Monday, March 23, 2020

Lawrence Reed and the New York Post on American Pharma and Biotech in the Age of Coronavirus Pandemic

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The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff thanks economist and President Emeritus Lawrence Reed for this insight:

"Hey, wouldn't this be a great time to take up the socialist cause by nationalizing the drug companies, putting government bureaucrats in charge of their operations, eliminating profit (and thereby ensuring losses), and vilifying anybody who might want to get wealthy by saving lives and solving a big public problem?"

Read the New York Post's "Say Thanks to Greedy Pharmaceutical Companies: They're our Best Coronavirus Hope" at...

Tuesday, March 17, 2020

Left Coast Correspondent: Wokeness and Coronavirus is a Dangerous Combination

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The Cautious Optimism Correspondent for Left Coast Affairs and Other Inexplicable Phenomena views the combination of wokeness and coronavirus (actually wokeness and reality) as a dangerous combination.

San Francisco progressives fight racism (and spread virus particles) in a deadly display of wokeness

CO has already reported that San Francisco city officials have placed the city in a soft-lockdown (aka. “shelter at home”) to maximize social distancing and minimize spread of the deadly Wuhan virus.

The Left Coast Correspondent doesn’t agree with much San Francisco City Hall does but thinks the restrictions make sense in these historic times. Given what the world is witnessing in Europe right now, at the very minimum it’s a prudent precaution.

So perhaps San Francisco government officials shouldn’t have been engaged in and encouraging large protest marches against coronavirus-racism just two weeks ago.

When positive cases of the virus had already popped up all over the Bay Area, city officials were out displaying their wokeness and calling for large crowds against bigotry to get even larger.

How many closely packed protesters, screaming political slogans at the top of their lungs into one another's faces, were passing the bug onto their fellow woke warriors? Just to become another positive test weeks later?

Or just as bad, how many were infected that we'll never know about, but who've since silently spread the disease to others?

The San Francisco Chronicle reported “’Fight for science, not rumors,’ the demonstrators cried out.”

I can’t think of a more ironic rallying cry given that by the time of the protest science had already established that the virus was transmitted through the air among people in close proximity to one another.

“’Standing in solidarity with our Chinese American community & against racism & xenophobia,’ wrote [California State Senator and former San Francisco Supervisor Scott] Wiener. ‘Coronavirus is a serious public health threat. It’s not an invitation to racial stereotyping.’"

Yes well, it's also an invitation to exponential infection growth when you call on hundreds of people to be squeezed together like sardines… yelling and spitting over one another to prove their varying degrees of wokeness in a giant progressive rite of passage.

Details from the San Francisco Chronicle here:

But San Francisco’s lunacy pales in comparison to the wokeness plague that has struck Northern Italy.

In early February as Italy continued to allow flights to land from China unabated, even as the world knew the Covid-19 virus was spreading outside Asia, the progressive mayor of the northern city of Florence deemed racism against Chinese the greater threat to public safety than the deadly virus itself.

To fight the real enemy Mayor Dario Nardella publicly instructed all residents to find random Chinese on the street and hug them to fight bigotry and xenophobia.

The Chinese Communist Party was so touched by the mayor’s campaign to combat prejudice against ethnic Chinese that it praised his gesture on its government-run website

Amazingly, given what is now the undeniably stunning backwardness of the “hug a Chinese” movement, the CCP still hasn’t contemplated removing the feelgood story from the Internet, preserving the absurdity and tragedy for all to see.

Now Northern Italy is the new world epicenter of coronavirus infections and deaths. Victims are being turned away from hospitals to go home and die due to insufficient resources.

368 deaths were reported in the last 24 hours, on a per-capita basis the equivalent of over 2,000 Americans a day.

Italian authorities are having difficulty picking up the bodies which are lying in private homes in slow states of decay.

So as the left-progressives relentlessly push their agenda without the slightest re-examination or scrutiny of their dogma, the rest of us should remember... wokeness kills. Literally.

Left Coast Correspondent: CCP's Coronavirus Propaganda Boasts "We can say with confidence that the U.S. owes China an apology, and the world owes China thanks"

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2 MIN READ - It’s no secret that The Cautious Optimism Correspondent for Left Coast Affairs and Other Inexplicable Phenomena lives in California. So why is he reporting on news from Communist China?

