Adam Tooze, I Love You

Would you agree with the premise that we are meant to see and hear that which we are meant to see and here? Perusing the iPad this morning, saw a reference to a podcast involving Adam Tooze. It came from an interview from Berlin.

Adam said he insisted on talking about the debt ceiling “default crisis” and got to the topic after an agonizing 15 minutes or so of small talk about learning German in his upbringing. And from the mouth of this very brilliant historical economist (the best kind there is!), came the words “it’s no big deal, even if they default a little bit.”

That surely explains why the markets have been so calm, despite the brinksmanship going on, even as we speak, in D.C. Because the dollar is so well entrenched as the global reserve currency, the impact on a brief, albeit scary default will be nil on the world economy. Well, that’s a big ass relief! But that’s not what I came to talk about.

I want to talk about inflation instead. After his words about the default, I suppose by way of explanatory detail, he talked about the relationship between the strength of the dollar, oil and inflation. This is the first time anybody has put those things together for me. After hearing what he said, I practically slapped my forehead. Of course!

So what is it, you ask? Geez..irony. I’ve been talking about this stuff for the past decade, but I never connected the dots. Here’s the story. Back when we were net importers of oil – say up to earlier in this decade – there was an inverse relationship between oil price and the strength of the dollar. Think about it. A stronger dollar means we could buy more oil per unit than if the dollar weakened. That makes each one cheaper. Makes sense.

Conversely, weaker dollars meant the money paid for oil imports would push the unit price up. OK, that’s not so straightforward. But if the dollar is the reserve currency that everybody trades in, what would affect the US would also affect those other countries paying dollars for the oil they import. Like Japan. Or Sri Lanka.

Sri Lanka, you ask? What have they got to do with this? I’ll get to that in a minute. Keep your shirt on. OK. Where was I? Oh yes – something changed. This decade. Fracking. The logistics solved of exporting our abundant LNG – liquid natural gas. When the Russians cut off Western Europe in the leadup to their invasion of Ukraine, who stepped it to fill the breach, foiling Vlad the Invader’s ignorant plans? Yup – we did.

OK, still not following. Back to Adam Tooze, my hero. He points out that now the US is a net EXPORTER of petroleum products. So now when the dollar gets stronger, we are selling oil in dollars. More expensive oil. So countries that import lots of oil (cue Sri Lanka) had a tough time finding the money to pay the tab. So they tried to reduce imports to save money. What happened? Rioting in the streets when people couldn’t cook their dinners because there was no fuel. So what did Sri Lanka do? They defaulted on their debts.

So that is a real default. What Washington is playing around with I’ll start calling a ‘political’ default. It’s not real. In fact, the moderator pointed out that JP Morgan said AFTER the default, Treasuries will increase in value. Talk about your law of unintended consequences. Adam didn’t dispute the suggestion; it led to the facts discussed above.

But hey, you point out, you said you wanted to talk about inflation, not oil, reserve currencies and Sri Lanka. Yeah. Right. Let’s talk about inflation relative to all of the above. The basics. Emily, please recite. “Inflation is too many dollars chasing too few goods.” We’ve talked about that before with respect to Covid. Then there were too few goods. Now let’s talk about this oil and the strength of the currency. The more oil we sell, the more dollars flow into the coffers of the country. Yes, you say, but those are private companies, not the government. Economies don’t differentiate. Record profits for oil companies. Google what Exxon paid in income taxes for the past two years since Covid. See how private dollars turn into public dollars? All that money means too many dollars chasing the same number of goods or less. Inflation. So the Fed raises interest rates, like this was 1971 and the problem was labor. Stupid – no, not stupid, political again. Must do something to protect the brand called The Government, even if it’s the wrong solution that will make things WORSE for its citizenry. Like Sri Lanka defaulting made things worse for its populace.

So now, let’s take a step back and analyze. The much touted need in previous years for ‘oil independence’ status has had the net effect of making everything you buy more expensive, coming after the effects of a global pandemic. What’d a predicted that?

“The Troubles”

We watched several episodes of a show on PBS about Northern Ireland back in the day when the residents of that pitiful area were hell bent on killing one another. It surely did bring to mind our current situation here in America. Let me ‘splain.

