DOWN ON THE FARM

A “farm” today means 100,000 chickens in a space the size of a Motel 6 shower stall. ~ P.J. O’Rourke   

Eighty percent of Americans live in urban areas. Close to 100% of our food isn’t grown in urban areas, other than folks who now are cultivating 21st century victory gardens in their back yards. As you’ve probably noticed, the price of groceries rose last month. Prices swelled 2.6%, the largest increase in 46 years mostly because of pricier meats, poultry, fish and eggs. Ordinarily, farmers would be pleased when retail food prices have risen, but not now.

Why not? Because even though retail groceries’ prices rose, agricultural commodity crop prices that farmers receive have steadily dropped as their input costs have risen. They’re crosswise in the barn. According to the USDA, farmers have gotten squeezed as input costs have climbed about 11% and crop prices have fallen 11% since 2011. Like many others, our nation’s agricultural (ag) markets have been in tumult, beginning two years ago with #45’s disastrous tariff policies with China. In retaliation, more than 20% of US agricultural exports face reciprocal Chinese tariffs and other countries. I’ve written previously how these tariffs have wounded US farmers.

Today the Census Bureau also provided unsurprising but sobering news about food services sales for April. Sales at grocery stores dropped by a record 13.2% from March. These are bad times for retail sales of virtually every sort.  

Generally speaking, farmers have long been a key Republican constituency. Nevertheless, they’ve been showered with fiscal benefits by both red and blue politicians, especially for ag commodity growers. The very first US Farm Bill was passed in 1933 by President Franklin D. Roosevelt, which provided needed financial aid and subsidies to farmers in the heart of the Great Depression.

The Farm Bill, renewed every five years, represents an age-old, impressive, publicly-financed ag safety net. Like previous versions, the latest $867 billion (B) Farm Bill, signed into law in December 2018, includes substantial taxpayer-provided support for farm incomes, crop prices, financing, crop insurance and, importantly from a political perspective, nutrition assistance programs. The funding of these nutrition programs within the Farm Bill, like SNAP aka “food stamps,” persuades urban Congresspeople to vote for legislation that also aids rural denizens.

Not every US farm receives this largesse. Over 60% of farmers do not receive any ag subsidies; the vast bulk of support goes to growers of the nation’s “industrial” agriculture commodities: corn, soybeans, wheat, cotton, and rice. Most recent information indicates that the largest 10% of farmers have received about 75% of federal ag subsidy dollars.

Unlike his totally passing the buck for covid-19 testing, the president has passed many bucks during the past two years directly to certain farmers. An additional $61B funding to the USDA is now compensating farmers for the “unjustified foreign retaliatory tariffs” as well as the pandemic’s economic damage. This impressive sum works out to an average of about $30,000 for each and every person employed on a US farm. However, very few of these dollars are actually going to workers toiling among the farms’ rows or to non-commodity growers. This elevated $30,000 sum is quite distinct from the $1,200 checks other members of the public have received or are still expecting to obtain.

This bounty might be historically justified because tenured farming emerged right after hunting-and-gathering humans started growing crops in fixed locations about 10,000 years ago. Food comes first, of course and farmers produce the food. Agriculture’s special place in our stomachs if not hearts is also ensured because over the long course of human history it’s been the only line of work that the vast majority of humanity has ever undertaken. Only recently, in historical terms, have many of us worked away from the soil, as shown in the chart below.

Share of Labor Force in Agriculture by Nation and Year

Nation	1500	1800	2012	2017
England/UK	58.1%	31.7%	1.2%	1.3%
Netherlands	56.8%	40.7%	2.5%	1.2%
Italy	62.3%	57.8%	3.7%	3.9%
France	73%	59.2%	2.9%	2.8%
Poland	75.3%	56.2%	12.1%	11.5%
US		90%	1.5%	0.70%

Sources: Ourworldindata.org, the World Factbook 

    The displayed educated guesses for ag’s share of national labor forces in 1500 show that up to three-quarters of laborers worked in the fields. England’s and the Netherlands’ ag labor shares indicate their farmers were somewhat more efficient than those in Italy, France or Poland. The mechanized Agricultural Revolution was in full “bloom” by 1800, shown by the reduced ag labor shares, especially in England. That was not true at first for American farmers, who did not have initial access to improvements deployed at English farms. By 1880, farms’ share of US workers was reduced to 49%.

This multi-century agricultural revolution included improvements in: crop rotation methods, roadways and canals, land management, selective breading of plants and animals, creation of regional and ultimately national markets for foodstuffs, allowances for exclusive ownership of land plots and new farming technologies. The English, Danish and others made significant, early enhancements to iron plows, so they could be guided more accurately and faster by fewer oxen. Another ag technology improvement was the creation of the seed press by none other than Jethro Tull. Mr. Tull’s marvelous mechanical seeder, patented in 1701, distributed seeds evenly across a plot of land and at the specified, correct depth. His original seed press was fragile, heavy and expensive; his efforts to improve it did not allow much time for his abiding interest in progressive rock music. Oh, well. Better versions of his seed press ultimately became very widely used.

