming in, according to Goldman Sachs. The economic shutdown will quickly cause the share of American companies that are cash-flow negative to nearly double, meaning they could be in danger of starving for funds.

Almost half of the companies in the hardest-hit sectors-- industries such as consumer services, transportation and entertainment-- will need to secure additional financing within six months or close their doors, Goldman said. Yet such borrowing now is more costly because yields on corporate bonds have risen in disorderly trading this month.

Small businesses face an even tighter deadline: half of the respondents to a Goldman survey said they will not last more than three months if the virus-induced shutdown persists.

The unappreciated frailties did not cause the downturn. The pandemic is responsible for that. And no business can stockpile enough cash to ride out an indefinite shutdown.

But the financial weaknesses surfacing may determine how the United States weathers its worst economic calamity in a century-- and which companies survive.

...The rolling quarantine may be an effective public health strategy, but it is proving to be bitter medicine for the U.S. economy.

The economic timeout is depriving businesses of revenue and costing millions of workers their salaries. But it isn’t doing anything to stop the bills.

“If it were possible to stop every transaction in the economy, and the coronavirus crisis passed very quickly, there wouldn’t be much of a problem,” said Larry Harris, a finance professor at the University of Southern California’s Marshall School of Business. “But the ‘pause button’ only works on some obligations.”

...All over the country, executives are trying to stretch limited cash to cover fixed expenses such as rent, loans and health insurance premiums. Corporations are cutting costs by laying off workers, halting dividends and stock buybacks and delaying new investments.

From the most prominent corporate names to unheralded manufacturers and restaurants, the objective is the same: live to fight another day.

Corporations such as General Motors, Hilton, Ford Motor Co., and Kraft Heinz Co. fortified their cash positions this month by tapping their credit lines with banks for a total of $140 billion, according to S&P Global Ratings.

For now, the nation’s banks, which have $3 trillion committed to such lending channels, can accommodate these demands. But corporate cash needs “could be significantly higher than in past periods given the scale of the coronavirus pandemic and the sharp or total cessation of activity for many businesses,” S&P warned this week.

The individual dramas playing out at businesses... reflect an economy that has skidded to a stop.

In cities such as Boston, New York, Las Vegas, Pittsburgh, San Francisco and Chicago, roughly 70 percent of hourly employees are not working, according to Homebase, a maker of scheduling software. On Wednesday, the number of air travelers passing through TSA checkpoints was barely 10 percent of normal. IHS Markit’s Purchasing Managers’ Index for the services sector hit a record low earlier this past week, a sign the economy is contracting.

...The United States has been through deep recessions before. Unemployment topped 10 percent during the 2008 financial crisis. In the early 1980s, the country was in and out of recession twice in less than three years.

Companies can ride out downturns by drawing on financial reserves. But no one expects even the largest companies to endure an indefinite shutdown, economists said.

Owners and shareholders invest their money in a business to earn a return, so leaving excessive amounts of money idle is counterproductive. Businesses are supposed to put money to work.

Keeping too large of a “rainy day” fund also could have economywide implications. If every company maintained an enormous cash cushion, there would be less capital to fund new investments. All else being equal, less capital means higher interest rates, which could slow economic growth.

“It’s very costly to have lots of cash sitting around,” said Patrick Chovanec, economic adviser at Silvercrest Asset Management.

In Washington, there has been talk about helping companies retain their workforce through the shutdown. On Thursday, the Federal Reserve and four other banking regulators encouraged lenders to make loans to small businesses and consumers.

Three days earlier, the Fed said it planned to establish a “Main Street Business Lending Program” to aid small and medium-sized businesses. The $2 trillion financial rescue legislation the president signed Friday likewise includes small business loan funding as well as massive aid for airlines and other major industries.

The same day Lynch was writing his piece, fellow Post reporters Robert Costa and Philip Rucker were writing Inside Trump's Risky Push To 'Reopen' The Country about his obsession that "Americans must get back to work and businesses need to reopen as quickly as possible. 'Our country wasn’t built to be shut down,' the president said at a news conference last Monday, opening five straight days of public declarations that raised the specter of easing social distancing guidelines and other restrictions by mid-April-- a timeline that most experts studying the pandemic say is dangerously premature."

[Lindsey] Graham’s private plea, which some of Trump’s advisers have echoed to the president, illustrates the political calculations underway inside the leadership ranks of the Republican Party as the president balances dual crises as he seeks reelection: the pandemic that is claiming lives and overburdening hospitals, and the resulting economic meltdown that already has left millions jobless, with many facing financial ruin.

The White House’s coronavirus task force, led by Vice President Pence, is preparing to issue revised recommendations from the president to the public once the current 15-day guidelines expire Monday.

Trump said Tuesday that he would like much of the country “opened up and raring to go” by Easter, which is April 12-- in part, he said, because he likes the imagery of church pews full for the holiday. Whether he follows through on that desire could be one of the most consequential decisions of his presidency.

The president is not technically the decider, however. The battle to reopen the country pits Trump against multiple governors, Democratic and Republican alike, who are scrambling to mitigate the impact of the coronavirus in their communities and marshal medical supplies for their hospitals. They will have the final say on when restaurants, stores and other gathering places in their states can reopen.

