Power & Market
The surge in unemployment isn't over. New jobless claims data released today by the US Department of Labor showed that total claims surged again in the week ending May 9, exceeding 2 million for the eighth week in a row.
Last week there were 2.6 million new claims for unemployment insurance. That was down from 2.8 million the previous week, and down from the peak of 6.2 million on the week of April 4.
Since claims began to surge on the week of March 21, 33.3 million new claims have been filed.
Last week the Department of Labor released monthly data estimating that 20 million jobs have been lost in recent months. That means nearly all the job gains of the last twenty years are gone.
This drove the unemployment rate above 14 percent, although Chicago Fed economists suggest that it may really be above 25 percent.
It's unclear how many of these workers will make an effort to return to the workforce. Many potential workers will simply leave the workforce and not return for many years as they wait for the economy to recover. Many older workers may never return.
In April, labor force participation in the 25–54 age group plummeted to a 37-year low, dropping to 79 percent. That's the lowest since 1983. (Keep in mind that we're looking only at workers in the 25–54 age range. We're avoiding the issue of students staying in school longer and Baby Boomers retiring.)
The overall effect, of this, of course, is that workers and entrepreneurs are producing far less than they were a few months ago. This presents a serious inflation risk, since the money supply has continued to increase at breakneck speed. Consumer price inflation is mitigated by gains in productivity. But that's certainly not where we are right now, and we have many more dollars competing for a shrinking pool of available goods and services.
Not surprisingly, grocery prices shot up last month at the fastest clip in forty-five years. Whether this lasts, however, depends in part on how well markets adjust to the new demand patterns that have emerged as a result of the COVID-19 panic. Food purchases have shifted dramatically away from restaurants and toward grocery stores. If markets are allowed the freedom to adjust as needed, price inflation will be mitigated in this regard, although it's unclear to what extent, and depends also on how many more rounds of helicopter money (i.e., the $1,200 per person stimulus checks) are implemented.
Four weeks ago I participated in a debate moderated by Bernardo Ferrero with Walter Block on the coronavirus quarantine. It is in English, but with the option of Spanish subtitles. (Which is why it took a while to upload.)
"Unfortunately, no one listens to economists."
~Gustave de Molinari(1852)
I have written some short essays on the following topics. The idea is to dip into the past to see what I can find that is relevant to things that are going on today.
- Jeremy Bentham on rule by “disinterested experts” or “the fallacy of authority” (1824)
- Herbert Spencer on the state and “Sanitary Supervision” (1851)
- Gustave de Molinari on economists as the bookkeepers of politics: “Unfortunately, no one listens to economists” (1852)
Jeremy Bentham (1748–1832) reminds us that bad things can happen when so-called experts are able to get the ear of the government. They are not disinterested parties as they often claim to be and sometimes do much harm in the name of promoting the “greater happiness of the greatest number.” How to make this calculation has always been a problem for utilitarian administrators: Whose “happiness” (or rights to life, liberty, and property) is sacrificed for the “greater good”? Over what time frame is this “greatest happiness” calculated, short term or long term? The “argument from authority” is one of the many “political fallacies” used by politicians to bamboozle the voters which Bentham discusses.
There is also the question of which are the best or most appropriate experts to use. It strikes me as not a coincidence that governments choose experts whose advice usually leads to increasing the power of the state and the prestige of the politicians who run those states. Cui bono? It is also not surprising that these experts usually do not include someone like a Frédéric Bastiat (1801–50) who would want to know about “the unseen” consequences of this advice, what the tradeoffs are, what the unintended consequences are, and who the vested interests who might benefit from this presumably “disinterested” advice are?
Herbert Spencer (1820–1903) raises many of these concerns in his piece, which was written soon after the cholera epidemic of 1849 swept through London and Paris. He also focuses on the incompetence of government authorities charged with public health and the impediments which government regulations place in the way of private and voluntary solutions to these problems. So what else is new?
Perhaps in the end it doesn’t really matter if economists like Bastiat do advise governments. According to Gustave de Molinari there are very good reasons why governments and the public ignore their advice anyway. It is not what they want to hear; they usually do not understand the economic principles at work; and the “tax eaters” who run the country have no reason to want to give up their privileges and benefits.