Per the documentary, it was the fight for Civil Rights in America that was the start of the troubles in Londonderry, Northern Ireland. Catholics were deprived of their civil and economic rights by Protestants. It led to significant income inequality, always a dangerous element that precedes serious woe with accompanying violence. Marches led to confrontations with police, and ultimately deaths of marchers and officers. At some point, the clashes turned from marchers versus cops to Catholics versus Protestants when fear took hold and the Ulster Defense Association got involved. There was an Evangelical minister called Ian Paisley that became the face of opposition to Catholics, among other sins like homosexuality, civil rights and The Good Friday Agreement that stopped the violence. Sinn Fein was the political arm of the violence sect of Catholics known as the Irish Republican Army. It was made up of the descendants of the same folks who tried to separate Northern Ireland from Great Britain during World War I.

With all that as background, think about life today in these good old States United. Evangelical support for Donald Trump. January 6th uprising at the capital. Guns everywhere with accompanying massacres. States passing legislation allowing open carry of weapons. These are all the elements in common with “The Troubles” as the natives in Northern Ireland came to call the civil war there. So are we actually already in a civil war here?

The most interesting part of the documentary was the testimony of people involved on all sides: Protestants, Catholics and police. All of them were effectively brainwashed to believe in their ’cause’, just as left wing Democrats and right wing Republicans have been. In the case of Northern Ireland, nothing was going to stop the violence until, in my opinion, it had effectively run its course and everyone was ready to compromise. George Mitchell, the Senator from Maine, helped negotiate the agreement. It took an outsider to make it happen.

Women had tried in the early 80’s, but the hatred was too strong and they were still in the tit for tat phase of war that ultimately lasted for 30 years. It was unlikely that women could bring about peace, given the misogyny on both sides of the dispute. So that’s a lesson in how to address our current difficulties. It likely won’t be women who will change things in this country. And the fact that it took 30 years to run its course says to me we won’t see ultimate resolution for quite some time here. It also says things will get much worse before they are resolved.

Northern Ireland was too small a space to have much effect on anyone outside their own back yard and eventually assassinations of members of the Royal Family and attempted assassination of the Prime Minister, Margaret Thatcher. That is where our situation differs from theirs. Our troubles will affect the whole world, given our status in political and economic terms. Today is the 26th, and still there’s no agreement on raising the debt ceiling. Default will be another chink in the armor of reason in the US. All we can do is watch and wait to see what happens next. I am not encouraged.

Bayesian Analysis

What is it? According to the website Stata, “Bayesian analysis is a statistical paradigm that answers research questions about unknown parameters using probability statements.” OK. In English, please?

There’s an equation, if that helps. No, don’t have flashbacks to flunking Algebra. This is pretty user friendly. Here it is.

The formula is: P (A|B) = P (B|A) x P (A) / P (B)234. Here, P (A|B) is the probability that A occurs if B occurs, P (B|A) is the probability that B may occur if A occurs, P (A) is the probability of event A, and P (B) is the probability of event B234. The formula is most often used to calculate what is called the posterior probability, which is the conditional probability of a future uncertain event that is based upon relevant evidence relating to it historically.

Doesn’t help much, huh? OK, the trick is in defining A and B. P obviously stands for probability. Let’s try it this way. Call A the probability that the Democrats won’t make a deal. Then, logically, B would be the Republicans say No to a deal. So let’s plug that in and discuss.

P(A/B) = 0.95 x (0.5/0.75) = 0.63

So according to my calculations, there is a 63% likelihood of both parties failing to make a deal. Where did I get this?

The likelihood of Republicans walking away if the Democrats refuse to deal is 95% – there’s no way McCarthy can blink, right? The probability of the Democrats refusing to deal is 50%, still fairly substantial because of the politics of increasing work requirements with Medicaid amongst liberal Dems. The likelihood that Republicans refuse a deal is higher at 75%. Duh. Do the math and you get 63% likelihood of a default. That answers my question posed in my dream diary. It was 40% a while ago, so that number feels about right to me. Unless something major changes (like the market crashes or the government runs out of money before 6/1), odds are we will default. That is not very encouraging, is it?

