Too Much Oil Anyway

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S1: The following recording may or may not include instances of words being said that the FCC would find me for their long arm could ever reach.

S2: It’s Monday, April 20th. Twenty twenty from Slate. It’s the gist.

S3: I’m Mike PESCA. Some of the networks are not taking the presidential press conferences live or they start playing it, but then they jump in to correct the fact I’d be bad at that job because I’d be pushing the plunger. I know 45 seconds into most press conferences for three days in a row, about a minute in.

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S4: I would have to say. OK, stop the show like Saturday.

S5: This was admitted in Dr. Burke’s will walk through some of these trends in a few moments, but the very positive trends for winning a win to close it out. While we mourn the tragic loss of life and you can’t mourn it in a stronger than we’re mourning it.

S4: Powerful, powerful mourning like mourning on steroids. Hulk Smash, then Hoak grieve, OK. That’s not the actual part. That’s a lie. That’s just a little demented. Here’s the part. That’s an untruth.

S5: On a per capita basis, remember that on a per capita basis, our mortality rate is far lower than other nations of Western Europe, with the lone exception of possibly Germany.

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S1: Well, possibly Germany, but not actually Germany, because per capita, Portugal, Austria, Denmark, Norway, Finland, really all of Scandinavia except Sweden, if you count them as Western Europe, all have a lower death rate than the United States. Plus all of Central and Eastern Europe as well.

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S4: Really everywhere in the world, including China. Because, you know, so many people who are in and we’vehad everywhere in the world a lower death rate than the United States, except that four or five countries in Western Europe that Trump was pointing to, because when it comes to death rate, the per capita number isn’t that instructive.

S6: We talked to the Financial Times John Burns Murdoch about this. I mean, the fact that you may be living in the Southwest and not have that many deaths around you is more salient than the fact that you’re living in New York and the amount of people living in the Southwest combined to create a national population that indicates you have a low per capita death rate. But even if you think that per capita is the way to count these numbers, Trump goes back and forth depending on how it suits him, because in the next day’s press conference, about a minute, a minute in, he’s scrapped the per capita measurement when talking about the absolute number of tests.

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S5: As of today, we’ve tested four point 4.1 eight million Americans. That’s a record anywhere in the world. The United States has now conducted more total tests than all of the following nations combined. France, the United Kingdom, South Korea, Japan, Singapore, India, Austria, Australia, Sweden and Canada.

S6: What a grab bag of nonsense. He’s not wrong. It just doesn’t really mean anything that the United States, a country of friends of 30 million, has tested Singapore, a country of 5.6 million. So what the US testing is at about eleven people per thousand in Australia at 17 people per thousand in Austria. It’s 20 per thousand. You’re twice as likely to get a test in Austria as in the United States. Let’s compare a part of the United States that’s of like population to Austria. New Jersey, they both have about eight point eight, eight point nine million people. Also, they both share a border with a major hotspot. Right. New York City in northern Italy. So New Jersey has done 160, 1000 tests. Austria has done one hundred two thousand tests so close. But Austria is a little better. Austria has had 470 deaths, which is bad. New Jersey has had four thousand three hundred sixty two deaths, which is horrendous. Now, where would you feel more comfortable as a citizen? Where would you feel better served by your government if one of these two government entities were to brag? Which one should it be? Today, Trump uncorked this bit of logic ventilators, ventilators, ventilators. Because ventilators, ventilators, ventilators were thought to keep people from dying, dying, dying. So he killed kind killed your maniac, maniac, maniac. Trump cited two articles in the National Review talking about ventilator hype. It does look like he’s right in so far as it seems that the United States will not exceed its ventilator capacity. But framing it that way as, oh, all you ninnies who were worried is just so wrong. It doesn’t put us all in the same. Vote. It’s an us versus them, my critics versus me, as opposed to saying we moved our resources around. We socially distanced our way out of the problem. It’s by trying so hard as a country and making so many sacrifices that we didn’t get to the horrible point where we needed extra ventilators. Maybe you could even mow he’s Trump, but it would be nice. It’d be nice if Trump could exhibit a little humanity just to acknowledge some of our assumptions about ventilators may not have even been right to begin with. Turns out ventilators prove less effective than what’s called pruning, which is a fancy term for lying on your side or stomach. It actually increases oxygen pretty well every day at every press conference. There are some sorry, numerous falsities, facts to correct, inferences to rebut. But I still think the overall facts should not be shielding the public from Trump’s misstatements. Well, the worry is that the president’s constant untruths will confuse or mislead the public as to how we’re actually doing. I firmly believe the president’s preening or scolding or arguing or pettiness isn’t something voters need to be shielded from. It shows us over and over again just who our president is on the show today. Oil one gallon, $2. OK, two for one. OK. OK. I’ll pay you a dollar just to take it off my hands.

