How to Beat the Inflation

“Buy less” is the most obvious answer. Yet often this isn’t possible. In Mexico, one quart of Haagen-Dazs vanilla at my supermarket now costs $15.00 US, almost what it costs in the USA. That outrageous price certainly won’t keep me from buying it. Only if the price goes to $20 would I perhaps reconsider.

I’ll bet most of you are like this with items you lust after. You cut back on things like socks and underwear, making do with holey old stuff. Beer, for some, is another non-negotiable. What do people do in rural red states, forced to buy gas to commute to their uninspiring jobs? Hard to figure that one, when there ain’t much budget left to cut.

Maybe that’s why the hard right is making such headway. If Biden does manage to get through Congress his billions to help these folks, they will piss it away on gasoline or beer, and then what? You bite the hand that feeds you.

I am just as bad. The pickup cartridge on my lovely vinyl-playing setup is going south after many years of usage. It is of course an essential link in getting the music to my ear, and a new one of equal quality will cost about $500, plus shipping here (maybe another $100). Not buying it renders my whole collection mere wall decoration. Buying a cheaper one is cutting off one’s nose to spite the face. How many quarts of Haagen-Dazs is that worth?

These kinds of quandaries are of little concern to people with real money. Instead they complain about the stock market dropping and worry about what they should do—as if there were any choice but to just hang on. Suzie Orman was interviewed on CNN the other night. Actually she looked pretty good for a 70-year-old dispensing commonplace advice. Her counsel on the stock market? Just do nothing and hang on; the market will come back; it always does (like it did in the 1930s?).

For the rest of us, my uncalled-for advice is like Suzie’s: just hang on. Or you could try one of the four tips from a popular Google site: “ask for a raise.”

Politics Visits the Dismal Science

A lot of people, myself included, avoid serious dealing with economics. You hear their gurus make pronouncements clouded with jargon, impenetrable concepts, and fixed ideas. They frequently disagree and like to argue. Many disdain the world of politics, though that is a living part of economics.

Now Larry Summers, the king of controversy, has joined with Ezra Klein on his show in a long but surprisingly enlightening discussion about the present inflation, how it developed, and what to do about it. This may be intimidating to some of you, yet very illuminating if you choose to get into it.

The problem both of them confront is the heavy downside of the strong U.S. economy. Both seem to agree that Biden’s American Rescue Plan was needed and welcome. But “it ran the economy hot.” Notwithstanding obvious benefits to the labor market, Summers believes, our virulent inflation resulted. Planners seemingly ignored the long-term consequences of runaway demand.

And the doctor who prescribes you painkillers that make you feel good to which you become addicted is generous and compassionate, but ultimately is very damaging to you. And while the example is a bit melodramatic, the pursuit of excessively expansionary policies that ultimately lead to inflation, which reduces people’s purchasing power, and the need for sharply contractionary policies, which hurt the biggest victims, the most disadvantaged in the society, that’s not doing the people we care most about any favor. It’s, in fact, hurting them.

For Summers this echoes and replays what happened in 1982, when Paul Volcker came in and instituted draconian reforms that finally tamed record inflation, though at the cost of a recession. There was outrage among many of the lefties, but the medicine worked. Now, once again, demand is out of whack, meaning too much money chasing too few goods. Ezra Klein seemingly accepts this but asserts that supply disruptions have played a role too: Ukraine and China and Covid have had their effects.

I think they both agree that the Fed must act soon and strongly. There is really no other instrument to control what seems likely—a long-term inflation of some 6% a year. The politics of all this become pretty obvious. Politico tells us:

Democrats worry about growth-killing [Fed] rate hikes in the middle of a midterm election year. But inflation is even worse for them politically. Recent polls show that price spikes are by far the top concern among voters. An NPR/Ipsos survey showed that 40 percent of Americans are worried about higher prices and 94 percent are aware of rising costs for food, energy, housing and other items.

One aspect of all this struck me. Left-leaning Democrats typically look for immediate relief to help the beleaguered victims (and counter the upcoming threat of the midterms). Bernie Sanders and others have proposed windfall excess profits taxes on Big Oil. Others want to rescind the federal gas tax.