The majority of the US agricultural improvements have been capital-using and labor-saving. In the 19th century, such improvements included the cotton gin, mechanical reaper and steel plow. This is unsurprising because historically the US has been resource "rich" (especially land and minerals) and labor "poor." Creating more efficient and productive machines remedied our nation's relative lack of labor. These farm machines allowed the relatively scarce workers to become much more productive.

These impressive improvements farm agriculture have produced more food for more people using less labor and land. In other words, extensive advancements in ag productivity occurred between the mid-17th and late 19th centuries. In 1880 it required 2.5 acres of farmland to produce 100 bushels (bu) of corn. In 1987 it took just 1.1 acres to produce 100bu of corn; in 2017, just 0.6 acres.

Similar advances in ag technologies have reduced the amount of labor needed to produce many foodstuffs. From the above chart all the listed nations except Poland now have less than 4% of their labor force working in agriculture; the US has just 0.7% of our labor force working on farms.

The second chart below shows my Agriculture Productivity Index for ten nations. This index measures the economic contribution of a nation's entire agricultural sector by comparing the nation's share of GDP derived from agriculture relative to its share of labor employed in agriculture. The higher the value of this index, the more productive is the ag sector; the more ag output is being produced measured against ag labor input.

Agriculture Sector Productivity

Nation	Agriculture Productivity Index, 2017
US	1.28
Australia	1.00
Italy	0.54
UK	0.54
China	0.66
France	0.61
Russia	0.50
Canada	0.80
Netherlands	1.33
Poland	0.21

This chart shows that in 2017 the Dutch and US economies have the highest ag sector productivity. Poland’s ag sector has the lowest. The US ag sector is over 11x larger than the Netherlands’ and 6.5x larger than Poland’s.

Every nation provides some level of subsidies to its agricultural sector because strategically all nations require domestically-produced food. Low Index values, less than 1.0, may mean inefficient or quite subsidized ag production. The members of the European Union (EU) in 2017 included Italy, the UK, France, the Netherlands and Poland from the chart. The EU spends $65B per year – over 3x what the US spends – subsidizing agriculture. It’s perhaps the largest, single-sector subsidy program in the world.

Let me end on a sweeter note. One very different, slender, non-industrial and quite tasty slice of US agriculture is organic farming. Organic farm sales represent just over 4% of total food sales and less than 0.01% of all farms. Demand for organically-produced, local farm products continues to show double-digit growth, despite its somewhat higher prices.

Surprisingly, this small-ish corner of the ag market is now booming, perhaps because of the viral crisis. More consumers are heading for community-supported agriculture (CSA) that is now thriving. According to the 2012 USDA Census of Agriculture, there are over 12,600 farms that market their produce through a CSA. CSAs are most definitely not what P.J. O’Rourke’s quote cited at this blog’s opening refers to.

Unlike many other farm operations, no CSA farmers are plowing their unsold crops into the soil, nor tossing perishables due to lagging demand. Au contraire, CSA farms are busier than usual. CSA members, like us, buy a share of a farm’s harvest throughout the season or year; it gets delivered every week in a box, headed finally for your kitchen. Our CSA, Full Belly Farm, is located northwest of Sacramento in the beautiful Capay Valley. Our box this week contained carrots, strawberries, chard, lettuce, spring onions, potatoes and Tokyo turnips. Yum.  

CSA programs around the country are experiencing a surge in people wanting to become members. Judith Redmond, a founding partner of Full Belly Farm, says, "The interest in getting fresh, organic produce just has skyrocketed during this crisis.” CSA farms like Full Belly are busy attempting to increase production to meet rising demand. Fingers remain crossed. The CSA supply-chain is quite brief and utterly local: the farm picks its ripe produce in the fields, inspects it, washes it, and within a day or so and brings it in a box that the member opens up at the delivery location and takes home. This is what our spring boxes of CSA veges can look like.

Source: Full Belly Farm

The state of American agriculture is thus very diverse, ranging from huge, subsidized industrial agricultural operations to far smaller, more personal CSAs. Many of the giant ag operations are being tormented by the effects of the covid microbe. Fortunately, CSAs are becoming more sought-after and popular probably because of the coronavirus. Here’s hoping we food consumers continue benefiting from small CSA boxes.

