The paths of destruction


There are direct routes and indirect ones





Mostly, though, the virus seems to get no further than the ACE2-rich cells of the nose and throat, and perhaps the lungs, before the body’s defences take care of it so well that its presence is never even noticed. Tests which look for genetic material from SARS-CoV-2 in swabs from the nose and throat frequently find it present in people who show no other sign of it at all: in one British survey 70% of those who tested positive were asymptomatic.

Almost all of those hospitalised have symptoms of pneumonia—the general name for the response of the lungs to a variety of viral, bacterial and fungal infections. When they get deep into the lungs, the SARS-CoV-2 particles find a target-rich environment in the alveoli, tiny air sacs which hang like bunches of grapes off the lung’s branching network of bronchial tubes and are lined with cells festooned with ACE2. It is in these sacs that oxygen from the air breathed into the lungs passes into the blood stream, and carbon dioxide from the blood passes into the lung to be breathed out. The more the virus damages and kills the cells lining the alveoli, the more difficult this exchange of gases becomes. Hence the shortness of breath.



Angles of attack


Dr Levitt wonders whether the problem may be in the blood vessels. ACE2’s role in looking after blood pressure depends on its ability to regulate signals that make blood vessels constrict or dilate. The way SARS-CoV-2 binds to ACE2 probably makes it less able to take part in that signalling. Covid-19 may thus reduce the amount of oxygen which gets into tissues not just by damaging the lung, but also by narrowing and damaging blood vessels. If so, drugs to dilate the blood vessels might help, at least in some cases. Finding out what treatment works best along those lines, though, requires clinical trials, says Dr Levitt.



Whether the virus helps it along or not, severe inflammation of the lungs often leads to what is known as acute respiratory distress syndrome (ARDS). It is ARDS that sees people rushed to intensive-care units (ICUs) and put on ventilators.

Because it is hard to tolerate having a tube stuck down your throat and into your lungs, patients on ventilators are heavily sedated and unable to do anything for themselves. Nurses must reposition them every few hours to prevent bed sores. Their doctors keep watch for kidney failure, blood clots and heart problems—risks to critically ill patients in ICUs that anecdote has suggested may be more common in covid-19 patients than in others. Those anecdotes are now being backed up by a few studies. However, as Dominic Wichmann of the University Medical Centre Hamburg-Eppendorf points out, this correlation does not necessarily mean SARS-CoV-2 is itself damaging the organs involved.

A quarter of covid-19 patients in British ICUs have had kidney problems severe enough to require dialysis. “It’s all part of the second phase of the illness when people, eight to ten days in, suddenly get worse,” says Claire Sharpe of King’s College London.

A big part of the problem, she says, is just dehydration, always a risk in ICUs, all the more so when patients are feverish. On top of this, the stress caused to the body by having air pumped in and out amounts to “a double hit on the kidneys”.

Chains of command







At this stage of the disease, cardiologists are also on high alert. Some covid-19 patients whose lungs start to improve then see an extreme deterioration in their heart function. This is not likely to be simply the effect of being in an ICU. But no one knows whether the damage comes from the virus itself infecting the heart, or from the inflammation it triggers.



Some of the clues come from the conditions which predispose people to the disease. “You’d think underlying lung problems or immune system problems will be the greatest risk,” says Dr Levitt. “But it seems the biggest risk factors have been hypertension, diabetes and obesity.” That has led many scientists to suspect that the profound inflammation seen in severe cases of covid-19 may be yet another problem linked to SARS-CoV-2’s fondness for ACE2. People with diabetes, hypertension and heart disease have more ACE2 on their cells as a response to the higher levels of inflammation that come with their condition; ACE2 has an anti-inflammatory effect. When SARS-CoV-2 sticks to ACE2 and reduces its ability to do its job, the underlying inflammation gets worse.




All told, just 58% of those who have gone into British ICUs and are not still there have been discharged alive. The rest have died. This mortality rate is double that seen for other viral pneumonias in the past three years.


A big worry is what happens to the brain. Sherry Chou of the University of Pittsburgh says that there is no evidence so far that SARS-COV-2 directly harms the brain or the central nervous system, but in parts of the brain, the spinal cord and the nerves the inflammation associated with the disease can lead to muscle weakness and other problems.

The mere fact of being in an ICU can also lead to cognitive impairment. The effect of more than a week in intensive care is comparable to that of a major head injury. The problems are linked to the delirium people often fall into when severely ill and heavily sedated in an unfamiliar environment. Delirium is a particular problem with covid-19, says Dale Needham of Johns Hopkins University. Patients spend a long time in the ICU during which they see no one they know—and the strangers caring for them in heavy-duty protective wear “look like aliens”.

