“Britain’s brief period of semi-freedom has ended, and with it any hope of a return to cultural, social or economic normality. We were out on parole, it turns out, and with a second wave of the virus seemingly starting to break, our liberties are being revoked. The heady days of August, with their subsidised meals and makeshift staycations, were as good as it got – a passing, delusional moment. We are entering another period of oppressive social control that could last until spring, a partial Lockdown Mark II which starts with the six-person limit on gatherings.
Cancellation therefore looms for Halloween, Christmas, Diwali, Rosh Hashanah, bonfire night and just about everything else that gives anybody any joy or meaning during Britain’s dark, long winters. Children won’t have real birthday parties. Quarantines or travel bans will likely be extended. The idea of al fresco dining will be a sick joke in the snow..
This shift in the mathematics has mixed implications for the economy. The return to offices, in as much as it was ever going to happen, may even go into reverse. Strict restrictions will remain on public transport..
There will be intense structural change, industries will be decimated and city centres will never look the same again. At least construction sites, factories and warehouses will be kept open this time, unlike when the original lockdown was imposed. The Government cannot afford another collapse in GDP. But the economy will not recover fully as quickly as the V-shaped optimists were hoping, and neither will the public finances – especially if the pressure for more subsidies becomes irresistible..
The cultural and social consequences of this authoritarian turn will be grave: previously law-abiding citizens will look at the police in a very different light. There will be widespread curtain-twitching, neighbour pitted against neighbour, all overseen by a joyless army of Covid “marshals” to monitor compliance. The first lockdown’s community spirit will disappear, replaced instead by a quasi-Napoleonic assumption that whatever isn’t explicitly allowed must be prohibited. We will become more Latin in the way we consider law and order and the state. Paradoxically, Boris Johnson, a quintessentially liberal Tory, will end up making our country permanently more illiberal, less respectful of freedom and more prone to being bossed around.
At the same time, the Left-wing professional classes will use their anger at Brexit and the prospect of a no deal as an outlet for discontent with the Covid fiasco. They were committed to the first lockdown; they won’t be this time, and will focus instead on criticising Johnson’s government. National unity is long since over.”
The word “propaganda” used to have a comparatively innocent meaning. It was how the Church sought a way of propagating the faith. Then came the ‘Great War’.
When Britain entered the war against Germany in August 1914, it was lamentably underprepared. Germany had an undefeated Imperial Army of nearly 4.5 million men. The British professional army numbered just 80,000 regulars – small enough, as the late Chancellor Otto von Bismarck had joked, to be arrested by the German police. The country needed to recruit soldiers, and quickly. We have all seen the marketing response. That poster of Lord Herbert Kitchener, for example, making a direct and personal appeal to the British public: your King and Country Need You. It was what Geraldine Boylan called the “first systematic propaganda campaign directed at the civilian population.”
It was also stunningly effective throughout the duration of the war. So effective that it would prove the inspiration for a young German soldier wounded during that same war.
In 1924 in a small prison in southwestern Bavaria, Adolf Hitler would express his admiration for British wartime propaganda to one of his lieutenants. Britain had mustered “unheard-of skill and ingenious deliberation”; “by introducing the German as a barbarian and a Hun to its own people, it thus prepared the individual soldier for the terrors of war and helped guard him against disappointment” – it also “increased his fury and hatred against the atrocious enemy.”
The German Empire, with its “mania for objectivity”, had failed to capture the necessary attention of its people. “It was hardly probable that [German efforts] would make the necessary impression on the masses. Only our brainless ‘statesmen’ were able to hope that with this stale pacifistic dishwater one could succeed in arousing men to die voluntarily.”
German propaganda in the First World War tended to be legalistic, officious, and convoluted. (The ‘Remain’ campaign during Brexit would essentially make the same strategic mistake: by appealing primarily to the head, with doom-laden warnings of the economic cost, rather than to the heart. ‘Take back control’ turned out to be a more compelling cri de coeur.) Germany’s propaganda official in America in 1914 wrote a commentary for the Saturday Evening Post. In it, his main point was that the relevant peace treaty between Germany and Belgium had, technically, expired:
“We were sincerely sorry that Belgium, a country that in fact had nothing to do with the question at issue and might wish to stay neutral, had to be overrun.”
