As reminders…

Alpha–Variant first identified in the UK

Beta–Variant first identified in South Africa

Gamma–Variant first identified in Brazil

Delta–Variant first identified in India

Omicron–Variant first identified in South Africa

Updating the chart above:

Ancestral: B.1.1.529 Omicron

Transmissibility: All the +

Immune Evasiveness: All the +

Vaccine Effectiveness: Check (for hospitalization)

Also as a reminder:

Coronavirus:

–Cases in South Korea, Vietnam, China and Malaysia remain high as they are still on their omicron waves. You have slight activity in level, but still high, omicron waves in portions of Western Europe like the Netherlands. In the US, cases are continuing to bottom out.

–So far no concerning lift offs in the Southern Hemisphere, as they start to head into fall.

–China continues to struggle with its “zero COVID” policy in the face of a still spreading omicron wave. There are reports of citizens in some cities and towns locked down since late February running out of food, as deliveries from the state are insufficient to live on, and only intermittent apparently. China runs its zero COVID policies via a phone app. If the app is green, you have a negative test in an approved window, and can go to work and go about your day. If your app is yellow, you are due for a test and must report to a mass testing center. If your app is red, you must report to a designated quarantine center. The “yellow” portion may be driving some of their problems. The same reports of food delivery issue also complain that the testing centers are massive charlie foxtrots with four hour waits in densely crowded lines.

That is, uh, not ideal if you are trying to contain the omicron wave in particular.

Since last Thursday, China has admitted announced new domestic transmission infections in Guangdong, Inner Mongolia, Hubei, Jilin, Shanghai, Guangxi, Tianjin, Hebei, Shanxi, Heilongjiang, Jiangsu, Sichuan and Yunnan provinces. Considering there are 31 provinces in China, that represents a little over a third of the country.

–In the US, it turns out quite a lot of the rapid at home tests the government paid for a little too late in the omicron wave to be particularly useful, shockingly, went unclaimed. The government has now announced that if you would like some more, well, everyone has now had their chance for “firsts”, so you can go ahead on up for seconds if you would like. The link has more details if you are interested.

–Safe to say you expect more professional leagues to start following the NFL’s lead, and lift COVID testing and restrictions rules.

–In actual coronavirus news (hard to come by this week), you had the New York Times express to its considerable surprise that since the omicron wave, there has been no significant difference in states that continued to have mask mandates and social distancing measures and those that did not. If anything, more omicron cases were found in states that had more, and more stringent, measures in place. And they looked hard for a difference in case load between these policies, because the slant of their article was to see if there was a difference between red Tribe R states and blue Tribe D states, because COVID must remain politicized. I guess.

First off, let’s recall what a terrible fallacy it is to approach this kind of analysis from state, or even county level, data. You are making just massive assumptions that of political correlation that make no sense when you consider what the voting actually looks like at the individual level in states, counties, even cities. Just as one example, Indiana is a state which the NYT would lump in with the red team R crowd. With good reason, as it was considered a very solidly “likely Trump” state leading up to the 2020 presidential election. In that bright red, Team R state, Joe Biden still received ~1.2 million votes versus ~1.7 million for Trump. But the policies of the state and its outcomes for COVID will now be interpreted by the NYT almost useless analysis as counting solely for Team R, even though only 57% of the votes cast in Indiana were actually for Team R. For the purposes of this NYT analysis, all Indiana residents will be judged by the votes of that 57%, and assumptions made about the personal choices they were making in terms of masks/mandates/vaccination etc. accordingly. Ignore the fact that I know people here in Indiana still doing masks voluntarily, despite the mandates ending (I am not one of them–but I do see them).

The more relevant correlation is that, yet again, masks and social distancing policies had no statistically significant difference at the public health level. This is consistent with a wide headlined recent study from Johns Hopkins which concluded at the public health level, these measures made little difference on COVID infection rates or outcomes. This is also consistent with what we said in this update months ago that as a public health measure, these types of policies did not appear to be having the desired public health impact–although they reduce your personal risk to some degree. That linked previous update also covers a few other confounding variables that the NYT is putting into its efforts this week.

The NYT finding no significant difference in mask/social distance policies is also consistent with the warning from history we mentioned so long ago, about the lesson of the Black Death Choose Your Own Adventure.

Eventually, everyone gets exposed to the pandemic. The Black Death will always get to England, and you are better off focusing on effective treatment/vaccination to mitigate the worst health effects of the pandemic.

–Finally for the coronavirus section, we have formally submitted a missing persons report for Dr. Anthony Fauci, last seen a few weeks ago all over your TV screens and headlines. We mentioned Dr. Fauci’s sudden disappearance from all major media to a reader recently, and the reader sagely nodded and then explained to us quietly that Dr. Fauci was Keyser Soze.

We’re not saying as the reader explained their case that it was like this — but it was exactly like that.

A (Semi)-Related Tangent

Wars involve propaganda from both sides to maintain the political will to continue the conflict. This surprises none of our readers (we hope). You can look back through history to see some common propaganda techniques and subjects, especially during the 20th century, when mass marketing and Bernays were making propaganda more prominent and effective. Now add the hyper catalyst of the internet and social media, and war propaganda is a feature of the Ukraine-Russia war.

We have mentioned before the ability of the internet, and social media in particular, to make “A/B” testing of marketing ideas cheaper, more efficient and more common. Another way to think of this is cooking spaghetti. An advertiser, or war propagandist in this case, comes up with an idea they hope is sticky, and chucks it at the wall. They can cheaply chuck a bunch of them at the wall in the social media era by creating the idea, pushing it to a few users, and checking engagement metrics (who clicked through, how many times, did they send it to their friends and which one, did they watch the entire video, linger over the ad etc.). Whichever idea “sticks” per the engagement metrics they then amplify and propagate. And that’s their new ad campaign.