More conservative Democrats like Larry Summers look for longer-term, painful fixes. I’m reminded of the blowback President Biden received for speaking his mind about Putin. He took a lot of undeserved flak for that, much of it from his own administration, which “overreacted and undercut him.” The State Department and the Kremlin both signaled unhappy long-term consequences from his remark.

Not everyone is on the same page regarding Putin, and unfortunately not everyone is on the same page regarding inflation. Summers and Klein did try to bridge that gap in a good, reasoned exchange.

Things We Find Beyond Our Control

Here are a few: Covid, the climate, Putin, the Congress, guns, cockroaches, Mark Zuckerberg. This man is a disease, worse than Covid. I want to focus on him because Facebook (now renamed “Meta”) seems maybe, at last, to be losing its sway over our mindless populace.

The latest evidence came last Tuesday when,

with a single earnings report and a disastrous conference call, Mark Zuckerberg wiped out $240 billion in value from his company. Meta’s was the largest one-day loss by a U.S. company ever, and the ripple effects were closer to tsunamis throughout Silicon Valley. . . . Meta’s market value of $900 billion at 3:59 p.m., was suddenly worth about $720 billion just 30 minutes later—reflecting a spectacular 22 percent fall in after-hours trading for one of the largest and most powerful companies in the world.

The numbers here are amazing. “If the drop holds, . . . the company’s overall value, known as its market capitalization, is on track to drop by a figure greater than the size of the entire Greek economy, based on data from the World Bank.”

There are many reasons behind Facebook’s rout, the most likely being the company’s reliance on a business model that uses your personal data to fuel its targeted online ad sales. But most people (at least the older ones) don’t use FB because of its business model. They want to see the latest pix of their grandkids or exchange recipes. Who cares if they reveal their personal data?

The government, for one, is beginning to care about big tech dominance. For some months now, “both parties want to regulate Facebook.” There is even talk of international regulation. Investors finally came to realize that the Zuck has likely overreached himself with a concept that promotes virtual reality over reality.

Some of you know that I have two sizeable Facebook sites: one to promote my book on Charles Mingus, the other in my own name. Unless I were to set up an email newsletter or recast my blog on something like Medium, I don’t know how I could easily reach you all. I deeply wish I could ditch Facebook and find other ways to communicate.

Considering the other megamonsters—Google, Apple, and Microsoft—why can’t we finally find ways to curb their immense power? Are we so absorbed in the virtual world that we cannot conceive, much less institute, ways to deal with the challenges of authoritarianism and climate change? The whole move to replace the reality of our natural world with virtual reality seems to me a clear instance of escapism, a dodge to avoid commitment to the only life we have.

The Nutmeg’s Curse

The reviews of Amitav Ghosh’s new book, The Nutmeg’s Curse, have not always been positive. Some have declared it to be anti-science. Yet others, like Roy Scranton, found that it “elegantly and audaciously reconceives modernity as a centuries-long campaign of omnicide, against the spirits of the earth, the rivers, the trees, and even the humble nutmeg, then makes an impassioned argument for the keen necessity of vitalist thought and non-human narrative.” I’m with Roy, with a few reservations.

The overall best review I found with a contemporary context is here, in The New Yorker.

Ghosh begins with a narrative of how the 17th century Dutch arrived at the Banda Islands in the Pacific to capture, enslave and kill the islanders in order to insure a monopoly on, of all things, the nutmeg, that highly treasured spice. He finds these events a paradigm for how colonialism and the “free” market have come to dominate trade by subjugation. The result is also tied inextricably to climate change and the rebellion of nature it embodies.

The U.S. has led this robust decadence through military and economic dominance. These are Ghosh’s carefully chosen words:

The job of the world’s dominant military establishments is precisely to defend the most important drivers of climate change—the carbon economy and the systems of extraction, production, and consumption that it supports. Nor can these establishments be expected to address the unseen drivers of the planetary crisis, such as inequities of class, race, and geopolitical power: their very mission is to preserve the hierarchies that favor the status quo.

And our New Yorker reviewer Olufemi O. Taiwo finds that

Ghosh sees potential in what it calls a “vitalist” politics, and in an associated ethic of protection that would extend to “rivers, mountains, animals, and the spirits of the land.” Ghosh identifies this ethos, in contrast to the world-as-resource view, with peasants and farmworkers in Asia, Africa, and Latin America—places and people long seen as peripheral to history.