These lessons were learned, by the defeated side. In Mein Kampf, Hitler would ask,
“To whom has propaganda to appeal ? To the scientific intelligentsia, or to the less educated masses ? It has to appeal forever and only to the masses !”
Propaganda must “be popular and has to adapt its spiritual level to the perception of the least intelligent.. Therefore its spiritual level has to be screwed the lower, the greater the mass of people which one wants to attract.”
Tim Wu, in his book The Attention Merchants:
“Hitler also intuited a few other basic truths about how we process information: since everything can be ignored, imprinting information in the memory requires a constant repetition of simple ideas: “The great masses’ receptive ability is only very limited, their understanding is small, but their forgetfulness is great. As a consequence of these facts, all effective propaganda has to limit itself only to a very few points and to use them like slogans until even the very last man is able to imagine what is intended by such a word.” Nuance was nonsense; complexity was a risk: “As soon as one sacrifices this basic principle and tries to become versatile, the effect will fritter away, as the masses are neither able to digest the material offered nor to retain it.” One couldn’t overstate the intensity of the effort required, for the masses “with their inertia, always need a certain time before they are ready even to notice a thing, and they will lend their memories only to the thousandfold repetition of the most simple ideas.”
And so the example of two world wars brings us to the ‘triumph’ of one of our own government’s most recent Coronavirus propaganda campaigns:
Stay at home Protect the NHS Save lives
Nobody could accuse the government or its now privatised Behavioural Insights Team (the so-called “Nudge Unit”) of baffling the populace with science here. A more recent iteration of Coronavirus propaganda plunged even more conclusively downmarket towards the patronisingly simplistic:
Hands Face Space
(We can probably all recognise when we’re being treated like morons.)
But that earlier ‘Stay at home’ iteration of the guidance worked – perhaps more efficiently than the government could ever have dreamed. Unfortunately, some things are easier to start than they are to stop. Scaring the population witless, and chasing them out of their offices into the apparent safety of their own homes, turns out to be one of them – especially if you elect to keep paying them as part of that Faustian bargain. But eventually, the piper needs to be paid..
To be fair to the government for a brief moment, and for that matter to all propagandists, propaganda cannot sell entirely dud products. As Jacques Ellul writes in his book Propaganda: the formation of men’s attitudes:
“..the propagandist must concern himself above all with the needs of those whom he wishes to reach. At the most elementary level, propaganda will play on the need for physical survival (in time of war). This can be further utilized, either to weaken resistance or to stiffen it. For example, Goebbels used this theme in 1945 to prolong resistance: “By fighting you have a chance for survival”. All propaganda must respond to a need, whether it be a concrete need (bread, peace, security, work) or a psychological need.. Propaganda cannot be gratuitous. The propagandist cannot simply decide to make propaganda in such and such a direction on this or that group. The group must need something, and the propaganda must respond to that need.”
Propaganda, in other words, only works if it is pushing at an already open door. This may explain why the mainstream media’s universal support for the Ukrainian incumbents is now meeting with an increasingly sceptical public response, at least amongst this correspondent’s contact network.
At the start of 2020, it seemed clear that a dangerous new virus was spreading around the world from China, and what everybody wanted was information and advice. Unfortunately, this need was met by three of today’s new Horsemen of the Apocalypse, namely government, the mainstream media, and social media. Many governments proved themselves not up to the challenge, notably those of the United Kingdom and the United States. Collectively, in no small measure this was down to a failure on the part of science itself.