While it’s true that Communist China is far, far left of California geographically, it’s just barely left of San Francisco politically (and maybe right of Berkeley). So for a brief interlude we’ll consider China part of the Left Coast Commune.

CO previously reported that the Chinese Communist Party (CCP) has launched a propaganda campaign pinning blame for the Wuhan virus outbreak on the United States, now referring to it in state-run media as the “American coronavirus.”

Within China, the CCP has informed the public for over a month that the U.S. military introduced the virus during the October 2019 World Military Games in Wuhan as a form of revenge for not winning enough medals.

However recently the Beijing government has become even more brazen.

Now the CCP is claiming their drastic containment measures effectively saved the planet from disaster and for that the world now owes them a huge thank you:

"The world should thank China for its gargantuan efforts and sacrifices to prevent the spread of the disease to other countries, an act that is really startling the universe and moving the gods.”

This sounds like the breathless news anchors on North Korea state television news hyperventilating as they praise Kim Jong-Un's godlike good looks and political prowess.

So with the United States being officially guilty of starting the outbreak, and China working effortlessly to contain it:

"Now we can say with confidence that the U.S. owes China an apology, and the world owes China thanks.”


On a side note, the Left Coast Correspondent agrees with CO completely that this propaganda theater of the absurd is engineered for Chinese domestic consumption only. The ridiculous Xinhua piece appears to have been run exclusively on the Chinese language website version, a standard distribution curb the CCP employs when it wishes to brainwash its own people largely outside the purview of the world at large.

Beijing knows that were it to publish such absurdity on its English language website, the story would quickly spread across the globe as an international laughing stock.

Hence the motivation: The CCP is probably still nervous about domestic public displeasure over its bungling of the outbreak, not limited to the arrest of the Wuhan ophthalmologist who tried to warn government officials of the disease and was instead arrested and forced by police to sign a confession admitting to "making false comments" that had "severely disturbed the social order."

From the BBC, a transcript of his signed statement:

"We solemnly warn you: If you keep being stubborn, with such impertinence, and continue this illegal activity, you will be brought to justice - is that understood?" Underneath in Dr Li's handwriting is written: "Yes, I do."

To deflect blame and stabilize its own grip on power, Beijing has used that typical ploy by communist regimes going back to 1917: blame the capitalist West.

For a century whenever communist regimes have created disasters (famines, genocides, environmental accidents, shooting down civilian airliners like Korean Air flight 007) the first response is to cover it up. And if that fails, concoct any story possible to blame the mishap on a Western capitalist country, usually the United States.

The Communist Party will say anything, however ridiculous, to maintain its power over China.

More details on China's coronavirus propaganda machine at:

To read this Chinese state-approved column implicating the U.S. military for the virus outbreak, visit this site and accept Google's offer to autotranslate from Chinese text to English:

Monday, March 16, 2020

Thoughts on the Fed's Coronavirus QE and the Economy in General

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4 MIN READ – The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff concedes to being better at writing about the past than predicting the future. So don’t bet your pension on it, but here are some thoughts on the recent Fed rate cut, $500 billion QE announcement, and state of the economy in general.

1) This will arguably be the first recession precipitated by something other than Federal Reserve monetary policy going back to World War II.

In fact if the U.S. economy slips into recession (and the Economics Correspondent believes it’s more likely than not that it will), it will signify the first purely exogenous shock recession in memory.

An exogenous shock is a disruption that arises from outside the economy such as the coronavirus/Wuhan virus—or a natural disaster or war. This is the opposite of the more common endogenous shock which is a disruption that originates from within the economy itself—such as too many bad mortgages in the 2000’s, overinvestment in dot-com companies in the late 1990’s, bad commercial real estate investments in the late 1980’s, or runway central bank inflation in the 1970’s.

It can be argued the last exogenous shock recession was 1973-74 when OPEC imposed an oil embargo against the United States. However the economy was already experiencing stresses from Fed inflation/stagflation, departure from the gold standard, and Nixon-era price controls so the slump was not caused entirely by exogenous factors.

But in 2020 the U.S. economy was functioning smoothly and then unexpectedly threatened with a contraction due completely to external—in fact foreign—factors.