SUDS AND BLACK GOLD STORIES

Beauty is in the eye of the beer holder ~ Kinky Friedman 

Talk about market madness. The combination of the constantly-mutating coronavirus and the necessary Sheltering-in-Place (SHiPing), has dramatically unhinged our economy during the past several months. Many goods markets have become lop-sided rollercoasters. There has been radically reduced demand, consequent surplus supply, and even short-term excess demand. The federal government and the Federal Reserve have already provided multiple trillions of aid to people and businesses, with more on the way. States are now either extending or relaxing their SHiPing restrictions because no one really knows what path to follow for reopening markets in our devastated economy.

Gone into the mists of some ever-fainter past are the stable goods markets drawn by people like me on Economics 101 classroom white-boards. The traditional microeconomic market diagram shows product demand and supply curves intersecting at a single point, demarking market “equilibrium” price and quantity. Those were the days. It’s no longer a two-dimensional white-board world (it never was, but…).

The government announced on April 29 that the 2020Q1 real GDP dropped by 4.8%, with consumer spending down 7.6% and business investment falling 8.6%. March unemployment rose to 4.4%; about 13% of our labor force is now receiving unemployment benefits. April’s unemployment tally will be even higher. It’s not official yet, but everyone who’s breathing already knows we’re now dealing with a significant macroeconomic recession. Unlike other recessions, this one has happened quite suddenly, with rising unemployment as a leading, not lagging, indicator of distress.

The media attempts to explain our changing macroeconomic situation by using “letters”: like “V” showing a rapid expansion after the big drop; “W” a bumpy increase than another drop and a final improvement; and what the “L” that signifies an economic drop with no actual bounce-back recovery for a longer time. Very nasty. Very possible.

Much mention has been made about covid-19’s effects on business’s supply-chains, especially those that have anything to do with Asia. Less attention has been paid to how the virus has affected “demand-chains,” meaning in what way customer purchases are happening; and how we’re actually buying, and not buying stuff. Right now, we consumers are mostly “chained” to our shelters, with too many of us unemployed. That’s why aggregate demand for goods and services has plummeted so much and so rapidly.

But it’s consumers who will ultimately determine how and when our decimated economy will be revived. The media’s pics showing the first brave (bleeding-edge?) folks getting their hair cut and nails painted are curious. The economy won’t be adopting a general recovery “letter” until multitudes of just-regular customers like your Uncle Myron and Aunt Dorie feel safe and secure enough to physically re-enter the nation’s markets and stores on a regular basis.

Everyone has now has gotten through last month’s “where’s the TP?” epoch that was caused by panic buying. People no longer eat in restaurants; they pick-up food from them or have it delivered. Restaurants expect sales to decline at least 27%. The media is now braying about up-coming meat shortages because 33% of US packing plants have been shut down. Will there thus be a run on ground beef and Big Macs? Yet another reason to become a vegetarian.

Some medicines remain in short supply, like hydroxychloroquine for lupus and arthritis patients and azithromycin, because #45 made false public statements that they might prevent covid-19. It’s astonishing that despite his maskarading as our leader (unlike his VP, who won’t even wear a mask since it’s the devil’s mark), 31% of surveyed adults still believe he’s “trustworthy.” Seriously, it’s beyond depressing that nearly one-third of adults still trusts what he says is true.

I highlight here two very different goods’ markets – beer and oil – that caught my eye as consumers and producers attempt to adjust in our covidified economy. They don’t mix well at all, being oil and water, but they each offer a special type of liquidity that makes them quite popular.

Beer.  Beer with me for a moment. There’s a growing problem in the beer market, like many, because of an imbalance, especially for independent craft beer brewers and brewpubs that don’t bottle or can their product. Although total US beer sales were down 1.6% in 2019 (a long-term trend), craft-brewed sales increased to more than 25% of the beer market. In 2019 there were 8,275 craft breweries, up 9.1% since 2018 (also a trend). Until until several months ago, more craft brewers and their brews were facing a growing market. That’s always good news. But 2020 is a different kettle of beer.

Demand has sunk to the very bottom of a pint glass 🍺 and supply can’t easily adjust. Humans have been brewing beer for 7,000 years during good times and bad. Modern craft brewing usually takes two to three weeks to create a new batch of beer; a double IPA or sour beer can take five weeks or more. Also, draft brews taste best for a relatively short time.

Many brewers therefore are agonizing about dumping their excess craft beer. “There was literally nothing that we could do with it,” lamented a Minneapolis brewer, as he ditched his unconsumed product. Closed bars and abandoned social happenings have created a draft beer surplus, which is being abandoned into wastewater treatment plants. This frees up tanks, kettles and kegs for breweries to start post-covid production at some point, but this loss is a calamity.

So it might be a very good time to fill your growler at a favorite local bar or brewery with surplus banana-scented hefeweizen (OMG), or whatever your brewpub’s special spring beer might be. Sure as shootin’ they’re having unaccustomed challenges selling it.