Science in the 2020s – or rather scientists – have met their Waterloo. Here is what Professor Michael Levitt, Stanford Professor of Biophysics and 2013 Nobel Laureate in Chemistry, said in a recent videoconference:
“I’m going to leave aside economics, politics and media, and just simply talk about the science here.. One thing that has struck me, once the virus moved from its China / Korea phase to the rest of the world at the beginning of March, is how totally inadequate science structure is for real-time science. People [institutions and research authorities] are insisting on refereed reports; no-one wants to share anything; the scientists are more panicked and scared of reality than anybody else. The august organisations like Lindau, the Royal Society, the National Academy of Science, have been totally silent. I am really disappointed. This has got nothing to do with the politics. As a group, scientists have failed the younger generation. Deciding what to do in this situation is really, really difficult. We cannot rely on one or two voices. There should have been a committee formed, either by the Nobel Foundation, by Lindau, by the Royal Society, the National Academy, in the middle of February, when this was coming down the road, and we should have discussed this. Instead, we let economics and politics dictate the science and, for me, the worst opposition I got was from very, very prominent scientists who were so scared that the non-scientists would break quarantine and infect them. There was total panic. And the fact is that almost all the science we were hearing, from organisations like, for example, the World Health Organisation, was wrong. We had Facebook censoring [research], the World Health Organisation showed contrary views.. This has been a disgraceful situation for science.. We should have been talking with each other.. reports were released openly, shared by email, and all I got back was abuse..”
[Emphasis ours.]
Into the informational void stepped the media. Traditional media responded as you might expect: by trying to terrify everybody – and largely succeeding. The threat to global public health represented by SARS-CoV-2 was amplified by the well-worn media mantra that “if it bleeds, it leads”. Alas for global public health, journalists are neither clinical epidemiologists, nor statisticians. As the economist Tim Harford pointed out in a copy of FT Magazine,
“Without good data, for example, we would have no idea that this infection is 10,000 times deadlier for a 90-year-old than it is for a nine-year-old — even though we are far more likely to read about the deaths of young people than the elderly, simply because those deaths are surprising. It takes a statistical perspective to make it clear who is at risk and who is not.”
(The impact of social media was admittedly more nuanced, depending on whom you chose to follow. But Facebook and YouTube did themselves no favours, in arbitrarily cancelling perfectly legitimate scientific content from accredited professional scientists that didn’t fit with their own preferred narrative. Their own preferred narrative involved siding with incumbent Anglo-Saxon governments and the W.H.O.)
We should add, we are not making light of the deaths of any victim of the novel Coronavirus, but a degree of perspective is warranted. As Professor Levitt points out,
“Lack of normality is a terrible risk. We’ve torn the fabric of society and I would not be surprised if the risk of tearing society apart constitutes a 10 times higher excess death risk [than Coronavirus]. People die from poverty, desperation and alcoholism. If we look at the statistics on alcohol consumption over the past month we could easily see excess deaths. A strong smoker loses 10 years of life, which is 120 times higher risk. An alcoholic might lose four to five years of life from this compared to coronavirus.”
To explain, Professor Levitt issued a forecast back in July 2020 that the overall impact of Coronavirus in the US, for example, would equate to roughly one month’s worth of “excess deaths” (i.e. over and above the average mortality rate of the country – roughly 50,000 people die every week in the US). The spread of the virus, in other words, never became exponential. After a few weeks, Levitt predicted, it would simply peter out. This has been the pattern in every country affected. As at end August 2020 his prediction was off by approximately 10%. By comparison, Neil Ferguson’s worst case forecast was for 500,000 UK Coronavirus deaths. Guess which “scientist” continues to get more airtime from our mainstream media ? Credit here should go, in passing, to Freddie Sayers and the team at Unherd, who have done sterling service in offering sensible analysis of the crisis from genuine scientists as opposed to discredited grandstanding fantasists. Levitt also believes that lockdown was a ghastly mistake. But we are where we are..
In any event, we can only conclude that having bet the ranch on draconian lockdown policies – and lost – the British government is now doubling down on the same faulty reasoning, rather than risk earning the anger of the electorate by acknowledging that it got it absolutely wrong the first time around – courtesy of the likes of Neil Ferguson, whose warnings were amplified by scaremongering media ghouls. But brazenly capitulating to the ‘sunk costs fallacy’ risks far more, for the entire country. The accumulated costs of its misguided lockdown policy, let alone the rejuvenated measures of Lockdown 2.0 that would follow, are already more than the national finances can bear. And now we have another magic money tree mysteriously flourishing in record time to pay costs associated with the government’s support for Ukraine against Russia.
