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The pandemic exposed flaws in Canada’s economic system. Fixing them won’t be easy

After a year of living with COVID-19, Postmedia is taking an in-depth look at the significant social, institutional and economic issues the pandemic has brought to light in Canada — and more importantly, how we can finally begin to solve them. You can…

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The COVID-19 pandemic has hit jobs and sectors that historically have fared better during hard economic times.

After a year of living with COVID-19, Postmedia is taking an in-depth look at the significant social, institutional and economic issues the pandemic has brought to light in Canada — and more importantly, how we can finally begin to solve them. You can find our complete coverage here.

Statistics Canada recently released its final tally of the economic output of the sports and entertainment industry in 2019. Did we ever have fun, in those pre-pandemic days!

The first championship by Toronto’s National Basketball Association franchise helped push the contribution of “spectator sports, event promoters, artists and related industries” to Canada’s overall gross domestic product (GDP) to $10.5 billion, the most ever.

The fun didn’t last, of course. Kawhi Leonard, the hero of the Raptors’ playoff run, left to play in Los Angeles. Then, in March of 2020, the virus that causes COVID-19 swept into North America, bringing death, economic destruction and an abrupt end to frivolity.

“You had to really shake your head and decide how serious is this,” Chris Fowler, chief executive of Edmonton-based Canadian Western Bank, said while reflecting on the early days of the pandemic. “When they started to cancel the NHL and the NBA, you were like, ‘Whoa!’ It punctuated the worry of it.”

It says something about us that the COVID-19 crisis only got real when we were denied access to non-essential pursuits.

Navdeep Bains, the former industry minister who oversaw the gargantuan effort that was required to jumpstart domestic production of masks, ventilators and other essential equipment, said in an interview that the big lesson for him from the past year is “resiliency.”

That’s a polite way of saying that we had grown too comfortable, making us blind to how fragile the economy had become. Our chronically underfunded health-care system was no match for a mysterious and deadly virus. To protect hospitals, we shut down the economy, wiping out a decade’s worth of job growth in a single month. To protect the economy, governments borrowed as if they were fighting a war, which in many ways they were.

The effort, so far, has gone better than many expected. An epic economic collapse has been partially offset by an almost-as-epic recovery. In January, the Bank of Canada assumed that the second wave of COVID-19 infections would cause GDP to contract again the first three months of 2021. Instead, it looks like the economy grew at an annual rate of around six per cent, according to the Bank of Nova Scotia’s real-time forecast.

It’s too soon to draw conclusions from what we’ve been living through for the past year, but it’s clear that some of the most important assumptions we had about the economy need to be reconsidered. The surprising strength of the rebound is the result of adaptation, not necessarily resiliency. If the latter is the goal then changes will be needed.

At first, we struggled to find masks, medical gowns and other personal protective equipment, and then we found ourselves near the back of the line for vaccines, because we had allowed our manufacturing capacity to erode. “There’s not a lot of manufacturing left in Canada,” Greg Hicks, chief executive of Canadian Tire Corporation Ltd., told Bloomberg News in March, a comment on the extent to which we have sacrificed self-sufficiency for cheap goods from Asia, Mexico and the United States.

Canada’s full embrace of the free-trade era, starting with the Canada-U.S. Free Trade Agreement in 1989, contributed to the shrinking of our manufacturing base. The other policy priority from that time — balanced budgets — resulted in a strained health system and a safety net so tattered that the federal government felt compelled to send the suddenly unemployed $2,000 cheques and subsidize the payrolls of tens of thousands of companies to keep them from firing people.

It was the right response, but a sign of weakness, not strength. “Our basic needs have to be thought through,” Mark Barrenechea, chief executive of Waterloo, Ont.-based Open Text Inc., one of the country’s biggest digital technology companies, said in an interview.

Ali Reyhany, founder and chief executive of Care Pharmacies, a Toronto-based group of independent drug stores, offered a more blunt assessment. “Everyone in the world is looking to solve the same problems,” he said. “If you take this type of beating, government, and you don’t fix it? I don’t know what to tell you.”

***

Canada’s GDP shrank 5.4 per cent in 2020, more than in 2009 (the Great Recession) and 1982 (stagflation).

But aggregate numbers like that don’t really tell the story.

Recessions typically punish goods producers. A downturn might prompt automobile makers to idle production, which in turn makes life difficult for their suppliers. But other sectors will muddle through until the economy recovers. Consumers continue to visit hair salons, restaurants and shops, although maybe not as often.

The COVID recession was different. The pandemic flattened restaurants, entertainment and tourism — corners of the economy that typically avoid the worst when the economic cycle turns. The production side of the economy actually did ok. Agriculture and mining made the list of essential services. Factories and construction sites were permitted to reopen relatively quickly. Meanwhile, accountants, coders, writers and other white-collar service workers simply plugged in from home rather than the office.

That dynamic caused some perverse outcomes. Consider employment in a category of companies that Statistics Canada calls “computer assisted design and related services.” The payrolls of those firms surpassed their pre-pandemic level in September and had increased by more than 13,000 positions as of January.