One Oregon microbrewery has sold only draft beer since it served its first pint over 20 years ago. But after the state closed all bars and restaurants in March, distributors canceled their beer orders. The owner had to decide whether to dump all of his already-brewed, but aging IPAs. Faced with that disconcerting prospect, the brewery hurriedly swung to canning its product; something the owner previously had sworn he would never do. Canning involves considerable expense, but less risk. He stated, “I would rather eat a lot of crow than send beer to a sewer.” Only the crocodiles will be disappointed.

Petroleum.  Like beer, oil has been used for thousands of years. The walls and towers of Babylon apparently used asphalt in their construction 4,000 years ago. Until very recently, petroleum products like kerosene were mostly consumed as a fuel for night-time lighting and for lubrication. The I Ching, written around 1000BCE, mentions oil in its unrefined, raw state being used by Chinese people.

The first drilled (rather than hand-dug) crude oil well in the US was near Titusville, PA in 1859. Recently, about 1 million oil and gas wells were active in the US; fewer are now actually pumping. Until February, the petroleum industry had yearly revenues of about $1.7 billion. The world’s largest oil producers are the US, Saudi Arabia and Russia.

The real (inflation-adjusted) price of crude oil has significantly fluctuated over time, as shown in this chart. 

real price of crude oiL, 1860-2020 ($/bbl.)

Source: The Economist, 4/27/2020.

The US spot price of WTI (West Texas Intermediate) crude oil – the US benchmark – on April 27, 2020 was $12.17/bbl. Two months before, on February 27, 2020, it was $47.17/bbl, almost 4x as high. That’s market turmoil.

Although there were price spikes in the 1860s because of the American civil war, in the 1970s because of the OPEC oil shock and again during the 2000s commodities boom, the real price of a barrel of crude today is around the same level it was between the late 1800s and the early 1970s.

The recent price drop initially happened when Saudi Arabia and Russia couldn’t agree about how much to cut their production to push petroleum’s world market price upwards. The US president, displaying his own oleaginous properties, came down firmly on the side of oil suppliers – the US petroleum giants and their brethren – in facilitating an agreement between OPEC and Russia.

Then the coronavirus emerged as an all too powerful oil market counterweight by suddenly cutting the demand for the Saudis’, Ruskies’ and everyone else’s “black gold.” World-wide demand for petroleum is down at least 30%, causing prices to dramatically fall, as shown above.

The world’s huge oil markets are now in meltdown, just like the far teenier, but dearer craft beer market mentioned above – and for the same reason, a novel microscopic avenger.

This petroleum price reduction can have several consequences. First, much of the now-uncompetitive US shale-oil production will be drastically reduced, if not halted. This is no small matter because, according to the US Energy Department, 63% of total US petroleum production in 2019 came from shale. US shale has some of the highest lifting (production) costs in the world, requiring a market price around $50/bbl to breakeven. Watch for an increasing number of shale firms declaring bankruptcy and/or being purchased by the already-massive, established firms like Exxon/Mobil, Chevron and Shell. Also watch for the US to lose its ranking as the world’s largest oil producer, which was the Saudi’s and Russian’s original goal, and for us to eventually begin importing more petroleum.

Second, with very low oil prices alternative energy will have more challenges in usurping market share from fossil technologies; recent progress in clean-energy technologies might be threatened. Third, because of petroleum’s outsized influence on the economy, its much-lowered price will likely increase deflationary pressures on overall prices. This isn’t necessarily good. If oil’s price stays very low for a while, policy-makers’ near-total reliance on deficit-financed aid may become a bit more costly. Why? Because one often-used hedge against both bigger public and private debt – inflation – won’t be in the cards.

Here’s hoping the beer, oil and every other market’s turmoil can soon diminish in consumers’ favor. That will likely take a fair amount of time, far more covid-19 testing, large improvements in consumer confidence, as well as a practically light-speed-provided effective vaccine.

BACK TO THE PAST? OR BACK TO THE FUTURE?

What you gonna to do when you’re black & blue? ~ Louden Wainwright III 

In an all too real a sense, the coronavirus has forced everyone to grudgingly drop our hubris. Our now-exposed conceit is that we could straightforwardly surmount any issue we’re facing because of our richly “cutting edge” technology, science and vast knowledge. Not this time.

Once again Mother Nature has reminded us, “You are not in control of this situation, I am.” Is it going to be back to the past echoed by the 1918-20 Spanish Flu one more time? Hopefully not, but it does have its rhyming parts.

At this point, it seems we have a choice: Are we going back to the past, or back to the future (admittedly without Doc Brown’s time-travelling DeLorean)? My hope is that with clear, systematic planning and proper policies we can head back to the future, albeit a different one than originally planned.