As an exogenous shock in 2020, many of the old standard rules and prescriptions that have been applied in the past may be far less effective.

2) Previous recessions involved large bad investments going sour that the Fed and fiscal policy attempted to save or prop up with cheap money and government stimulus. Not to say there are absolutely no bad investments in 2020, but this time the Fed is not responding to a collapse in a major sector like the housing market, even though it might just create some new bad investments along the way now that rates are going to zero again.

Instead the demand curve for many consumer items and even some business investments has rapidly gone inelastic. That is, no matter how much money you put in people's pockets they still won’t pay to get on a plane, or a cruise ship, buy movie tickets, attend sporting events, or go to restaurants.

Furthermore government-mandated closures to limit the virus’s spread will further force the demand curve to go vertical such as closing schools, churches, bars, night clubs, retail stores, or imposing domestic travel restrictions. Thus the Fed’s traditional monetary response will have less impact than in the past.

(see diagram... price moves up or down on the Y-axis, but the quantity demanded on the X-axis remains unchanged, ie. a perfectly inelastic demand curve)

Homeowners can refinance and put more money in their pockets, but they may not show any greater propensity to spend that money. Businesses may be able to finance future projects more cheaply, but may not be willing to commit to large investment projects. Both parties may want to see more progress in the fight against the virus that has so acutely altered their spending behavior.

3) In the early analysis the fallout from the outbreak was being called a supply shock by most economists since it disrupted supply chains stemming from China and was predicted to have an impact on the ability of firms to produce at normal capacity when employees can’t come into work or travel.

However the Economics Correspondent sees potential for an equally large demand shock as both consumers and companies are pulling back on spending for items that could put themselves or their workers at risk of infection.

In the months to come talk of supply may give way to far more discussion about demand.

4) The Fed’s aggressive move to zero interest rates and a $500 billion QE should put to rest the theory that central bank governors are plotting to bring the economy down just to rid themselves of Donald Trump in 2020.

With the economy in such a vulnerable state, and in an election year no less, if the Fed truly wanted to cripple Trump’s chances of re-election it would raise rates or at the very least sit on its hands, not cut rates to zero—during an emergency meeting, on a Sunday.

5) We can likely expect the current $800 billion and $900 billion federal budget deficits to balloon to well over $1 trillion when tax revenues fall while simultaneously the government spends more on unemployment, “support” for hard hit industries, and possibly old fashioned bailouts.

This is the problem with running large deficits during economic good times: the good times inevitably end.

However deficits as a percentage of GDP matter more than in nominal dollars. For deficits to run as high as during the first term of the Obama administration (9.8%, 8.6%, 8.3%, and 6.6% of GDP for the fiscal years 2009-2012) they would have to reach $2.3 trillion, $2.0 trillion, $1.9 trillion, and $1.5 trillion today—assuming a $23 trillion GDP.

But don’t expect the media to report the deficit in those terms.

Fortunately or sadly, depending on you point of view, the Economics Correspondent believes the U.S. government has far more room to borrow than most people suspect. Running one trillion dollar deficits and saddling future generations with $23 , $24, and $25 trillion in debt may be morally unconscionable, but Japan has amassed a debt-to-GDP ratio of over 250% for nearly a decade while the U.S. stands at 107%.

6) On this last point the Economics Correspondent is really going out on a limb with a theoretical prediction:

Given that a potential coronavirus/Wuhan virus recession will not be the result of a huge collapse in bad investments or major imbalances in certain sectors, when the outbreak is finally resolved via a vaccine, or benign mutation, or aggressive mitigation controls, or favorable warm weather odds are the recovery will be more rapid and V-shaped than past recoveries. Because there are fewer overhangs from bad loans or overbuilt industries going through the painful process of readjustment and resource reallocation to match traditional consumer preferences.

In the case of the virus, consumer preferences are changing very quickly based on safety concerns, and when the virus is no longer a major threat they will return to something pretty close to where they were prior to the outbreak. This is not a case of building lots of mansions that people either didn’t want, didn’t need, or couldn’t afford that need to be liquidated. It’s consumers hunkering down who will re-emerge when the crisis ends and probably go on a relief spending binge.