Yet there still were about 373,000 fewer people working at bars and restaurants. The contrast is a miniature portrait of systemic unfairness and inequality that was exposed by the crisis. The hardest hit were also the most vulnerable. Coders and the like earn an average of about $1,700 per week, four times as much as the typical server or bartender makes. Technology industries are dominated by men, while women and younger people make up the majority of workers in frontline services.

“We exposed all the weaknesses in the economy for women,” said Jennifer Reynolds, president of Toronto Finance International, an agency that promotes Canada’s biggest city as a top banking centre. “COVID put a spotlight on the problem.”

Those fissures informed Ottawa’s response to the crisis. The rescue effort that followed the 2008-09 financial crisis favoured bankers and industrial companies via the bailout of automobile makers and subsidies for construction. This time, households and smaller companies were first in line for help.

The Bank of Canada quickly dropped the interest rate on which commercial banks base their lending to 0.25 per cent, about as close to zero as policy-makers think they can safely go, and used its unique power to create money to become a major buyer of corporate and government bonds, allowing it to put even more downward pressure on the cost of borrowing. Tiff Macklem, the governor, also has indicated that he intends to leave the benchmark interest rate near zero until at least 2023.

Ultra-low interest rates and a flood of cash risk stoking inflation. It’s a risk Macklem is willing to take for now. He hinted in a speech earlier this year that he thought it might be possible to push the jobless rate lower than its pre-pandemic level of around 5.5 per cent without causing prices to spike. (The jobless rate was 8.2 per cent in February, down from its COVID crisis peak of 13.7 per cent in May.) The experience of other central banks shows prices are more anchored than experts previously thought. That means the central bank can let the economy run hot in order to speed up the recovery and pull those marginalized workers back in the economy.

“We’re going through an incredibly unique economic cycle, like nothing we’ve ever experienced,” Macklem said in an interview. “We need to both understand how inequality and unevenness is affecting economic outcomes and we have to understand how our policies affect unevenness and inequality.”

Prime Minister Justin Trudeau’s response was even more extraordinary.

His predecessor, Stephen Harper, showed a certain amount of restraint when he confronted the Great Recession. He did enough, but there was never any doubt that he intended to balance the budget as quickly as possible. He did so, just before losing the 2015 election to Trudeau’s Liberals.

The intellectual consensus about the risk posed by government debt had changed by the time the pandemic forced the closure of the world’s biggest economies. The bias towards prudence shown by countries such as Canada, Germany and the United States a decade ago had come to be seen as the reason the recovery was so frustratingly slow. Some prominent economists had become convinced that governments needn’t worry too much about debt, as long as the economy grows at a rate faster than the cost of borrowing.

Trudeau took that information and went all-in. The Finance Department reported a deficit of $268.2 billion between April and January, compared with a shortfall of $10.6 billion over the same period a year earlier. Revenue was about 15 per cent lower, while expenditures surged 84 per cent to cover CERB, the wage subsidy and various other patches in the existing safety net.

Net debt was about $993 billion at the end of January, compared with about $721 billion at the end of March 2020, the close of the federal government’s previous fiscal year.

The prospect of a $1-trillion debt makes many people uncomfortable. Fowler of Canadian Western Bank said governments’ current level of borrowing is unsustainable and could require higher taxes to get it under control. His comments show that there are pockets of resistance to the theory that debt can be eroded simply by ensuring that growth is faster than the government’s cost of borrowing.

Still, the Alberta banker stopped short of saying Trudeau was reckless. In fact, the business community, which typically insists on fiscal prudence, is all but universal in its praise of the aggressiveness of the government’s response. Executives have issues with choices and execution, but they aren’t worried about the debt. The history of economic crises, including the Great Depression, shows they were worsened by governments doing too little. For once, authorities opted to err on the side of doing too much.

“It was very important for governments to proceed quickly,” Monique Leroux, vice chair at Fiera Capital, a Montreal-based investment firm, said during a virtual conference hosted by the Canadian Chamber of Commerce in February. “If we go back to 2008, it took a while for governments to move forward and it was very difficult. So, I think that part was well done in Canada and in other countries.”

***

There almost certainly will be unintended consequences, but it’s unlikely that any of them will be worse than the disaster we were facing at this time a year ago. The Toronto Stock Exchange went into Easter weekend at a level that was 60 per cent higher than its pandemic-induced trough. Stock prices reflect a multitude of variables, but an important one is confidence in the future. The markets are telling us that things are better than they feel.

“In hindsight, we reduced our staff too much,” said Greg Engel, chief executive of Organigram Inc., a Moncton, New Brunswick-based producer of cannabis products. “The demand continued to grow.”

 Cannabis plants at Organigram’s facility in Moncton, N.B.

Engel started 2020 with a staff of about 800 people. The lockdowns forced Organigram to kill plants because it was effectively impossible to process the harvest. Half the staff accepted voluntary layoffs. In August, the company made half of those departures permanent. The forced stop in the spring had a lasting effect. Demand is worthless without supply.