Patients who have come through ARDS may also suffer from anxiety and post-traumatic stress disorder. It all adds up to a bleak prospect. In 2017 a study in the Baltimore-Washington area found that a third of previously employed patients who survived ARDS were not back at work five years on. Covid-19 will cast as long a shadow over some survivors’ lives as it will over those who mourn the dead.


Why you need to read Jane Austen to appreciate perpetual bonds

It takes a nineteenth-century perspective to see the merit of consols

EVERYBODY AGREES that Jane Austen’s “Pride and Prejudice” is a love story. A truth less universally acknowledged is that it is also about money. When Mr Darcy first enters the Meryton assembly, the stir he causes owes something to his looks and bearing.

But it owes a lot more to the fast-circulating report of his £10,000 a year. Darcy’s money is old money. It comes neither from commerce nor the professions, but from Pemberley, the family pile in Derbyshire.

In Jane Austen’s day, wealth was measured by the yearly income it provided. The reckoning for sovereign debt was similar.

Britain financed the Napoleonic wars by issuing “consols”—bonds that could not be redeemed but which, like Darcy’s estate, promised payments in perpetuity.
There are now demands for consols to be revived as a means to manage the escalating fiscal costs of the coronavirus. Francesco Giavazzi and Guido Tabellini of Bocconi University have called for a perpetual-bond issue to be jointly backed by euro-zone countries. George Soros has echoed this.

Any scheme that adds to fiscal firepower without adding to the measured stock of debt might be especially welcome in euroland. But it is quite wrong to view consols as a means to circumvent fiscal discipline.

Perpetual bonds are an ideal form of debt. Many bondholders care far more about how much income a bond pays than its capital value. You might call this the Darcy doctrine.

To understand it, consider the goals of public-debt management. One is to finance budget deficits at the least cost consistent with steady taxes and spending. Another is to supply safe and liquid financial assets. The more able governments are to meet the demand for securities, the lower and more stable is the long-run cost to the taxpayer.

The need to keep costs down leads them to issue short-term bills, which are usually in high demand and carry the lowest interest rates. The need to keep costs stable and predictable leads them to issue long-term bonds.

These goals can be met at least as well by issuing consols. In a thought-provoking paper in 2015*, John Cochrane of the University of Chicago proposed that the entire stock of American public debt should be made up of two securities. The first would have a fixed value of $1 forever and a coupon payment that is set in line with overnight interest rates.

The second would have a fixed coupon payment of $1 forever and a price that is determined by market forces. The fixed-value, floating-rate bond would meet the need for a safe, trusted and highly liquid security. It would have the same qualities as a Treasury bill. The fixed-coupon security would have the character of long-term debt.

Perpetual bonds have several advantages. A big one is liquidity. America’s sovereign debt is currently divided up into hundreds of distinct securities with different maturities. A 30-year bond that is issued in one year becomes a 29-year bond the next.

The more individual bond issues there are, the less liquid each one is. By contrast, perpetual bonds are identical. A consol issued today is the same as a consol issued last year. And there is never the need to roll it over.

There are advantages for bondholders, too. A floating-rate perpetual would be a super-liquid, super-safe asset. A fixed-rate perpetual, meanwhile, would be in high demand from pension funds with promises to retirees that stretch into the indefinite future. Ideally the coupon would be inflation-protected.

A bond that pays the same in real terms for many years is the quintessential Darcy asset, say Victor Haghani and James White of Elm Partners, a fund-management firm.** Much of people’s wealth—their human capital; their pension benefits; their homes—is akin to an inflation-protected long-lived bond. It is judged by income, just as Austen saw it.

Why, then, is so much debt made up of bonds with a principal that is paid back at a relatively short, set maturity? Credit risk is part of the explanation. In a company bankruptcy or when a country defaults on its foreign-currency debt, bondholders are paid back some fraction of the principal value of the bonds. But consols have no principal. Only countries with pristine reputations might be trusted to stand behind them.

Prejudice is a potential barrier to perpetual bonds. But they should be judged on how well they meet debt-management goals. On that basis, they are useful tools. Why not use them?

* “A New Structure of U.S. Federal Debt” (May 2015).

** “Reviving a 19th Century Perspective on Financial Well-Being” (May 2020).

The EU must retreat to survive

For both pragmatic and democratic reasons, it would be lunacy to sue the German government

Gideon Rachman

EU German Court Chess
© James Ferguson

Anybody who has worked in Brussels will be familiar with the bicycle theory of European integration. The idea is that unless the EU keeps moving forward, it will fall over and crash.But the bicycle theory is dangerously out of date.

