Punish the Prudent: Fed v. Savers

“Coupon clippers” is not a description Americans aspire to fit. In the French, they are rentiers, those who live off the regular payments of others. The words have the whiff of an idle, leisure class–parasitical in many eyes.

But what they are (or their forebears were) are savers, a rather more virtuous-seeming lot. Yet even by that name, they no longer smell so sweet. The Federal Reserve in its latest bent toward loose money this past week has all but condemned the financially chaste to meager droppings, by adopting a “framework” that effectively ensures super-low interest rates into the horizon.

The double whammy for savers is that this policy is part of an ongoing effort to boost the inflation rate, which if successful will further erode the yields of those bond coupons (or more likely, money-market funds and CDs). And in perhaps a triple threat, the Fed’s action appears likely to drive a further fall-off in the value of dollar, the store of savings value.

Super-low interest rates–seen by political economists as necessary oxygen for a depressed global economy in the Covid-19 pandemic–have the further effect of promoting borrowing and speculation, the very antithesis of cautious wealth management. Already, most asset prices are near historical highs, making the notion of “diversification” in place of pure savings a non-starter for those with little running room in life. And, even a future of low longer-term rates (often keyed to mortgages) cannot be assured–the fixed-income market was already driving them higher this week.

Not coincidentally, another short-run beneficiary of the Fed’s moves (known technically as financial repression) are the hugely-indebted public borrowers. Governments can try to manage their gaping deficits by getting a free pass on repayment.

It’s politically expedient, even in normal economic times, for a sovereign to want to monetize its debt. What office holder would prefer to cut spending on popular or palliative programs or raise taxes to pay for them? Better to let private financial holdings leak. (A potential political cross-current exists in middle-class retirees, including those on fixed pensions that rely on bond income–but they are still far from being a voting majority.)

So it is now official U.S policy–likely to be widely followed abroad–to punish the prudent and reward the reckless in order to try to help a third group, the struggling. It’s a devil’s bargain, and not likely to work out well in the end for any of the three.

South Africa: The Clouds Return


Emerging markets are under stress again in the global downturn that’s accompanied the Covid-19 pandemic. Few of their stories are as compelling to a world audience—and as exasperating–as South Africa’s.

Prolonged African successes are still exceptional, and so many wanted to believe that after the Nelson Mandela presidency his country had been redeemed from its apartheid past. Celebrations replaced boycotts and a new democracy welcomed investment in South Africa.

But the last decade hasn’t been as heralded. In fact, it’s bordered on being disastrous for South Africa, tainting more than just a hopeful symbol. The nation is the continent’s second-largest economy (but three times the GDP per capita of the biggest, Nigeria) and remains the corporate and financial capital of Africa.

The long setback followed a broad general upswing since the end-of-apartheid throes of the early 1990s (with a brief relapse during the emerging-market squeeze of the late 1990s). The better times had continued until the fallout from the global financial crisis of 2008 was compounded by the corrupt, autocratic presidency of Jacob Zuma. Over these last 10 years, the value of the rand currency has dropped by 57% against the U.S. dollar.

Even after Zuma was forced out, South Africa suffered through strikes, high crime and power brownouts and was already falling off badly before the global pandemic. Per-capita GDP declined from 2015 to 2017, and recession followed in 2019.

Although still essentially a one-party state, under the African National Congress, the nation cannot muster the political will to rationalize its state industries. Debt is increasing (junk status since 2016), along with the tax burden. Even before Covid-19, South Africans were suffering an unemployment rate near 30%, far higher than that among youth.  Yet civil servants have managed to boost their compensation by 40% in real terms during the same decade of decline for others.

So much has contributed to the ups and later downs of post-revolutionary South Africa that you could write a book about it.  In fact, two capable journalists recently have done so. A simple take might be that in an attempt to share the wealth created under primarily-white domination, that wealth has been fitfully parceled out and not enhanced in the process. Not enhanced and, in critical respects such as infrastructure, not even sustained (see the Eskom electric utility).

A heavy-handed response to the novel coronavirus might have been understandable in a country that suffered so memorably during the AIDS years and is not far from other recent African afflictions. But the government did unnecessary damage to business sectors, including its globally-recognized wine industry through a series of alcohol-related clampdowns. Constraints on the Web, such as high prices for data, hampered e-commerce.