“You just can’t flip a switch and start scaling and growing cannabis again,” Engel said. “We didn’t have enough product to package.”

By December, a new crop of cannabis was ready, although still not enough to keep up with surging orders. Engel started bringing people back, and he’s now restored about 130 of the positions he axed last year, putting Organigram’s headcount at about 600.

However, staffing at Organigram probably won’t grow much higher for now, even though demand remains strong and Engel anticipates it will get even stronger. That’s because the lockdowns forced him and his lieutenants to come up with ways to keep up with orders with fewer people. They added automation and devised more efficient production methods. Those innovations promise to make Organigram more profitable. They’re here to stay.

“If there is a positive from COVID, and I don’t want to say there has been a positive because it has had a detrimental impact on the world and on a lot of people, but it did force us to look at efficiency,” Engel said in an interview. “With fewer people, we are able to get more output within the facility.”

You want companies to be in good shape once the recovery arrives. The growth that followed the Great Recession disappointed because there were too few companies left standing in the immediate aftermath to take full advantage of the surge in global demand. That might not be as big an issue this time. Insolvencies spiked in 2008 and 2009. In contrast, the bankruptcy rate plunged in 2020, and even though it has picked up this year, it remains well below pre-pandemic levels.

But as the example of Organigram shows, a foundation of healthy companies doesn’t necessarily mean that employment will be quickly restored. The crisis has accelerated a shift to a digitally oriented economy that will present employers with opportunities to replace humans with software power by artificial intelligence and various state-of-the-art machines. That means the unemployment rate could remain elevated, which will make it harder for governments to work off their debts.

The fear of being replaced by technology also could add to the anxiety being felt by a labour force that already is coping with high levels of stress and burnout.

Three million Canadians were working from home in January, according to Statistics Canada. Their bosses might be pleasantly surprised with the results: a third of those workers feel they are more productive, while about 60 per cent say they accomplish just as much at home as they do at the office, the agency said in a study published on April 1.

However, there’s reason to think that full-time telework is bad for our health. Thirty-five per cent of the new teleworkers have replaced their commutes with longer hours, Statistics Canada said. The extra effort is exacerbating stress levels that were high before the pandemic, and have been pushed even higher by the isolation and strangeness of the past year, Jennifer Moss, author of The Burnout Epidemic, said at a virtual conference hosted by the Conference Board of Canada on April 2.

It’s an unfamiliar variable that will affect the recovery. Delvinia, a fast-growing research and data firm in Toronto, was working at 150 per cent capacity at one point last year as companies grasped the importance of digital information. Founder and CEO Adam Froman’s staff struggled to keep up. Some burned out. Some quit. It wasn’t as simple as beefing up mental-health benefits because it was nearly impossible to get an appointment with a psychologist or therapist.

“Last year is going to be considered one of the greatest learning years for companies about how to manage, not through a pandemic, but just how to manage,” said Adam Froman, founder and chief executive of Delvinia, a Toronto-based research and data firm. “It’s not about foosball tables anymore, or paid lunches. You need a culture that can survive a pandemic.”

***

Life-altering moments tend to be followed by significant change. The Second World War showed that government could get things done when it wanted, and politicians used that momentum to put in place many of the programs that we now take for granted. Overreach in the 1970s led to high inflation, high interest rates and high unemployment, setting in motion a partial dismantling of what was built after the war. The Great Recession triggered a new resolve to constrain the biggest banks, which ensured the financial industry had big reserves of cash with which to confront the latest economic crisis.

COVID-19 will bring similar structural change. Governments won’t have to do all the work. Reyhany, the pharmacist, raised about $40 million by listing his company’s online pharmacy business, Mednow Inc., on the TSX Venture Exchange in early March. The pandemic has made investors keen to get behind both health and technology companies, and Mednow offered exposure to both. Open Text’s Barrenechea said he’s in the process of hiring about 300 people in Canada, and for the first time, location isn’t an issue because the pandemic has shown that companies like his can function without an office. “Modern work works,” he said. “We’re embracing it.”

The other force that will push Canada out of the recession is the response to climate change. Global pledges to neutralize carbon emissions within a few decades have reached a critical mass, and they are increasingly backed by policy, such as a carbon tax in Canada and U.S. President Joe Biden’s decision to block the Keystone XL pipeline from Alberta. The policies remain controversial, but after a decade of promise, green energy’s moment appears to have arrived. “For all of these years, we’ve been working so hard, and it’s all coming together now,” said Kirsten Marcia, chief executive of Saskatoon-based Deep Earth Energy Production Corp, which last month completed a successful test of what could be Canada’s first geothermal power project. “This is our year.”

So, the recovery has a tailwind. That means the worst probably is behind us, although a third wave could complicate matters.

But as the economy starts to feel better, it will be important to resist confusing relief with victory. The recession was devastating because we were vulnerable and those vulnerabilities haven’t been fixed. All we’ve done to date is apply very expensive Band-Aids.