So in one way the book is a history of vitalism, culminating in the Gaia concept: “that living organisms interact with their inorganic surroundings on Earth to form a synergistic and self-regulating, complex system that helps to maintain and perpetuate the conditions for life on the planet.”

In Ghosh’s terms:

The awareness of a Gaia-like earth did not wither away of itself because of literacy; it was systematically exterminated, through orgies of bloodletting that did not spare Europe, although its violence was directed most powerfully at the Indigenous peoples of the Americas. Yet, not only has that awareness survived among the Indigenous people of the Americas; many of them also credit their perceptions of the Earth with having made their own survival possible, in the face of exterminatory violence. Never have these perceptions of the Earth mattered more than at this moment when the mechanistically ordered world of modernity is disintegrating before our very eyes.

As I said earlier, I have a few reservations about this really wonderful book. One is that vitalism can be undercut (and often is) by superstition and turgid magical thinking. Ghosh documents this but not sufficiently so.

Also, it’s hard for an old rationalist like me to accept this total spiritualizing of nature. Yet the alternatives seem to have led the world deeply astray. If you accept Ghosh’s arguments about our awful colonialist appropriation of nature, his approach to vitalism, or something like it, must follow.

The book makes you think of the many varieties of human wretchedness and, maybe, of human possibilities for redemption. More than a critique, this is an indictment of much Western thinking. In its way it is finally a religious statement.

Choices and Observations: Reengaging with the U.S.

costco interior

As most of you know, it costs a lot to live here, and not just in dollars. To live in the United States these days you constantly adjust your thinking about what you buy or don’t buy. And because the political situation is such an imponderable mess, you just put on your blinders each day.

My kids live in Charlottesville, certainly not (in most ways) a typical U.S. town. Home to a major university and a lot of wealth, there are maybe 8,000 black people (19% of the total population) living at the lower economic end. White people mostly live firmly separate lives from them, and those with bucks enjoy a kind of preppy culture, fed by the university and its traditions.

My kids have two boys, aged 4-1/2 and 1-1/2. They recently bought a big new house and are living the good life, though there are always money concerns. They buy a lot of stuff. Costco is the staple of life for folks like this, and it’s one of the great success stories of Charlottesville. The store size and the immense quantity of stuff available boggles the mind of a Mexican vecino.

Costco’s prices are good though you have to buy in quantity. Everything is big, including the shopping carts. The quality is excellent, the store help quite accommodating. People love the concept—and talk about it. At a dinner party I heard much about the variety of wines, cheeses and gourmet items. What a massive consumer culture informs the U.S.!

Politically, the left-right split normally prevents any kind of political commonality, so people here generally tune out its nasty cultural implications, disregarding them because there are no obvious solutions and because the triggers are hidden and dangerous. For liberals, it’s easy to talk about the latest Republican outrage or laugh at Matt Gaetz, but such conversation can be short-lived. Ventilating just doesn’t get you very far, and one gets fed up with the negativity.

So the genteel side of life in Charlottesville controls a lot of what happens here. And that’s not all bad. I know some music faculty here, but it’s hard to imagine far-out jazz finding an audience. Still, a jazz scene somehow flourishes, often minus black people. All the extremist splits in American society are here, most of them covered over. Cultural survival requires it.

P. S.  Costco wins with the millennials and everyone else.

The Coronavirus Blues

Ten Reasons Why a ‘Greater Depression’ for the 2020s Is Inevitable

Why Our Economy May Be Headed for a Decade of Depression

 Welcome to the End of the ‘Human Climate Niche’

I want to call it the coronavirus blues, that empty, groping housebound depression that keeps you from engaging with all that free time. It’s a coma of aimlessness—not really to be compared to clinical depression, though maybe a second cousin. Wearing a mask intensifies the detachment. Even with walks outside one feels alienated from life; taking off the mask doesn’t help much .

Social isolation causes it, and one way or another it seems to infect everybody. Camus called it a “feeling of exile, that sensation of a void within which never left us, that irrational longing to hark back to the past or else to speed up the march of time, and those keen shafts of memory that stung like fire.”