So if you recall, Putin’s original casus belli to invade the Ukraine was NATO encroachment, the long unity of the Ukrainian and Russian people and the artificial border between them needing historic remedy, so he recognized two new independent republics within the Ukraine and then sent troops “at their request” to “de-Nazify and demilitarize” the Ukraine. Nowhere in this original casus belli speech, or famous pre-taped “discussion” of the issue with his cabinet ministers, was the possibility of the Ukraine developing weapons of mass destruction discussed.

Nowhere.

However, now that progress in the Ukraine has not been to Putin’s liking, there have been first stories that the Ukraine, with US assistance (of course) may have been working on a “dirty” bomb and intending to use it. Hence, Russia’s invasion was totally understandable, you guys, because we can’t be having proliferating nuclear weapons.

That “A” test was not as sticky as they hoped, most probably because, per their own military doctrine, if anyone is going to set off a low yield nuke in the middle of a conventional war in Europe first, it’s probably Russia.

So this past week they went with idea “B”, to see if this would be more sticky. The latest claim of possible WMDs is “reports and findings” from Russian “peacekeeping” troops in the Ukraine of biolabs in the Ukraine that have been doing US funded (of course) bioweapons research. They have (of course) immediately destroyed the weaponized versions they discovered, so dangerous were they. But they have totes kept the notes and records they seized (of course), although they are not releasing them (also of course), so dangerous would they be as an explanation of how to do what was clearly, obviously and totally being done in the Ukraine you guys (such reason! Much sense!).

So now Russia is –really- invading Ukraine because of this dangerous weapons research, to foil this nefarious US plot to release yet another pandemic upon the world.

They just didn’t mention that before because of, well, reasons.

China’s media chipped in to helpfully offer that the US supports exactly 330 different labs around the world in 30 different countries. In fairness, we suppose they would know, since the NIH did cop to lax oversight resulting in gain of function research being conducted in Wuhan, China. So I will totally concede at least one such laboratory to the CCP–which was being operated by their government, and located in China. Got me on that one guys.

Before you snicker too much though, the “nefarious bioweapons program funded by the sinister US government” plays better to an international audience than you might otherwise think, and it’s how we connect this to the coronavirus section.

Way back, in the long long ago, when the Wuhan lab leak hypothesis was first being raised as a possible origin for SARS-CoV-2, China responded by claiming that SARS-CoV-2 was really a US developed (of course) bioweapon that had been smuggled into their country and nefariously released by US soldiers participating in the Olympics for the world’s militaries (obviously). The timing and location of that supposed leak make no sense even with China’s official story on the first SARS-CoV-2 cases in China. But you don’t need logic if you are pushing the right emotional buttons, as we have also illustrated before (“why am I reading this? Why now? How does this make me feel? Who wants me to feel this way and why?”).

Believe it or not, this explanation for SARS-CoV-2 was widely circulated on Chinese social media, and undoubtedly believed by more than a few people there. And why not? Chinese entertainment media is openly portraying America, and Americans, as the “bad guy” in their movies, and have been deliberately pushing their growing version of Hollywood as a way to compete internationally for hearts and minds. “Wolf Warrior 2” has a loose cannon Chinese special ops guy defeating the evil corporate mercenary American whose company was exploiting impoverished Africans (yes, in the same formulaic generic Hollywood action movie plot since time began). “Wolf Warrior 2” was the highest grossing movie in Chinese history, and among the highest grossing movies ever, internationally, including some of the big Hollywood releases. Such a smash hit that a group of Chinese diplomats have apparently been calling themselves the “Wolf Warriors” as part of their intent to wage tougher diplomacy to battle the bad guys (remember who that was?) throughout the world. “Wolf Warrior 2” has only recently been eclipsed at the Chinese box office by this little retelling of the history of the Korean War.

Spoiler alert–the “bad guys” are US Marines.

Propaganda is everywhere, and in fairness, the CCP are not the only ones to push favored political messages via narrative embedded in the compelling stories and images of movies and TV shows.

Interestingly, though, because the US government has done a great deal to squander its credibility, the idea that the US is funding nefarious bio research has surprising traction in the West as well–for several major reasons. I would argue you can go all the way back to Colin Powell famously holding up a vial of white powder in Congressional testimony claiming that Iraq was weaponizing anthrax with intent to provide it to terrorist organizations in the immediate post-9/11 days, and this justified the invasion of Iraq. I would argue this is when many in my generation said “this seems a little odd, but presumably our government knows something we don’t”, only to discover years later that the mass scale, systematized bioweapons program in Iraq did not really exist. The credibility hit to the US government on this topic now, even among its own citizens, even today, still reverberates. It is because of this, and the secrecy over other actions taken in the name of the US government that are…. under reported…. in the US (like the massive amount of droning under Obama, and special forces operations on going in many parts of Africa even today), that a significant chunk of people are cynical enough to hear “US funding bioweapons lab in the Ukraine” and think “well, it’s possible.”

Because given the track record, yeah, it’s at least possible. Probable? Confirmed by ze Russians? Ehhhhhh…. let’s not get too carried away.

But you have other strikes against the US government’s credibility that makes this particular propaganda claim more “sticky,” both of which occurred during the coronavirus pandemic.

First is the NIH’s slow admission that it had, at a minimum, been negligent in its oversight of its grantees who were, in fact, conducting gain of function research with the Wuhan Virology Lab. We covered that here. Second is the conspiranoia over the Tunisian beagle experiments, where animal testing was done with unnecessary cruelty in a country without the same stringent requirements and oversight for animal welfare in medical testing that was attributed to a grant from the section of the NIH Dr. Fauci heads, although it is not clear that this grant actually funded this work. We covered that in a little depth here.

So to some, there is precedent that the US government may be funding biology projects that it does not have a good handle on, or funding them to be conducted in places where the oversight is more lax and more dangerous research can be conducted.

No surprise then that Victoria Nuland, the former ambassador to Ukraine now serving as the Undersecretary of State for Political Affairs, got some questions from congressional reps this week about the Russian propaganda around possible US funded bioweapons research going on in the Ukraine. She promptly stepped right in it. One particular exchange has been clipped and widely shared on social media.