“What the pandemic did was show all the warts in the system,” said Delvinia’s Froman. “There was no hiding.”

Financial Post

• Email: kcarmichael@postmedia.com | Twitter:

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Four Years Ago This Week, Freedom Was Torched

Four Years Ago This Week, Freedom Was Torched

Authored by Jeffrey Tucker via The Brownstone Institute,

"Beware the Ides of March,” Shakespeare…

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Four Years Ago This Week, Freedom Was Torched

Authored by Jeffrey Tucker via The Brownstone Institute,

"Beware the Ides of March,” Shakespeare quotes the soothsayer’s warning Julius Caesar about what turned out to be an impending assassination on March 15. The death of American liberty happened around the same time four years ago, when the orders went out from all levels of government to close all indoor and outdoor venues where people gather. 

It was not quite a law and it was never voted on by anyone. Seemingly out of nowhere, people who the public had largely ignored, the public health bureaucrats, all united to tell the executives in charge – mayors, governors, and the president – that the only way to deal with a respiratory virus was to scrap freedom and the Bill of Rights. 

And they did, not only in the US but all over the world. 

The forced closures in the US began on March 6 when the mayor of Austin, Texas, announced the shutdown of the technology and arts festival South by Southwest. Hundreds of thousands of contracts, of attendees and vendors, were instantly scrapped. The mayor said he was acting on the advice of his health experts and they in turn pointed to the CDC, which in turn pointed to the World Health Organization, which in turn pointed to member states and so on. 

There was no record of Covid in Austin, Texas, that day but they were sure they were doing their part to stop the spread. It was the first deployment of the “Zero Covid” strategy that became, for a time, official US policy, just as in China. 

It was never clear precisely who to blame or who would take responsibility, legal or otherwise. 

This Friday evening press conference in Austin was just the beginning. By the next Thursday evening, the lockdown mania reached a full crescendo. Donald Trump went on nationwide television to announce that everything was under control but that he was stopping all travel in and out of US borders, from Europe, the UK, Australia, and New Zealand. American citizens would need to return by Monday or be stuck. 

Americans abroad panicked while spending on tickets home and crowded into international airports with waits up to 8 hours standing shoulder to shoulder. It was the first clear sign: there would be no consistency in the deployment of these edicts. 

There is no historical record of any American president ever issuing global travel restrictions like this without a declaration of war. Until then, and since the age of travel began, every American had taken it for granted that he could buy a ticket and board a plane. That was no longer possible. Very quickly it became even difficult to travel state to state, as most states eventually implemented a two-week quarantine rule. 

The next day, Friday March 13, Broadway closed and New York City began to empty out as any residents who could went to summer homes or out of state. 

On that day, the Trump administration declared the national emergency by invoking the Stafford Act which triggers new powers and resources to the Federal Emergency Management Administration. 

In addition, the Department of Health and Human Services issued a classified document, only to be released to the public months later. The document initiated the lockdowns. It still does not exist on any government website.

The White House Coronavirus Response Task Force, led by the Vice President, will coordinate a whole-of-government approach, including governors, state and local officials, and members of Congress, to develop the best options for the safety, well-being, and health of the American people. HHS is the LFA [Lead Federal Agency] for coordinating the federal response to COVID-19.

Closures were guaranteed:

Recommend significantly limiting public gatherings and cancellation of almost all sporting events, performances, and public and private meetings that cannot be convened by phone. Consider school closures. Issue widespread ‘stay at home’ directives for public and private organizations, with nearly 100% telework for some, although critical public services and infrastructure may need to retain skeleton crews. Law enforcement could shift to focus more on crime prevention, as routine monitoring of storefronts could be important.

In this vision of turnkey totalitarian control of society, the vaccine was pre-approved: “Partner with pharmaceutical industry to produce anti-virals and vaccine.”

The National Security Council was put in charge of policy making. The CDC was just the marketing operation. That’s why it felt like martial law. Without using those words, that’s what was being declared. It even urged information management, with censorship strongly implied.

The timing here is fascinating. This document came out on a Friday. But according to every autobiographical account – from Mike Pence and Scott Gottlieb to Deborah Birx and Jared Kushner – the gathered team did not meet with Trump himself until the weekend of the 14th and 15th, Saturday and Sunday. 

According to their account, this was his first real encounter with the urge that he lock down the whole country. He reluctantly agreed to 15 days to flatten the curve. He announced this on Monday the 16th with the famous line: “All public and private venues where people gather should be closed.”

This makes no sense. The decision had already been made and all enabling documents were already in circulation. 

There are only two possibilities. 

One: the Department of Homeland Security issued this March 13 HHS document without Trump’s knowledge or authority. That seems unlikely. 

Two: Kushner, Birx, Pence, and Gottlieb are lying. They decided on a story and they are sticking to it. 

Trump himself has never explained the timeline or precisely when he decided to greenlight the lockdowns. To this day, he avoids the issue beyond his constant claim that he doesn’t get enough credit for his handling of the pandemic.