What happens then? Already talked about that, so no need to beat the dead horse. Ouch – just watched The Godfather for about the sixth time last night, so dead horses images are vivid right now.

When there is no immediate response from the world financial markets, there will be a miss in Social Security payment – one check late. Can you hear the howling? Can you picture the media frenzy? All the while, real stuff is happening in the world that we aren’t paying any attention to. That is foolish, if not downright dangerous.

What do we need to turn this around? Ganas..desire. Somebody has to stand up and say enough is enough and stop this madness. Who will do that? I am a small voice in the wilderness, but I feel like I’ve been the Cassandra in the room. How ’bout you?

UPDATE 5/21: Did another quick analysis yesterday. The odds are now 75% that the government will default. Things are getting worse. Playing with fire. Check it out

Thanks to the Washington Post for the Cartoons of the week, source of the image. Says a lot, eh?

Three Trillion Dollars

According to Axios yesterday in a short note, they reminded us that banks in the United States are holding three trillion dollars worth of Treasury bills in their vaults. Here’s the thing: if there’s a default, what will those Treasuries be worth? Let’s discuss that.

Thought experiment. It’s June 12th, and there’s no lifting of the debt ceiling. Addlepated Joe won’t invoke the 14th Amendment or claim a platinum coin to continue payments. I suspect he vowed after the Republican Senate lowered taxes for the rich under Trump never to negotiate with terrorists called R people again. That wasn’t very well worded, but you get the idea. So the game of chicken will go to the end. But who is Ren and who is the bully? Recall from Footloose, Ren, aka Kevin Bacon, Five Degrees of Separation man, got his Converse sneaker shoelace caught around the gas pedal and couldn’t jump off the tractor. He looked brave, but instead he was stuck. I think that’s, ironically, the other Kevin, aka McCarthy the hapless. If he blinks, he loses his speakership. If he stays the course, he’ll try to blame AJ, aka Addlepated Joe. So that makes AJ the bully who will end up in the canal across from his overturned tractor .

This is what you don’t want.

So back to my point. The United States, for the first time in its history with the exception of a few technical defaults, will declare itself closed for business and shutter the payment window. At first, there should be no discernable impact. Gee, must be ok. A week goes by. Now it’s June 19th, 2023. On the 14th of June, we will not have received my Social Security deposit. Others like me but more dependent on that money, will be subjected to a barrage of requests for profile from the likes of CNN, New York Times and The Washington Post. We’ll be shaking our fists, or moaning about not being able to pay our debts. Axios will profile the blame game from D.C. My Home Depot store will be practically empty. A few contractors will buy a little paint here and there, but customers will cancel the work because they aren’t sure if they will be receiving their Social Security, Veterans Retirement, and all the other payments that go out from the Treasury. That affects 52% of Americans. Not a small number.

What happens next? Those in the rest of the world who hold the bulk of Treasuries will sell them – at any price. 80% of that is held by two countries, China and Japan. China at $870 billion can afford to do that, and they wish us harm. Japan at a trillion dollars can’t afford to do that, their leadership isn’t strong and they will worry about their balance sheet more than our ability to protect them from China. So the price of Treasuries would drop to near zero. That makes interest paid on those remaining go up – way up. Inflationary? You betcha. But what about those $3 trillion in Treasuries in the vaults of those banks? Nothing has really changed about the bank’s holdings in real terms. But on paper, their ability to pay depositors their money has disappeared. Result? Massive run on banks that will make Silicon Valley and First Republic failures pale in comparison. Now we’re talking Citibank, Wells Fargo, Bank of America and Chase. Shades of 2008 all over again.

So will smart bankers start to slowly sell their Treasuries even before the default, having done a similar thought experiment to mine? If they do, same result over time. So even the anticipation of a default could be inflationary. This is a most dangerous game being played in D.C. It is very similar to my previous post about Weimar Germany wanting to get out of reparations, and violating the Versailles Treaty to do it. Bruning and Schacht. The impact from that poor decision was a significant continuation of pain in The Great Depression. It wouldn’t surprise me if we see a similar outcome here.

So what is one to do? Since half the country will be in the same boat, it is very difficult to say. When this is over, inflation will be soaring. That will make the value of my house go way up, and my credit card debt will be devalued. But here’s the thing: what happens to my reset mortgage in September when interest rates are 20%? I’d have to sell my house. But who will buy it at those levels? Nobody. That will apply to everyone else in my situation. Oh, but wait. Think about all those people who refinanced when interest rates were near zero during Covid? The banks won’t be getting enough income to offset interest rate increases. Another hit to their holdings. Ouch. In my case, Wells Fargo will have to settle for something less in a monthly payment. Real estate market frozen all over the country.

Depression coming. This is what I sensed over the last few weeks. So we’ll keep talking about it. Strange times.

Weimar Or Less?

Yes, I’m back to talk about the same topic I’ve been beating to death over the past six weeks or so – the economy and whether we will be able to add a default on the debt to the elements of disaster equation. That’s a reference to the Air Disasters metaphor I invoked a few entries ago.

Heinrich Bruning - ain't he a cutie?
Heinrich Bruning – Ain’t he a Cutie?

But now I want to talk about historical precedents, specifically that of Weimar Germany in 1931. A guy named Bruning was the chancellor and another fellow called Hjelmar Schact was in charge of the German reserve bank. If you recall, reserve banks came into being between the late 1800’s in Germany and in 1913 in the US.

Without going into excruciating detail, let me describe what happened in Germany that led to the end of the Weimar republic. No, it wasn’t the early inflation in 1923. That was relatively short-lived, and got fixed pretty rapidly with the Dawes plan. It wasn’t just the Versailles Treaty alone that destroyed the republic. It was human error. Vanity? Hatred? Yes, and perhaps a fundamental lack of understanding of the potential for disaster brought on by the actions of Bruning and Schmidt. More detail, you ask? Well, OK, if you insist.

In ’23, the Germans were having trouble with reparation payments to Britain and France. When they were late delivering some telephone poles (I’m not kidding – really!) France invaded the Ruhr valley, which was akin to the old ‘cutting off your nose to spite your face’ kind of move. That started a tit for tat between the two countries, leading to more economic pain all around. And that inflation previously mentioned. Big inflation – you know, the wheelbarrel full of Marks to buy a loaf of bread inflation. Like Zimbabwe.

Wall Street Crash

After Dawes, everybody bumped along for a while, mostly on borrowed money for Germany. Borrowed American money. Then came 1928 and the boom market in the US. Many Germans put their life savings into American stocks – you know, adding to the musical chairs players at the end just before the music stops. And stop it did, in October of ’29. Then Germany was in big time trouble. Nobody could pay anybody back. So by ’31, Bruning had had enough of trying to repay reparations. He wanted them gone. So with Schact’s blessing, he made a customs union agreement with Austria. Well, that really set things off with the French, as it was in direct violation of the Versailles Treaty. What little money was left in German and Austrian banks went elsewhere. First the Austrian banks failed; then the German banks. Since Germany wasn’t paying the money back it had borrowed from the Americans, American banks started to fail. The French franc was in trouble too, since trade stopped when nobody had any Marks or Dollars.

So the so-called Great Depression was not a seamless event caused strictly by the Wall Street crash in October of ’29. Things got worse after 1931 because of the guys in charge doing really stupid things. Kinda like today. You know – the default on the debt?

Some estimate the likelihood now at 60%, a big jump from previous expectation. The Reps are gonna try to pass some legislation this week intended to force Dems to negotiate a spending cut. If we’re on our way to a recession, does a spending cut make sense? Not if you’re a Keynesian economist, which the Reps are not. This is just another wide swing of the economic pendulum that will result in, by one estimate, the loss of a million jobs.

World Wide Depression – Not Pretty

Where will those jobs be lost? Travel and hospitality. Housing. Home improvement – oops, hitting close to home for me there. In other words, anything that isn’t absolutely necessary for survival. Will that bring on a recession? You betcha. Will it go too far? More than likely. This is a global economy after all. Britain is already in trouble. France can’t get their people to agree to work another two years before retirement. And Germany? Who knows. But it’s a safe bet when there’s a run on banks in America, Britain and France, Germany will feel the pinch. And what about China? Russia? Instability everywhere? That’s a post for later on as the pinching spreads. But it doesn’t bode well for any of us, economically or likely politically. That will have to wait for another post as well. Will it bring Trump back? Depends on how healthy Joe Biden stays. Scary, huh?

But There’s More

Add in the effect of the Covid pandemic on people staying home to work. This is now a ‘thing’ and the ramifications are significant to one additional problem in the financial sector. What might that be? Commercial real estate and the loans taken out to pay for those buildings. Who’s hurting most? From a cursory glance, it appears commercial real estate in large Texas cities have the most vacancies. Why is that? I thought everybody was moving from California to Texas? Let’s check that out.

Empty Office Space in Houston

I’m back! The answer isn’t clear from a quick Google search. But this is my sense: commercial real estate vacancy rates in these large Texas cities have been high for quite some time – likely since the crash in ’08. Oil prices dropped below zero at one very fluky point. That had to have an impact on that commercial space in those big cities.

God knows how these developers have hung on as long as they have. Low interest rates probably helped. But that’s not the case anymore. There’s talk about turning older commercial buildings into residential housing, so I suppose that means there’s no going back. Oil will likely range in price between $70 and $80 a barrel for a long time to come. No wonder Texas is crazy.

One of Erik’s and My Favorite Shows

But I digress. To summarize: the country’s financial situation reminds me of those episodes of Air Disasters on The Smithsonian Channel. It is always at least three things going wrong that cause airplanes to crash. How does that apply to the economy? So now we see interest rates rising leading to regional bank failures with high commercial vacancy rates, negatively impacting commercial mortgage backed securities and the crazy Republicans in Congress threatening to default on the debt. That’s four factors. Looks like a perfect storm for crashing the economy to me.

Impact Time

Here’s what I’d ask: if we’re gonna crash, can we do it before September? That will help my interest rate scenario previously discussed if the Fed starts cutting rates. Who ever thought I’d be hoping for a crash? Sorry to be so parochial, but hey: it’s every man (or woman) for himself/herself now. Don’t say I didn’t warn you.

Still on This Topic

I’m sorry if I’m beating this poor horse to death, but I feel compelled to get it down in bits and bytes, if for nothing else than posterity. It’s the Economy Stupid, the smartest thing ever said by a redneck named James Carville way back in the Clinton Era. It’s always about the economy, forever and ever, world without end, Aaahhhmmen.

James Carville – I wonder if he realized how smart he really was when he said this?

Right now I’m sort of noodling, as the future in the next three-four months will be opaque, but of the utmost importance. So indulge me a bit as I try to parse through this thing.

Here we go. Money right now is flowing to safety and to higher interest. Per Axios today, half a trillion (yes, Virginia, I said trillion) dollars has flowed out of banks and into treasuries and money market funds since last April. Why is that time frame and the receiving institutions significant? It’s when the Fed started raising interest rates. After twenty some odd years of low rates, now we’re in the stratosphere, relatively speaking. Another quarter point increase from the Fed this past week. Three bank failures in the past three weeks. Result? Treasury prices are up, which means interest rates are down. Is this a good thing or a bad thing? It depends.

The Infamous Debt Ceiling

Interest rate hikes make borrowing more expensive for everyone, including the federal government. That adds to the deficit. Treasuries, or T-bills as they are called, are used by the federal government as a means to borrow money. If the interest rates are going down, that’s good for keeping the deficit numbers in check. Does any of that matter? We shall see this summer when the Republican-led Congress has to vote on increasing the debt ceiling. Let’s talk about that a bit.

The chair of the House Budget Committee is a Republican named Jodey Arrington, a man who thinks it’s a good time to default on the debt by not raising the debt ceiling. This is to pressure President Biden to cut spending on social programs. But not raising the debt ceiling means Social Security checks would not go out. That’s 44% of our monthly income. Ouch. I’ve already alerted Emily that she needs to be hoarding her paychecks for the next three months, just in case. There’s another issue for us. Our variable rate house mortgage with Wells Fargo will reset to a 15 year fixed rate mortgage in September. This will triple our mortgage payment. If we cannot refinance with them or another bank, the impact to our budget will be significant. So all this noise regarding the financial system, Congress and banks really hits home with our personal budget. Right now, the odds of the government defaulting on its debt are around 11%. Each month that goes by without an agreement increases those odds and lends more instability to the system. So with money flowing out of the banks within this unstable financial system, the logical next step is for financial institutions to cut back on lending.

The Trillion Dollar Question

So the big question for us, is: what will interest rates be on mortgages come September? It’s anyone’s guess at this point. But I’ll be watching closely. I’d advise you to do the same.

Attention Must be Paid

Our Current Reality

Nearly two years ago, I wrote a blog piece about Credit Suisse. The gist of my post was that the esteemed bank/holding company had finally gone too far, and was destined to fail. So what is happening right about now? Yesterday, the Swiss government had to backstop its failure with a fifty billion dollar bailout. It’s lost 75% of its stock price. It has to redo its books for the past two years. In other words, a bank too big to fail appears on the verge of failure. So what can we learn from this?

First of all, once again I foretell the future. I figured it would happen last year, but these things do that time. Second – the Swiss government sure has a lot of money in its coffers. No big surprise there. All those billions stashed by oligarchs and other assorted criminals generates fees and interest. Finally, after a decade of mismanagement, Credit Suisse is finally getting its comeuppance. Even a French derivation of Swiss in its name can’t save it this time.

History Does Tend to Repeat Itself

So what’s different from last year or before? Interest rate hikes. Global interest rate hikes. All those central banks working in synch to make money more expensive. The management at Silicon Valley Bank ignored the trend and now they’re likely going to have to give back a whole bunch of dough. All those crypto investments hawked by Tommy Boy Brady and Matt Demon (oops, Damon..sorry, autocorrect didn’t catch that one) are collapsing, because there never was anything behind them anyway. This is clearly a return to the heady days of late 1929, where everybody everywhere all at once was investing in crazy market offerings.

Great Series that Contains a Forewarning

I’m changing the subject slightly, but it will tie in with the above, I promise. We’ve taken to gathering in the evenings that I’m not working and watching serials on television. We did Deadwood (previous post), The Man Who Fell to Earth (ditto – I think?) and now we’re doing Babylon Berlin. Berlin – in 1929. The series does a good job of capturing all the elements of what went on in that hotbed of hedonism in that time frame. But the main thesis is the rise of Nazism, in reaction to those excesses and a desire to ‘make Germany great again’. Kinda like today. With the likes of Ron DeSantis (ooh: am I going to have to register as a blogger since I mentioned that bully’s name?) worrying about ‘wokism’, we’re on the verge of rewalking the path that led to world wide disaster.

The other thing I watched was Frontline from Tuesday night, talking about easy money since the crash of ’08. There were lots of sound bites, but it was more about furthering the blame game than truly explaining the situation that we face at the moment. So let me try to do that (back to talking about economics).

This Picture Gets it Right

There are conflicting pressures at work. Inflation has finally arrived. Where did it come from? The Covid pandemic. Supply vs demand. Demand stayed constant; supply dwindled. Not too many dollars at first: too few goods. Then we got used to prices increasing at Publix. We didn’t stop buying toilet paper; we just paid P&G more for the Charmin. That was the case throughout 2022. The Federal Reserve and Central Banks worldwide finally decided that inflation was not temporary or even transitory: it was pretty much now baked in, some places more than others. So they used the only tool they had at their disposal and raised interest rates. Since they were late in acting, they undoubtedly went too far too fast. The objective was to cool the economy and stimulate layoffs. That hasn’t happened. It isn’t likely to happen. However, now we’re seeing the real fallout from their actions. Bank holdings are diminishing in value. It’s all about bonds they hold to park their money. Old bonds are worth less because new bonds carry higher interest rates. When the bank attempts to shore up its balance sheet before getting a ratings hit, word gets out through Twitter that depositor’s money isn’t safe, and what happens? The age old phenomenon of bank runs. People standing in line to withdraw their capital. In the case of Silicon Valley Bank, those withdrawals totaled about forty billion dollars. That’s a whole lotta money. Signature’s failure was too much crypto. Same with Silvergate Capital, which didn’t fail, it just closed up shop.

Workforce reductions already in effect before interest rate hikes

But there are other factors at work here, ones you don’t hear much about. They’re causing great confusion amongst the bankers because they are contrary to ‘normal’ inflation dynamics. Those factors are demographics and mortality. We were already short of workers because of reduced birthrates over the past two decades. Add in the half a million American workers who died from Covid. Then there’s the hundred thousand per year dead from overdoses. Finally, consider the effect of all those layoffs when everything shut down . Lots of people went from the workplace to early retirement. The net result? A giant hole punched in the pool of available workers for business. It doesn’t matter how much interest rates rise. Business can’t layoff workers because they don’t have enough to begin with. A true conundrum, eh?

The Titanic as a Metaphor for The Economy?

But I just read that the European Central Bank raised interest rates another half a percent a short while ago. No flinching on their part. Stay the course. Even if it’s heading to that iceberg, it’s what is expected of us. Give me a break. What will happen? We will see more pain coming soon as central banks keep trying to build levees to hold back the rising tide of the financial collapse, greatly exacerbated by their actions. It’s like Andrew Mellon is back at Treasury, advising Herbert Hoover in 1929 not to intervene with direct financial support, because the downturn will burn off the bad stuff. Think of the consequences. Guess we’re about to see a live version of Babylon Berlin.

The End of The Last of Us and the Iffy Banks

The final installment of the HBO Series The Last of Us aired last night. Recall this series is based on a video game of the same name. There are two primary characters: Joel, the protector, and Ellie, the 14 year old allegedly immune to the fungus turning people into zombies. They’d spent eight previous episodes enduring all manner of misery in order to reach Salt Lake City and the ‘fireflies’ who can use something in Ellie to create a vaccine. At least that was the story they believed.

Ellie in the HBO Series and the Video Game

But alas, that wasn’t the entire story. For humanity to live, Ellie must die – via brain surgery. Oh, and there are no guarantees that this can save humanity. “The Surgeon thinks” this might work. Well, that’s not good enough for Joel the protector. He says ‘no dice’, then proceeds to shoot everyone who stands between him and Ellie, his substitute daughter. Perfectly logical reaction, right?

OK, first the overtones. Salt Lake City – Mormon Central, that sect not known for lionizing women. Ellie, the Christ-like sacrificial lamb. Not a 33 year old Nazarene this time: a 14 year old girl is the savior of humanity. Through flashback, we get a glimpse of why Ellie is immune. Just after her birth, Ellie’s mother is bitten by a zombie. She cuts the umbilical cord and the idea is the fungus is in the newborn’s brain, and somehow that makes her ‘one of them’ without being ‘one of them’. Yeah, whatever.

HBO is still the most relevant source of good television for nearly all generations, IMHO

The NY Times reviewer for this episode included a link to a review of the video game from ten years ago. A guy named Chris Suellentrop wrote about its shortcomings and the industry as a whole back then. Apparently it was difficult for the player to assume the role of Ellie for much of The Last of Us. Another link to a 2014 review suggests that episode 7 of the HBO series was a subsequent, separate game. Finally, the review of The Last of Us Part II makes it clear that the HBO series ends with that game’s beginning. Before Joel dies. At the hands of a vengeful woman called Abby. But undoubtedly that’s the stuff of the second series which HBO has already approved.

Yes: provide human flesh to consume?

There is so much to be said about it all, but the episode that really got me wasn’t this final one, it was its predecessor, Episode 8. That was the first time we saw Ellie as something very different: a killer. She was a kid before meeting a cult-like leader who also happened to rationalize and indulge in cannibalism. Normal kind of behavior right? It was inevitable in this landscape. That changed her virtually overnight; she effectively grew up because of her exposure to this man and his followers. Sounds very similar to my plot in the first five books of Suffer the Children. But oh man was I ever na├»ve in writing that series. There’s this whole world out there – the video game world, its players, reviewers – a virtual industry previously unknown to me. It pushes the limits of everything that is terrifying and hopeless. I’m not entire sure I want to know more about it. Emily and I discussed what I perceive to be a nihilistic bent for her generation. But when we watched Episode 9 together, even she said it was, in her words, ‘really dark’. These are, indeed, times of transition for all of us. We should all just hold onto our hats..it’s gonna be a bumpy ride.