The exact exchange is this:

SEN. MARCO RUBIO: Does Ukraine have chemical or biological weapons?

VICTORIA NULAND: Ukraine has biological research facilities which, in fact, we’re now quite concerned Russian troops, Russian forces may be seeking to gain control of, so we are working with the Ukrainians on how we can prevent any of those research materials from falling into the hands of Russian forces should they approach.

MARCO RUBIO: I’m sure you’re aware that the Russian propaganda groups are already putting out there all kinds of information about how they have uncovered a plot by the Ukrainians to unleash biological weapons in the country, and with NATO’s coordination.

If there is a biological or chemical weapon incident or attack inside Ukraine, is there any doubt in your mind that 100% it would be the Russians behind it?

VICTORIA NULAND: There is no doubt in my mind, senator. And in fact, it is a classic Russian technique to blame the other guy for what they are planning to do themselves.

Those are the exact words used.

Those already predisposed, for the reasons we mentioned above, to believe that the US might have some form of dodgy research going on in Ukraine, possibly even including bioweapons development, have read a LOT into her first answer. I think they are doing an awful lot of mind reading there, which is always dangerous, because it serves that particular confirmation bias. They think Ms. Nuland has been caught out and is evasively saying “well, there’s some research facilities, and we’re worried about the Russians getting to them because of what’s in them, and we are trying to get some of those materials out of the way.”

I will concede, particularly given NIH’s record in Wuhan, that this is possible. But it makes assumptions on what is a really vague statement, particularly when a LOT of perfectly medically useful, clinical testing and research in infectious diseases is, by nature, very easily dual use.

What do I mean by that?

Well, here’s the thing: any competent medical technician working in a hospital microbiology laboratory has the skills to isolate, identify and grow any number of bacteria that are considered potential bioweapons. And they will show up in routine clinical practice because many of these bugs exist in the wild, and the rare person will catch tularemia or cholera or even cutaneous anthrax and present to the hospital with it. Every year.

They are not hard to culture or grow. Genetically manipulating them is shockingly easy as well–we know a LOT about how bacteria work, because their genomes are so compact and efficient. They are one celled organisms after all. One of my professors in undergrad finished out our last lab section in an upper level genetics/microbiology class by stating matter of factly that “all of you in this room, just as undergrads, have the knowledge and skills to isolate and genetically modify bugs that are potential WMDs.”

You can buy kits to mix and match pretty much any gene you want–as long as you know what its sequence is, have a copy of it already, and know where you want to put it in a new bacteria. That is basically paint by numbers science these days–all you have to do is execute on the step by step manual in the kit.

No, I am not making that up. But it’s NOT to make WMDs easy. It’s to make research on things like multiple antibiotic resistant bacteria easier and cheaper to do, because we can move genes for antibiotic resistance around to help us find antibiotics that will still work. The reason it is low hanging fruit “dual use” though is because the same techniques that do amazingly beneficial medical work can also be used to make bioweapons.

Ukraine, as we mentioned before, is a very agriculture driven place. You can find bacillus anthracis spores out in the wild in huge swaths of the world, often on farms, where they cause cutaneous (skin infection) anthrax in the occasional farmer. Every year. If you inhale those spores, you can get pulmonary anthrax, which is the deadly form feared for WMDs–but that only rarely happens to farmers. Most farmers show up with the cutaneous version. I would lay money that there are cutaneous anthrax cases in the Ukraine, because they still happen in Europe every single year. The same bacteria causes both diseases–it’s really just if you inhaled the bacteria, or merely touched it, that determines which form of anthrax you catch.

Alright DuckDuckGo…. show me medical anthrax isolates in the Ukraine!

We got a winner!

Same for tularemia, which people who are around farm animals a lot are at risk to catch, because the bacteria which causes it lives in the wild too. You get cases of this that pop up sporadically in Europe, the US etc. as well. So… show me medical tularemia in the Ukraine!

Another winner!

I am also willing to bet plague has sporadically shown up, and there has been a cholera outbreak or two in the Ukraine, but am too lazy to keep to DuckDuckGo’ing.

The point is that medical labs and universities in the Ukraine can pick these bugs up in the wild from ordinary, routine medical samples from patients who happened to get infected with a WMD capable bug in the wild. They don’t need the US to send them, and since they are a sporadic threat to Ukrainian citizens’ health, it would expected that there is research going on involving these kind of bacteria in the Ukraine for better identification, epidemiology, treatment etc.

In fact, there is, per those linked papers.

Paid for by the Ukrainians themselves, since those are diseases that hit the occasional Ukrainian farmer.

Those could very easily be the “Ukraine research facilities” that Ms. Nuland was talking about, and the worry about the Russians reaching them is that in the back of some grad student’s freezer could very easily be tularemia or anthrax. NOT for a bioweapons program, but from clinical or veterinary samples, if their PhD project was on something like “subspeciation of tularemia isolates in Ukrainian bunnies and antimicrobial resistance patterns”.

(we’re not entirely making that up–rabbits are a major zoonotic vector for tularemia, also known as “rabbit fever.”)

When Victoria Nuland says “biological research facilities” in the Ukraine and being concerned about what it is in some of them, it is equally, if not more plausible, that this is what she is thinking about. Does it involve bacteria that are on lists as possible WMDs? Sure. Does that mean the research involving them was a weapons program? Almost certainly not. There are absolutely legitimate, sound medical reasons for samples of these bacteria to be in Ukrainian university and hospital labs, and perfectly benign research being done with them (already going on in those linked publications!). Reasons and research that have nothing to do with weapons, and in quantities so small they couldn’t be weaponized anyways.

“But why is Victoria Nuland concerned about keeping them away from the Russians then? Why are we working to ‘prevent any of those research materials from falling into the hands of Russian forces should they approach‘ then, man? CLEARLY, this is the cover up of the weapons program!” I hear you say, Cynical Conspiracist Hypothetical Reader.

I get your cynicism. Again, it’s possible that is what is going on.