With Nixon, the famous question was always what did he know and when did he know it? When it comes to Trump and insofar as concerns Covid lockdowns – unlike the fake allegations of collusion with Russia – we have no investigations. To this day, no one in the corporate media seems even slightly interested in why, how, or when human rights got abolished by bureaucratic edict. 

As part of the lockdowns, the Cybersecurity and Infrastructure Security Agency, which was and is part of the Department of Homeland Security, as set up in 2018, broke the entire American labor force into essential and nonessential.

They also set up and enforced censorship protocols, which is why it seemed like so few objected. In addition, CISA was tasked with overseeing mail-in ballots. 

Only 8 days into the 15, Trump announced that he wanted to open the country by Easter, which was on April 12. His announcement on March 24 was treated as outrageous and irresponsible by the national press but keep in mind: Easter would already take us beyond the initial two-week lockdown. What seemed to be an opening was an extension of closing. 

This announcement by Trump encouraged Birx and Fauci to ask for an additional 30 days of lockdown, which Trump granted. Even on April 23, Trump told Georgia and Florida, which had made noises about reopening, that “It’s too soon.” He publicly fought with the governor of Georgia, who was first to open his state. 

Before the 15 days was over, Congress passed and the president signed the 880-page CARES Act, which authorized the distribution of $2 trillion to states, businesses, and individuals, thus guaranteeing that lockdowns would continue for the duration. 

There was never a stated exit plan beyond Birx’s public statements that she wanted zero cases of Covid in the country. That was never going to happen. It is very likely that the virus had already been circulating in the US and Canada from October 2019. A famous seroprevalence study by Jay Bhattacharya came out in May 2020 discerning that infections and immunity were already widespread in the California county they examined. 

What that implied was two crucial points: there was zero hope for the Zero Covid mission and this pandemic would end as they all did, through endemicity via exposure, not from a vaccine as such. That was certainly not the message that was being broadcast from Washington. The growing sense at the time was that we all had to sit tight and just wait for the inoculation on which pharmaceutical companies were working. 

By summer 2020, you recall what happened. A restless generation of kids fed up with this stay-at-home nonsense seized on the opportunity to protest racial injustice in the killing of George Floyd. Public health officials approved of these gatherings – unlike protests against lockdowns – on grounds that racism was a virus even more serious than Covid. Some of these protests got out of hand and became violent and destructive. 

Meanwhile, substance abuse rage – the liquor and weed stores never closed – and immune systems were being degraded by lack of normal exposure, exactly as the Bakersfield doctors had predicted. Millions of small businesses had closed. The learning losses from school closures were mounting, as it turned out that Zoom school was near worthless. 

It was about this time that Trump seemed to figure out – thanks to the wise council of Dr. Scott Atlas – that he had been played and started urging states to reopen. But it was strange: he seemed to be less in the position of being a president in charge and more of a public pundit, Tweeting out his wishes until his account was banned. He was unable to put the worms back in the can that he had approved opening. 

By that time, and by all accounts, Trump was convinced that the whole effort was a mistake, that he had been trolled into wrecking the country he promised to make great. It was too late. Mail-in ballots had been widely approved, the country was in shambles, the media and public health bureaucrats were ruling the airwaves, and his final months of the campaign failed even to come to grips with the reality on the ground. 

At the time, many people had predicted that once Biden took office and the vaccine was released, Covid would be declared to have been beaten. But that didn’t happen and mainly for one reason: resistance to the vaccine was more intense than anyone had predicted. The Biden administration attempted to impose mandates on the entire US workforce. Thanks to a Supreme Court ruling, that effort was thwarted but not before HR departments around the country had already implemented them. 

As the months rolled on – and four major cities closed all public accommodations to the unvaccinated, who were being demonized for prolonging the pandemic – it became clear that the vaccine could not and would not stop infection or transmission, which means that this shot could not be classified as a public health benefit. Even as a private benefit, the evidence was mixed. Any protection it provided was short-lived and reports of vaccine injury began to mount. Even now, we cannot gain full clarity on the scale of the problem because essential data and documentation remains classified. 

After four years, we find ourselves in a strange position. We still do not know precisely what unfolded in mid-March 2020: who made what decisions, when, and why. There has been no serious attempt at any high level to provide a clear accounting much less assign blame. 

Not even Tucker Carlson, who reportedly played a crucial role in getting Trump to panic over the virus, will tell us the source of his own information or what his source told him. There have been a series of valuable hearings in the House and Senate but they have received little to no press attention, and none have focus on the lockdown orders themselves. 

The prevailing attitude in public life is just to forget the whole thing. And yet we live now in a country very different from the one we inhabited five years ago. Our media is captured. Social media is widely censored in violation of the First Amendment, a problem being taken up by the Supreme Court this month with no certainty of the outcome. The administrative state that seized control has not given up power. Crime has been normalized. Art and music institutions are on the rocks. Public trust in all official institutions is at rock bottom. We don’t even know if we can trust the elections anymore. 