It is about time that the government came clean with the electorate and treated them like adults rather than naughty children. People die. People die of things like heart disease, cancer, diabetes and stroke. It is now impossible to know the true toll of Coronavirus, since the administration and Public Health England, like the administrations of other western governments, have deliberately fiddled the figures, and conflated dying “from” Covid and dying “with” Covid. Relative to the population, a small number of people have died from Coronavirus, but then a small number of people die each year after falling down the stairs. Is Boris Johnson now planning to ban stairs ? (Actually, better not give him ideas.)
Nowhere is the absurdity of lockdown seen in all its stark economic cost than in major world cities. James Altucher, writing of New York at the height of lockdown, suggests that the Big Apple simply won’t recover from this sort of government-directed economic shock:
“Midtown Manhattan, the centre of business in NYC, is empty. Even though people can go back to work, famous office buildings like the Time-Life skyscraper are still 90% empty. Businesses have realized that they don’t need their employees at the office.
In fact, they’ve realized they are even more productive with everyone at home. The Time-Life Building can handle 8,000 workers. Now it maybe has 500 workers back..
Even in the 1970s, and through the ’80s, when NYC was going bankrupt, even when it was the crime capital of the U.S. or close to it, it was still the capital of the business world (meaning, it was the primary place young people would go to build wealth and find opportunity). It was culturally on top of its game — home to artists, theater, media, advertising, publishing. And it was probably the food capital of the U.S.
NYC has never been locked down for five months. Not in any pandemic, war, financial crisis, never..
Summary: Businesses are remote and they aren’t returning to the office. And it’s a death spiral — the longer offices remain empty, the longer they will remain empty..”
A similar story for San Francisco and other urban centres.
The implications for our own national finances are grievous. Gilts are a disaster waiting to happen. We still maintain that gold and silver, and sensibly priced miners, should be bought on any dips. Equities, wherever they happen to be nominally listed, should be bought on a strictly bottom-up basis. The future outlook, especially given events in Ukraine, is otherwise too uncertain to make big and possibly unsustainable macro calls.
Brace, also, for a deluge of books covering the Coronavirus crisis, which will define our age as surely as the Great Depression did the 1930s. An early entrant is The Wake Up Call by John Micklethwait and Adrian Wooldridge. Reviewing it for the Financial Times, columnist Janan Ganesh – perhaps the paper’s finest columnist – observed:
“It is not big government that works, they conclude, so much as competence and trust. Their treatise might avert a lot of aimless state spending in the future.”
That latter aspiration strikes us as a forlorn hope. But we are certainly living through a colossal crisis of trust. Trust is ebbing away from government, from politicians, from corporations, from institutions – much of what makes the fabric of modern society. We have also seen a practical demonstration throughout the West of why Big Government is not to be wished for, but to be desperately avoided. Professor Michael Levitt, again, in a tweet from 4th September 2020:
“The West has committed suicide, killing the institutions that defined western democracy. While by no means the worst crisis we have faced (WW1, WW2), this is purely self-inflicted and all for an unavoidable few weeks of excess death.”
Lord Sumption would appear to agree. Speaking on the Daily Telegraph’s Planet Normal podcast, he made the following comments:
“..Government had no planning in place before the lockdown was announced; it never conducted any kind of cost-benefit analysis; it never examined the educational or economic consequences of the measures it was proposing to take; it probably was only driven into those measures at the last moment by the now notorious statistical projections of Professor Ferguson. And the result was what we have seen. There was a period of six weeks or so when it was just about possible to justify the lockdown as being necessary to enable the NHS to catch up; thereafter, it served no purpose whatever, other than to destroy our economy and our children’s chances.”
So, once again, bad modelling and bad forecasting leads to economic disaster. 14 years on from the Global Financial Crisis, the technocrats who thought they were in control have learnt precisely nothing.