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S7: But first, Nobel Prize winning economist Joseph Stiglitz answers questions about our current predicament and our ongoing challenges with wealth in this country.

S8: Joseph Stiglitz is one of the most important economists in the world, how important? Well, they don’t even list the chair of the Council of Economic Advisers under President Bill Clinton because there’s too much else to get to like. Nobel Prize winner and chief economist of the World Bank. His newest book is People Power and Profits Progressive Capitalism for an Age of Discontent. And if you thought the age was marked by discontent when the hardcover came to print, let’s consider it now. Hello, Professor Stiglitz. Nice to be here. So first, I want to talk about not just the depths of this recession. And let’s let’s hope it’s only recession and not a depression, but the kind of recession it is. So I want to talk about quality and quantity. It seems to me. But you tell me in the past when we’ve had recessions, they’ve been because of essentially demand. You know, the last recession, there were mispriced home assets. And so there was all this excess demand that couldn’t be met. But this time supply has been thwarted.

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S4: All of a sudden, without warning, boom, the economy comes to a halt because we’re preventing the supply from getting to the marketplace. And that’s, of course, we’ll have downstream effects like people will lose their jobs and then they won’t be able to create the demand. But does the kind of economic downturn it has been? How will that affect what happens going forward and how we get out of it?

S9: It’s totally different. And that’s why the name that was given to the rescue package that Congress passed, which was call it a stimulus package, was totally misplaced. The problem was not a lack of aggregate demand, as you said, for 2008, but the covered nineteen. Nobody wanted to go to work. Nobody wanted to buy goods that required them to interact with other people. It was both a supply and demand shock at the same time. And that means that responses have to be markedly different. But it is important to realize that as this lockdown continues and as economic activity gets interrupted, there will be adverse effects on aggregate demand. And the magnitude of that will depend to a large extent on how we respond and the fact the way the way government responses have been designed so far have left enormous gaps that make me very worried about what the economy will look like even after we control the pandemic.

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S10: So the only entity that doesn’t have this balanced budget constraint is the federal government. And not only that, they print their own money. And we can talk about inflation in a second, but they’re the ones who have to. We can’t expect the states to spend more than they have, but we can expect the federal government to rush in with a lot of spending. And compared to 2008, it hasn’t been true or 2009 it hasn’t been terrible. But from what I’ve read, you think that the federal government could do a lot more.

S9: That’s right. And it could do it in a much better designed way. So, for instance, Representative Jiah Paul has a proposal called the Guaranteed Paycheck Program. And what that does, it says look at the IRS and the Social Security, have all the data on all the companies, including how much every worker gets paid and what every company is paying. If you used that data based and you use some of our data processing companies, you could have been able to get money to all the vulnerable people very quickly and in a very targeted way. And it would have cost much less than the current program has cost. And that’s what a number of European countries have done. So I think when you look at it in comparison with what has been done elsewhere, the administrative costs have been huge. About 1 percent, about three and a half billion dollars go into the banks to administer program. And when they haven’t done a very good job and not well targeted and the unemployment rate soared much higher than in other countries, which began at a higher level of unemployment, but have been able to maintain it, keep it from rising in the way that it has in the United States.

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S11: The unemployment benefit itself, give these administrative costs aside, seems, oh, I’m not going to say generous. It’s terrible if you have to take it. But six hundred dollars a week. For the amount of time that it’s available, in addition to state funds, I mean, that comes out over a sixty thousand dollar a year salary, that seems okay.

S9: They have put money in on the assumption that this is going to be a very short term interruption. And the thing is that today it’s looking increasingly clear that at least in parts of the country, this is going to last a lot longer. So the amounts that we had projected are clearly going to be insufficient. There’s another problem with the unemployment insurance system, which was that in many of the states it was not prepared for the onslaught of applications. And that suggests that actually the numbers that we’ve seen, more than 2 million who’ve applied is a vast underestimate of really the number of people who’ve been unemployed, furloughed, let off their job.