Central banks around the globe have thus far staved off an even sharper economic contraction, and hopes for a turnaround soon have bolstered prospects for emerging markets. The rand and the Johannesburg stock index are off their spring lows.  South Africa has always been blessed with natural advantages; maybe a run of international luck will give its leadership one more chance at redemption.

Where Will Americans Sweat It Out Now?

Photo by Leon Martinez on Pexels.com


“The gym” has been one of the last spots to reopen in the pandemic. Most of the U.S. has gotten there, but only this Monday are such indoor workout spaces permitted to operate, with one-third capacity, in New York State. Required inspections are delaying this further in the Big Apple. And New Jersey’s governor is still waiting and watching.

Yet, despite those closures and notwithstanding all the laments about a Quarantine 15 of extra body weight, it’s evident that fitness regimens were a part of life that Covid-19 wasn’t going to undo.  Gym rats have had to relocate and rejigger their workouts but appear often to have done so.

We’re talking about a sizable chunk of the U.S. population: 23% of adults engage in both aerobic and muscle-strengthening activity in a 2018 survey.  (More than half said they did at least the former.) A record 60 million Americans belonged to some kind of health club in 2017, suggesting much displacement during the pandemic, although of course many if not most such memberships ultimately lead to scant exertion.

Since March, urban parks and suburban streets have been unusually populated with runners as well as purposeful walkers, by various accounts.  The leeway offered by work-from-home (for those still employed) has spread out the lap times somewhat. Cycling demand, meanwhile, hasn’t been as strong for years—just try getting a new bike or related gear and you’ll see.

Other exercise equipment designed for home use has also boomed in sales, as reflected in stock prices of the makers and sporting-goods retailers. A dropoff is felt by suppliers to shuttered gyms, but overall business has remained strong.  Alli Schulman of the Sports & Fitness Industry Association: “I can say, on an anecdotal basis, from speaking with members of the industry, that at-home fitness equipment sales have skyrocketed throughout the last few months, seeing sales increases of up to 400%.” And sure enough, just as with bicycles, in-home gym equipment is in shortage.

A passion for particular exercise, as epitomized by the “runner’s high,” is so enduring that its stickiness even during trying times shouldn’t be surprising. But it may be that incremental activity, if only a daily walk, has been goaded by recognition of the novel coronavirus’ bead on the worst out of shape.

Whether the sort of golf that has gained new favor (boosting the results of a Dick’s Sporting Goods unit) will result in much exercise is unclear. That probably depends on whether an electric cart and beer are part of the package.

True workouts often are solitary endeavors or done with a single partner or trainer. Thus the discouragement of group functions during the pandemic is not a net negative for all but the busiest SoulCycle or yoga class. (Even these are now earnestly conducted outdoors with social distancing.)

So, while the fortunes of gym operators—and of many personal trainers whose income is derived from clients there—have suffered in the pandemic, the great body of Americans has found ways to keep fit. As with so many aspects of Covid-19 life, investments and livelihoods will be riding on how enduring these adapted habits and choices will be. Maybe in the process we’ll actually end up with a healthier nation.

A Requiem for Old Hong Kong


The fact that Hong Kong publisher Jimmy Lai and other dissidents have been freed on bail after their latest arrest shows that even under new security laws imposed by Beijing, the Special Administrative Region still enjoys a distinction from Chinese mainland legal practices.  Arrestees there do not soon emerge from incarceration pre-trial—sometimes never.

This is a modest consolation and perhaps not a lasting one. The Xi Jinping crowd’s crackdown on Hong Kong has escalated and little confidence can be placed in the assurances of the SAR’s Vichy administration that safeguards will remain in place. Thus, gloom gathers around each successive act of Chinese dominion despite the persistent, rebellious spirit of many Hong Kongers.

