Thoughts from Pontevedra, Galicia, Spain: 28.2.20

Spanish life is not always likeable but it is compellingly loveable.   

Christopher Howse: A Pilgrim in Spain  

Note: I'm indebted to Lenox Napier's Business Over Tapas for some of today's items.

Spanish/Galician Life 

• I'm a tad obsessed now with how fat the Spanish are getting, stimulated again by a report that the percentage of the population overweight has reached 25.
• Five of Spain's 'treasures' from El País.
• And some of Spain's many beautiful but 'other-planet' places.
• This is one of the many excellent signs (flechas) on the Portuguese Camino in Galicia. I've posted it here just to remind you that in next door Asturias the direction is the other way round. As I've said, 1,000 years of pilgrimage and the 2 regions haven't standardised this. Spanish 'localism' at its best/worst:-

Fortunately for tile-makers, the one on the right can be revolved as necessary . . .

• Talking aesthetics . . . Galician 'ugliness'(feismo) is nationally famous. This little scene helps to explain why:-

From left to right . . . Decent barn, nice house, ugly brick wall, ugly granite house, nice little White House, pretty granite house, and ugly granite house. But - in compensation - the countryside(paisaje) is universally pretty.

• On this latest camino, I was able to get a glass of white wine made from the Catalana grape I wrote about last September. Well, the bar owner said it was white but it was actually pink, from a red grape, of course. Quite nice at the time but with a lingering sulphurous(?) after-effect.
• My understanding of this issue might well not be perfect but it seems that this week the highest court in Galicia has reversed the decision of the Spanish Supreme Court on the legality of land reclamation in the nearby port of Marín and the construction of several buildings there. The thing is - the reclamation and construction were effected under a plan of the year 2000 and the Supreme Court decision was in 2010, meaning that there's been at least 10 years of huge uncertainty for, and quite possibly more. Judicial systems are slow throughout the world but this is surely a tax excessive.

The EU 

1. Richard North is a Brexiteer who thinks it's been done extremely badly by the British government. But he's no fan of the Brussels technocrats either: For some time now, I've been coming to the conclusion that the intellectual capacity of the EU – as a collective – is declining. We're past the stage where the founding fathers and their immediate successors had a close grip on issues, and a real understanding of the nature, the aims and the objectives of the Union. We've now got to the stage where we're dealing with apparatchiks, little more than jobsworths, who are in it for the power and prestige (and the money), but who do not have that deep-rooted understanding of their roles which can only come with conviction and emotional empathy.   http://eureferendum.com/blogview.aspx?blogno=87529
2. Here's an even more critical view of said technocrats and their bureaucratic mindset: Brussels is icily acting according to its own perverse, bureaucratic logic. This is driven by a compulsion for one thing only: total control. Both the individuals who make up a given bureaucracy and the entity itself will always act exclusively to shore up power through two main processes: regulating “chaos” and “solving problems”. For Brussels, unbounded control freakery is a sickness as much as a sentiment. Its bizarre laundry list of demands betrays the squalid reality that EU countries view Brussels as little more than a vehicle for selfishly advancing their own interests. As the world teeters on the brink of another industrial revolution, the rule-obsessed EU is efficiently regulating itself into irrelevance across industries like genetics and AI, even though these will decide the international pecking order for the next 500 years. Unable to compute the future, the EU clings to the past. As the world changes rapidly around it, the EU, in its obsessive-compulsive quest for orderly direction, is actually standing still.
3. And here's an article on the selfishness and lack of solidarity of many of the governments of the richest countries in the EU. 

One does wonder about the future of the European Union/Empire. And I guess one's view determines how much of a Remainer or Brexiteer one is. Assuming one's a Brit, of course. Which I won't be for much longer, if my application for Irish citizenship is accepted. Or at least not exclusively.

The USA

• Trump faces his 'Chernobyl moment' after slashing pandemic defences to the bone, says Ambrose Evans Pritchard in the article below.

The Way of the World 

• A comment on that infamous 'Holocaust themed' Carnaval parade:- According to local residents, one of the most unnerving things about the whole parade was how unaffected the onlookers appeared to be, a sure sign that the horrendous impact of the events during the Holocaust have been so normalised in modern culture.

Finally  . . .

1. Lenox Napier provides this amusing addendum to my comments on roundabouts of yesterday: The large roundabout into Almería, decorated with 'I (tomato) Almerìa', was recently repainted with the 3 lanes reduced to 2. Making it twice as dangerous as before. 
2. An unusual event at the opera last night . . .  One of our party of 3 - all foreigners - was asked - nay, commanded - by the Spanish woman in front of her to talk less noisily. Not during the performance but during an intermission. I was tempted to remind her that we live in the noisiest country in the world and to ask how she coped. I wasn't too surprised when she later shouted at someone to switch off his phone as the curtain started to rise, as he was doing so. One of the world's bossy malcontents.

THE ARTICLE

Trump faces his 'Chernobyl moment' after slashing pandemic defences to the bone

Three weeks ago there was much talk of a Chernobyl moment for China’s Communist Party, discredited by totalitarian attempts to suppress news of the spreading coronavirus in Wuhan. But fast-moving events can play wicked tricks, especially on a White House allergic to scientific facts. COVID-19 is more likely to be the Chernobyl moment for Donald Trump. His systematic destruction of US pandemic defences - policy vandalism of the first order - and his surreal efforts to conjure away the virus with denialist spin suddenly brings an unthinkable prospect into play.