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
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“Britain’s brief period of semi-freedom has ended, and with it any hope of a return to cultural, social or economic normality. We were out on parole, it turns out, and with a second wave of the virus seemingly starting to break, our liberties are being revoked. The heady days of August, with their subsidised meals and makeshift staycations, were as good as it got – a passing, delusional moment. We are entering another period of oppressive social control that could last until spring, a partial Lockdown Mark II which starts with the six-person limit on gatherings.
Cancellation therefore looms for Halloween, Christmas, Diwali, Rosh Hashanah, bonfire night and just about everything else that gives anybody any joy or meaning during Britain’s dark, long winters. Children won’t have real birthday parties. Quarantines or travel bans will likely be extended. The idea of al fresco dining will be a sick joke in the snow..
This shift in the mathematics has mixed implications for the economy. The return to offices, in as much as it was ever going to happen, may even go into reverse. Strict restrictions will remain on public transport..
There will be intense structural change, industries will be decimated and city centres will never look the same again. At least construction sites, factories and warehouses will be kept open this time, unlike when the original lockdown was imposed. The Government cannot afford another collapse in GDP. But the economy will not recover fully as quickly as the V-shaped optimists were hoping, and neither will the public finances – especially if the pressure for more subsidies becomes irresistible..
The cultural and social consequences of this authoritarian turn will be grave: previously law-abiding citizens will look at the police in a very different light. There will be widespread curtain-twitching, neighbour pitted against neighbour, all overseen by a joyless army of Covid “marshals” to monitor compliance. The first lockdown’s community spirit will disappear, replaced instead by a quasi-Napoleonic assumption that whatever isn’t explicitly allowed must be prohibited. We will become more Latin in the way we consider law and order and the state. Paradoxically, Boris Johnson, a quintessentially liberal Tory, will end up making our country permanently more illiberal, less respectful of freedom and more prone to being bossed around.
At the same time, the Left-wing professional classes will use their anger at Brexit and the prospect of a no deal as an outlet for discontent with the Covid fiasco. They were committed to the first lockdown; they won’t be this time, and will focus instead on criticising Johnson’s government. National unity is long since over.”
The word “propaganda” used to have a comparatively innocent meaning. It was how the Church sought a way of propagating the faith. Then came the ‘Great War’.
When Britain entered the war against Germany in August 1914, it was lamentably underprepared. Germany had an undefeated Imperial Army of nearly 4.5 million men. The British professional army numbered just 80,000 regulars – small enough, as the late Chancellor Otto von Bismarck had joked, to be arrested by the German police. The country needed to recruit soldiers, and quickly. We have all seen the marketing response. That poster of Lord Herbert Kitchener, for example, making a direct and personal appeal to the British public: your King and Country Need You. It was what Geraldine Boylan called the “first systematic propaganda campaign directed at the civilian population.”
It was also stunningly effective throughout the duration of the war. So effective that it would prove the inspiration for a young German soldier wounded during that same war.
In 1924 in a small prison in southwestern Bavaria, Adolf Hitler would express his admiration for British wartime propaganda to one of his lieutenants. Britain had mustered “unheard-of skill and ingenious deliberation”; “by introducing the German as a barbarian and a Hun to its own people, it thus prepared the individual soldier for the terrors of war and helped guard him against disappointment” – it also “increased his fury and hatred against the atrocious enemy.”
The German Empire, with its “mania for objectivity”, had failed to capture the necessary attention of its people. “It was hardly probable that [German efforts] would make the necessary impression on the masses. Only our brainless ‘statesmen’ were able to hope that with this stale pacifistic dishwater one could succeed in arousing men to die voluntarily.”
German propaganda in the First World War tended to be legalistic, officious, and convoluted. (The ‘Remain’ campaign during Brexit would essentially make the same strategic mistake: by appealing primarily to the head, with doom-laden warnings of the economic cost, rather than to the heart. ‘Take back control’ turned out to be a more compelling cri de coeur.) Germany’s propaganda official in America in 1914 wrote a commentary for the Saturday Evening Post. In it, his main point was that the relevant peace treaty between Germany and Belgium had, technically, expired:
“We were sincerely sorry that Belgium, a country that in fact had nothing to do with the question at issue and might wish to stay neutral, had to be overrun.”