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S11: Yeah. And so the unemployed, the official unemployment rate went from, what, about four to eleven or so?

S9: That’s right. And it’s probably going to go much higher. All the projections are that it will go possibly to an excess of 20 percent.

S11: Yeah. So I’ve heard I heard an economist, Furman of Yale, I think, say that he looked back and the most we’ve ever wiped out unemployment in a year is point 7 percent. So, you know, extrapolate it’s gonna be a decade to get back to where we were. Does that seem plausible to you?

S9: Will it come? Coming back to what I said before. It really depends on how well we manage the Cauvin 19 crisis, because if it were just a supply side event, once the pandemic is under control, you might say, well, we’ll just pick up with where we left off. The problem is we won’t be able to do that for a couple of reasons. First of all, both household and firm balance sheets are going to be destroyed. The average American has five hundred thousand dollars in the bank account. He misses one or two paychecks and he’s in desperate shape. So that means that there are going to be lots of families that were on the edge and been pushed over the edge. That means they’re not going to be buying cars or even clothes. That’s going to limit demand. There’ll be a lot of firms in a similar position, which will limit their amount of investment and their worry about demand will also limit the amount of investment. And then there are a whole set of liquidity problems. A lot of people are not going to be paying the rent. The landlords won’t be having their income. They won’t be able to play paid their suppliers.

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S10: And you get a credit gridlock, which is very difficult to get out of you in the past have, I think, rightly said we’ve been to we’ve agonized too much over the debt and there’s a lot of actually bad faith, Afghanization. Oh, when my party is in power, I could drive up the DAP, but when your party can’t. That said, when you look at the price tag of all this, when does a twenty three trillion dollars. Now, when does that begin to restrain the country that provides the currency that the world uses?

S9: I’m not that worried about it because as I mentioned before, as we leave that pandemic behind us, it may take a while. There’s still going to be a real shock to the economy. What we call balance sheet effects, liquidity effects. And people are going to be scared and there’s gonna be a precautionary behavior. So I think there’s gonna be an insufficiency of aggregate demand for sometime in the future. Now, at some point, all the liquidity that we put into the economy, all the borrowing may lead to increased inflationary pressures. So we’ll have to keep a lookout for that. When that happens, we have a set of tools to deal with that. We have actually two sets of tools. One of them is we raise taxes and there’s a lot of opportunity to raise taxes on the very rich, as Warren Buffett put out a pointed out. And we need environmental taxes to strengthen our environment, environmental policies to deal with the problems of climate change. So we have a lot of potential of raising revenues that would dampen those inflationary pressures. And the other one is that monetary policy can tight, tight, no little bit and take out some of the liquidity which they poured into the economy in the last few months.

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S10: Right. In two years, if we’re in a expansionary times and the unemployment is dropping or drop to. Somewhere near where it was before, you know, this is one of those God willing scenarios and the debt was, I don’t know, 35, 40 trillion with that worry you at that point, obviously.

S9: Yes, but we’re not talking about debt levels like that. You know, one way of thinking about it is just go back it to World War 2. We emerged from World War 2 with the debt GDP ratio of about one hundred and thirty five percent in the period after that was the period of our most rapid economic growth. President Eisenhower was not afraid of the deficit. He didn’t say, well, off defs austerity. No. He had a very robust highway program, an education program or research program. And out of all that came one of our real periods of prosperity. And it was shared prosperity with every group participating and the lowest to the bottom having the highest rate of growth compared to the top. So it seems to me that we can manage that debt. If we put in place the right policies, obviously if we do just the opposite, if we try to have austerity, we will wind up with a very weak economy and stagnation for years to come.

S11: So I think it’s a glib point, but I think you’d have a good answer for it. I have seen people on Twitter talking about the fact that Abbott Labs is coming up with, we hope, some good serology and antibody testing. Other private companies are well, I’m not just talk about chipping in with PPE. Really coming up with some of the technology that could change as private companies. And so people perhaps not Nobel Prize winning economist will say, ha, ha, see Bernie Sanders, the private sector can deliver more than the public sector. But what’s the you know, how would you respond to glib, though, it is such a charge?