Who defends your liberty? According to the establishment and current ethos, your rights exist because US soldiers roam the globe crushing yesterday’s enemy of the state. So your ability to speak your mind, worship God in personal and corporate ways, own property and the fruits of your labor, in short, your right to be left alone by government, is defended in such places as remote desert valleys in Afghanistan, steaming jungles in Thailand, or late night bars in Okinawa.
I disagree. The best that can be said is that soldiers overseas keep the US safe from external enemies—I disagree with this as well, but that is another article. However, our rights are not being eroded by tribal Afghan warriors. Our rights are being eroded by our very own political class and its sycophantic supporters.
So, who defends your liberty? Anyone who willingly stands up to encroachment by the state and says enough is enough. Last Saturday in Columbus, Ohio, defenders demanding an open Ohio were legion. These were folks standing in front of the statehouse or honking their horns while driving around the square—average folks who simply want to be left alone. Average in the sense that you see them in the grocery store or walking your neighborhood.
Yet they are something much more than just average. These folks understand that any freedom lost to the state, no matter the reason or circumstance, is freedom that will not be readily returned. So they acted and they rallied.
The attitude of the event was best summed up by the sign “My constitutional rights do not end where your fear begins!” While the use of “your” is ambiguous, from talking to the woman holding the sign, as well as others in the crowd, “your” was directed toward Ohio governor DeWine and his director of health Dr. Acton. Not as often mentioned, though also indicted, are the silent state legislators who quickly and quietly granted certain emergency powers, so to speak, to the executive branch in late March.
For some, just the general idea of freedoms so obviously trampled was reason for action. They were there for my freedoms as much as their own. For others, the reasons were more personal, such as the woman holding the sign “Special needs families are suffering!” She told me about the challenges she faces now that the services her child requires have been declared nonessential, which she recounted with a painful smile.
There were the store owners and employees out of business and out of jobs, demanding the ability to once again trade and work.
There were the armed defenders of the Second Amendment, proving once again that weapons in the hands of the people do not lead to violence, but act as a bulwark against the state.
There were semitrucks whose drivers blared horns so loud they still echo in my head.
There were lawyers, such as the one reading a list of folks arrested for “unlawfully assembling” in cities throughout Ohio.
And there was the older man chanting “Open the bars.” He told me he had worked in bars for the past three decades and had never been unemployed…until now.
Additionally, there were the various organizers, a loose coalition, who proved that the people can cooperate and take collective action without a central authority.
However, most importantly, there were the folks who peacefully, though loudly, protested the state, speaking for (I believe) many hundreds of thousands more.
Non–math folks are now familiar with the term exponential growth, especially when applied to a virus. But the term can be applied to protests as well. The initial rally drew some seventy-five participants. Just nine days and a few rallies later, the number was likely around one thousand.1 Sounds like "exponential" growth to me.2
Despite the media downplaying these assemblies, or attempting to show them negatively, the numbers of events and protesters will grow as more folks take account of their situations and realize that they are now much worse off. And the virus is not cause. The cause is a heavy-handed state that seeks to be even more heavy-handed.
If you want to thank someone for defending your freedom, come to Columbus this Saturday at 1:00 p.m. and add your voice or horn to the raucous roar, “Open Ohio!”
- 1. One local TV station said there were “dozens of protesters,” which is true if you also consider that there were hundreds more as well. Another station said there were “hundreds of protesters.” I get to one thousand by estimating the folks in the cars circling the large statehouse square, plus the number of protesters on the sidewalk, coming and going, over the hour I was there. Breitbart livestreamed the event, which appears to back up my estimate. In the end, though, it is just my best guess.
- 2. Not exponential in the pure mathematical sense, but exponential in the colloquial sense of growth whose rate increases sharply.
Listen to the Audio Mises Wire version of this article.
Information on total deaths through April 4 shows no indication of a general surge in deaths in the United States. It's quite possible that we'll see April's total mortality begin to show levels well above normal, but the weekly data we have so far show no indication of this.
We now have data up through week 14 (the week ending April 4, 2020) for this year, as can be found here.
In fact, the average total deaths for this year (averaging the first 14 weeks of the year for each year) shows a decline in 2020. Average weekly deaths in the US up through April 4 were 55,149 in the US. During 2017 and 2019, the average was over 57,000. During 2018, the average was over 59,000.
For the single week ending April 4, total deaths numbered 49,292. That's down from the previous week, and also down from 2019's week 14 total of 56,593. It's also down from 2017's week 14 total of 57,972, and down from 2018's total of 59,771.