For thousands of years diseases have challenged our place on Earth. However, for the first time a viral attack is happening with the modern rendition of widespread personal and national globalization as our standard operating practice and with social media instantly available to billions of us.

Virtually everyone has followed the coronavirus’ ruinous voyage ever since it first attacked humanity in Wuhan, China last December. We’ve tallied its daily destructive path via social media. And it’s rapidly turned the world upside down – in no small part because of globalized mass travel and complacent conceit.  

Historically, there have been other journeys that have turned the world upside-down. At the end of the 15th century, Christopher Columbus discovered a “new world.” It took him 7 ½ months to present Queen Isabella and King Ferdinand, his royal venture capitalists, with proof of his success. He offered the monarchs as his testimonials; gold, pearls and aji (South American chili peppers) he had taken from indigenous peoples. For our current viral journey, we haven’t had to wait until mid-July to learn about the coronavirus’ presence in China. We learned about it in real-time.

Shown below are some of the pandemics that have significantly wounded us over a very long time.

PANDEMICS THROUGH THE AGES 

Pandemic	Date	Worldwide Deaths
Black Death/Bubonic Plague	1331-1353	75-200M
3rd Bubonic Plague	1855	10-15M
Spanish Flu	1918-20	50-100M
Spanish Flu in the US	1918-20	675,000
Hong Kong Flu	1968-69	1M
Swine Flu	2009-10	150-500K
Typhus	1489+	11.4M
Smallpox*	18th C –1979	900M
Measles	500AD+	1.3M annually
Malaria	450AD+	2M annually
HIV/AIDS	1980’s+	32M
Coronavirus	As of 4/20/20+	151.0K (US: 36.1K)

*The only infectious human disease ever to be completely eradicated. +Continuing

Sources: Wikipedia and New York Times

The reoccurring Black Death that probably killed 30% to 60% of Europe's population in the 14th Century wasn’t the first human pandemic; the coronavirus pandemic won’t be the last. Why? Because Mother Nature always bats last. Non-flu diseases continue their deadly routs around the world. Over their long history of human calamity, “ordinary” diseases like Typhus, Malaria, Yellow Fever, HIV/AIDS and Measles are responsible for more deaths than any others. Thankfully, only a few of these ordinary diseases are endemic in the US.

The chart above shows the dates these pandemics have occurred, from about 15 centuries ago to the present day. Only in the last century has medical science been able to stifle some of these diseases’ plunder. The victory over Smallpox is an impressive, singular example. A strange Black-Death linkage happened this year when many Christian churches around the world were closed for their April 5th Easter Services. When was the last time Churches closed en masse on Easter Sunday? During the 14th Century Black Death.

Perhaps the 1918-20 Spanish Flu is the most similar pandemic to the current covid-19 virus. They are produced by two different virus types, but they both caused (or are causing) tremendous suffering. I have regretted not asking my father, who was then a teenager in Brooklyn, about his recollections regarding the Spanish Flu medical catastrophe.

The Spanish Flu occurred during WWI, when knowledge of viral diseases was yet to be well comprehended, and was unknowingly carried by thousands of troops in Europe and beyond. One expert estimated that the Spanish Flu killed 218 out of every 100,000 people living on Earth at the time. In the US this flu was first noticed at Ft. Riley, Kansas among returning US Army soldiers.

The US was crippled by this flu that preyed particularly on young adults (unlike covid-19). The average age of a 1918 flu victim was 28. Older adults seemed to have some immunity, again unlike covid-19. The 1918-20 flu was particularly devastating in the high-density, industrial cities in Eastern US, especially in Pennsylvania. More than 17,500 Philadelphians (my original home town) died of this flu in the first six months of 1918; magnified by the city’s holding a giant downtown parade on September 29, 1918. About 200,000 people attended the Fourth Liberty Loan Drive parade that promoted the war effort and public purchases of war bonds. Floats displayed the latest locally-built additions to America’s arsenal. Within three days, every bed in Philadelphia’s 31 hospitals was filled with Spanish Flu victims. This flu struck in three distinct waves. In Philadelphia, the case fatality rate was a colossal 37%. By the end of this flu’s rampage over 60,000 Pennsylvania residents lost their lives. [At this point, 1,285 Pennsylvanians have succumbed to covid-19.] Many epidemiologists believe the Spanish Flu is still with us; over time it has metamorphosed into the seasonal H1N1 flu.

The “novel” characteristics of the current coronavirus mean we don’t yet have any way of directly alleviating its damage; mitigation persists as our only means of fighting covid-19. In stark terms, it’s 6-feet apart or 6-feet under. The frenetic, on-going efforts to produce a coronavirus vaccine won’t be finished for at least 12-18 months under the best of circumstances. Success is not guaranteed despite our knowledge and technology. So far, every nation including ours has been fighting a defensive battle against this virus by attempting to flatten the curve.