But I would argue it’s equally possible, if not more probable, that the reason to clear those benign medical culture samples and benign research cultures out of the Ukraine before Russia can find them has way more to do with propaganda than a cover up. After all, Russia has now thrown this down as the most recent “totes justifiable reason for our aggression” explanation of Putin’s war.

Because if the Russians want to commit to this particular lie, they can capture one of these labs, point to a tiny vial in someone’s freezer for their PhD project on “epidemiology of tularemia in rabbits in Eastern Ukraine” and then announce on social media “See? Ve have found ze tularemia bioweapon, comrades!”

In a thick Soviet accent, even though they no longer call everyone comrade and are not the Soviet Union anymore.

This is for the optics, so they’ve gotta’ commit to the character here, after all.

Alternatively, the Russians can capture one of these labs and just bring along their own favorite WMD bug. I guarantee you Russian medical and university labs also have clinical samples of these bugs, and are also doing perfectly benign medical research of them. But Vlad can send a few guys to “borrow” a tube of anthrax to plant in a Ukrainian lab and go “See? Weapons program. Totally legit that we were bombing the shit out of a Ukrainian hospital now, you guys. Totally. Legit.”

That’s plan B, though, because the genomic analysis of those is more likely to show they are Russian strains, and not Ukrainian (or US) strains.

And despite this being cartoonishly obvious to people who know enough medicine and microbiology, most people do -not- know enough medicine or microbiology to know what an obvious crock that is. Especially on the internet. The internet has no idea that this was really innocent research for some grad student in a Ukraine university, and not nearly enough tularemia to do anything with, let alone an aerosolized version ready for a weapon. But the internet will still have takez. And the propagandists are counting on that.

That’s how war propaganda works, and what Victoria is alluding to with Senator Rubio’s follow up question.

I very seriously doubt the Ukraine has a US funded bioweapons program. The US used to have its own bioweapons program in the WW1-WW2 era, before we made lots of nuclear bombs. Because the US has nukes, there is no reason to have biological weapons. They are inferior WMDs. I very much doubt the US is funding bioweapons research in the Ukraine as a result. Plus, why on earth would you put such a nefariously evil research program in a country that borders Russia and was just invaded by Russia in 2014? Are you trying to get caught in the middle of your cartoonishly evil plot?

Again, I suppose that’s possible. I’m just not sure it’s probable here, absent more information on what exactly Ms. Nuland was talking about with these “research facilities.”

As bad as I think the NIH oversight was of the gain of function research going on at Wuhan, as cynical as I can be about government effectiveness, I think a US funded and supported bioweapons program being run in the Ukraine is an extraordinary claim and requires extraordinary proof. Or, more likely, is just wartime propaganda and the Russian PR machine chucking the “we invaded because bioweapons!” spaghetti at the wall, and hoping it sticks better than the other excuses that have fallen onto the floor so far. Victoria Nuland’s first answer, in particular, I think is better explained by insufficient communication coupled with lay person understanding and confirmation bias by the Internetz than it is explained as a smoking gun that the US is, for…. reasons…., doing some kind of shady infectious disease research in the Ukraine.

After all… they have the Wuhan Virology lab for that already… LOL

–So by now, you are probably freaking out that A) it is surprisingly easy to come across samples of bacteria that you can turn into WMDs and B) the knowledge to isolate, grow and even genetically modify them is surprisingly low hurdle.

Before you freak out too much, though, remember that if weaponizing these bugs was that easy, we would see these used by terrorists way more often. And that’s the rub. It’s one thing to identify and grow a WMD-capable bacteria. It’s another to do that without A) killing yourself by catching the bacterial disease then B) scale up into industrial sized production where you are growing bacteria in huge vats like you will need to do to in order to make any kind of weapon. The space and equipment requirements for step B) start to draw some questions from authorities at that point, even if you pretend you’re opening yet another craft microbrewery. Which, yes, you can totally dual use brewery equipment for industrial scale up of a bioweapons program. Even if you accomplish those feats, you have still have the three biggest hurdles to making your own biological warfare weapon in your garage:

1. You have to find a way to aerosolize the bacteria you have grown, and do so at industrial scale. Otherwise, you cannot spread your weapon very effectively, and in diseases like anthrax or plague, are not even causing the most deadly version of those diseases if they are not being inhaled.
2. Your aerosolization method must be able to survive use a spray or bomb, and then grow like normal to cause the disease once someone inhales it. For example, if you are going to be as banal as to release it over a city from a crop duster airplane, your aerosolized weapon must be able to become a sprayed mist, which falls to the ground where you want it, somehow protects your chosen bug from freezing to death in the air (and/or higher UV exposure), and then grows like wild fire in the lungs of whatever poor SOB was underneath it. -That- is more technically complicated than you might think.
3. You must have a vaccine or treatment for your weapon, or your weapon will turn around and kill you too. And to be clear, it still might, because these things mutate, and can mutate past your cure–that’s why these are incredibly dumb weapons to develop, let alone use.

It’s the aerosolization steps, and the treatment steps, that are the enormous technical hurdle, and the real “secret sauce” for a serious bioweapons program.

The testing that goes into those, and facilities required, are tough to hide and take way more than just med tech or undergraduate education.

Socioeconomic

–Most of the commodity chaos this week is happening due to geopolitical events, but suffice to say it comes as a significant challenge to a global supply chain that was already experiencing cascading disruption from the pandemic (and reactions to it), and is not nearly over those.

Now, significant producers of wheat and energy, as well as other important commodities, are off the table. Prices are going parabolic on everything from nickel (Russia a major producer) to neon (Ukraine, covered last week) to wheat (both Russia and the Ukraine) as well as oil, since a significant portion from Russia won’t be touched by anyone. This has sent natural gas prices in Europe soaring, same for heating oil. The CEO of Volkswagon suggested this week that the hit from economical fallout around the Russian-Ukraine war may well be worse than the supply chain disaster around COVID. Gasoline in the US is at or over $4 a gallon on average (don’t @ me California readers–I know you have been much higher already). The February CPI in the US was 7.9%. It will be worse over the next couple months.