Totals for all deaths are an important metric to follow because the CDC is now encouraging healthcare administrators to be "liberal" with assigning COVID-19 as the cause of death. Total deaths thus provide much-needed context. If COVID-19 deaths surge but total deaths increase by a much smaller amount, this helps us better understand the extent to which the general population is directly affected by the disease.
While average total deaths remain down nationwide, we do nonetheless find some places where total deaths have indeed increased significantly. In New York State, for example, week 14 showed about 1,000 deaths above the expected number of deaths of the period. Specifically, during week 14, there were 3,182 deaths reported in New York. That's up by more than 50 percent from week 14 of 2017–19. Clearly, total deaths are well above normal in New York. New York State has a total of approximately 19 million people.
But New York is atypical.
Colorado, an alleged "emerging area of concern," shows an increase of 8.9 percent (or 66 total deaths) above total mortality for week 14 of 2019. Week 14 of 2020 is 5.2 percent (or 40 total deaths) above 2018. The average for the first fourteen weeks of the years was up 4 percent (or 32 deaths) compared to 2019, and up 3.1 percent (or 25 deaths) compared to 2018. Colorado has a population of about 5.7 million people. Unless COVID-19 was present in Colorado long before many experts insist is possible, the higher death totals have largely occurred before COVID-19 was known to be in the state. The first four weeks of 2020, for example, were already at elevated levels. The 2020 weekly high (so far) of 865 people was recorded during week 8, which occurred in late February.
Meanwhile, in Florida the average for total deaths for weeks 1–14 is up 2.1 percent (up 86 people) over 2019. But 2020's average is still down 1.8 percent (or 79 people) from 2018's average. Week 14 itself was below total deaths for 2017, 2018, and 2019, with a total of 3,710 deaths. That's down by 9.5 percent compared to week 14 of 2019 (4,100 deaths), and it's down by 8 percent from 2018's week 14 total (4,034 deaths). Florida has a total of over 21 million people.
Of course, it is entirely possible that total deaths are pushed down by social distancing practices. With fewer vehicles on the road, there are fewer auto accidents. Diseases other than COVID-19 might be spread less often as well. On the other hand, economic collapse exacerbated by social distancing may be leading to more suicide and stress-related health problems. The extent to which these various factors contribute to overall mortality is unknown, and may never be known. But what does appear evident is that deaths due to COVID-19, at least so far, have not been sufficient to increase nationwide total mortality to a level that significantly exceeds what has been seen in the past decade.
In an article published in Italian on April 13 and translated here into English, the Italian philosopher Giorgio Agamben raises some points that merit careful consideration. He says, "We then accepted without too many problems, solely in the name of a risk that it was not possible to specify, limiting, to an extent that had never happened before in the history of the country [Italy], not even during the Second World War (the curfew during the war was limited to certain hours), our freedom of movement. We consequently accepted, solely in the name of a risk that it was not possible to specify, de facto suspending our relationships of friendship and love, because our proximity had become a possible source of contagion." He anticipates an objection and responds to it: "I know that someone will hasten to respond that we are dealing with a condition that is limited in time, after which everything will return to how it was. It is truly strange that we could repeat this other than in bad faith, since the same authorities that proclaimed the emergency never stop reminding us that when the emergency has been overcome, we will have to continue to observe the same directives and that 'social distancing,' as it has been called with a significant euphemism, will be society’s new organizing principle."
Information on total deaths through March 28 shows no indication of a general surge in deaths in the United States. It's quite possible we'll see April's total mortality begin to show levels well above normal, but the weekly data we have so far show no indication of this.
We now have data up through week 13 (the week ending March 28) for this year, as can be found here. As of April 15, the week 13 data is not yet quite complete, although the CDC lists that data as 93 percent complete.
The missing data may yet slightly push up these totals, but given that data from hard-hit New York, New Jersey, and Michigan is already accessible for week 13, big increases from the current total are unlikely. After all, week 13's total would need to increase by 27 percent just to match 2019's week 13, as can be seen here (week 1 is the column on the left for each year. Week 13 is the column on the right):
The average for the first thirteen weeks of the year during 2020 is 53,529. That's below 2019's average of 57,928, and well below 2018's average of 60,115. This is not surprising, since the 2017–18 flu season was especially deadly.