However the Economics Correspondent will hedge with an “on the other hand” scenario that Harry Truman so famously despised (an irritated Truman exclaimed “I want an economist with one arm!”). If the slump is bad enough to drag the financial system into crisis again, the recovery could be stretched out.

Or worse yet, if government decides to “medicate” the recovery with a slew of new regulations and taxes a la Herbert Hoover and Franklin Roosevelt, full recovery could be postponed for years.

That said, Donald Trump doesn’t seem like the sort of President who would jump in and start overregulating the economy to death like the 1930’s New Deal, setting price controls throughout the economy, and jacking tax rates up to 79% in 1936.

And thank goodness Joe Biden looks poised to win the Democratic presidential nomination, because at most he might be "bold" enough to launch a miniature version of Obama’s recovery package which might retard recovery for a few years.

But if Bernie Sanders were to become President and get his way, his prescription for recovery would include the Green New Deal, a government takeover of medicine, and sharply higher taxes on everyone. Franklin Roosevelt’s New Deal is the closest historical analogue and the Great Depression lingered on for another thirteen years.

Fortunately in the middle of a global medical crisis, voters are less likely to want socialist revolution than the Democratic establishment candidate.

Saturday, March 14, 2020

Coronavirus and the Saudi/Russian Oil Price War: Trump Orders Energy Department to "Fill Up" the Strategic Petroleum Reserve With Cheap Oil

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The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff views this as a logical move with no losers except Saudi Arabia and Russia.

Top off the Strategic Petroleum Reserve (SPR), do it at rock bottom prices that save the taxpayers billions, and stimulate a little more American energy activity and jobs at a time when Russia in particular attempts to bleed it dry with moneylosing predatory pricing.

Analysts estimate the SPR requires another 77 million barrels to reach full capacity. Assuming an average pre-price war barrel price of $60 and current purchase price of $32, Trump’s directive will save taxpayers $2.16 billion.

77 million barrels is not enough to fully counter Saudi and Russian combined production boosts of approximately 1.4 million barrels-per-day. Assuming the Department of Energy attempted to perfectly offset the price war’s production increases on a daily basis the SPR would be full after just 55 days.

However--and the Economics Correspondent is not an expert on the logistics of the SPR--if there’s an opportunity to expand the reserve’s capacity at all, now might be the logical time to do it and buy even millions more barrels on the cheap.

The Economics Correspondent only hopes that Trump and future presidents use the Strategic Petroleum Reserve as exactly that: a reserve for strategic emergencies such as a war or another 1973 oil embargo, not as a political relief valve to placate commuters every time market prices temporarily spike.

And speaking of temporary spikes at the pump, ever since shale oil has made America the world’s largest oil producer with private companies free of government monopoly cartels like OPEC, consumers may not have noticed that there haven’t been many of those major price spikes anymore.

Long gone are the sorts of “crises” drivers regularly confronted in 2000, 2002, 2005, and 2008. During those supply shocks the nation recycled old debates of production vs consumption and President George W Bush argued repeatedly with Congressional leaders that the solution was to allow more U.S. domestic production. In response the likes of Harry Reid, Nancy Pelosi, Chuck Schumer and Barabara Boxer consistently retorted that “More U.S. drilling won’t lower gas prices by even a few pennies per gallon.”

Which side has been proven right?

Read more details in the Washington Examiner's article at:

Thursday, March 5, 2020

Stalin Screened the "The Grapes of Wrath" as Anti-American Propaganda... And It Backfired

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3 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead stuff never tires of recounting both the tragedies and comedic bunglings of Marxist socialism and communism. With Bernie Sanders—himself a sympathizer to Marxist regimes in Cuba, Chavista Venezuela, Sandinista Nicaragua, and the old Soviet Union—making a strong but fading run for the Democratic presidential nomination, it’s time to delve back into history.

CO readers may already be familiar with the Ukrainian Holodomor.

During the 1930’s, while the United States was struggling to recover from the Great Depression, Josef Stalin’s Soviet Union was experiencing what American University history professor Peter Kuznick describes as an “economic boom.”

Well, not exactly.