In the early days of lockdown, Henry Kissinger warned that if the mitigation plan does not go well, the world will find itself set “on fire.” He died in 2023. Meanwhile, the world is indeed on fire. The essential struggle in every country on earth today concerns the battle between the authority and power of permanent administration apparatus of the state – the very one that took total control in lockdowns – and the enlightenment ideal of a government that is responsible to the will of the people and the moral demand for freedom and rights. 

How this struggle turns out is the essential story of our times. 

CODA: I’m embedding a copy of PanCAP Adapted, as annotated by Debbie Lerman. You might need to download the whole thing to see the annotations. If you can help with research, please do.

*  *  *

Jeffrey Tucker is the author of the excellent new book 'Life After Lock-Down'

Tyler Durden Mon, 03/11/2024 - 23:40

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Red Candle In The Wind

Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by…

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Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by printing at 275,000 against a consensus call of 200,000. We say superficially, because the downward revisions to prior months totalled 167,000 for December and January, taking the total change in employed persons well below the implied forecast, and helping the unemployment rate to pop two-ticks to 3.9%. The U6 underemployment rate also rose from 7.2% to 7.3%, while average hourly earnings growth fell to 0.2% m-o-m and average weekly hours worked languished at 34.3, equalling pre-pandemic lows.

Undeterred by the devil in the detail, the algos sprang into action once exchanges opened. Market darling NVIDIA hit a new intraday high of $974 before (presumably) the humans took over and sold the stock down more than 10% to close at $875.28. If our suspicions are correct that it was the AIs buying before the humans started selling (no doubt triggering trailing stops on the way down), the irony is not lost on us.

The 1-day chart for NVIDIA now makes for interesting viewing, because the red candle posted on Friday presents quite a strong bearish engulfing signal. Volume traded on the day was almost double the 15-day simple moving average, and similar price action is observable on the 1-day charts for both Intel and AMD. Regular readers will be aware that we have expressed incredulity in the past about the durability the AI thematic melt-up, so it will be interesting to see whether Friday’s sell off is just a profit-taking blip, or a genuine trend reversal.

AI equities aside, this week ought to be important for markets because the BTFP program expires today. That means that the Fed will no longer be loaning cash to the banking system in exchange for collateral pledged at-par. The KBW Regional Banking index has so far taken this in its stride and is trading 30% above the lows established during the mini banking crisis of this time last year, but the Fed’s liquidity facility was effectively an exercise in can-kicking that makes regional banks a sector of the market worth paying attention to in the weeks ahead. Even here in Sydney, regulators are warning of external risks posed to the banking sector from scheduled refinancing of commercial real estate loans following sharp falls in valuations.

Markets are sending signals in other sectors, too. Gold closed at a new record-high of $2178/oz on Friday after trading above $2200/oz briefly. Gold has been going ballistic since the Friday before last, posting gains even on days where 2-year Treasury yields have risen. Gold bugs are buying as real yields fall from the October highs and inflation breakevens creep higher. This is particularly interesting as gold ETFs have been recording net outflows; suggesting that price gains aren’t being driven by a retail pile-in. Are gold buyers now betting on a stagflationary outcome where the Fed cuts without inflation being anchored at the 2% target? The price action around the US CPI release tomorrow ought to be illuminating.

Leaving the day-to-day movements to one side, we are also seeing further signs of structural change at the macro level. The UK budget last week included a provision for the creation of a British ISA. That is, an Individual Savings Account that provides tax breaks to savers who invest their money in the stock of British companies. This follows moves last year to encourage pension funds to head up the risk curve by allocating 5% of their capital to unlisted investments.

As a Hail Mary option for a government cruising toward an electoral drubbing it’s a curious choice, but it’s worth highlighting as cash-strapped governments increasingly see private savings pools as a funding solution for their spending priorities.

Of course, the UK is not alone in making creeping moves towards financial repression. In contrast to announcements today of increased trade liberalisation, Australian Treasurer Jim Chalmers has in the recent past flagged his interest in tapping private pension savings to fund state spending priorities, including defence, public housing and renewable energy projects. Both the UK and Australia appear intent on finding ways to open up the lungs of their economies, but government wants more say in directing private capital flows for state goals.

So, how far is the blurring of the lines between free markets and state planning likely to go? Given the immense and varied budgetary (and security) pressures that governments are facing, could we see a re-up of WWII-era Victory bonds, where private investors are encouraged to do their patriotic duty by directly financing government at negative real rates?

That would really light a fire under the gold market.

Tyler Durden Mon, 03/11/2024 - 19:00

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Trump “Clearly Hasn’t Learned From His COVID-Era Mistakes”, RFK Jr. Says

Trump "Clearly Hasn’t Learned From His COVID-Era Mistakes", RFK Jr. Says

Authored by Jeff Louderback via The Epoch Times (emphasis ours),

President…

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Trump "Clearly Hasn't Learned From His COVID-Era Mistakes", RFK Jr. Says

Authored by Jeff Louderback via The Epoch Times (emphasis ours),

President Joe Biden claimed that COVID vaccines are now helping cancer patients during his State of the Union address on March 7, but it was a response on Truth Social from former President Donald Trump that drew the ire of independent presidential candidate Robert F. Kennedy Jr.