Russia is also a significant exporter of fertilizer, and those exports are now restricted too. There is no one capable of making up that shortfall right now. There are significant portions of Africa and Asia that are not farmable without imported fertilizer–a lot of which they got from Russia, and Russia is pausing exports. We mentioned last week that Hungary, a major producer of wheat and corn in its own right, banned agricultural exports for the rest of the year. We mentioned that wheat price correlated with the Arab Spring of a few years back; Iraq announced this week hundreds of millions of dollars for emergency purchases of wheat to create a national emergency reserve and their citizens are already in the streets in their thousands. They will not be the last. China has had one of the worst winter wheat seasons in its history, a 20 year low, and will need to make up that shortfall as well. There are people with greater expertise than me in financial markets genuinely concerned about famine in a significant portion of the world. While I think North America will be relatively insulated by the trade between Canada, Mexico and the US, fertilizer and crop prices will rise here as well.

You may want to pick up a few extras at the next trip to grocery store, and while I know that inflation is eating away at everyone, if you can, spare change for the local food bank will become more and more critical as this year rolls on.

In fact, I would recommend you strongly consider adding some extra canned goods around.

As a reminder, historically speaking, Spring is the starving season. You are in the period where all the winter stores and whatever winter crops there are have been eaten, and nothing has grown to maturity yet. When stocking up, aim with getting through Spring in mind.

I suspect that by the fall things will already be getting frisky. By spring next year, we will really see where the food price and supply madness will have taken the world. Deus impeditio esuritori nullus.

Beyond food, the energy inflation and availability issue will begin to weigh heavily this year. You may recall our discussion last October about how the modern global economy runs on the expectation of, if not cheap, at least stable and predictable inputs of energy. If price, or worse, availability at any price, go haywire, the disruption in prices and production that will cascade. While I still think it very improbable, the risk that cascading disruption will turn into cascading failure as a result of energy price and availability instability is non-zero. You can read what we said in October about this here; I think it very much remains relevant. None of the solutions being discussed thus far, ranging from increased drilling to increased renewables (from wind to solar to nuclear), will be online remotely fast enough to keep this from being a very exciting year.

You can read a good short piece on some of the significant new variables in play from a more expert economic perspective here.

–Alright, the long promised section on other things to consider as we exit the pandemic into a rapidly changing world.

Just to re-orient us briefly, historically, post-pandemic periods have seen divergent choices between greater authoritarianism and greater individual liberty. The course locally is quite unpredictable. Some places go more authoritarian, others with substantial gains in liberty. Historians looking for common features to suggest why particular outcomes happened in particular places have struggled (as you can see at that link).

As geopolitics returns to history, so too shall local politics after pandemics.

One of the major weapons against Russia thus far has been both official sanction, as well as voluntary financial system and business isolation of Russia from the global economy. China is no doubt watching this closely, with expectation that the same may well apply should they get froggy over Taiwan.

This includes limitations on SWIFT transactions, which is the dollar based clearing system that greases most transactions through the world. This is the benefit of the dollar being the world’s reserve currency.

The ability to use this again to similar effect is in some doubt though. The effects will be so dramatic, and already are for many average Russians (and it’s just getting started), that alternatives to the US dollar will arise. Before the end of the decade, the US dollar may well have lost reserve currency status (that will have implications for the US debt, by the way), and at least a bifurcation in the most accepted currency is likely to have occurred. That was inevitable eventually anyways. All good things, as the quote goes.

China, for example, will try to insulate with the yuan in competition to the dollar. They already are, and central bank digital currencies like the digital yuan (think of a Bitcoin issued by the Chinese central bank) are being postulated as a way for China to help Russia bypass SWIFT. Right now it doesn’t because the transactions along these networks are a fraction of what goes over SWIFT. That might change after the severe economic pressure being applied to Russia to help blunt a war effort.

Further, you will hear more talk about central bank digital currency as well from the NATO side of things. For the simple reason that it can make payments both more transparent and push button controllable than even SWIFT. You may recall that there was some talk that cutting Russia out of SWIFT would take a few days to technically accomplish during the first weekend of the war, and you have likely heard as well that Russia is not entirely out, as some of its banks still have some access, or they can simply flow through accomplice banks in other countries. Not at the same flow rate which is what will matter, but they will still have some access. In a fully controlled digital currency, that can change quickly.

–I think most agree that use of financial repression, specifically, limitations on the ability to transact via commonly accepted currency as a means to economically hobble a war effort, is reasonable to do against aggressive rogue states and their oligarchs as a non-violent means to achieve political victory in war. As the saying goes, war is merely politics by other means. The crudest, most base, and outright dumbest means, but that has not kept humanity from trying them over and over and over again.

I digress.

HOWEVER, events that got superseded by Russia’s invasion of the Ukraine are worth your consideration, as government mandated financially repression by the same means as employed against Russia were used against common citizens.

And I mean the exact same. You had government seizures of accounts and forbidding money or cash to transfer to designated “bad guys”. You also had government pressure causing private businesses to do the same, for fear of perceived or actual adverse regulatory threat if they did not “get on board.” Or simply following their perception of the politics. However that corporatism happened, it definitely did.

So something to watch very closely is the means and tools of this type of financial repression, because it will sneakily weigh heavily on where -your- locale comes down on the scale of greater authoritarianism versus greater individual liberty:

After all, while we all agree that it is a good and useful tool to be able to thwart the ability of rogue and aggressive nations to transact in wartime, the same tools can be used by the government against much smaller fry. Without much difference, and in fact, with greater ease. How, when and where the line is drawn on appropriate use of these tools, and what checks and balances are in place to prevent government abuse of them will be critical.

After all, when discussing a new tool that a government can use against nations or individuals, we must remember Popper’s political razor–assume the worst people will one day run the government (because over a long enough time span, they -will-); the best government then is the one where the worst can do the least amount of damage while they are there.