Ohio Gov. Mike DeWine (R), who moved early to confront the outbreak and was the first governor to order restaurants and bars closed, said in an interview, “People’s heads are now moving toward how we will open this back up. That is certainly something we’re looking at.” But, he added, “You’ve got to be ready for the surge that we know is coming.”

In other states across the country, the surge has arrived-- and it is testing Trump’s belief that Easter is a reasonable target.

In New York, the center of the coronavirus pandemic in the United States, Gov. Andrew M. Cuomo (D) has emerged as a national leader during the pandemic as he has excoriated the federal response and pleaded with the administration to send more ventilators and other supplies and to be prudent about a resumption of normal life.

“If you ask the American people to choose between public health and the economy, then it’s no contest. No American is going to say, ‘Accelerate the economy at the cost of human life,’ ” Cuomo told reporters last week.

Trump has fostered a transactional dynamic-- in which he insinuates that loyalty and praise could be helpful for states seeking federal help-- that has unsettled governors looking for fair terms and clear guidance from the federal government, several gubernatorial aides said privately.

As Trump said Tuesday on Fox News Channel, “It’s a two-way street. They have to treat us well, also. They can’t say, ‘Oh, gee, we should get this, we should get that.’”

A growing uneasiness about Trump’s motives and leadership hovers over private conversations among governors, according to top Democrats and Republicans privy to the conversations. Even those who are Trump’s political allies are “never quite sure what he’ll do or if they can trust what they hear from Pence,” according to one adviser to a Republican governor who, like others interviewed for this story, spoke on the condition of anonymity to comment frankly.

Trump’s highly charged approach has prompted some governors to band together and discuss their own timelines for closures and other issues, with bipartisan and strong but under-the-radar partnerships driving many decisions.

“We’re all drinking out of a fire hose, but they’ve really been leaning on one another and pulling together,” Maryland Gov. Larry Hogan (R) said in an interview. “There is texting and phone calls back and forth-- and it’s not like, have your scheduler call my scheduler.”

This collective gubernatorial power could be a counterweight in the coming days if Trump continues to rally for a national reopening. But governors will also continue to lean on Trump for federal help-- an imperative that New Jersey Gov. Phil Murphy (D) said would outweigh emerging tensions over reopening the economy, at least for now.

“We can’t print money, and we don’t have anything close to the stockpiles the federal government has, so we need them,” Murphy said in an interview.

Some red-state governors have been more aggressive about keeping their economies humming.

In Florida, Gov. Ron DeSantis (R) was far slower than other big-state governors to order restrictions, and he refused to close beaches this month to spring break revelers.

And in Mississippi, Gov. Tate Reeves (R) issued an executive order classifying most businesses in the state as “essential,” thereby exempting them from any shutdown orders that cities and counties issue.

“Mississippi’s never going to be China,” Reeves said-- even as neighboring Louisiana has recorded one of the highest surges in coronavirus cases. Louisiana Gov. John Bel Edwards (D) has warned that the number of patients will soon exceed the state’s treatment capacity.

Trump has said that his “first priority” is the health and safety of the American people and that his decision about what to recommend will be guided by the medical experts on his team. “We will be using data to recommend new protocols to allow local economies to cautiously resume their activity at the appropriate time,” the president said Tuesday.

Yet in private discussions, the president has been driven much more by economic concerns, according to people involved in internal debates or briefed on them. Trump has long viewed the stock market as a barometer for his own reelection hopes, and he has been distraught at the meltdown in recent weeks. He has been inundated with calls from business leaders, wealthy supporters and conservative allies urging him to get Americans back to work and stave off further calamity, even if doing so carries health risks.

“There’s a fatalism that no matter what he does, he’s going to get blamed by half of the country,” said a former senior administration official with knowledge of Trump’s thinking. “If there is something he has some measure of control over, which is the economy, why not potentially try to take action? Yes, there will be a death toll, and he’ll get blamed one way or another, but in all likelihood, whether he gets reelected or not will depend on where the economy is and where people’s perceptions of the economy are six months from now. That’s where he is primarily focused.”

Former Pennsylvania governor Ed Rendell (D) said Trump is “overreacting terribly” to economic concerns by suggesting a premature return to normal when he ought to be focused entirely on mitigating the spread of the coronavirus.

“The thing he wanted most was to have a great economy. Boom, he’d win,” Rendell said. “It’s causing him to make a terrible error... If the virus doesn’t abate, he’ll be blamed for it, and it’ll be an utter disaster.”

It is far too soon to measure public approval of Trump’s management of the pandemic and draw meaningful conclusions about his reelection chances, but it is likely to be the main event on which he is judged by voters in November, according to political strategists.

“The way public officials handle crises can be make or break moments for political careers,” said Whit Ayres, a Republican pollster who is not affiliated with the Trump campaign. “The way public officials perform, their competence and their ability to help their constituents recover from a crisis overshadows almost anything else that they do.”

Trump’s reliance on his gut instincts and his decision to put his grievances and skepticism of the federal government at the fore of his approach has alarmed many governors, who said they feel isolated as they respond to a global crisis.

