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The Fed is addicted to propping up the markets, even without a need-By Steven Pearlstein

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On Monday, the Federal Reserve announced it was expanding its program to get more credit into the hands of large corporations by buying a broad cross-section of investment-grade bonds, part of its pledge to inject $4 trillion into the global financial system to lessen the blow of a pandemic-induced recession.

Why, exactly, the Fed feels it necessary to inject more dollars into the corporate credit market is hard to fathom. The interest rate at which investment-grade companies can borrow on the bond market is now below 4 percent, about as low as anyone can remember. And the pace of bond issuance so far this year, at over $1.2 trillion, has been double that of last year’s torrid pace. Indeed, there’s so much capital sloshing around that investors are lining up to lend money to companies such as Boeing and Macy’s and the cruise-line operator Carnival, although these companies’ revenue has plummeted with along revenue in much of the travel and retail sectors. And this flurry of borrowing and lending comes despite warnings from Standard & Poor’s that the number of companies facing a downgrade in its credit ratings is at an all-time high.

The best explanation for this confidence is the widespread belief on Wall Street that the Fed will do “whatever it takes” — that is, print money to buy as many bonds as necessary — to keep credit flowing to the business sector, no matter the risk. By placing a floor under bond prices, the Fed makes it possible for over-indebted, sales-starved companies to borrow even more to cover operating losses, or refinance existing loans, allowing them to avoid, or at least delay, the day when they cannot pay their bills.

It’s not just creditors, however, who benefit from the Fed’s bond buying — by shielding shareholders from the risk of being wiped out through bankruptcy, their shares are also worth more. And it is that, more than the prospect of a quick recovery or the day-trading of individual investors, that has allowed what had been an overpriced stock market to regain almost all that it lost during the scary early days of the pandemic, despite an unemployment rate that is expected to remain close to double digits for the rest of the year. Things have become so crazy that Hertz stock, which should have become worthless when the company filed for bankruptcy last month, was trading at $6 a share at one point last week. The company has since announced plans to raise $1 billion to pay creditors by issuing new stock.

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posted by f.sheikh

When Gandhi was wrong! Civil Rights & Non-Violence Movements-By Rafia Zakaria

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” Whatever Gandhi’s motives, the appeal to Hitler was not new. The year before, American missionaries meeting with Gandhi pleaded with him to condemn Hitler and Mussolini, but he refused, insisting that no one, even these two fascists clearly uninterested in human dignity, was “beyond redemption.” Czechs and Jews were told to engage only in passive resistance, a sacrifice that would redeem them. Passive resistance failed to deliver either group, but Gandhi, for his part, never quite acknowledged this. (It was also not the only strategy they employed: consider the Warsaw Uprising of 1943, or the revolt at Auschwitz-Birkenau the following year.) Gandhi did write another, more vehement letter to Hitler, but this, too, was never delivered. “

“Where the Holocaust was concerned, Gandhi was wrong. But the strategic impetus of nonviolence is to prove the moral virtue of the suffering. Martin Luther King Jr. recognized this. His adoption of Gandhi’s non-violent agitation tactics was likely strategic, for it was well-known that Gandhi was himself a racist, advocating for racial “purity” and against the mixing of races. (He had also supported British suppression of the Zulu uprising in South Africa.)Yet, King saw beyond that: whether it was colonized Indians during the days of the British Empire, or black Americans during the civil rights era, the preservation of virtue through nonviolence was central. The agenda of the dominating powers in both cases was to subjugate and barely permit the oppressed to subsist. Indians in the British Empire, like black Americans during the civil rights era, were allowed to live, but without dignity or humanity, and always with the threat of state-sanctioned violence and incarceration.

During the Holocaust, the strategy was extermination. Hitler was not interested in permitting Jews some kind of minimal existence where they labored for the benefit of the German state; his plan was the active and intentional extermination of all of them from the face of the Earth. There was no question of the relative virtue of the oppressed vs. their oppressors; it was about their actual and pointed and complete extirpation. No amount of moral virtue could save them from the end that had been so meticulously planned for them.