Illustrating the global scope of relevant experience, Liberian Tolbert Nyenswah, who ran one of the most successful contact tracing efforts in Africa during the 2014-16 Ebola epidemic, said “All people are talking about right now is hospital beds, ventilators, testing, testing, testing. Yes, those are important, but they are all reactive. You are dealing with the symptoms and not the virus itself. You will never beat a virus like this one unless you get ahead of it. America must not just flatten the curve but get ahead of the curve.” A growing number of knowledgeable people have united around a test-trace-quarantine strategy, while we wait, hopefully, for an effective vaccine. Before a vaccine becomes available maybe by the end of next year, testing is the most essential tactic for managing the coronavirus.

The initial CDC-designed and assembled coronavirus test proved unreliable, due to its complexity and mis-fabrication (which it only admitted later). It failed to follow Occam’s razor with tragic consequences. The wheels of government always turn slowly: The Administration once promised that 27M tests would be available by the end of March. After this disastrous start, only 3.56M tests have been conducted through April 17.

There has been worthy, wide-spread criticism leveled at #45 and his obsequious associates for not definitively planning how to combat this coronaviral pandemic. His autarkical approach is doomed. I’m reminded of a well-known quote from #34, Dwight D. Eisenhower; “Plans are worthless, but planning is everything.” The current president doesn’t believe in either planning or plans. He’s an all-too-sterling member of the “Ostrich Alliance;” world leaders who have kept their heads firmly planted in the sand with respect to fighting the coronavirus. [FYI: The Ostrich Alliance also includes President Gurbanguly Berdymukhammedov of Turkmenistan; say his name just one time fast.]

We are all suffering because #45’s viral testing efforts are wholly insufficient. Such efforts are vital for reviving our comatose economy that he alleges to care about. Apparently, he’s decided to toss the testing “ball” into the states’ court of already-filled unfunded responsibilities rather than offer any real leadership or support. His decisions are senseless, reckless and irresponsible.

The viral policy contest between epidemiologists and economists has now become more heated. More than 22 million people have filed for unemployment benefits in the past month, 15% of our labor force. The coronavirus’ consequent economic turmoil is growing ever-larger. The US labor market is beyond black & blue. Which has amplified the calls for “opening up” the economy, that in turn has increased appeals/pleas for additional, much-needed federal funds for covid-19 and serology (antibody) testing, equipment and personnel. When is such fiscal relief coming? Astonishingly, the president hasn’t said. Congress should halt its politicking, and get dollars into the pockets of suffering people and businesses.

Economists predict the unemployment rate will rise to at least 15% by May, a level last seen 81 years ago. A gaggle of GDP forecasts for the second quarter range from dreadful (-8%) to disastrous (-15%), portraying an abysmal near-term future. Consumer spending, the single largest part of GDP, is also black & blue and expected to drop at least 14%. Macroeconomic policies are needed to bring our economy out of its coma. But no one knows when they should begin, without causing a second wave of deaths.

From an ivory-tower macroeconomic perspective, the sizeable federal funding that has already been provided, with more in the offing, is affording a tragic, real-time test of nascent Modern Monetary Theory (MMT). MMT posits there won’t be much if any inflationary consequence from the giant, supplementary monetary (and fiscal) policy expansions that have happened within the last three weeks. Many doubt the MMTers.

We are all debt-heads now. Every single dollar of expanded federal, state and local government expenditures that’s fighting the coronavirus is debt-financed. The federal government is expected to increase its deficit-financing by $4 trillion (T) dollars this year alone, a deficit that’s two times as big relative to GDP in any year since WWII ended. Business’ borrowing is also at record levels, and their credit lines are being depleted. Over the past decade households’ debt levels have also greatly increased. To counter this, the Federal Reserve has reduced interest rates to zero and provided more than $2T in loans to banks.

Total government, business and household debt is now 224% of our GDP, a worrying all-time high. Macroeconomic textbooks state in normal times such vastly-increased debt could create increased inflation and topple our economy’s now fragile house of cards. And, of course, these are not normal times at all.

The president’s shouts to immediately “liberate” states from the shackles of Sheltering-in-Place (ShiPing) orders demonstrate his total inability to properly lead our nation. His path will take us back to the past.

Economic and other policy-makers who value peoples’ well-being and public health strongly caution against suddenly stopping the states’ and localities’ mitigation efforts now, despite the economy’s strong recessionary drift. They aptly believe using data from broadly increased testing (at some point) should ultimately foretell when governors can more safely relax their ShiPing rules, and mitigate another covid-19 resurgence. This is the path back to the future.