This is a sad twilight for one of the globe’s great symbols of human freedom, going back to its time as a British colony.  Many Westerners carry fond and admiring memories.  Certainly I have, from several stays, two of which included time with Jimmy Lai. A scrappy Chinese immigrant who built a garment business and then became a tabloid news monger, he surprised me during an interview in the early 1990s for the Wall Street Journal by crediting social philosopher Karl Popper for inspiration. Lai’s mix of high- mindedness and vulgarity was as popular with his audience as it was detested by the Communist Party. By the time he invited me and a Forbes colleague to dinner at his distinctive home a decade later, he was steeled for battles to come but, first, came a fine-chateau Bordeaux.

Hong Kong was changing and, much as its business establishment tried to pretend otherwise, outsiders like Jimmy and a generation that could be his grandchildren began gathering in the streets to fight the drift toward “one system” with the People’s Republic.  They were and are joined, of course, by many professionals and ordinary folk who’ve always embraced the notion that political freedoms went along with the economic liberties that set their city apart.  The irony was, however, that Hong Kong’s success made it tempting for occupation by many who’ve captured the spoils of mainland-style capitalism, and with that loot has come insidious power and influence.

The curtain isn’t likely to come down quickly on all that was special about Hong Kong. It is in the interest of few that such an abrupt end occur.  But the long run, even with stirring performances by 71-year-old Jimmy Lai and his young rebel offspring, we will see the lights dim. May the spirit that lifted that place find a new port of call in Asia or beyond.

Wage Work: The Foggy 2-Year Window


Nothing in today’s jobless data changes this picture: Western nations and especially the U.S., with its fluid labor force, face the daunting  prospect over the next few years of millions of workers without demand for their previous form of work.

I say that, mindful of the hazards of projecting even slightly into the future the conditions of the present. So, yes, things can change, particularly if a vaccine against Covid-19 proves reliable over time or a sure-fire treatment is established. But as of now, large swaths of employment seem gone for many months. To date, these job losses are concentrated in activities involving sizable numbers of tightly situated customers or staff—live entertainment, tourism, meetings and classes, food and beverage. In a downturn this wide, however, there will be secondary industry casualties to anticipate.

How can the workforce, and by implication the market economy generally, be sustained through a long interruption?  This is a somewhat different question from how can these employees as people survive. Government fiscal taps have been on fully to see to that.  Even the U.S. now has effectively a Universal Basic Income in the form of supplemental unemployment benefits and other measures to prop up most households. Public-sector jobs, meantime, have largely been preserved even where it is not clear the work is ongoing.

Ideally, a short-run transformation of labor can be led by the private sector, which is most agile in adapting to opportunities.  No surprise, a trio at the University of Chicago’s Becker Friedman Institute has laid out the potential—and obstacles—for this kind of renewal. Their “reallocation shock,” if it is to be managed, would require adequate underlying investment and demand. Less likely, it also envisions political tolerance of volatility in labor pay and practices.

To some degree, employment shifts at the basic hourly end of the work ladder have already taken place. Some retailers of consumer staples have prospered post-virus and done additional hiring.  With so much shopping now occurring digitally, logistics operations that get packages “the last mile” to purchasers have also gained force.  Large, sophisticated operations such as UPS and Fed Ex, and arguably Amazon,  can reasonably offer appealing career tracks to the displaced. It is not as evident that the various gig-economy alternatives that appear to be glorified delivery boys are going to satisfy too many beyond the immediate circumstances.

Whenever employment lags in America, proponents of more activist government are quick to renew calls for infrastructure or conservation corps as a way of offering ‘dignified’ work with long-lasting payoff. This reflects rosy recollections of New Deal-era projects that in fact have more checkered histories. Still, obviously, if underutilized manpower could be put to incremental output in the public realm, that would be a plus.  The frictional barriers to this—for instance, attaining the right skills and conditioning, getting the labor to desired sites and minimizing resistance from existing (unionized) labor—are not minor.

Quick skills retraining is a key to addressing a labor gap of hopefully only a few years. Where apprentice programs are successful, mostly outside the U.S., they can help. America’s community colleges, as well as trade schools that may be public or private, are the most obvious domestic instruction. But how fast can these institutions (and their governing boards) adapt? And at a time of ever-fiercer bidding for tax revenues, would they have the resources to do so?