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S9: Well, fundamentally, all those advances rest on basic science, which has been basically underwritten by governments, not only in the Nordic states, but in Europe. And it is that those advances in basic science, which are really the basis of the advances that our corporate sector brings about. So if the foundation of all the recent work in biology that we’re talking about is research in DNA and RNA, all of that was government funded. It didn’t come out of private laboratories. Moreover, the real danger is that when we rely too much on private laboratories and on intellectual property, the danger is that the market maximizing profits will allow the rich to get access to the vaccines to get access to the test. But ordinary citizens won’t. And that means we will not be able to get the pandemic under control. So we’ll have to do go beyond the market. The market knows how to charge higher high prices. It knows how to exploit an uncertain times. It does do a good job in innovation. But we’ve seen in the last few months real market failures. Our economy, our market hasn’t even been able to produce the masks and the protective gears that are our hospitals need. They haven’t been able to produce the tests that we need. So it is very clear that for whatever the strengths of the market, this pandemic event and nothing else has showed some of the limitations.

S11: Well, President Trump says at least part of this is because of an attenuated he didn’t use the word supply chain that we rely on China for some of this. And he says we’d never shut up. We should have produced it at home. Does he have a point?

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S9: Nobody forced the market to do that. The market was short sighted, focusing entirely on profits today without any attention to resilience to risk. So I really blame the market. Just like, you know, in 2008, 70-plus blamed the government. The government never forced banks to make bad loans. It was the banks who decided that they would undertake too much risk. There was a government failure in not stopping the banks from undertaking such risk. But when there’s a robbery, you don’t blame the government for not having a cop on the scene. Really blame. Robert, for doing the robbery, and the lesson is we cops and we need regulators. And here we need more basic science. And the real problem was that the Trump administration knew year after year tried to cut the budget of the CDC, the budget of the science that would have provided the basic science that would have enabled us to respond to this pandemic in a more effective way.

S8: Joseph Stiglitz is the author, most recently of People Power and Profits Progressive Capitalism for an Age of Discontent.

S12: He is a winner of the Nobel Prize in Economics. Thank you so much. Thank you.

S6: And now the spiel. I know a guy who sold his house last month. He was happy to get a good offer, an offer near ask, maybe ask Etting can. It’s too many details. But he wanted to tell me one thing, that the coup de gras of this whole transaction was the furniture he got. The new owner to take all the furniture. Oh, wow. I said, so how much extra did you get for the furniture? No, no, no, extra. You’re not hearing me. I got them to take it as part of the purchase price. No one’s accepting furniture donations on Long Island these days. No one’s carting away big pieces of furniture. I don’t know. The guy said what I would do if he was like, I don’t want your furniture. The guy told me that he was in the real estate business for 40 years. Getting to give away. Being allowed to give away his furniture for free was the greatest deal he ever made. Which brings us to oil. How you might wonder, can oil be negative $25 a barrel if I go to fuel up? Will a guy pay me twenty five dollars? Yeah. Give me 10 bucks.

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S1: I’m pumped to. Right away, sir. Pump two has been turned on and here’s your $10. Well, that actually won’t happen. But, you know, barrel of oil, that’s a commodity and it’s worth something. But we don’t factor this in. There are costs to making the barrel of oil like shipping the oil and storing the oil. And when the actual oil is worth nothing, then all you’re left with are those costs. When the commodity is worthless, you have to literally pay people to take it off your hands. I know some oil producers must be like me when I had a keyboard that went about three octaves with two busted keys and I just kept saying, come on, it’s gotta be worth something to someone. Doesn’t anyone on Craigslist want this slightly damaged piano? They do not. Fine. I’ll just put it outside. But you can’t just put oil outside. The New York Times ran a story about a guy who produced too many onions. Turns out onions aren’t that popular for home use. They’re used in institutions for onion rings. Institutions let us let us stipulate that Hardee’s and Arby’s are institutions. You can bury onions, you can’t bury oil. You can’t just throw a while away. BP tried to do that exactly 10 years ago today in the Gulf of Mexico. It did not go well. The ibises did not like it. I have another friend who’s a geologist. He gets paid to find oil. I joked to him today, is your skill now more assuring the oil companies where you definitely won’t hit oil? Don’t worry, you’re safe here. Shell, Chevron, Exxon, no oil here. I know it could have ruined you had you hit oil. There is some kind of Charlie Kaufman slash George Sanders comedy. Short story about the hero who is the world’s worst geologist. But right now he’s the most sought after man in business. It’s a real skill like trying to produce a musical called Springtime for Hitler that is guaranteed to lose money. There was a lot of glibness about the oil industry going into the negative. It’s not the whole industry. It’s the month and the month of May futures. But, you know, it really could have happened to a nicer group of cartoon villains. Am I right? But such a quick, crushing pain that will actually be felt throughout the whole economy. It’s not really good for anyone. It doesn’t necessarily usher in the accelerated death knell of this dirty industry. At least it doesn’t do it in a way that is decoupled with terrible economic outcomes for the rest of us. The one silver lining is this. If there was ever a time for oil to go to zero, a price that will be reflected somewhat at the pump and really cheap gas prices. This is the best time for it, because normally economic theory says when gas is really cheap, it’s an inducement to get in your car over other various forms of transportation. Not now. No one’s going anywhere. This is the best time for oil to be really, really cheap. It’s not really worth zero or negative 20 or 30 that it hit at some point. That’s what the May futures indicate. It’s a little bit of panic buying, a little bit of just having zero demand in the very, very short term. And when all the orders are to sell, the price will go down and down past zero, down into the negative. People who watch oil have seen this coming for a while, by the way. One of my favorite economic terms is the crack spreads. So when the oil industry, the crack is the term they use to refer to breaking apart or cracking crude oil into the various components they need, you know, gas, oil, jet fuel, diesel fuel.

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S4: The spread or the difference between the crude barrel and its component parts has been negative for a while, indicating the crude is worth less cracked than the opposite of crack. What would that be? Methadone. Negative crack spreads. Please don’t tell your loved one. They have that negative crack spreads occur when suppliers are hitting their tank tops. Did you know this? This is not refer to sleeplessness, but it’s the. Oh, is almost sloshing over the storage capacity. Speaking of gentlemen, you’d never want to associate with a tank top. We have President Donald J. Trump. We have the Saudi king, King Salman. And then there’s a guy whose publicist wants him to take off his shirt whenever he gets a chance. Vladimir Putin, they’re all mentioned in this recent Trump text. The big oil deal with OPEC plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. Just spoke to them from the Oval Office. Great deal for all. Are you short, omma short? I’m assured by this tweet assuring me things are going to be great. Then about ten days later, oil goes negative.

S1: Trump gets on the phone with a guy hiding in his Dacca from the problems going on in the Kremlin. And then he gets on the phone conferences in the titular head of a monarchy who’s 84 years old and has had Alzheimer’s disease for going on five years now. Oh, by the way, the royal family is beset by Corona virus, the royal family of Saudi Arabia, and actually had to halt the war in Yemen because of Corona virus.

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S4: And then right around the time of that triumphant tweet, Trump sought to assure all of us even more strongly when he said this.

S5: As you know, they’re trying to get rid of the glut of oil. There’s a tremendous glut of oil. And we don’t want anything to hurt our incredible industry, actually, the largest producer in the world now. So we don’t want anything to hurt those jobs, those great jobs in Texas and North Dakota and Oklahoma and everywhere. We have a tremendous energy. New Mexico, tremendous energy business. And we want to keep those jobs. So we’re we’re working on it. I think eventually it’s going to work out, may work out quicker than what most people thought possible and maybe it won’t, but it’ll work out eventually.

S4: It always does for Donald Trump, except when it doesn’t. And he says it does. I’ll go. I’ll defer to him on this one. The guy knows oil like him. It’s anxious and trades in crude.

S3: And that’s it for this show, Margaret Kelly, just associate producer, says if the price of suntan oil goes into the negative, she’ll be rooftop bronzing. Fourth with just producer Daniel Schrader is hoping coconut oil goes into the negative. Finally, he could do that hair mask. He’s been eyeballing the gist. Then Samuel took a vial of oil imported upon his head and kissed him and said, Is it not because the Lord hath appointed the Truby captain over his inheritance? And Saul said, You know, I’d be more impressed with the gesture if oil weren’t less than free. What do I owe you money now? Look at this guy. You protect her. Prue, and thanks for listening.