TOILET PAPER, CHICKS AND GOLD BARS

I’m not counting any chickens. ~ Jeff Bridges  

How’s your Sheltering-in Place (Sh-i-P) coming along? We’ve been at it since Monday, March 16, which seems like... The SF Bay Area counties now have extended their Sh-i-P orders through May 3. Further extensions, with masks, are only a matter of time.

Don’t worry, this blog doesn’t get within 6 feet (or should it be 27 feet, see here) of casting judgement on how rigorously any of us are following our Sh-i-P rules. It is only semi-virus-related so I consider it mildly other-worldly, since covid-19 occupies 110% of the public’s conscious attention, or so the media presumes.

Instead, this blog centers on toilet paper (TP) and chicks 🐥 (not the Dixie kind) that have flown off stores’ shelves, just like TP. For more fiscally-focused folks, I also consider gold, a precious metal that humans have valued through innumerable crises of every sort, including ones like this one.

It’s an understatement to say many aspects of people’s behavior have been changed over the past several months, during this initial chapter of covid-19. Countless folks’ expectations have become frenzied by Sh-i-Ping, the Administration’s pinballing, sometimes deceptive messaging and the media’s ceaseless proliferation of coronaviral stories – letting us know for example when Papua New Guinea registered its first coronavirus case. Such untethered expectations change personal consumption patterns, create panicked, feverish purchasing and subsequent emptied shelves. Voila, resulting scarcities of toilet paper, chicks, and glass gem popcorn seeds, among other items.

Toilet Paper: (FYI, the use of the colon as part of this subsection title is purposeful.) What is it with TP anyway? Normally it is an ordinary, inexpensive consumer product that sells for $0.67 per roll at Costco, when it’s in stock. That’s very different than TP’s price in Venezuela, where hyper hyperinflation has taken its toll. A roll of TP in Caracas costs at least 2,600,000 bolivars. Yet another of the multitude of reasons to not live there.

Toilet paper has been around for a good long time. The first documented human use of TP happened in China during the 6th century AD – 15 centuries ago. In Ancient Rome, a sponge on a stick was often used, and, after use, placed back in a pail of vinegar. In other locales, wealthy people wiped themselves with wool, lace or hemp. Less wealthy folks used rags, wood shavings, leaves, grass, moss, water, snow, seashells, or corncobs. The rise of publishing in the 18th century led to the use of newspapers and cheap, popular books’ pages for cleansing.

However, actual rolls of TP didn’t accompany toilets until more recent times. Commercial toilet paper began in the mid-19th century, with a patent for roll-based dispensers filed in 1883. Indoor plumbing first started to be placed in American homes in the mid-1800s. In 1940 nearly one-half of US houses lacked hot piped water, a bathtub or shower, or a flush toilet. Toilet paper dispensed from rolls was first popularized in 1890 when the Scott Paper Company began selling it, coinciding with mounting use of indoor, flush toilets. Now more than seven billion rolls of toilet paper are sold yearly in the US. Over time, deflation has struck the rolls. The size of a general single sheet of TP has shrunk 26% since 2000. Nothing’s sacred.

Today’s TP scarcities recall another shortage when Johnny Carson joked in his December 19, 1973 Tonight Show monologue that “there is an acute shortage of toilet paper.” There really wasn’t any shortage; on stage, he verbally made it up.

The first OPEC oil embargo also was happening when Johnny joked and created large amounts of public anxiety as well as blocks-long queues at gas stations. Carson’s audience apparently found his jest more frightening than funny. His “news” sent large numbers of shoppers into grocery stores to buy and hoard toilet paper. Thus an actual shortage was born. The Scott Paper Company urged people to stop panic-buying their product. Nevertheless for several months, TP was in short supply or actually absent from store shelves. TP was bartered for, traded, and even sold on the black market.

 That was then, the present-day TP shortage, shown above, arose from consumers’ anxiety-driven purchases, but not from a misplaced joke. It has been happening not just in the US, but in Australia, New Zealand, Hong Kong and Japan. Why? Perhaps shoppers fearful of coronavirus quarantine measures have stockpiled essential supplies to last out a week or two (or more) of isolation. In Hong Kong, ambitious thieves actually held up a supermarket to steal a TP delivery.

Buying TP is a relatively cheap action and satisfies people’s need to think they are “doing something” when they feel at risk. Also, customers may sense that buying TP is part of their crucial “preparation process” for Sh-i-P. Finally, TP is utterly non-perishable, has few straightforward substitutes and is one of the rare products someone can buy in larger-than-normal quantities that is guaranteed to be eventually used before it goes bad. Hence, large expanses of emptied-out TP shelves exist here, as displayed above. Not to worry; breathe deeply, it’s hopefully temporary.