To survive, the EU actually needs to find a brake and a reverse gear. The alternative is a potentially fatal collision between the EU’s institutions and its nations.

The chances of conflict have risen dramatically following a German constitutional court ruling that places Germany in direct confrontation with both the European Central Bank and the European Court of Justice.

The German court, based in Karlsruhe, ruled that the ECB’s bond-buying programme — which has helped keep the European single currency afloat — failed a “proportionality test” by not taking into account its broad economic effects. It also stated that the ECJ had been acting beyond its authority, when it declared the ECB’s bond-buying legal.

Ardent supporters of the EU have reacted with horror to the German court’s actions. Some have argued that the Karlsruhe ruling has “put the entire EU legal order in jeopardy” and that the European Commission must respond with “infringement proceedings” — in other words, take Germany to court.

My own view is that, for both pragmatic and democratic reasons, it would be lunacy for the EU to sue the German government. Germany is the biggest country in the EU and the largest contributor to its budget. The EU cannot be built in opposition to its member states — least of all Germany. The club can survive Brexit. But without Germany, there would be no EU.

Opinion polls in Germany suggest that the constitutional court is the most respected institution in the country. The Bundesbank is also traditionally regarded as a key guardian of Germany’s postwar democracy — and a guarantee that the hyperinflation of the Weimar Republic years will never return.

For the EU to humble two of the most important pillars of Germany’s postwar stability would invite a public backlash.

If Germany was behaving in a fundamentally undemocratic manner, then this kind of fatal confrontation might be an unavoidable obligation. But, while it is possible to dispute both the economic and the legal logic behind the Karlsruhe ruling, there is no suggestion that the court has acted in an undemocratic or improper manner.

The EU view is that the ECJ is the higher court and outranks Karlsruhe. But, if the EU starts infringement proceedings, the dispute between the ECJ and Karlsruhe would be arbitrated by the ECJ itself — a circular situation that would instantly undermine the moral force of its ruling. It is true that letting the Karlsruhe court ruling stand is not a trivial matter.

At worst, it poses real risks both to the survival of the euro and to the EU’s efforts to remain a club of liberal democracies. Hungary and Poland — whose governments are rapidly eroding their national democracies — have both seized upon the Karlsruhe ruling to justify their own efforts to ignore EU law.

It was predictable that the Hungarian government, led by Viktor Orban, would react in this way. But Mr Orban is an unscrupulous character who — much like the US’s Donald Trump — will use any argument, however spurious, to justify what he was going to do anyway.

In reality, the Hungarian and Polish cases are very different from that of Germany. The governments in Warsaw and Budapest are genuinely undermining the independence of their courts. By contrast, the Karlsruhe court has demonstrated its freedom from political influence, with a ruling that is highly inconvenient for Berlin.

EU infringement proceedings against Hungary and Poland are justified, given that their democratic institutions are genuinely under threat. But, in the long run, the fate of Hungarian and Polish democracy will be decided within those two countries, not by Brussels.

The Karlsruhe ruling also has dramatic implications for Europe’s single currency.

It is widely believed the economic shock caused by Covid-19 means that continued radical action by the ECB is the only thing that stands between the EU and another debt crisis. If the German courts tie the hands of the ECB (or prevent the Bundesbank participating in ECB programmes), then the survival of the euro might be in question.

But there should be a democratic way out of this.

German opponents of the Karlsruhe decision argue that the judges reflect only a small conservative faction, within their country. If that is true, it is open to Berlin to try to amend the German constitution or the EU treaties, to make it absolutely explicit that the ECB’s actions are legal.

If Berlin cannot win that argument at home — or in the wider EU context — then Germany may have to consider leaving the European single currency. Even raising that issue could provide a helpful clarity. It might persuade the Germans that the ECB’s actions are not so unacceptable, after all.

Or it might persuade Berlin’s European partners that they need to do more to respect German misgivings about the management of the euro.

That kind of fundamental debate is overdue. The EU’s survival cannot be secured simply by pedalling the federalist bicycle ever harder.

The direction of travel also needs to be reassessed, debated and agreed.

When a Nation Goes Nutty

By Bill Bonner

Week 12 of the Quarantine

Sow the wind and reap the whirlwind.                                                                          – Hosea 8:7

SAN MARTIN, ARGENTINA – One country. Two systems.

One financial. One economic.

One for Wall Street. One for Main Street.

One for the elite. One for everyone else.

One fraudulent. The other just a rip-off.

To make a long story precariously short (and deliberately provocative), the “rich” got some of their wealth honestly.

The rest they got by ripping off the poor and middle classes, using their fake-money system.