Robert F. Kennedy Jr. holds a voter rally in Grand Rapids, Mich., on Feb. 10, 2024. (Mitch Ranger for The Epoch Times)

During the address, President Biden said: “The pandemic no longer controls our lives. The vaccines that saved us from COVID are now being used to help beat cancer, turning setback into comeback. That’s what America does.”

President Trump wrote: “The Pandemic no longer controls our lives. The VACCINES that saved us from COVID are now being used to help beat cancer—turning setback into comeback. YOU’RE WELCOME JOE. NINE-MONTH APPROVAL TIME VS. 12 YEARS THAT IT WOULD HAVE TAKEN YOU.”

An outspoken critic of President Trump’s COVID response, and the Operation Warp Speed program that escalated the availability of COVID vaccines, Mr. Kennedy said on X, formerly known as Twitter, that “Donald Trump clearly hasn’t learned from his COVID-era mistakes.”

“He fails to recognize how ineffective his warp speed vaccine is as the ninth shot is being recommended to seniors. Even more troubling is the documented harm being caused by the shot to so many innocent children and adults who are suffering myocarditis, pericarditis, and brain inflammation,” Mr. Kennedy remarked.

“This has been confirmed by a CDC-funded study of 99 million people. Instead of bragging about its speedy approval, we should be honestly and transparently debating the abundant evidence that this vaccine may have caused more harm than good.

“I look forward to debating both Trump and Biden on Sept. 16 in San Marcos, Texas.”

Mr. Kennedy announced in April 2023 that he would challenge President Biden for the 2024 Democratic Party presidential nomination before declaring his run as an independent last October, claiming that the Democrat National Committee was “rigging the primary.”

Since the early stages of his campaign, Mr. Kennedy has generated more support than pundits expected from conservatives, moderates, and independents resulting in speculation that he could take votes away from President Trump.

Many Republicans continue to seek a reckoning over the government-imposed pandemic lockdowns and vaccine mandates.

President Trump’s defense of Operation Warp Speed, the program he rolled out in May 2020 to spur the development and distribution of COVID-19 vaccines amid the pandemic, remains a sticking point for some of his supporters.

Vice President Mike Pence (L) and President Donald Trump deliver an update on Operation Warp Speed in the Rose Garden of the White House in Washington on Nov. 13, 2020. (Mandel Ngan/AFP via Getty Images)

Operation Warp Speed featured a partnership between the government, the military, and the private sector, with the government paying for millions of vaccine doses to be produced.

President Trump released a statement in March 2021 saying: “I hope everyone remembers when they’re getting the COVID-19 Vaccine, that if I wasn’t President, you wouldn’t be getting that beautiful ‘shot’ for 5 years, at best, and probably wouldn’t be getting it at all. I hope everyone remembers!”

President Trump said about the COVID-19 vaccine in an interview on Fox News in March 2021: “It works incredibly well. Ninety-five percent, maybe even more than that. I would recommend it, and I would recommend it to a lot of people that don’t want to get it and a lot of those people voted for me, frankly.

“But again, we have our freedoms and we have to live by that and I agree with that also. But it’s a great vaccine, it’s a safe vaccine, and it’s something that works.”

On many occasions, President Trump has said that he is not in favor of vaccine mandates.

An environmental attorney, Mr. Kennedy founded Children’s Health Defense, a nonprofit that aims to end childhood health epidemics by promoting vaccine safeguards, among other initiatives.

Last year, Mr. Kennedy told podcaster Joe Rogan that ivermectin was suppressed by the FDA so that the COVID-19 vaccines could be granted emergency use authorization.

He has criticized Big Pharma, vaccine safety, and government mandates for years.

Since launching his presidential campaign, Mr. Kennedy has made his stances on the COVID-19 vaccines, and vaccines in general, a frequent talking point.

“I would argue that the science is very clear right now that they [vaccines] caused a lot more problems than they averted,” Mr. Kennedy said on Piers Morgan Uncensored last April.

“And if you look at the countries that did not vaccinate, they had the lowest death rates, they had the lowest COVID and infection rates.”

Additional data show a “direct correlation” between excess deaths and high vaccination rates in developed countries, he said.

President Trump and Mr. Kennedy have similar views on topics like protecting the U.S.-Mexico border and ending the Russia-Ukraine war.

COVID-19 is the topic where Mr. Kennedy and President Trump seem to differ the most.

Former President Donald Trump intended to “drain the swamp” when he took office in 2017, but he was “intimidated by bureaucrats” at federal agencies and did not accomplish that objective, Mr. Kennedy said on Feb. 5.

Speaking at a voter rally in Tucson, where he collected signatures to get on the Arizona ballot, the independent presidential candidate said President Trump was “earnest” when he vowed to “drain the swamp,” but it was “business as usual” during his term.

John Bolton, who President Trump appointed as a national security adviser, is “the template for a swamp creature,” Mr. Kennedy said.