“Sometimes it’s difficult to understand what the White House’s position is,” Wisconsin Gov. Tony Evers (D) said in an interview. “We had the president one time saying it’s a hoax, then a few weeks later, it’s really, really bad, then, let’s shoot for Easter.”

Evers said Wisconsinites seeking facts and guidance are turning instead to local leaders and institutions, such as the Archdiocese of Milwaukee, which has canceled Easter Sunday Masses despite the president’s desire for packed pews. Asked whether he would take his cue on when to reopen Wisconsin’s economy from the president, the governor said, “No.”

“There is a disconnect, and while the president is free to make any comments he wants to, it’s confusing to people-- that’s the bottom line,” Evers said. “My health-care officials and scientists are telling me it’s still a big deal. They’ll make the decisions based on science. That’s what we’ll do here.”

It’s not as if governors are opposed to reopening the economy quickly. “I share that goal with the president,” Rhode Island Gov. Gina Raimondo (D) said in an interview.

In fact, Raimondo argued, governors are more in touch with the real-world consequences of the shutdown than is the president, who hears mostly from executives of large companies.

“We are the ones in our communities talking to the laid-off waitress stressed [about how] she’s going to take care of her children, talking to hospital workers worried if they will be safe,” Raimondo said.

As John Kasich, a former Republican governor of Ohio, put it, “When you’re governor, you realize you’re really the father or mother of the people inside of your state. You’re right there. You live with them. You see them. You hear from them.”

Trump has been closely tracking what governors say in the media and has been quick to attack those he sees as critical of the federal response. He has repeatedly trashed Washington Gov. Jay Inslee (D) and Michigan Gov. Gretchen Whitmer (D), to name just two.

Whitmer and other governors said they are treading lightly with Trump and hoping to avoid his wrath. “I know that there is a sensitivity, sure,” Whitmer said in an interview.

“I have 10 million people in this state, and I need to be able to deliver on protecting them,” Whitmer said. “Working with the federal government is really important. I’ve never gone out of my way looking for a fight, and I’m certainly not doing that, because I need as much partnership and assistance from the federal government as I can get.”

“At the end of the day,” she added, “this isn’t a political fight. This is a fight to save lives.”

Is Trump out of his mind? Yes, of course-- and he isn't alone. As Victoria Bekiempis wrote yesterday in The Guardian there are plenty of right wing extremists who seem almost eager to see more workers die for the same of keeping the pre-election economy chugging along. "Some of those conservatives," wrote Bekiempis, "have taken the president’s concerns over the dire health of the US economy a step further-- suggesting that the inevitable deaths of many people to the virus might be an acceptable cost of doing business in the face of a shocking economic collapse that saw more than 3 million new people register for unemployment.

And then-- naturally enough, came the story of Texas Lt Gov. Dan Patrick, telling Tucker Carlson that many older Americans would happily risk their lives for the sake of the economy. "The extreme rightwing media figure Glenn Beck shared the sentiment," wrote Bekiempis. "'I would rather have my children stay home and all of us who are over 50 go in and keep this economy going and working, even if we all get sick, I would rather die than kill the country. ’Cause it’s not the economy that’s dying, it’s the country,' Beck said on an episode of his program on Blaze TV." And Wisconsin GOP greed-pig Ron Jonson who said "We don’t shut down our economy because tens of thousands of people die on the highways. It’s a risk we accept so we can move about. We don’t shut down our economies because tens of thousands of people die from the common flu... getting coronavirus is not a death sentence except for maybe no more than 3.4% of our population, [and] I think probably far less." The current U.S. population is 331,002,651. So... just 11.25 million people. What's the big deal? Wisconsin's population is 5.85 million, so not even 200,000 dead. And in the county that was most responsible for Johnson;'s reelection in 2016-- Waukesha of course-- not even 14,000 would die.

The rightwing Federalist magazine has also run stories urging Trump to get the economy going again and attacked Democrats-- not the US president-- for their reactions to the crisis. One article peddled the idea that “a handful of Democratic activists created alarming, but bogus data sets to scare local and state officials into making rash, economy-killing mandates.”

Elsewhere business lobbying groups are also lobbying against economic shutdowns. The Tampa Bay Times reported that the Florida chamber of commerce has lobbied the Republican state governor, urging him not to take drastic measures that might shut down the state’s economy.

“I don’t think the data says we need to do a statewide shutdown,” Mark Wilson, the chamber’s CEO, told the paper.

It is true that conservatives are not alone in their desire to stimulate the languishing economy.

New York’s governor, Andrew Cuomo, a longtime Trump foe, echoed the White House’s desire to relaunch business.

“I take total responsibility for shutting off the economy in terms of essential workers but we also have to start to plan the pivot back to economic functionality,” he told journalists in the state capital, Albany. “You can’t stop the economy forever.”

But, Cuomo said on Tuesday that economic rebound should not be accompanied by death.

“If you ask the American people to choose between public health and the economy, then it’s no contest,” he said. “No American is going to say, accelerate the economy at the cost of human life, because no American is going to say how much a life is worth.”