We’re talking about perhaps 30 million earners in the U.S. alone being dramatically affected. As yet, even techno-optimists have come up short in offering other than bleak estimates of how society’s new arrangements will suit those at the face of basic service sectors. Yet, as noted, human adaptability can confound linear projections. The best policies are those that keep opportunities open. As better news appears, I’ll be looking for it.

Help Preserve the Local News…All of it.


Initiatives such as Report for America are tackling the crisis of local (and state) journalism, which has seen the rapid depletion of reporting ranks at newspapers and other media across the country. (See for reference the new book  “Ghosting the News”  by Margaret Sullivan of the Washington Post.) Often these efforts to shore up the resources of the hometown press are directed ambitiously at investigative or data-driven work to showcase abusive or neglectful exercise of political or commercial power.

These are worthy efforts to uphold the “comfort the afflicted, afflict the comfortable” tradition of the Fourth Estate.  Citizen readers can only hope that alternatives or supplements to the old advertising-based revenue model are found—subscriptions rarely being enough—before advertisers either largely disappear or gain more complete ability to dictate what adjoins their messages. Certainly, on-the-ground assistance is more vital to journalism right now than the kind of studies and symposia that the industry’s foundations have long supported.

I’d only encourage the sleeves-rolled-up saviors of the local press to remember that customers come looking for more than the righting of wrongs.  We know they care about sports, shops and eats, among various nearby pastimes. Here’s a checklist of other reporting opportunities:

  •  Obituaries.  The final milestone in a citizen’s life is a great occasion for putting notables past and present in perspective, as well for discovering remarkable neighbors whose deeds were otherwise known only to a few.  Paid obits (still a good revenue source for legacy media) can be a good starting point but are rarely written as a journalist would, with the most important details first and foibles included.  (They’re also replete with euphemisms for death.)
  • Legal notices.  Another cash cow for legacy media, they are rarely read and therefore a useful source of leads on genuine news breaks.  Business and other license applications are noted here, as well as land or building applications if those aren’t well documented publicly at town hall. The relative significance of each notice is lost in the legalese—that’s for a reporter to develop.
  • The courts. Beyond what takes place in live judicial proceedings, the documents filed at the typical courthouse are a gold mine: Civil proceedings, motions and discovery materials can flag “news” well removed from the cases at hand. And do not dismiss divorce and custody matters as tawdry personal affairs—litigants say the damnedest things about newsworthy people.
  • Property deed recordings.  They can confirm what parcels actually sold for, and sometimes provide clues on hidden owners.  Nothing connotes power and influence so much as land.
  • Police logs.  Beyond the alarming or sometimes ridiculous incidents, there may be patterns that local law-enforcement is unable or unwilling to draw together.
  • Campaign-finance documents, now required at all levels and not always catalogued online.
  • Meetings of school and town boards are good for more than just quotable exchanges—they can be tip-offs to enterprising stories that aren’t spoon-fed by Public Information Offices.

To be local is to be the chronicler of record for a community, in an era ever more in need of history’s first draft.

The Shaping of the Modern Hamptons

Summary of Current Research

From 1967, when a legislative ally of Gov. Nelson Rockefeller carried a bill to extend the Sunrise Highway through the undisturbed farm-woodlands belt of the Hamptons to Amagansett, to 1999, when the Community Preservation Fund became law to preserve open space on Long Island’s East End through a surtax on property sales, a political and policy revolution reset the priorities of one of America’s choicest locales.

From the “Halt the Highway” movement that eventually stopped the Sunrise extension, through a host of other new forces–including the Pine Barrens Society, the Peconic Land Trust and the Group for the South Fork–a changed consciousness overtook Hamptons decision-making. This, even as some significant developments went through and incoming wealth continued to populate the region. Though this transformation was formally nonpartisan, it has been accompanied by an end to the long Republican hold in Suffolk County. By the early 2000s, Democrats grew to dominate local politics.

This rapid recasting of government policy happened in the background of the summer party-celebrity culture that occupies so many visitors and part-time residents of the Hamptons. Even to those who’ve lain down roots there in the last 20 years, it may be a lost if recent history. This is the story of the people and events that reshaped everyday life beyond the Shinnecock Canal for decades to come.