–So the specific moment in time where this financial repression was used against individual level actors, and not entire states (and certainly not billionaire oligarchs) was very recent. It happened when Justin Trudeau invoked the Emergency Powers Act in Canada to clear the trucker protests in Ottawa. In addition to the arrests and seizures of vehicles still blocking Ottawa streets, the Canadian government used the Emergency Powers Act to freeze accounts of a list of those suspected or known to have donated to the protests.

Again, these were not billionaire oligarchs. Some were donors who never attended a protest, never blocked a street but said “I’m sick of mask mandates–I’ll throw $50 online at the cause” weeks before the Emergency Powers Act was declared the government moved in to break the protests up. A $50 donor to a cause they believed was peacefully critical of government policy, and their free speech towards those criticisms, is quite a world apart from the corrupt billionaire inner circle helping run an aggressive authoritarian regime. Yet their accounts were frozen just as hard as a Russian expat oligarch.

Set aside what you think, or have heard, about the protestors, how much financial report they received (and who from), and their politics. The chance for confirmation bias on both sides is high. To one side, they are a grassroots movement making peaceful, legitimate protest. To the other, they are a psyop attempting to subvert democracy by holding the capital city hostage to impose their minority opinion. Your take on them is anywhere from those extremes to something in the middle.

The invocation of the Emergency Powers Act in this circumstance got Trudeau sued by the Canadian equivalent of the ACLU. That court case will be pending.

However, Trudeau’s move -was- ratified by a vote of Parliament. The motion passed by a narrow majority after the Trudeau administration argued that the threat remained for the protestors to reorganize and attempt to threaten the economy of Canada again. Canada’s finance minster went on television to explain the expectation that the financial tools used to freeze accounts and access to banking/credit/mortgages/ATMs etc. would continue to be used. The Ottawa mayor announced that he was looking for ways to sell the towed and seized vehicles, which, for at least some of the protestors, are privately owned property and their means of livelihood.

It is important to note–there was no court proceeding. The government had to prove nothing beyond a reasonable doubt, or even more likely than not (preponderance of evidence). They had to show no evidence whatsoever. They simply pointed at accounts and donations, froze and seized them. Nor was their any clear path to appeal or process to unfreeze the account if you used, say, your main checking account to throw $50 at a cause because you were unhappy about mask mandates.

Two days after the ratifying vote in Parliament, after many uncomfortable op-eds about these steps published around the world, the Trudeau administration cancelled the Emergency Powers Act. Iran and China both dunked on Trudeau’s “draconian” and authoritarian methods to end the protest, and called them human rights abuses.

Yes, Iran and China. Who do, indeed, do this a little more frequently–such as China’s deservedly notorious social credit system.

Again, regardless of what you think of the protestors personally, or their reported politics, these are the facts of the response of the -Canadian- government.

While I have not seen reports that Canada followed through on threats of state seizure of dogs and children, made before the arrest fest to scare protestors into leaving before arrests became forced, the financial repression was very real.

Canada has unfrozen most of the accounts, and in clear signs of embarrassment of the quite righteous anger over some of these moves, the Canadian mounties claim they never turned over a list of accounts to the banks that froze them (total mystery how that happened, and I am sure top people at the Mounties, the premier investigative institution in Canada, are working on that now). Canadian finance ministry spokespeople have said “it’s possible” small donors “were caught up by accident” in their account freezing frenzy. Parliament members are still digging for more details on how that might have happened.

–So there is a must read twitter thread on government sanctioned financial repression on the individual that went super viral around this time–and for very good reason.

What it describes, eloquently, is the balance point in the scale, where the post pandemic shape of things where you live will tilt towards or away from totalitarianism.

This guy (or gal) hits the nail -right- on the head.

This is exploration of the consequences of the worst possible people getting to decide who is in and who is out, extra-judicially, of the financial system. Read the -entire- thread. Really. Read it. It’s Twitter, so it’s short too:

https://mobile.twitter.com/punk6529/status/1494444624630403083

–My only addition to that thread is that even if there is a fully digital, centralized and controlled currency to restrict transactions, there will arise in parallel a non-custodial currency of some kind and a -massive- black market that trades with that currency.  It was not so long ago that Tide laundry detergent was filling this role for drug dealers who wanted to avoid bank scrutiny, after all.

If I ask “what backs the US dollar—why is the dollar currency?” most people will immediately tell me the “full faith and credit of the US government.”

They are just so gosh darned –cute- when they are all indoctrinated like that!

“Full faith and credit” is a nice story. Makes the government seem more necessary and important, as if otherwise, currency does not exist and there is just no trade at all, other than maybe barter.

However, the “full faith and credit of the US government” is -not- what makes the US dollar a currency.

The only property which makes a currency, which you can trade for goods and services, is the willingness of others to -accept it- for goods and services.  Which they will only do if they, themselves, believe the dollar they get from you can be exchanged by them with someone else for goods and services.  Otherwise your dollar is worthless. 

Don’t believe me?  Hop in a time machine and go to ancient Rome with your dollar.  See what goods and services you can get for it.  “Of course that won’t work–there was no US government then to guarantee the dollar with its full faith and credit!” I hear you say, Debating Hypothetical Reader. Okay. We can stay modern era. This time, try to use your dollars to buy stuff in modern day rural Japan or a village in the south of France.  Even in modern day rural Japan, or a village in the south of France, there is only a small chance (bordering zero) they will take your dollars. In fact, odds are FAR greater than not your dollar bills are no good there at all!

I know right?  Don’t those f***ers in Japan or quaint French villages know the full faith and credit of the US government is behind your dollars–and that the government of the Most Powerful Nation on Earth^TM says that they should take your dollars as legal tender for the sandwich you are trying to buy?

The nerve! The audacity!

Well, your problem in our hypothetical trips is that anyone you try to hand dollars to is immediately thinking about the hassle it will be to go to a bank and exchange your dollars for yen or euro they can actually use with their neighbors. If that thought alone isn’t making them hesitant, they also have to figure out how much your dollars are actually worth in exchange with their currency to make sure they don’t get ripped off in the trade.