The coming backlash may sweep Bernie Sanders into power on a socialist manifesto of Piketty wealth taxes, the partial closure of the US oil and gas industry, and vast increases in the size and role of the US government, all with an implicit budget deficit of $3 trillion. Try feeding that into your models for GDP growth, equity prices, or bond yields.

The Trump administration has cut funding for the US Center for Disease Control by 9%. This month he proposed slashing it a further 16%. The worst hit area has been pandemic preparation. The CDC’s global health security initiative has been chopped by 80%, reducing country coverage from 49 to 10.  Mr Trump got rid of the US Complex Crises Fund. He shut down the pandemic and global health machinery at the White House, and fired the lot. He tried to cut the budget of the National Institutes of Health - the world’s finest concentration of science - by 20% in 2018, and by 27% in 2019. 

Congress stopped the worst but damage has been done. Tom Frieden, ex-head of the CDC, warned two years ago that the cuts would leave the US at the mercy of the next killer virus. “The surveillance systems will die, so we won’t know if something happens. You can’t pull up the drawbridge and expect viruses not to travel,” he said. Ouch.

It has been a war on science.  Mr Trump’s cuts have nothing to do with fiscal austerity. They happened just as he was pushing through tax cuts and driving the US cyclically-adjusted budget deficit to 6.3% of GDP (IMF data), spraying money with Peronist abandon. The science cuts were ideological. Some readers chide me for being an unreconciled Never Trumper. This is why. 

And now the White House has a disaster on its hands. “The epidemiological conditions for a pandemic are met,” said Prof Marc Lipsitch, Harvard’s guru on infectious diseases. Don’t be fooled by the seemingly low numbers of infections in the US (57 as I write): the country has tested just 426 people. Only three of the 100 public health labs even have working test kits.

One reason why South Korea appears to have so many cases is because it has carried out 44,981 tests. “They are looking, so they are finding,” says professor Caitlin Rivers from John Hopkins University.  

Dr Nancy Messonnier, head of the CDC, is doing her best. She told America on Tuesday that COVID-19 cannot be stopped and that public policy will have to switch from containment to mitigation (already Japan’s policy), a way of saying that the virus will ultimately circulate like flu. “It's not so much of a question of if this will happen in this country any more but a question of when this will happen. We are asking the American public to prepare. This might be bad,” she said.

The White House will have none of this. The virus is “very much under control” and a vaccine is very close, tweeted Mr Trump.  Up to a point, Lord Copper. Key indexes on Wall Street and global bourses have this week fallen through the first key lines of technical support. Masanari Takada from Nomura says global macro hedge funds have changed strategies almost overnight since COVID-19’s global break-out, switching to trades that “prepare for a global recession.” It is the same message from record low yields on 30-year US Treasury bonds and soaring risk spreads on US oil and gas frackers. 

Larry Kudlow, the White House economics chief, persists bravely. The US containment of the coronavirus has been “pretty close to airtight”. Growth in the US will be unscathed, though “China is going to take awfully big hit.”  Has nobody told him that US firms with tight supply chains are fast running down their inventories, or that the full effect of cancelled container shipping from Chinese and East Asian ports has not yet been felt? Little is returning to normal. China’s economy remains closed and there is a critical shortage of workers at ports. Ships cannot even dock.

The Baidu index shows that 72% of migrant workers have not returned to the big cities since the Lunar New Year.  Coal use at major power plants is down 47%.  The longer this goes on, the greater the global economic shock, even if you believe the fairy tale that COVID-19 is a local Chinese virus and won’t cross the oceans.

Undaunted, the Trump camp is putting out the message through talk radio and in cabinet testimony on the Hill that virus chatter is scaremongering by political opponents, a line also adopted by the insouciant leader of Lombardy in Italy. Yesterday the head of US homeland security, Chad Wolf, told a stunned Senate committee that the death rate of COVID-19 is akin to normal winter flu. He doubled-down when pressed by a senator who clearly knew that the designated chief of US emergency preparations does not understand the elementary facts of the matter.  Actually the average flu death rate is around 0.1. Tracking data from China shows a 4.0% mortality rate in Wuhan, 2.8% in Hubei, and 0.8% in other regions, but rising. The ratio rockets logarithmically for the late-middle aged and elderly.  Furthermore, only a small fraction of people contract flu each year because the rest are vaccinated or have acquired immunity from past flu infections. There will be no COVID-19 vaccine for months. Nobody has immunity.  

The Trump administration is taking an insane political gamble by pitting itself against the CDC and against the US fraternity of virologists. It will lose this bet. I also suspect that COVID-19 will expose deep failings within the US health-care and insurance system. 

Many poor Americans without coverage or Medicaid will try to tough it out at home rather than risk ruinous medical costs. Illegal immigrants will avoid the health surveillance system for fear of being deported. The disease will spread in these distressed pockets - large chunks of society in fact - before sweeping the leafy suburbs.  The only way to slow the internal contagion is to offer free testing and care for anybody with COVID-19, as Singapore is doing in what has become the world’s gold standard regime for this crisis.

If the CDC is right and a US epidemic is on its way, the unfolding drama and shocking death rate will work to the advantage of Bernie Sanders in the Democratic primaries. It will shatter Republican claims to competence and could conceivably propel the septuagenarian firebrand into the White House with a majority in both houses of Congress. Just wait until the global macro funds sink their teeth into that prospect. 

What are the Dow index and the S&P 500 worth in a global economy facing - potentially - the worst ‘sudden stop’ since August 1914, and a new America led by a President Sanders with a mandate for socialist upheaval? Let’s be generous and say about half of current levels.