In effect, after 2008, they had access to an almost unlimited amount of credit priced at artificially low rates, giving them a greater and greater share of the nation’s real wealth.

And who noticed? They said the Federal Reserve was “stimulating” the economy.

But the two-system system is now wreaking havoc on our economy, our society, and our government… and driving the whole kit and kaboodle to a disaster.

To back up…

Sons and Daughters

The two-system system works for us, the top 10% who benefit from it. Many of us are retired.

What’s it to us if there are no jobs?

We have financial assets (stocks, bonds, real estate, cash, gold). We’re happy to see the Fed pumping them up. 

We don’t even mind (for now) that the economy was shut down by the Trump-Fauci duo. We didn’t have to go to work anyway.

But what about the others? The 90%? Our sons and daughters.

The uneducated… the poor… the ones who have nothing… who earn minimum wages… who need jobs… who start families and careers already burdened with hundreds of thousands of dollars’ worth of student debt, mortgages, car payments, and their share of the national debt, too?

And don’t forget the middle-aged, middle classes… Typically, the ones in the middle suffer most when a nation goes nutty.

They have something to lose… but not enough wealth or financial savvy to protect themselves.

And there’s a good chance they will lose everything in the collapsing economy/money-printing lollapalooza/political upheaval ahead.

Built on a Lie

If such a disaster is so obvious (to us), how come others don’t see it? How come they don’t look into an awful future and change it before it happens?

After all, they created the two-system system. They, and only they, could change it.

Well, how about this for a naked reason…

The deciders, the influencers, the economists, columnists, politicians, academics, captains of business, and sergeants of well-meaning nonprofits – almost none of them understands what is really going on.

Why not? Because it’s amazing what you can’t see when your wealth depends on being blind.
All of them – Democrat, Republican, Trump-lovers, Trump-haters – are part of the upper 10%. They all benefit from the fraudulent, fake-money system… and none wants to think about it too hard.

They’ve built their careers, their reputations, their fortunes on a lie. They’re not about to open their eyes now.

Besides, they – like all of us – are caught up in the whirlwind.

Politics… racism… fascism… Keynesianism… MMTism… global warmingism… COVID-19ism… Just read our mail!

We’ve described it previously as “context collapse.” The rules… the traditions… the ideas we thought we could trust… suddenly give way.

The hot air rushes by us so fast, our feet leave the ground… and we are dizzy… and then nauseous.

Context Collapse

Just think about what’s happened in the past few months.

The economy effectively “turned off”… with a 50% drop in GDP… and 20% unemployment.

…The Fed “printed” three trillion in the last three months.

…Between April ’19 and April ’20, the difference in federal tax collections dropped by nearly a trillion dollars.

…Strange new unidentified “defense forces” – kitted out like robocops from a sci-fi movie – appeared on the streets of Washington.

…A U.S. president so afraid of his own people he needs to hide in a bunker? The Washington Post:


Three months ago, these things would have been considered impossible.

But now, everything is possible… no matter how bizarre, grotesque, un-American and implausible.

And now, as the center of our “normal” beliefs turns to mush, the edges harden.

The “fascists” on the right… the “anti-fascists” (Antifa) on the left.

The fences go up… but the barriers to civilized conduct go down.

Moonstruck Delusions

Some want to destroy what they think is a “capitalist” system.

Some want to protect what they believe is a “conservative” society.

Both groups are moonstruck… seeing new possibilities… with new hope… and even greater delusions. CNN:

The Boogaloos [apparently anarchists] are an emerging incarnation of extremism that seems to defy easy categorization.

They are yet another confounding factor in the ongoing effort among local, state and federal officials to puzzle out the political sympathies of the agitators showing up to the mostly peaceful George Floyd rallies who have destroyed property, looted businesses, or -- in the case of the Boogaloos who descended on Minneapolis -- walked around the streets with assault rifles.

And here’s MSN:

Sen. Tom Cotton, an Arkansas Republican, on Monday pushed for the use of military force against Black Lives Matter demonstrators…

"…let’s see how these anarchists respond when the 101st Airborne is on the other side of the street," Cotton said on Fox News.

After all, paraphrasing former Secretary of State Madeleine Albright…

What good is an army if you can’t use it to protect yourself from the people you stole from?

A new opportunity to tackle climate change

Countries should seize the moment to flatten the climate curve

The pandemic shows how hard it will be to decarbonise—and creates an opportunity

FOLLOWING THE pandemic is like watching the climate crisis with your finger jammed on the fast-forward button. Neither the virus nor greenhouse gases care much for borders, making both scourges global.