To be fair to our hypothetical Japanese and French, you are probably the same way if we reversed the scenario a bit. Are you taking pesos if someone wants to buy your car—and -only- offers pesos?

Why not? The full faith and credit of the Mexican government isn’t enough for you?

No, you most likely insist on dollars because exchanging pesos is an inconvenient trip to a bank and an exchange fee you will pay to get to a currency you can actually use day to day.  One that you know, without hesitation, that your neighbors and business partners will take in exchange for stuff you want to buy. So pesos are not much of a currency to -you- because hardly anyone else around you is going to take them for things -you- want to buy. Doesn’t matter what faith or credit the government printing the currency has in it.

What makes a currency, then, is the faith of the transacting party -accepting- the currency. When they do, it is usually for one of two reasons.  Possible reason 1 is the intrinsic usefulness of the material of the currency.  For paper dollars, that’s not much. On the other hand, if you were trading oil as currency, well, some will take the oil because they can just use the oil for energy.  That is faith in the intrinsic usefulness of the medium, and that makes it valuable and thus acceptable for trade.  For Tide, this is at least partially true as well.  The drug dealer can always take it and just use it to clean his clothes.  It’s also way more easy to obtain and carry than a barrel of oil.  And there are other modern era examples of this kind of alternative currency beyond Tide. For instance, an alternative currency of coupons redeemable for honey arose due to exigent circumstances (a cash shortage) not so long ago:  https://mobile.twitter.com/wrathofgnon/status/1458005197121212416?cxt=HHwWgMCq8Y-A8LsoAAAA

That’s right—a bee backed buck.

But intrinsic usefulness of the material (Tide), or right to exchange it for something with intrinsic value (honey) is less common as a reason for someone to take your currency in trade. As we mentioned before, the faith and credit that really make a currency is the party -accepting- the currency has in that currency’s fungibility with others for goods and services the accepting party might want to buy with the currency later.  That others would also accept Tide for goods and services, or our bee honey bucks, is -also- why these were able to successfully trade for goods as services as an alternative currency. They were non-custodial, meaning no one was logging accounts or details of who was exchanging detergent or bee bucks. And they required NO faith or credit of a government. Yet, there they were, working as a perfectly functioning currency for transactions between two parties!

And yes, the plethora of crypto coins are exactly this–when, and only when, exchanged directly peer to peer on their blockchains. If, on the other hand, the cryptocurrency has to go through an exchange to be converted to dollars/rand/pesos/yen/euros to buy other goods and services, it becomes custodial. Canada has already clamped down on digital wallets that touched an exchange to convert to Canadian dollars, for example. And the US regulators are already tracing these through a plethora of legal means with acronyms like KYC (“know your customer”), which you can read about in the following excellent article.

But my main point is that as long as someone will give you something for an alternative currency, and that someone believes they can then trade the alternative currency for things they want, nearly -anything- can become a currency.

So I am only slightly more optimistic about the possible dystopia the linked thread writer describes. Because -something-, some Tide-like non-custodial currency, will inevitably arise. Will it be declared and illegal, and a tyrant attempt to ban and penalize transactions in that alternative currency? Absolutely. But if you “cancel” and financially “de person” enough people, or disenfranchise large enough groups at a go, they will band together at the margins by creating new alternative currencies for every one the tyrant attempts to ban.

It’ll still be a dystopian reality though, and won’t do much more than allow the marginalized people to scuffle by in a parallel economy and society, even if they cannot access banks, credit etc. And yes, would make for a pretty great novel…

–Anyways, for other perspective on when, where and how the line on government use of financial repression is employed, especially against individuals, it’s worth mentioning that Jeffrey Epstein’s accounts were not frozen, even after his arrests and convictions. Jeff was never “depersoned” by the financial system. In fact, TD Bank in Canada took on Epstein’s business in 2019 after Deutsche Bank dropped him (only after DB was publicized as handling his banking). Recent leaked files from Credit Suisse add onto the leaks in the Panama Papers (among other leaks) of the banking and financial institutions that have had no problem doing business with human rights violators, dictators, and corrupt government officials. These accounts were never frozen and the account owners “depersoned” from the financial system.

Donate $50 to truckers protesting COVID policies though…

To say this inconsistently applied is putting it mildly.

–Let’s indulge ourselves a little, though, and extend the thought to dystopian extremes. If you are a budding tyrant using the modern power of financial repression to enforce your political goals, depersoning a $50 supporter is not only possible, it’s the point.  To demonstrate the power of the state when challenged, and that no one is too big, or too small, and that the state will not hesitate to remove the ability to feed or sustain yourself by jettisoning you from an increasingly cash hostile world.  For how do you pay bills in the era of e-pay and “do not send cash” without a bank account or credit card?  How do you buy food? Most of us are not farmers and where we live rarely has enough acreage to effective subsistence farm. So the inconvenience and marginalization is the point and the punishment–to make them a dependent of their friends and relatives, that their friends and relatives should see them diminished. The most pure and ruthless flex of raw power by our hypothetical tyrant.

If the state can, and will, deperson the smallest, and condemn them to that fate, the message is that they can, and will, do the same to you. Especially if they let obvious and egregious offenders like Jeffrey Epsteins, connected to the inner circle go free. You can’t even be sure where the line is that will get you financially kneecapped. It’s a sword of Damocles constantly over your head, that Big Brother can loose at any moment. So you had better shut up and get with their program—or else.

Without trial, without charges, without due process—solely by bureaucratic fiat. Our dictator can even be a little more on the clever side, and merely use corporatism (government capture of private business to ensure complicity of government and private enterprise). That grants our hypothetical dystopian dictator the fig leaf that “oh, it’s the –bank– that decided to do this, not our kind, benevolent and totally reasonable government. We merely gave them a list of suspect names, and told them what a nice financial business they had, and it would be a shame if anything unduly regulatory happened to it.”