Scott Gottlieb, who President Trump named to run the FDA, “was Pfizer’s business partner” and eventually returned to Pfizer, Mr. Kennedy said.

Mr. Kennedy said that President Trump had more lobbyists running federal agencies than any president in U.S. history.

“You can’t reform them when you’ve got the swamp creatures running them, and I’m not going to do that. I’m going to do something different,” Mr. Kennedy said.

During the COVID-19 pandemic, President Trump “did not ask the questions that he should have,” he believes.

President Trump “knew that lockdowns were wrong” and then “agreed to lockdowns,” Mr. Kennedy said.

He also “knew that hydroxychloroquine worked, he said it,” Mr. Kennedy explained, adding that he was eventually “rolled over” by Dr. Anthony Fauci and his advisers.

President Donald Trump greets the crowd before he leaves at the Operation Warp Speed Vaccine Summit in Washington on Dec. 8, 2020. (Tasos Katopodis/Getty Images)

MaryJo Perry, a longtime advocate for vaccine choice and a Trump supporter, thinks votes will be at a premium come Election Day, particularly because the independent and third-party field is becoming more competitive.

Ms. Perry, president of Mississippi Parents for Vaccine Rights, believes advocates for medical freedom could determine who is ultimately president.

She believes that Mr. Kennedy is “pulling votes from Trump” because of the former president’s stance on the vaccines.

“People care about medical freedom. It’s an important issue here in Mississippi, and across the country,” Ms. Perry told The Epoch Times.

“Trump should admit he was wrong about Operation Warp Speed and that COVID vaccines have been dangerous. That would make a difference among people he has offended.”

President Trump won’t lose enough votes to Mr. Kennedy about Operation Warp Speed and COVID vaccines to have a significant impact on the election, Ohio Republican strategist Wes Farno told The Epoch Times.

President Trump won in Ohio by eight percentage points in both 2016 and 2020. The Ohio Republican Party endorsed President Trump for the nomination in 2024.

“The positives of a Trump presidency far outweigh the negatives,” Mr. Farno said. “People are more concerned about their wallet and the economy.

“They are asking themselves if they were better off during President Trump’s term compared to since President Biden took office. The answer to that question is obvious because many Americans are struggling to afford groceries, gas, mortgages, and rent payments.

“America needs President Trump.”

Multiple national polls back Mr. Farno’s view.

As of March 6, the RealClearPolitics average of polls indicates that President Trump has 41.8 percent support in a five-way race that includes President Biden (38.4 percent), Mr. Kennedy (12.7 percent), independent Cornel West (2.6 percent), and Green Party nominee Jill Stein (1.7 percent).

A Pew Research Center study conducted among 10,133 U.S. adults from Feb. 7 to Feb. 11 showed that Democrats and Democrat-leaning independents (42 percent) are more likely than Republicans and GOP-leaning independents (15 percent) to say they have received an updated COVID vaccine.

The poll also reported that just 28 percent of adults say they have received the updated COVID inoculation.

The peer-reviewed multinational study of more than 99 million vaccinated people that Mr. Kennedy referenced in his X post on March 7 was published in the Vaccine journal on Feb. 12.

It aimed to evaluate the risk of 13 adverse events of special interest (AESI) following COVID-19 vaccination. The AESIs spanned three categories—neurological, hematologic (blood), and cardiovascular.

The study reviewed data collected from more than 99 million vaccinated people from eight nations—Argentina, Australia, Canada, Denmark, Finland, France, New Zealand, and Scotland—looking at risks up to 42 days after getting the shots.

Three vaccines—Pfizer and Moderna’s mRNA vaccines as well as AstraZeneca’s viral vector jab—were examined in the study.

Researchers found higher-than-expected cases that they deemed met the threshold to be potential safety signals for multiple AESIs, including for Guillain-Barre syndrome (GBS), cerebral venous sinus thrombosis (CVST), myocarditis, and pericarditis.

A safety signal refers to information that could suggest a potential risk or harm that may be associated with a medical product.

The study identified higher incidences of neurological, cardiovascular, and blood disorder complications than what the researchers expected.

President Trump’s role in Operation Warp Speed, and his continued praise of the COVID vaccine, remains a concern for some voters, including those who still support him.

Krista Cobb is a 40-year-old mother in western Ohio. She voted for President Trump in 2020 and said she would cast her vote for him this November, but she was stunned when she saw his response to President Biden about the COVID-19 vaccine during the State of the Union address.

I love President Trump and support his policies, but at this point, he has to know they [advisers and health officials] lied about the shot,” Ms. Cobb told The Epoch Times.

“If he continues to promote it, especially after all of the hearings they’ve had about it in Congress, the side effects, and cover-ups on Capitol Hill, at what point does he become the same as the people who have lied?” Ms. Cobb added.

“I think he should distance himself from talk about Operation Warp Speed and even admit that he was wrong—that the vaccines have not had the impact he was told they would have. If he did that, people would respect him even more.”

Tyler Durden Mon, 03/11/2024 - 17:00

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