For additional context, I have broken out New York State. Here we do finally see a surge in total deaths during week 13.
New York was at clearly elevated levels at the end of March, although total deaths remained below what was reported during week 2 of 2018. But even with this late-month surge, total average deaths for the first thirteen weeks of the year were down in New York when compared to 2017, 2018, and 2019. If we assume New York's week 13 total points toward its high reported COVID-19 numbers, we will likely see a surge in weeks 14 and 15.
On the other hand, Colorado, an alleged "emerging area of concern" shows no signs of a surge in total deaths. In fact, week 13 in Colorado was near a multiyear low for total deaths. For the first thirteen weeks of the year, the 2020 average (815 deaths per week) was higher than the 2019 average of 795 per week, and higher than 2018's average of 801 per week.
Unless COVID-19 was present in Colorado long before many experts insist is possible, the higher death totals have mostly occurred before COVID-19 had time to spread. The first four weeks of 2020, for example, were already at elevated levels, and the very high total of 865 people recorded during week 8 occurred in late February.
Of course, it is entirely possible that total deaths are pushed down by social distancing practices. With fewer vehicles on the road, there are fewer auto accidents. Diseases other than COVID-19 might be spread less often as well. On the other hand, economic collapse exacerbated by social distancing may be leading to more suicide and stress-related health problems. The extent to which these various factors contribute to overall mortality is unknown, and may never be known. Moreover, the total number of deaths due to COVID-19 is unreliable since deaths are increasingly attributed to COVID-19 even when no test is performed and when other serious medical problems are present. But what does appear evident is that deaths due to COVID-19, at least so far, have not been sufficient to increase total mortality to a level that significantly exceeds what has been seen in the past decade.
Two weeks ago, during a March 17 address to the nation in response to the COVID-19 outbreak, President Donald Trump asked that Americans work from home, postpone unnecessary travel, and limit social gatherings to no more than 10 people.
And last week, on March 27, Trump signed a stimulus package of over $2 trillion dollars to provide relief to an economy on the precipice of collapse.
The aid package includes handouts and loans to individuals, small businesses, and other distressed industries.
Despite Trump’s allegedly “having created the greatest Economy in the history of our Country” just before the markets tanked, massive and immediate government intervention was the only thing left to forestall a total collapse.
Or so we were told.
So why can’t the greatest economy in the world handle a temporary shock without needing trillions of dollars injected just to stay afloat?
Central banks’ war on savers is one reason.
Using central bank–created fiat money introduces a dilemma. Because of inflationary monetary policy, Americans have long been forced to select from among three undesirable options:
A) Save. Hold the central banks’ paper money and be guaranteed a loss of at least 2 percent in purchasing power every single year (assuming the 2 percent inflation standard).
B) Consume. Spend Federal Reserve notes on immediate goods and services to get the most out of current purchasing power.
C) Speculate. Try to beat the central banks’ planned price inflation, seeking a higher return by investing in higher-risk asset markets.
With businesses and Americans defaulting on their rent and other obligations only days into the collapse, the problem is clear: few have any savings…and why should they, when saving their money at negative real rates of return has been a sucker’s game?
Lack of sound money, or money that doesn’t maintain its purchasing power over time, has discouraged savings while encouraging debt-financed consumption.
American businesses and individuals are so overleveraged that once their income goes away, even briefly, they are often left with no reserves at all.
Meanwhile, small-time savers who can’t get big returns from making high-risk investments have a lot to lose. Although it is true to some that small 2 percent-per-year losses can go easily unnoticed, over just ten years 2 percent price inflation amounts to a loss of nearly 20 percent in purchasing power.
Needless to say, this makes it harder to save and maintain one’s standard of living.
Now, with central banks slashing short-term interest rates even more, and with the Fed moving rates to zero, the dollar has been further destroyed as a method of preserving savings. (And negative nominal interest rates could be coming next.)
Inflationary economic policy, absent the guardrails of sound money, has created a situation with an obvious and deadly conclusion: that many Americans lack savings to protect themselves against downturns.
This situation isn’t necessarily the fault of the people, but rather of a system in which discouraging and punishing savers is a crucial tenet.
The Federal Reserve, the US Treasury, and the White House are trying to reassure the public that everything is “under control,” that “the U.S. economy’s fundamentals are still strong,” and that the economy will skyrocket once COVID-19 is taken care of. What if they’re wrong?
One of my fondest books as a child was Doctor at Timberline, by Charles Fox Gardiner. Gardiner was a doctor early in the settlement of western Colorado in the nineteenth century. Each chapter of the book is a self-contained story of his experiences tending to the ailments of mostly men in mining towns, ranches, and lonely cabins high in the Rockies. The book was a gift from my father, who spent his teenage years before the war in Mintern, Colorado, where his father owned and ran a saloon. I passed it along to my son, who enjoyed it, too.
The book has been lost for some time. A pity, since I would love to read it out loud to my grandchildren. There is only one story that I remember distinctly. It involved taming a temperamental horse. A good horse was very valuable property in the that era as long as it was, shall we say, docile. This horse was not. The doctor needed the horse and, instead of trying to sell it, he decided to break its spirit.
The doctor was not a horse trainer or bronco buster, so he decided on a plan to teach the horse who was boss. The first thing he did was separate the horse from his other horses into a small corral, where the horse could not see others of his kind. He did not let the horse out of this small corral. Then he cut the its water and feed ration so drastically that the horse almost starved. The doctor slowly increased the horse's ration, eventually leading it out of its solitary confinement to graze and to rejoin the remuda.
Needless to say, the doctor broke the horse's rebellious spirit, and it became completely willing to do whatever the doctor demanded.
The Sixth Amendment to the US Constitution says that all criminal defendants “shall enjoy the right to a speedy and public trial.” Many state constitutions also guarantee speedy trials, as do many state statutes.
Specifically, the Sixth Amendment states:
In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury…and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.
In recent decades, this right has slowly grown more tenuous as the court system has grown increasingly overloaded in many areas by an ever increasing load of state and federal laws that bring grave penalties for the convicted. Defendants must wait long periods in some cases to get a court date.
As often happens with government mandates for permits, permissions, and hearings, court requirements that defendants stand trial are not met by the government with a willingness to actually provide the services necessary to allow compliance. That is, governments force us to submit to certain government procedures, but the government is unwilling to provide those procedures in a way that's timely or accessible.
But now that the wheels of "justice" are grinding to a complete halt, thanks to COVID-19 related shutdowns, the accused may now be waiting for trial indefinitely. Some US immigration courts, for instance, have declared that they won't be doing anything for a year:
The 9th Circuit Court of Appeals in San Francisco extended an earlier one-month emergency declaration for federal courts in San Diego and Imperial counties by a year to April 17, 2021, according to an order posted on the circuit’s website Friday. The court’s judicial council cited public-health concerns and governments declaring states of emergency.
The order suspends the federal Speedy Trial Act, which means anyone facing criminal charges will have to wait longer to exercise their constitutional right to a jury trial—including defendants already in custody. In San Diego and Imperial counties, a significant share of those federal cases involves immigration, drugs and U.S. Customs offenses, the council said.
The state of Kansas is denying speedy-trial rights at the whims of a single judge:
Less than two weeks ago, cases in Douglas County District Court were being set for trials, and other hearings delayed because some trials were already scheduled. But as state and local officials have gradually restricted further how many people can be in one place at one time in efforts to slow the spread of COVID-19, the courts can’t function normally.
Gov. Laura Kelly on Thursday signed into law a bill that expands the authority of the chief justice of the state Supreme Court to issue orders “to extend or suspend any deadlines or time limitations established by statute when the chief justice determines such action is necessary to secure the health and safety of court users, staff and judicial officers.”
In Colorado, a legislator demands the legislature close the speedy-trial "loophole." By "loophole" he means the law that insists that the government respect a defendant's rights or set him free.
But, as with the natural rights protected by other articles of the Bill or Rights—and similar texts found in state constitutions—there is no clause at the end which says "null and void in case of virus."
Naturally for defendants who are in jail awaiting trial—people who are still presumed innocent, mind you—long delays can destroy them both personally and financially. Delays can ruin careers and ruin marriages. They alienate children from parents. They impact the defendant's health.
There is a reason, of course, that the right to a speedy trial—which goes back to clauses 39 and 40 of the Magna Carta—exists. Delaying justice is a common tactic of governments that really can't be bothered with respecting the rights of the accused. But as with so many liberties, this one is apparently to be ignored when some governors decide it to be so.