These lessons were learned, by the defeated side. In Mein Kampf, Hitler would ask,
“To whom has propaganda to appeal ? To the scientific intelligentsia, or to the less educated masses ? It has to appeal forever and only to the masses !”
Propaganda must “be popular and has to adapt its spiritual level to the perception of the least intelligent.. Therefore its spiritual level has to be screwed the lower, the greater the mass of people which one wants to attract.”
Tim Wu, in his book The Attention Merchants:
“Hitler also intuited a few other basic truths about how we process information: since everything can be ignored, imprinting information in the memory requires a constant repetition of simple ideas: “The great masses’ receptive ability is only very limited, their understanding is small, but their forgetfulness is great. As a consequence of these facts, all effective propaganda has to limit itself only to a very few points and to use them like slogans until even the very last man is able to imagine what is intended by such a word.” Nuance was nonsense; complexity was a risk: “As soon as one sacrifices this basic principle and tries to become versatile, the effect will fritter away, as the masses are neither able to digest the material offered nor to retain it.” One couldn’t overstate the intensity of the effort required, for the masses “with their inertia, always need a certain time before they are ready even to notice a thing, and they will lend their memories only to the thousandfold repetition of the most simple ideas.”
And so the example of two world wars brings us to the ‘triumph’ of one of our own government’s most recent Coronavirus propaganda campaigns:
Stay at home Protect the NHS Save lives
Nobody could accuse the government or its now privatised Behavioural Insights Team (the so-called “Nudge Unit”) of baffling the populace with science here. A more recent iteration of Coronavirus propaganda plunged even more conclusively downmarket towards the patronisingly simplistic:
Hands Face Space
(We can probably all recognise when we’re being treated like morons.)
But that earlier ‘Stay at home’ iteration of the guidance worked – perhaps more efficiently than the government could ever have dreamed. Unfortunately, some things are easier to start than they are to stop. Scaring the population witless, and chasing them out of their offices into the apparent safety of their own homes, turns out to be one of them – especially if you elect to keep paying them as part of that Faustian bargain. But eventually, the piper needs to be paid..
To be fair to the government for a brief moment, and for that matter to all propagandists, propaganda cannot sell entirely dud products. As Jacques Ellul writes in his book Propaganda: the formation of men’s attitudes:
“..the propagandist must concern himself above all with the needs of those whom he wishes to reach. At the most elementary level, propaganda will play on the need for physical survival (in time of war). This can be further utilized, either to weaken resistance or to stiffen it. For example, Goebbels used this theme in 1945 to prolong resistance: “By fighting you have a chance for survival”. All propaganda must respond to a need, whether it be a concrete need (bread, peace, security, work) or a psychological need.. Propaganda cannot be gratuitous. The propagandist cannot simply decide to make propaganda in such and such a direction on this or that group. The group must need something, and the propaganda must respond to that need.”
Propaganda, in other words, only works if it is pushing at an already open door. This may explain why the mainstream media’s universal support for the Ukrainian incumbents is now meeting with an increasingly sceptical public response, at least amongst this correspondent’s contact network.
At the start of 2020, it seemed clear that a dangerous new virus was spreading around the world from China, and what everybody wanted was information and advice. Unfortunately, this need was met by three of today’s new Horsemen of the Apocalypse, namely government, the mainstream media, and social media. Many governments proved themselves not up to the challenge, notably those of the United Kingdom and the United States. Collectively, in no small measure this was down to a failure on the part of science itself.