Both put the poor and vulnerable at greater risk than wealthy elites and demand government action on a scale hardly ever seen in peacetime.

And with China’s leadership focused only on its own advantage and America’s as scornful of the World Health Organisation as it is of the Paris climate agreement, neither calamity is getting the co-ordinated international response it deserves.

The two crises do not just resemble each other. They interact. Shutting down swathes of the economy has led to huge cuts in greenhouse-gas emissions. In the first week of April, daily emissions worldwide were 17% below what they were last year.

The International Energy Agency expects global industrial greenhouse-gas emissions to be about 8% lower in 2020 than they were in 2019, the largest annual drop since the second world war.

That drop reveals a crucial truth about the climate crisis. It is much too large to be solved by the abandonment of planes, trains and automobiles. Even if people endure huge changes in how they lead their lives, this sad experiment has shown, the world would still have more than 90% of the necessary decarbonisation left to do to get on track for the Paris agreement’s most ambitious goal, of a climate only 1.5°C warmer than it was before the Industrial Revolution.

But as we explain this week the pandemic both reveals the size of the challenge ahead and also creates a unique chance to enact government policies that steer the economy away from carbon at a lower financial, social and political cost than might otherwise have been the case. Rock-bottom energy prices make it easier to cut subsidies for fossil fuels and to introduce a tax on carbon.

The revenues from that tax over the next decade can help repair battered government finances. The businesses at the heart of the fossil-fuel economy—oil and gas firms, steel producers, carmakers—are already going through the agony of shrinking their long-term capacity and employment.

Getting economies in medically induced comas back on their feet is a circumstance tailor-made for investment in climate-friendly infrastructure that boosts growth and creates new jobs. Low interest rates make the bill smaller than ever.

Take carbon-pricing first. Long cherished by economists (and The Economist), such schemes use the power of the market to incentivise consumers and firms to cut their emissions, thus ensuring that the shift from carbon happens in the most efficient way possible.

The timing is particularly propitious because such prices have the most immediate effects when they tip the balance between two already available technologies. In the past it was possible to argue that, although prices might entrench an advantage for cleaner gas over dirtier coal, renewable technologies were too immature to benefit.

But over the past decade the costs of wind and solar power have tumbled. A relatively small push from a carbon price could give renewables a decisive advantage—one which would become permanent as wider deployment made them cheaper still. There may never have been a time when carbon prices could achieve so much so quickly.

Carbon prices are not as popular with politicians as they are with economists, which is why too few of them exist. But even before covid-19 there were hints their time was coming. Europe is planning an expansion of its carbon-pricing scheme, the largest in the world; China is instituting a brand new one.

Joe Biden, who backed carbon prices when he was vice-president, will do so again in the coming election campaign—and at least some on the right will agree with that. The proceeds from a carbon tax could raise over 1% of GDP early on and would then taper away over several decades.

This money could either be paid as a dividend to the public or, as is more likely now, help lower government debts, which are already forecast to reach an average of 122% of GDP in the rich world this year, and will rise further if green investments are debt-financed.

Carbon pricing is only part of the big-bang response now possible. By itself, it is unlikely to create a network of electric-vehicle charging-points, more nuclear power plants to underpin the cheap but intermittent electricity supplied by renewables, programmes to retrofit inefficient buildings and to develop technologies aimed at reducing emissions that cannot simply be electrified away, such as those from large aircraft and some farms.

In these areas subsidies and direct government investment are needed to ensure that tomorrow’s consumers and firms have the technologies which carbon prices will encourage.

Some governments have put their efforts into greening their covid-19 bail-outs. Air France has been told either to scrap domestic routes that compete with high-speed trains, powered by nuclear electricity, or to forfeit taxpayer assistance. But dirigisme disguised as a helping hand could have dangerous consequences: better to focus on insisting that governments must not skew their bail-outs towards fossil fuels.

In other countries the risk is of climate-damaging policies. America has been relaxing its environmental rules further during the pandemic. China—whose stimulus for heavy industry sent global emissions soaring after the global financial crisis—continues to build new coal plants (see article).

Carpe covid

The covid-19 pause is not inherently climate-friendly. Countries must make it so. Their aim should be to show by 2021, when they gather to take stock of progress made since the Paris agreement and commit themselves to raising their game, that the pandemic has been a catalyst for a breakthrough on the environment.

Covid-19 has demonstrated that the foundations of prosperity are precarious. Disasters long talked about, and long ignored, can come upon you with no warning, turning life inside out and shaking all that seemed stable. The harm from climate change will be slower than the pandemic but more massive and longer-lasting.

If there is a moment for leaders to show bravery in heading off that disaster, this is it. They will never have a more attentive audience.