These thoughts are reinforced from reading recent remarks by Nouriel Roubini, the infamous Dr. Doom who was one of a very few who predicted the housing debacle and near-global collapse of the financial system in 2006. Now he predicts something even worse to come, what he calls the Greater Depression, which will make your coronavirus blues look like small change. (How the word depression got to be applied to economic collapse is another story.)

Roubini considers ten factors or trends that will be exacerbated to produce a severe global depression, a series of events that make another crisis inevitable. A summary of the ten: fiscal deficits and private-sector debt; the healthcare crisis and the aging; the coming deflation; currency debasement; digital disruptions like automation; deglobalization and protectionism; populism; the standoff of the U.S. and China; cyberwars accelerating to cold wars; and the environmental disruptions.

Finally in the list he considers man-made climate change.

The Paris Accord said 1.5 degrees. Then they say two. Now, every scientist says, “Look, this is a voluntary agreement, we’ll be lucky if we get three—and more likely, it will be four—degree Celsius increases by the end of the century.” How are we going to live in a world where temperatures are four degrees higher? And we’re not doing anything about it. The Paris Accord is just a joke. And it’s not just the U.S. and Trump. China’s not doing anything. The Europeans aren’t doing anything. It’s only talk.

And then there’s the pandemics. These are also man-made disasters. You’re destroying the ecosystems of animals. You are putting them into cages—the bats and pangolins and all the other wildlife—and they interact and create viruses and then spread to humans. First, we had HIV. Then we had SARS. Then MERS, then swine flu, then Zika, then Ebola, now this one. And there’s a connection between global climate change and pandemics. Suppose the permafrost in Siberia melts. There are probably viruses that have been in there since the Stone Age. We don’t know what kind of nasty stuff is going to get out. We don’t even know what’s coming.

Roubini is one of those economic savants who puts it all together in one totally depressing yet horribly believable package. For some reason, skeptics like this make entire sense to me. His grim analysis, oddly, can offer a program to treat your coronavirus despair, unlike other doom-sayers such as David Wallace-Wells. One takes a kind of weird comfort in thinking that somehow these cheerless predictions can turn into a recipe for reform and, one hopes, reconstruction.

Hard Truths about Climate Change

Climate math: What a 1.5-degree pathway would take

How McKinsey Destroyed the Middle Class

Op-Ed: The McKinsey I hope the world gets to know

Do we really have any chance to come to grips with climate change? Like many of us, I go back and forth on that one. Some recommend throwing out the whole capitalist system. If that seems a bit unlikely, you’d need to know how to redirect the system and what it would really take to decarbonize global business.

A pretty convincing roadmap for that is provided by McKinsey, the firm some love to hate. The critics hate its high-pressure culture, its stress on process, its success. But the business of America is still business, and McKinsey’s leaders have recently tried to transform their firm’s role to reflect the totally changing world we’re living in. I almost went to work for McKinsey in 2006, which would have been to the delight of my capitalistic forebears, but that didn’t happen and I’m grateful.

Anyhow, McKinsey recently issued a report on Climate Math that challenges business to meet the demands for a 1.5-C degree warming limit. This is very much worth your reading so you can understand in some coherent detail the challenges in achieving that goal.

 . . . With further warming unavoidable over the next decade, the risk of physical hazards and nonlinear, socioeconomic jolts is rising. Mitigating climate change through decarbonization represents the other half of the challenge. Scientists estimate that limiting warming to 1.5 degrees Celsius would reduce the odds of initiating the most dangerous and irreversible effects of climate change.

The report offers five necessary and difficult steps to get to that goal. “The good news,” they say, “is that a 1.5-degree pathway is technically achievable. The bad news is that the math is daunting.”

None of what follows is a forecast. Getting to 1.5 degrees would require significant economic incentives for companies to invest rapidly and at scale in decarbonization efforts. It also would require individuals to make changes in areas as fundamental as the food they eat and their modes of transport. A markedly different regulatory environment would likely be necessary to support the required capital formation.

The report traces five needed interdependent “shifts” in areas that we all know, with varying means and prospects of achieving reform:

    • reforming food and forestry
    • electrifying our lives
    • adapting industrial operations
    • decarbonizing power and fuel
    • ramping up carbon capture and carbon sequestration activity.

