The Virus Cramdown

There is a woke centrist meme that our elites are merely incompetent, or beholden to ideologies that makes competence impossible. Mentioning that things are from places is racist, so anti-racist ideology prevents you from realizing you should perhaps shut down flights to a bubbling disease reservoir. “Public health experts” have more respect for their institutional prerogatives to prevent products from coming to market than the idea that catching sneezes with literally anything is better than letting em rip, so we get ridiculous lies about the inefficacy of masks.

This meme is not really the case – the substantive grifts they are in charge of have in fact been effective, if inefficient, at their intended purpose. The point of “antiracism” isn’t to shave off 15 IQ points from your decisionmaking ability, it’s to ensure lots of jobs and lots of power for antiracists. The point of making sure only masks that have been consecrated by the appropriate priest are Medical Devices, rather than the identical mask used by an Oaxacan sandblaster, is to ensure Medical Device Manufacturers maintain their profits.

In the context of the ongoing wuflu crisis, these grifts pile up body counts even as the institutions are granted more and more relative authority, simply due to being the only game in town. The CDC might be a gang of mendacious retards, but they are the ones with the right words in the name and access to unlimited borrowing ability, so sure, treat them as ipso facto Serious People and put them in charge of coordinating vast logistical efforts. Given this dynamic, and the meta-dynamic where every grant of authority turns into an opportunity for loot, how does this play out as things escalate? And how are things going to escalate?

The Economy, the filicidal bull-god we have all been obliged to sacrifice to for the past 40 or so years, has gone full Wile E. Coyote and currently finds itself with inertia and time as the only relevant variables. There is no bottom.

Understand – the US has shut down essentially its entire service sector, immiserating perhaps a third of its workers and nearly every small business from drycleaners to auto body shops, with no concrete end in sight either in terms of the length of the shutdown, or the consequential damage to the rest of The Economy. These are the workers that finance huge portions of the consumer credit sector (which in turn means the consumer goods sector – from Fords to iPhones). They rent, and those revenues pay for the small property owner/rentor sector – which pays a lot of local property taxes (first batch due in 6 weeks!). It’s dead turtles all the way down.

The healthcare sector, perhaps the largest ongoing grift in contemporary America (a fifth of GDP!), has an incredibly top heavy cost structure that relies on siphoning medicare & insurance dollars into vastly expensive and profitable drugs and procedures, concentrated at the end of drawn-out death processes with an expensive menu of interventions like cancer and heart disease. Along the way, administrators of various sorts (hospital admins, “outreach”, research, insurance adjusters, etc) take their cut. It is wildly maladapted on a financial level to deal with a sudden switchover to exclusively triaging acute respiratory distress, which realistically they may or may not ever get paid for. It’s the equivalent of taking a microchip fab and repurposing it to spit out sandbags.

Local and state government revenues are collapsing, and their pension funds are looking pretty shaky (unless and until they’re inflated back to profitability by the Fed while obligations remain constant). Historically being a civil servant has been a pretty cushy gig even in the context of broader economic turmoil, but it’s not out of the question that people start to question the wisdom of paying eg health inspectors to inspect restaurants that no longer exist, when few citizens have the cash to pay even their existing taxes, let alone the extra required once half the tax base collapses.

(In the interests of brevity I’ll stop talking about every economic sector, but for a really bleak scenario, consider that a lot of farmers are getting to be pretty old guys, and in that business incapacitation at the wrong time does almost as much economic damage as an outright fatality.)

The thing is that all of this would actually be survivable with aplomb, if we made a reasonable effort at maintaining baseline standards of living for the duration of the crisis, suspending every practical nominal obligation, and making distributed planning possible. There have been many situations where large portions of The Economy are shut down, even unexpectedly, and ramp back rapidly afterwards. As long as the capital is preserved – not even really physical capital (although it helps), but the social, human, and organizational capacity to undertake projects – the fabled “v shaped recovery” is the norm. Germany went from a smoking ruin in 1945 to a prosperous industrial powerhouse ten years later. While they were in the process of being literally incinerated during the war, their economic production in real terms nonetheless went up until the very last stage.