Science in the 2020s – or rather scientists – have met their Waterloo. Here is what Professor Michael Levitt, Stanford Professor of Biophysics and 2013 Nobel Laureate in Chemistry, said in a recent videoconference:
“I’m going to leave aside economics, politics and media, and just simply talk about the science here.. One thing that has struck me, once the virus moved from its China / Korea phase to the rest of the world at the beginning of March, is how totally inadequate science structure is for real-time science. People [institutions and research authorities] are insisting on refereed reports; no-one wants to share anything; the scientists are more panicked and scared of reality than anybody else. The august organisations like Lindau, the Royal Society, the National Academy of Science, have been totally silent. I am really disappointed. This has got nothing to do with the politics. As a group, scientists have failed the younger generation. Deciding what to do in this situation is really, really difficult. We cannot rely on one or two voices. There should have been a committee formed, either by the Nobel Foundation, by Lindau, by the Royal Society, the National Academy, in the middle of February, when this was coming down the road, and we should have discussed this. Instead, we let economics and politics dictate the science and, for me, the worst opposition I got was from very, very prominent scientists who were so scared that the non-scientists would break quarantine and infect them. There was total panic. And the fact is that almost all the science we were hearing, from organisations like, for example, the World Health Organisation, was wrong. We had Facebook censoring [research], the World Health Organisation showed contrary views.. This has been a disgraceful situation for science.. We should have been talking with each other.. reports were released openly, shared by email, and all I got back was abuse..”
[Emphasis ours.]
Into the informational void stepped the media. Traditional media responded as you might expect: by trying to terrify everybody – and largely succeeding. The threat to global public health represented by SARS-CoV-2 was amplified by the well-worn media mantra that “if it bleeds, it leads”. Alas for global public health, journalists are neither clinical epidemiologists, nor statisticians. As the economist Tim Harford pointed out in a copy of FT Magazine,
“Without good data, for example, we would have no idea that this infection is 10,000 times deadlier for a 90-year-old than it is for a nine-year-old — even though we are far more likely to read about the deaths of young people than the elderly, simply because those deaths are surprising. It takes a statistical perspective to make it clear who is at risk and who is not.”
(The impact of social media was admittedly more nuanced, depending on whom you chose to follow. But Facebook and YouTube did themselves no favours, in arbitrarily cancelling perfectly legitimate scientific content from accredited professional scientists that didn’t fit with their own preferred narrative. Their own preferred narrative involved siding with incumbent Anglo-Saxon governments and the W.H.O.)
We should add, we are not making light of the deaths of any victim of the novel Coronavirus, but a degree of perspective is warranted. As Professor Levitt points out,
“Lack of normality is a terrible risk. We’ve torn the fabric of society and I would not be surprised if the risk of tearing society apart constitutes a 10 times higher excess death risk [than Coronavirus]. People die from poverty, desperation and alcoholism. If we look at the statistics on alcohol consumption over the past month we could easily see excess deaths. A strong smoker loses 10 years of life, which is 120 times higher risk. An alcoholic might lose four to five years of life from this compared to coronavirus.”
To explain, Professor Levitt issued a forecast back in July 2020 that the overall impact of Coronavirus in the US, for example, would equate to roughly one month’s worth of “excess deaths” (i.e. over and above the average mortality rate of the country – roughly 50,000 people die every week in the US). The spread of the virus, in other words, never became exponential. After a few weeks, Levitt predicted, it would simply peter out. This has been the pattern in every country affected. As at end August 2020 his prediction was off by approximately 10%. By comparison, Neil Ferguson’s worst case forecast was for 500,000 UK Coronavirus deaths. Guess which “scientist” continues to get more airtime from our mainstream media ? Credit here should go, in passing, to Freddie Sayers and the team at Unherd, who have done sterling service in offering sensible analysis of the crisis from genuine scientists as opposed to discredited grandstanding fantasists. Levitt also believes that lockdown was a ghastly mistake. But we are where we are..
In any event, we can only conclude that having bet the ranch on draconian lockdown policies – and lost – the British government is now doubling down on the same faulty reasoning, rather than risk earning the anger of the electorate by acknowledging that it got it absolutely wrong the first time around – courtesy of the likes of Neil Ferguson, whose warnings were amplified by scaremongering media ghouls. But brazenly capitulating to the ‘sunk costs fallacy’ risks far more, for the entire country. The accumulated costs of its misguided lockdown policy, let alone the rejuvenated measures of Lockdown 2.0 that would follow, are already more than the national finances can bear. And now we have another magic money tree mysteriously flourishing in record time to pay costs associated with the government’s support for Ukraine against Russia.