Each of these areas plays out in three scenarios the report envisions, not as predictions but as “snapshots” to get where we have to go.

All the scenarios, we found, would imply the need for immediate, all-hands-on-deck efforts to dramatically reduce GHG [greenhouse gas] emissions. The first scenario frames deep, sweeping emission reductions across all sectors; the second assumes oil and other fossil fuels remain predominant in transport for longer, with aggressive reforestation absorbing the surplus emissions; and the third scenario assumes that coal and gas continue to generate power for longer, with even more vigorous reforestation making up the deficit . . . .

Relying so much on reforestation seems to me dubious at best, despite the report’s qualifications. The final pages state in bold type, “It is impossible to chart a 1.5-degree pathway that does not remove carbon dioxide to offset ongoing emissions. The math simply does not work.”

The challenges here are immense and the report does not shy away from them. But finally we are getting serious analysis of how feasible (or unlikely) the 1.5-degree goal is.

Turning Off Fossil Fuel Funding

Why the Climate Movement’s Next Big Target Is Wall Street

Want to Do Something About Climate Change? Follow the Money

BlackRock C.E.O. Larry Fink: Climate Crisis Will Reshape Finance

The financing spigot has provided way over half a trillion dollars during the last three years to America’s fossil fuel producers. That’s from just four Wall Street banks—JPMorgan Chase, Citibank, Wells Fargo and Bank of America. This money invariably goes for the worst kinds of anti-climate projects, like oil pipelines.

Only a very few of the largest companies, like Exxon Mobil, can self-finance their projects. The others are wired to the biggest banks and investment firms, and the climate movement is beginning to take note of the problem.

Though many banking institutions have branded themselves as green, the world’s top 33 largest banks collectively provided $1.9 trillion in financing for coal, oil, and gas companies since countries put forth the Paris Climate Agreement in 2015.

Bill McKibben has organized StopTheMoneyPipeline.Com to “demand that banks, asset managers and insurance companies stop funding, insuring and investing in climate destruction.” Just getting started, the group has targeted Chase, BlackRock Asset Managers (with its nearly $7 trillion in investments) and Liberty Mutual Insurance—all of whom could stop fossil financing tomorrow without any real damage to their business.

McKibben writes that “These titans may be too big to pressure. Yet if we could get just one offending bank to move toward divesting from fossil fuels, the ripple effects would be both swift and global.” And even now, BlackRock’s website leads off with the statement that “Sustainability, and climate change in particular, are transforming investments.” They post a letter from CEO Larry Fink about “how climate risk is an investment risk” and how sustainable strategies are the future. Maybe Fink and McKibben can now have lunch.

Several writers predict a sort of domino effect if even one of these “banks” (what an outmoded term for these guys!) gets serious about this kind of funding strategy. Fink wrote that he believes “we are on the edge of a fundamental reshaping of finance.” He would “introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability.”

We would note that sustainability is always a tricky and ambiguous word, but let’s give Larry credit for evidently trying finally to monitor the fossil funding spigot.  According to one of Bloomberg’s opinion writers, his letter marks the end of the road for coal.

Let the Big Banks Pay

Why Central Banks Need to Step Up on Global Warming

Climate Finance

Why We Need Finance to Fight Climate Change

“That’s where the money is” was Willie Sutton’s reply when someone asked why he robbed banks. I’ve used his cool rejoinder before, but it’s especially apt when you think about the overwhelming problems coming: mitigating and adapting to what the world faces in global warming.

Bill McKibben talked about getting the big banks to just quit lending to the oil industry—which they fund to the tune of hundreds of billions of dollars a year. This seems about as likely as getting a junkie off fentanyl but, as he said, it’s kind of a Hail Mary pass.

Bernie Sanders’ grandiose climate proposals ($16.3 trillion) are just unrealistic when it comes to funding. Elizabeth Warren’s are only a bit more practical. The amounts for underwriting any kind of comprehensive Green New Deal are staggering. Great bags of money will be required to have any hope of success.

But it does seem right and proper, as Columbia’s Adam Tooze proposes, that “a decade after the world bailed out finance, it’s time for finance to bail out the world.” That is, it’s time for the world’s largest financial institutions to step up on climate change, which a few of them have already committed to do, the IMF being one. But the grand scale that will be required is something else again.