During that "economic boom"—specifically 1932-1933—4 to 6 million Ukrainians starved to death as well as several million more ethnic minorities in Soviet satellite states such as Kazakhstan, Azerbaijan, Armenia, Georgia, and Western Siberia.

This was on top of the Russian famine of 1921 that killed another estimated 5 million.

Stalin had pressed for nearly all the country’s resources to be sacrificed for the development of prestigious heavy industries such as steel and electrification—and later the military and a nuclear weapons program—while the average Soviet citizen’s welfare was sacrificed for the glory of scientific Marxism.

His reforms to “dekulakize” the farms—that is, denounce landowning farmers as class enemies, tear them away from their farms, and force all peasants into huge, state-run agricultural collectives—resulted in falling agricultural output. Then when the kulak peasants resisted, he sent the Red Army and secret police into Ukraine to enforce a program of class liquidation that deliberately starved millions to death before they submitted to his authority.

Sorry Professor Kuznick, booming economies don't produce mass famines.

Nevertheless, Stalin remained committed to proving the superiority of communism to his people and in a strange twist recruited an American movie for help.

In 1940 Hollywood produced John Steinbeck’s “The Grapes of Wrath” starring Henry Fonda, from a novel that portrayed the plight of American farmers who had been impoverished by the calamity of the Great Depression. Steinbeck, a communist sympathizer at the time, painted a picture of the suffering proletariat exploited by California and Midwest agricultural capitalists. Uncle Joe saw the perfect narrative for an anti-Americanizing propaganda campaign.

Western movies were generally prohibited in Stalin’s USSR. Lavrentiy Beria's NKVD—the brutal predecessor to the “more humane” KGB—strictly controlled information about the outside world while party newspapers circulated false depictions of superior Soviet living standards.

Given the importance of preserving the lie of Soviet prosperity, Stalin viewed foreign films as “subversive” and the last thing he wanted was for his own people to get a glimpse of true American or Western European lifestyles.

But a chance to showcase an American movie that actually painted its own people as poor, struggling, suffering victims at the hands of the capitalist class? As VintageNews writer Nikola Budanovic notes, “Uncle Joe thought that a film which the Americans label as ‘socialist’ must be heaven-sent in the largest and most influential socialist state of the time.”

By 1948 the temporary alliance with Britain and the U.S. against Nazi Germany was long dissolved and Cold War was underway. The Great Depression had also long since ended and America was enjoying a postwar economic boom, but that didn’t matter. The right moment had arrived.

Stalin’s secret police arranged free showings of “The Grapes of Wrath” all across the country—renamed "The Road to Wrath" to remove the title's religious reference.

This clever maneuver, where America’s own films would be turned against it, would be the propaganda triumph Stalin had coveted.

However after a few weeks of screenings Stalin and his NKVD realized Steinbeck’s story was having the opposite effect on Russian viewers.

Yes, seeing the Joad family’s crops turn to dust and the clan lose its farm were misfortunes that Russian audiences could sympathize with—even identify with—even if Russian property was confiscated by the Communist Party, not a private bank whose loan wasn’t being repaid.

But Russians were astounded when they saw a family of common farmers owned a house—even temporarily—far more lavish than anything they could ever hope to live in. Americans could afford rifles, shotguns, and other firearms and were even allowed to keep them?

And most of all the Joads owned a car that they hopped in and drove to California! In their eyes the Joads were unimaginably rich, possessing wealth on the same level as the Moscow party bosses.

Who would have ever thought, they asked, that in America when poor people’s crops die and they lose their farms that they can just pack their vast belongings into the car and drive cross-country to find better opportunities?

Far from convincing Russians that the United States was an empire of poor proletariat masses being crushed under the boot of capitalist exploitation, “The Grapes of Wrath” unmasked a stark contrast between America’s allegedly oppressed poorest—whose lifestyles appeared regal to Russian viewers—and the far more miserable existence of communist life.

Stalin ordered the film pulled within weeks.

His “Grapes of Wrath” debacle is one of a long list of farcical propaganda mistakes the communists made over the decades, and it would bring us all even more laughter if not for the epic tragedy that communism wrought upon the Soviet people for nearly seventy years.

For more on Stalin's failed propaganda campaign, go to:

To read more on the multiple famines of the Lenin and Stalin eras, go to: