Well here we are closing out the last full week of March 2020. The bogus stock market had 3 up days this week and is now down 3-4% on the last day of the week. Infection curves remain exponential worldwide and a few political figures have contracted the virus. The more the merrier in my opinion because very few are leaders . The US just passed China in cases and is set to be the new epicenter of the world with the EU nipping at our heels. Africa and India are relatively unscathed so far but exponential curves being what they are typically start out tiny before blowing up. It is hard to Imagine a country which faces greater devastation than India if the virus sets up housekeeping there. Their leader realizes that and closing down the country for 3 weeks with very few cases demonstrates his concern. Whether it will work in the long run is dubious.
The dense urban areas have fared the worst so far and this pandemic has shown the fragility of the world’s globalized industrialized economic system. There is an ongoing battle of the bands going on with one camp demanding resources to fight the virus by pouring medical resources into a broken Public Health System before it can destroy the economy and the other camp pouring money into the economy. This gambit a restive attempt to ward off economic collapse using fiscal underpinning to counteract the sudden stall of world markets. It is a time of great displays of courage and altruism along with shocking instances of denial and blatant stupidity, greed, and peevishness from the white house but also from selected governorships and a few large countries to the south of us notably Brazil and Mexico. Amazingly PBS recently stated that Trump enjoys a 60% approval over his handling of the crisis, a poll which left me gasping for air. Behind the scenes the Federal Reserve is in a full on panic attack of QE money printing and asset purchases of securities and bonds and probably equities to save the huge corporations and financial elites and banks much like what was done in 2008. In addition vast sums have been printed since November in Repo rescues to keep money and credit from “freezing up,” Supply chains across the world are not supplying and oil and energy demand and world transportation has fallen off a cliff.
Oil consumption is estimated to be off as much as 20 million barrels a day,about 20% when the next figures will be issued. The feud between OPEC and Russia about production quotas resulting in a flood of oil supplies at a time of a catastrophic drop in world demand couldn’t have been timed any worse to kill the oil market. The Trump administration has been demanding these two players STOP these production excesses. The Irony of course is that the US is the world’s largest oil producer and it has shown no sign of stopping fracking in the Permian and Baaken formations and so oil prices may have more to fall. The US oil majors have embarked upon enormous debt assumptions within the past few years to fund dividends,stock buybacks.executive bonuses, asset purchases and exploration and are now just giving the oil away. North Dakota prices for frac oil are under $15 and Canadian oil sands oil under $13 as I write. Our local Wyoming Sour is near ZERO! If this continues for much longer Frac insolvency looms and not just to the small and medium players. Other commodities world wide have been hammered as well and the real danger to the globe is what happens to food commodities and delivery and planting schedules now that we are in Spring. I wonder what might happen to fuel deliveries when refineries and oil companies continue to produce transport fuels at a loss. If a company could afford it it would seem to me that it might be better to cap wells and shut in production and lay off workers to preserve what you can of your underground reserves. Those with urgent cash flow needs may not have that luxury.
A major point of this post is not to cover the health risks and progression of this pandemic. My major emphasis is continue to repeat the precariousness of the globalized economic model which is a point I have made for over a decade. Simply put, I think this model is in the early and rather sudden stages of collapse. Along with other students of energy I have long maintained that ENERGY, primarily oil energy, IS THE ECONOMY. Oil is the single most important factor driving increased GDP, world resource production, world food production, world global climate disruption, world pollution and world overpopulation. Oil energy use is directly or indirectly behind vast increases in world urbanization and changing job patterns. Without cheap oil, Ricardo’s Comparative Advantage of world job sourcing could never have taken hold to such a huge extent.
The Sixth Extinction of our insects, mammals and birds would not be happening if the world population was still 2 billion people which it was in the year I was born. Without globalized excessive tourism and massive increases in oceanic and airline transportation and its associated interdependent supply chains this Corona virus would have had a much harder time of it establishing a foothold in the world. The Black Deaths of the 14th century were also spread rapidly through the transportation networks of the time. I have stated in many past blogs that the collapse of this Industrial civilization is baked into the cake this century. I have long speculated that the collapse could take many forms from a gradual decline with some up reversals, to a stair step decline, to a catastrophic sudden decline brought on by some trigger such as war, a massive environmental event, asteroid impact, nuclear holocaust or a pestilential pandemic. This recall’s Durer’s Four Horsemen of the Apocalypse”War.pestilence,famine, and death.
Our civilization is fragile and unsustainable for a myriad of reasons. Vast income inequality began to grow in the seventh decade of the 20th century just as US conventional oil production peaked in 1970. Coincidence or consequence? The past 50 years since then have seen the largely fair and functional capitalistic system which generated the prosperity for the 200 years up to 1970 captured by greedy elites who manipulated the nations tax and legal system allowing them to establish monopolies and eliminate competition giving them their wish of privatization of their profits and socialization of their losses when they bet wrong. They manipulated the financial system creating arcane “instruments” like mortgage backed securities and derivatives along with inscrutable algorithms and corrupt unfair trading engines like HFT(high frequency trading) for the purpose of making money from leveraged paper and digital paper never actually making anything of value for the rest of the world. Parasite is not a strong enough word to describe them. This was accompanied by vast debt issuance and degradation of the currency which continues right up to today’s multi trillion dollar bailout of almost everyone, all triggered by a tiny speck of RNA looking like the label on a Mexican beer bottle. My view is that we are seeing some of the early stages of economic collapse and if financial collapse follows any doubt I had about the timing would be erased. But the jury is still out and the courageous soldiers in the ERs along with all the ancillary staff may yet turn the tide as they try to save us but the hospital health system in the US is almost certain to be overwhelmed in some regions. The jury is also out on whether we are already on the road to herd immunity or just barely started as until we have herd immunity requiring vast increases in testing, there is no light at the end of the tunnel signalling the end of the pandemic. Getting to herd immunity with a population with the variety of comorbidities present in the US population is likely to increase the death toll as well. An effective vaccine or treatment for Covid 19 is obviously necessary but the nature of the pharmaceutical and insurance industries does not give me hope. The abject incompetent federal response to date also gives me little optimism. I think it is self evident that we will not return to the American Dream we were all enjoying before that first case in Wuhan on November 24, 2019 broke the spell of China’s ongoing economic miracle. I have a nagging ache in the pit of my stomach that what little social cohesion we have in the US might crumble in the face of food or energy shortages and the anxiety brought on by millions realizing that their future is collapsing right before their eyes. It should be self evident that our entire social economic globalized system was a perfect setup waiting for a pandemic. A TV Western from the 50’s always closed with:” That’s the way it happened. Moving West.” That’s the way it happened.