Silicon Valley Bank – Iffy at Best

New topic: the recent failure of several banks, some affiliated with crypto, others primary money suppliers to startups. All ‘iffy’ banks. Silicon Valley (SVB) and Signature Bank both went under in the last few days, the result of bad managerial anticipation of the impact of interest rate hikes and skittish depositors. Over the weekend, the Fed tried to find a buyer for SVB with only partial success. The answer? Make all depositors whole, using an alleged ‘one year’ loan to staunch the outflow of cash. Will that be sufficient? According to Marketwatch, there are nine other ‘iffy’ banks out there. If you were a depositor at any one of those, would you leave your money in? Not likely. There will undoubtedly be more fallout to come. Stay tuned, and I’ll write more as it manifests itself.

It’s a fascinating world we live in, eh? Tomorrow we’ll talk about the Saudis making nice with the Iranians and what MBS wants from the US in exchange for God knows what. Can you say nook you lar? George W. Bush did, once upon a time. Later!

Kansas City’s Night

A Pensive Mahomes

Last evening, the Chiefs shone in the second half of the Super Bowl. They dominated the Eagles the entire two quarters. Philly players looked stunned by the outcome. C’est la vie. But I found such irony in another fact. The show playing opposite the Super Bowl was set in Kansas City. But there was little celebrating going on in that plot: it was The Last of Us, Episode 5, entitled “Long, Long Time”. Joel and Ellie arrived in Kansas City to find the city overrun, not by killer mutants but by killer humans, bent on revenge on collaborators with the newly-overthrown government. There were no surprises until the very end, when one of the human horde’s SUVs gets swallowed up in a sinkhole, revealing a swarm of mutants that kill the vengeful last vestige of humanity in KC. Kinda looked like the Chiefs’ defense swarming over the Eagles’ attempts to pursue yardage.

Melanie as Kathleen

There were some issues with the show (no, not Rihanna’s half-time program), but The zombie one. First, there was a big issue with casting. The ‘bad girl’ Kathleen was played by Melanie Lynsky, who will forever be Rose on Two and a Half Men for me. She was most unconvincing as a ruthless killer. Too lispy. Then there’s the soundtrack. Now I know this show is based on a video game, so the music is aimed at a slightly younger demographic. But geez, guys, to call it insipid is to be generous. Moony girl voices, singing songs I know nothing of, add nothing to the proceedings. Often the cleverest shows include songs in the closing credits that appeal to a different age. In this case, they could have gone with the old time pop tune “Kansas City” by Lieber and Stoller, sung by Wilbert Harrison in 1959. But that would be too obvious. A better option would have been to honor Kansas City’s contribution to jazz that began in the 20’s in the Prohibition era. The town was overseen by a political boss named Tom Pendergast. 12th Street and Vine had about 50 jazz clubs, the site referenced in a verse of Wilbert’s song.

Count Basie

KC is where the likes of Count Basie and Charlie Parker got started with their particular form of jazz. So the end of the show could have featured Basie’s “One O’Clock Jump” or maybe “April in Paris”, but it feels like neither of these fit. Instead, I think the Charlie Parker songbook would have been more appropriate. “Bird of Paradise” would likely have been too obscure and too upbeat for the mood. The one I would have picked would have been ‘Don’t Blame Me”, title appropriate to the theme of the show, and just the right tempo.

Charlie Parker, ‘Bird’

It’s too bad the show runners aren’t better educated on musical genres apart from current EMO-ish tunes. They missed a real opportunity last night. But speaking of EMO, I had some other thoughts about The Last of Us. Recognizing it’s based on a video game, I started to notice by Episode 5 that everyone dies, some sooner, some later. But everyone except Joel and Ellie die. No one is left behind, waving goodbye. But that is the nature of video games. No! Often that is the goal of a video game: kill everyone. How very sad for young people. No wonder you’re all so jaded and depressed. No wonder these mass shootings occur. No, I’m not suggesting a causative relationship between video games and mass shootings. What I am suggesting is that a hopeless young person often acts out their rage and despair in one last act that will give them notoriety. If you can’t find it in a video arena, why not real life? Whatever that is.