It is about time that the government came clean with the electorate and treated them like adults rather than naughty children. People die. People die of things like heart disease, cancer, diabetes and stroke. It is now impossible to know the true toll of Coronavirus, since the administration and Public Health England, like the administrations of other western governments, have deliberately fiddled the figures, and conflated dying “from” Covid and dying “with” Covid. Relative to the population, a small number of people have died from Coronavirus, but then a small number of people die each year after falling down the stairs. Is Boris Johnson now planning to ban stairs ? (Actually, better not give him ideas.)
Nowhere is the absurdity of lockdown seen in all its stark economic cost than in major world cities. James Altucher, writing of New York at the height of lockdown, suggests that the Big Apple simply won’t recover from this sort of government-directed economic shock:
“Midtown Manhattan, the centre of business in NYC, is empty. Even though people can go back to work, famous office buildings like the Time-Life skyscraper are still 90% empty. Businesses have realized that they don’t need their employees at the office.
In fact, they’ve realized they are even more productive with everyone at home. The Time-Life Building can handle 8,000 workers. Now it maybe has 500 workers back..
Even in the 1970s, and through the ’80s, when NYC was going bankrupt, even when it was the crime capital of the U.S. or close to it, it was still the capital of the business world (meaning, it was the primary place young people would go to build wealth and find opportunity). It was culturally on top of its game — home to artists, theater, media, advertising, publishing. And it was probably the food capital of the U.S.
NYC has never been locked down for five months. Not in any pandemic, war, financial crisis, never..
Summary: Businesses are remote and they aren’t returning to the office. And it’s a death spiral — the longer offices remain empty, the longer they will remain empty..”
A similar story for San Francisco and other urban centres.
The implications for our own national finances are grievous. Gilts are a disaster waiting to happen. We still maintain that gold and silver, and sensibly priced miners, should be bought on any dips. Equities, wherever they happen to be nominally listed, should be bought on a strictly bottom-up basis. The future outlook, especially given events in Ukraine, is otherwise too uncertain to make big and possibly unsustainable macro calls.
Brace, also, for a deluge of books covering the Coronavirus crisis, which will define our age as surely as the Great Depression did the 1930s. An early entrant is The Wake Up Call by John Micklethwait and Adrian Wooldridge. Reviewing it for the Financial Times, columnist Janan Ganesh – perhaps the paper’s finest columnist – observed:
“It is not big government that works, they conclude, so much as competence and trust. Their treatise might avert a lot of aimless state spending in the future.”
That latter aspiration strikes us as a forlorn hope. But we are certainly living through a colossal crisis of trust. Trust is ebbing away from government, from politicians, from corporations, from institutions – much of what makes the fabric of modern society. We have also seen a practical demonstration throughout the West of why Big Government is not to be wished for, but to be desperately avoided. Professor Michael Levitt, again, in a tweet from 4th September 2020:
“The West has committed suicide, killing the institutions that defined western democracy. While by no means the worst crisis we have faced (WW1, WW2), this is purely self-inflicted and all for an unavoidable few weeks of excess death.”
Lord Sumption would appear to agree. Speaking on the Daily Telegraph’s Planet Normal podcast, he made the following comments:
“..Government had no planning in place before the lockdown was announced; it never conducted any kind of cost-benefit analysis; it never examined the educational or economic consequences of the measures it was proposing to take; it probably was only driven into those measures at the last moment by the now notorious statistical projections of Professor Ferguson. And the result was what we have seen. There was a period of six weeks or so when it was just about possible to justify the lockdown as being necessary to enable the NHS to catch up; thereafter, it served no purpose whatever, other than to destroy our economy and our children’s chances.”
So, once again, bad modelling and bad forecasting leads to economic disaster. 14 years on from the Global Financial Crisis, the technocrats who thought they were in control have learnt precisely nothing.
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
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Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and specialist managed funds.
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