Gandhi failed to see this. But he provided a workable plan for certain liberation movements—and this post-Floyd second chapter of America’s civil rights movement could be one of them. The situation of black Americans today is more similar to that of the colonized Indians. The vast web of subjugations small and large directed toward black Americans insures that their labors will be ignored, their character continually besmirched, their voices silenced in service of white supremacy. The American brand of subjugation is one of not only outright violence—from agents of the state as well as white nationalists—but also deprivation and neglect: excluding many millions of black people from access to health care, functioning educational systems, and countless other privileges that most white Americans enjoy.

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posted by f.sheikh

Simple Mask Wearing & Distancing Could Have Saved Many Lives & Trillions of Dollars

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(Worth reading article by Naseem Nicholas Taleb, a Lebanese American mathematician statistician who writes that six serious errors in the start of pandemic led to serious consequences of loss of life and money. Bureaucrats ignored simple solutions. f.sheikh)

SIX ERRORS: 1) missing the compounding effects of masks, 2) missing the nonlinearity of the probability of infection to viral exposures, 3) missing absence of evidence (of benefits of mask wearing) for evidence of absence (of benefits of mask wearing), 4) missing the point that people do not need governments to produce facial covering: they can make their own, 5) missing the compounding effects of statistical signals, 6) ignoring the Non-Aggression Principle by pseudolibertarians (masks are also to protect others from you; it’s a multiplicative process: every person you infect will infect others).

In fact masks (and faceshields) supplemented with constraints of superspreader events can save us trillions of dollars in future lockdowns (and lawsuits) and be potentially sufficient (under adequate compliance) to stem the pandemic. Bureaucrats do not like simple solutions.

First error: missing the compounding effect

People who are good at exams (and become bureaucrats, economists, or hacks), my experience has been, are not good at understanding nonlinearities and dynamics.

The WHO, CDC and other bureaucracies initially failed to quickly realize that the benefits of masks compound, simply because two people are wearing them and you have to look at the interaction.

Let us say (to simplify) that masks reduce both transmission and reception to p. What effect on the R0(that is, the rate of spreading of the infection)?

Simply the naive approach (used by the CDC/WHO bureaucrats and other imbeciles) is to say if masks reduce the transmission probability to ¼, one would think it would then drop from, say R0= 5, to R0=1 ¼. Yuuge, but there is better.

For one should count both sides. Under our simplification, with p=1/4 we get R0′= p² R0 . The drop in R becomes 93.75%! You divide R by 16! Even with masks working at 50% we get a 75% drop in R0.

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“Genetic Engineering & Super intelligent Humans” By Stephen Hsu

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Lev Landau, a Nobelist and one of the fathers of a great school of Soviet physics, had a logarithmic scale for ranking theorists, from 1 to 5. A physicist in the first class had ten times the impact of someone in the second class, and so on. He modestly ranked himself as 2.5 until late in life, when he became a 2. In the first class were Heisenberg, Bohr, and Dirac among a few others. Einstein was a 0.5!

My friends in the humanities, or other areas of science like biology, are astonished and disturbed that physicists and mathematicians (substitute the polymathic von Neumann for Einstein) might think in this essentially hierarchical way. Apparently, differences in ability are not manifested so clearly in those fields. But I find Landau’s scheme appropriate: There are many physicists whose contributions I cannot imagine having made.

I have even come to believe that Landau’s scale could, in principle, be extended well below Einstein’s 0.5. The genetic study of cognitive ability suggests that there exist today variations in human DNA which, if combined in an ideal fashion, could lead to individuals with intelligence that is qualitatively higher than has ever existed on Earth: Crudely speaking, IQs of order 1,000, if the scale were to continue to have meaning.  In Daniel Keyes’ novel Flowers for Algernon, a mentally challenged adult called Charlie Gordon receives an experimental treatment to raise his IQ from 60 to somewhere in the neighborhood of 200. He is transformed from a bakery worker who is taken advantage of by his friends, to a genius with an effortless perception of the world’s hidden connections. “I’m living at a peak of clarity and beauty I never knew existed,” Charlie writes. “There is no greater joy than the burst of solution to a problem… This is beauty, love, and truth all rolled into one. This is joy.” The contrast between a super-intelligence and today’s average IQ of 100 would be greater still.

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posted by f.sheikh