There is no real practical reason why we can’t decide we’re giving every warm body with a SSN a couple grand a month until July 4th, or send every business a check for their payroll direct from the IRS, or decide the trade-in value for home-sewn masks is 50 bucks apiece. Pick your approach of choice, it probably doesn’t matter as long as the money is spread wide and deep. We could afford it, the Treasury can borrow for 30 years at roughly 1.25% right now. They don’t even strictly need to “borrow”, that’s just an accounting fiction – it suffices to say they can tax back 3 months of plate-spinning over the next half century without much trouble. There would never be a better use of money than avoiding an equivalent proportion of casualties to the US Civil War, and probably worse damage to property and liberty.

Even without a hard date for the end of hostilities against the Tiniest Chinese, the same putatively racist bodybuilders who accurately predicted the course and timing of this crisis would be happy to predict its end date and advise you accordingly if there was an actual victory condition. But, it looks like the plan is instead another forever war, where victory is constructed to be impossible.

What is shaping up is nothing less that the greatest looting campaign in world history – bigger than the 2008 bailouts, bigger than the rape of Russia, bigger than the sack of Rome. Theoretically unlimited power to address the current crisis will not be used, and won’t even be squandered – it will be weaponized.

Consider that the financial sector has been granted access to unlimited funds. That’s not hyperbole or a figure of speech. The banking reserve requirement is now zero. Banks can make whatever loans they want. Buying assets themselves would be gauche, but that’s what clients are for, and they’re happy to supply them whatever capital they need. Individual financial firms like Berkshire Hathaway are sitting on literally hundreds of billions of dollars of cash or might-as-well-be-cash (which the Federal Reserve will ensure is redeemable at par). The private equity sector has 1.5 trillion in dry powder (interesting verbiage there).

You, or your landlord, or your local McDonalds franchise, or the best damn transmission shop in three states, does not have unlimited capital. In fact, you’ll discover that even the promises of temporary keep-the-lights-on support to avoid wasteful capital destruction were worthless. If you own a corporate bond for which there is no market, the feds will trust the inestimable judgment of Moody’s and cash you out at par. If you merely own a domestic machine shop while we’re supposed to be onshoring manufacturing as quickly as possible Once This Whole Thing Blows Over, you’d be better off selling your Bridgeport on Craigslist while you can. On a personal level, you’ll find it harder than anticipated to keep the lights on in der coronabunker while you’re told that as a matter of state policy you are forbidden from venturing aboveground.

And there’s the cramdown. The value of real assets like real estate and capital intensive businesses will be driven as close to zero as possible. The value of fake assets, like bond ETFs, T-bills, or that favor you did for your guy at Blackrock, will be maintained for insiders. Those insiders will use the latter to buy the former for a pittance. Only once they have ridden off with their loot like a Khazar horde and actually need revenue to insanguinate their new holdings will The Economy be allowed to restart, on their terms of course.

When these firms talk about waiting for valuations to fall further before considering investments, they don’t mean the value of potential targets. If a cruise line is worth basically the value of its floating steel, and the market price drops to reflect that, there’s no room for grift. What they’re talking about is exploiting a imposed liquidity crunch that causes targets to give up a plausible long-term play to satisfy short-term obligations, and causes them to dispose of assets in the meantime. A transmission shop might still have its CNC machine, and a chunk of commercial real estate, but it has to lay off its employees and it’ll eventually run out of cash, and its order backlog is long gone. If prospective “investors” can convince the government to drive down the value by half, and as a consequence the valuation by three quarters, when they buy out the owner they’ve come out massively ahead. Fortunately, they have capital to rehire (wages aren’t what they used to be, of course) and restart.

A sane government would try to prevent this. We don’t have one, so we rely on emergent arrangements. The Constitution might not be a suicide pact, but suicide pacts do exist for a reason. In extremis, it is very important to convince people with mounting incentives to defect that they hang together or every effort will be made to hang separately.

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