How would you get the central banks—like the Federal Reserve and the Bank of England—to cough up, or backstop, long-term loans? Tooze put it in terms of moral obligation and the threat of financial crisis:

Acting as a backstop to the issuance of a massive volume of publicly issued green bonds is certainly a novel role for the central banks. But after their exertions in the 2008 financial crisis, central bankers, of all public officials, can’t plausibly retreat into an insistence on the limits of their mandate. . . .

Decarbonization is a vastly more complex technical, economic, and social problem. But to embark on solving it we need to mobilize all the resources we can muster. The essential responsibility of the central banks is to ensure that money does not stand in the way.

The World Resources Institute projects the scale (for the short term, it seems) of public/private investment needed to remediate and adapt to what’s coming:

    • The World Economic Forum projects that by 2020, about $5.7 trillion will need to be invested annually in green infrastructure, much of which will be in today’s developing world.
    • This will require shifting the world’s $5 trillion in business-as-usual investments into green investments, as well as mobilizing an additional $700 billion to ensure this shift actually happens.

How is it possible to persuade the mercantile banking industry to get in on the action—and indeed make money doing it? A National Climate Bank has been proposed to sidestep the big banks and foster greenhouse gas reductions. Read more about that here. I’m not sure that will do the job; it’s mostly for smaller-scale projects.

What’s required is a Congress dedicated to transforming banking regulations to demand that a certain percentage of big commercial bank investments be made in wide-ranging, large green projects with commercial potential. Once again, like so much involving climate change, it’s a political problem. We are talking about trillions of dollars, folks, and Willie Sutton knew where that money was hiding.

Big Oil and Big Tobacco Long in Cahoots

New Documents Reveal Denial Playbook Originated with Big Oil, Not Big Tobacco

Did Exxon Deceive Its Investors on Climate Change?

Exxon Climate Plan Wasn’t Fake, Tillerson Says In N.Y. Trial

Failing surge barrier, New Orleans

We are just discovering how long and how deeply the tobacco and oil industries joined together to deceive the public about their toxic products. Their connections go back to the 1950s, studying and funding deceptions about smog science and cancer science.

The Center for International and Environmental Law wrote about this over three years ago, and like most other important news it got swamped by the furor over Trumpism. The Center used documents unearthed from the tobacco industry to establish the connections. Tobacco, they reveal,

used the same playbook of misinformation, obfuscation, and research laundered through front groups to attack science and sow uncertainty on lead, on smog, and in the early debates on climate change. Big Tobacco used and refined that playbook for decades in its fight to keep us smoking—just as Big Oil is using it now, again, to keep us burning fossil fuels.

The New York state attorney general is now bringing suit against Exxon Mobil, charging that the world’s biggest publicly traded energy company “misled its shareholders and the public by misrepresenting the risks that climate change poses to the value of its oil and gas assets.” The company took in $290 billion in revenue last year, and the suit argues not that it helped create climate change but that for years it has schemed (basically by keeping two sets of books) to defraud its investors, analysts and underwriters about the risks of climate change to its business.

That rather seems like begging the real question, though it will finally expose what many have suspected about Exxon’s business practices—assuming the state wins the suit. Ex-CEO Rex Tillerson, Mr. Trump’s one-time secretary of state, knew about this for years. Lee Wasserman, who directs the Rockefeller Family Fund (interesting, isn’t it, that the Rockefeller fortune came from Standard Oil?) wants to hold fossil fuel companies liable for reparations for the massive damages their products and practices have caused.

The company of course denies any attempt to mislead and professes to be proud of its many years of (accurate) research into climate change. The other day Tillerson testified under oath that the company knew long ago that global warming was very real, “a serious issue and we knew it was one that’s going to be with us now, forevermore.”

Tillerson didn’t deny Exxon’s role in creating the problem—which isn’t what the trial was about. But in his nuanced view, the company did its best to address the issue once it became apparent. He also said there may be plenty of blame to share, given that Exxon was providing products demanded by society.

But don’t hold your breath until Exxon becomes accountable for the huge sums that some states and cities are now suing for.