Is this a power you are comfortable with government having, in its current apparently unrestrained, unchecked and unbalanced fashion–even a democratic government?

Or should we be thinking about a “Congress shall make no law” or “the right of the people to transact shall not be infringed” amendment?

–So another must read this week covers the viral twitter thread we linked above. In it you will learn how this behavior is NOT confined to Canada, and how, for example, new regulations on the US Treasury make this kind of extra-judicial financial repression possible in the US as well, with relatively minimal governmental effort. But you will also see the author argue that my belief that an alternative currency will arrive is irrelevant, because it won’t be practical enough. Crypto will not solve it, because you cannot buy enough necessities directly with crypto, and do not have the other necessary accounts like credit, mortgage, brokerage etc. to participate fully in society still. You wind up as the plucky, but free, maligned minority in all your favorite future dystopia movies. But he will ALSO argue that not even gold, which is inherent store of value in the material itself, AND non-custodial, will suffice either. The money quote in this article, no pun intended, is “The answer to government weaponization of the financial system isn’t a new financial system. It’s a new government.”

–This is also worth pondering (and it is from the middle of last year):

Now, one hopes that the reporter writing this article got a lot of this wrong. Otherwise, this is the Bank of England asking for consideration of a “programmable” digital pound sterling. Specifically, one that lets the issuer (Bank of England or an employer) “control … how it is spent by the recipient” to “ensure it is only spent on essentials, or goods which an employer or Government deems to be sensible.”

In fairness, the rationale for this “programmability” is that these are digital pounds (or dollars, if similarly adopted here) issued by the central bank in times of emergency, either directly, or through your employer. So you get your “COVID stimmys” direct to your bank account digitally–but to avoid abuse of stimmies, they can only complete transactions on things like bills, mortgages or food. They can also more easily isolate and remove rogue state actors, since the flows are completely traceable, and thus moving through accomplice banks still connected to the system in non-sanctioned countries can stopped as well.

However, -if- all money goes digital, as it is trying to do, and only digital dollars or pounds are now accepted anywhere for anything, mission creep for this type of currency becomes very easy, and can go to uncomfortably hot places on pavement stones of good intentions.

Even if we protect individuals from financial repression with this system, it can still go to some surprisingly “Brave New World” “happy” dystopia places.

Just to spit ball a hypothetical example from a medical perspective, eating a healthy diet is hard. Takes discipline and focus, and let’s face it, not a lot of our fellow citizens pull it off. That means we have high rates of preventable heart disease and type 2 diabetes, which put a major financial strain on the healthcare system in terms of hospitalizations, surgeries and drugs, to say nothing of lost quality of life to conditions like this.

What if I told you that if we simply programmed your digital dollars to allow you only a certain amount of junk food per month, and after that, could only buy good, fresh healthy food?

I promise you, we will save lives by doing that. Dietary prevention is worth decades and enormous dollars of treatment.

What about tobacco products? We can help you quit by simply programming your money to no longer be accepted after you buy two packs this week. Then no longer be accepted after you buy a pack two weeks from now. Then no longer accepted for tobacco products at all. You simply can’t get them.

We can be your helping hand in quitting. Again, for your good health, and the health of all around you.

I promise you, we will save lives doing that too.

But maybe government is a little too icky to get involved. How about your employer, now programming your paycheck digital dollars to guide your diet by not allowing transactions for junk food? Or tobacco? Just to reduce its health insurance bills. Yes, I know that sounds to our West Virginia readers like the creep of the ol’ company scrip, getting paid in coupons that are only good at the company store (and thus what the company wants you to buy)–and that’s exactly what it is–but again, we will save lives and create better health doing this.

And it won’t be government doing it. It will be employers, and thus, if you don’t like it, you can always just quit.

Voluntary on your part.

Sure, in our hypothetical brave new world here, all employers do this now, and if not, their health insurance is either prohibitively expensive or we will have some regulatory questions for them, but again, it’s not anyone making you do this. You working for a living is completely voluntary. Sure there’s not much you can do without money, tough to go places, risk of vagrancy, limited healthcare options. May not be a great choice–but it’s still your choice to be employed under these digital money conditions.

And really, if we have the digital dollars, the purely digital money, and the ability to program like this, don’t we have the moral obligation to save lives–even at the cost of a little liberty in your bad habits of chocolate and cigarettes? Of course we do.

Oh, and you also drink a little bit too much. Fatty liver is a major health problem, so is cirrhosis. To say nothing of the preventable fatalities from drunk driving. We’ll make a few more keystrokes here…and here… in the digital dollars you receive. There. Now we can help you control those health risks too…for your benefit…and everyone’s shared benefit, really. Again, minor inconvenience and sacrifice from you so that we can help you be the best you can be, and help everyone be healthier and safer.

A fitter, happier, more productive society–who would oppose that?

All with our programmable cashless society run on a digital currency issued by the central bank directly (or indirectly via your employer). Not to mention the transparency to end corruption, money laundering and tax evasion.

You would have to be some sort of sociopath, or criminal with something to hide, to oppose this, right?

–The most convincing reasons this won’t happen?

1. Blowback and condemnation, particularly international and especially from op-ed pages the Trudeau administration likely thought were allies, reversed Canada’s course embarrassingly fast.
2. But the best reason is the most practical, as pointed out in a wry online comment I saw. “The reason you’ll never get a fully transparent central bank digital currency is obvious. There is no way for politicians to take their bribes after they pass it–so they won’t.”

–Choices between authoritarianism and increased individual liberty are the predictable aftermath of a pandemic, something the Black Death aftermath taught us.

Again, this is a decade that will make a century–or more. The end of the Pax Americana, the emergence of new institutions from the Bonfire of the Credibilities, and where the scale tips in the garden are where that century will be decided.

–Chances of catching coronavirus, despite declining case volumes most places in the world, are approximately the chance that we have to include this one, not only for the theme with the lyrics and our long socioeconomic diversion this week, but because we already linked the track after it on the same album…

<Paladin>