Chicks. Everyone loves baby chicks, especially at Easter-time. Demand for new chicks is off the charts this year. Flocks of people have been rushing to raise backyard chickens amid their coronavirus concerns and egg shortages. Hatcheries report an increased demand for baby hens as more people want to grow chickens for eggs, meat and companionship. Baby chicks are certainly cute, as shown below, and look great under the Easter bush.

 The USDA reported last week that the national inventory of shell eggs decreased 10% for the second consecutive week and the nation-wide supply of Large eggs declined 14%, characterizing the current run on chicken eggs across the nation. As a consequence, wholesale prices for shell eggs continue to show sharp daily increases, rising to levels not seen since March 2018. In some areas, wholesale prices of eggs have tripled during the past three weeks, which has spurred more panic buying of eggs and chicks.

This year, Cackle Hatchery, based in Missouri, has seen its chick sales rise 100%. It’s been so hectic at McMurray’s Hatchery in Iowa that callers wanting to order chicks have been put on long holds. The hatchery is nearly sold out of chicks for the next month. McMurray’s has seen a rise in “homesteader types” and others who want to raise their own chickens. A growing number are first-time, wanabe chicken farmers.

“This has to do with the perceived hoarding that is going on,” Bud Wood, McMurray’s owner and president, said of the surge. “People are afraid they won’t be able to buy eggs and chickens in the grocery store, and they don’t want to have to go to the store and possibly be infected.” “They’re panic-buying chickens, like they did toilet paper,” stated Tom Watkins, McMurray’s Vice President.

My daughter Lindsay and her family have already raised backyard chickens several times, and are about to start anew. As a veteran chicken-raiser she offers the following observations. Newly-hatched chicks are fragile creatures that first take careful indoor tending, including the use of heat lamps to keep them warm. Her kids have likened them to little-dinosaurs. Once they’re living outside, you must keep your chickens safe from predators. One of their chickens was picked off by a dive-bombing hawk while they were still young, and several others met their demise by racoons. Be prepared for the long-haul; it takes six to nine months for them to mature enough to produce eggs. Once they’re big enough, letting them free-range in a large run during the day means your yard’s bug population will surely decline because of their constant search for food, as well as have more nutrient-rich eggs and happier chickens. Remembering that they’re farm animals is key; they’ll poop everywhere and their cage needs to be cleaned out regularly. However, you can use their composted droppings as a high-nitrogen fertilizer in your newly-created virus “victory” garden. (Don't use fresh chicken manure, it'll burn the plants.) Finally, if you add a bit of cayenne pepper to their food, you’ll get really gorgeous orange-yolked eggs, that aren’t spicy. Yum.

Gold. Given the deep drops in stock prices and increased market volatility, demand for gold is rising, even for 400 troy ounce (27.4 lb.) bars similar to those in Ft. Knox’s vaults. There are over 368,000 golden bars at Ft. Knox which used to “back” our dollar until 1971. Thank goodness the market for gold and gold bars isn’t closed like your favorite local bar is. You’ll want that quarantini for home delivery, right? So let’s take a shallow dive into gold, where unlike TP and chicks, shortages don’t exist, yet.

 Gold is a precious metal that has been used for coinage, jewelry, and other arts throughout recorded human history. The first precious metal coins, made of electrum an alloy of gold and silver, were used as money around 600-500 BC in several places around the ancient world; in China’s Yellow River valley, in India’s Ganges River valley and by the king of Lydia in western Asia Minor (modern Turkey). The Lydian coins weighed anything from a slender 0.006 troy ounces up to half an ounce, varying by value. These coins were stamped with animal heads, such as lions and rams to discourage counterfeiters.

The world’s largest gold producer is China, by a large margin. The US, the fourth biggest producer, supplied 253 tonnes in 2019. About one-half of all gold produced is used in jewelry, 40% in investments and 10% in industry. Overall, there is about one ounce of refined gold in the world for every person. Being a mature commodity, the world supply of gold increases at approximately the same pace as population growth. The several gold crowns that I “wear” in my mouth thus have accounted for an infinitesimally miniscule portion of “industrial” gold usage.

Many investors look to gold in periods of market turmoil because they believe it holds value through recessions better than other assets. And guess what is now coming to an economy and stock market near you, a recession. Over 10 million Americans filed for unemployment benefits in March. Precious metals like gold have often served as a hedge against market volatility, political instability, currency weakness, and economic collapse. Demonstrating this increased demand, the price of gold has recently risen, as shown below.

GOLD SPOT PRICE, March 19 to April 3, 2020 

Will investors turn to gold as covid-19 continues its horrific assault on our health? Or will it be fools’ gold? If the nastiest predictions about the economy’s second quarter performance become valid, it’s certainly possible gold will be good. Will it be another golden age? Exceedingly unlikely.