‘But Nothing That Should Matter To Markets’

“But nothing that should matter to markets.”

That disclaimer is applicable to nearly everything these days, up to and including the pandemic, which is still producing a daily deluge of dire headlines like some tropical storm that “settles in” and won’t leave until cars are floating down the road and homes are “waist” deep. (And that metaphor is all too real. Just ask a German.)

Iran notched a new daily record for deaths over the weekend, and caseloads are near records in the Philippines, Thailand and Vietnam. In Tokyo, things are “out of control,” according to local experts. Cases in the Japanese capital were near 4,300 on Saturday. On Friday, when the city reported almost 5,800 new cases (figure below), Governor Yuriko Koike called the situation a “disaster.”

On June 1, the seven-day moving average of new cases in the city was ~500. As of Sunday, it was 4,200. That’s remarkable. There are plenty of Olympics jokes. But none of them are funny.

Pleas for stricter lockdowns “have so far been rejected by Yoshihide Suga, who faces a general election in the next three months, with his support at record lows,” a Bloomberg article by Isabel Reynolds noted.

Reynolds managed to deliver a remarkably incisive take, as far as short Bloomberg articles go anyway. Instead of “restrict[ing] individual freedoms in the pursuit of reining in COVID-19… Japan has relied on asking people to refrain from going out unnecessarily [with] no penalties for disobedience, and no enforcement,” Reynolds wrote, adding that the “soft approach, reflect[s] a deep-seated aversion to the authoritarianism seen before and during World War II.” She went on to note that Japan’s US-crafted constitution guarantees freedom of movement, but also tasks the government with protecting public health. Now, those two things are increasingly at odds.

“Infection situation: The infection is spreading,” read Tokyo’s official COVID updates page on Sunday. “System for the provision of health care: The system is under strain.”

In the US, the system is similarly “under strain” in some states, and the words “liberty” and “freedom” are now a (figurative and literal) Get Out of Jail Free card for grossly negligent governors derelict in their duty to protect a sick citizenry and also for various vigilantes prone to threatening state and local officials for championing mask mandates in schools, among other common sense containment measures.

Never before have I personally witnessed such an acute breakdown in civic-mindedness in the US. Americans have been “bowling alone” for decades, to channel Putnam. But the fact that school administrators and health officials are now under threat of physical violence from their (literal) neighbors simply for suggesting that students wear face coverings during a pandemic, suggests the country’s social capital is completely exhausted.

Although the pace of vaccinations is rising again in the US, the seven-day average for daily deaths has doubled in the space of two weeks (figure above).

ICU capacity is nearly maxed out in some areas. “Mississippi seeks doctors, nurses and ventilators as COVID patients pack ICU beds,” read one headline.

“No beds. There are no beds. In Middle Tennessee right now it is impossible to find an empty, staffed ICU, ER, or med/surg bed,” the chief medical officer of a hospital in Middle Tennessee lamented. “As an ER doc and a healthcare administrator, this past week has been one of the most exhausting and disheartening of my career,” he added.

As of Saturday, 96% of Texas ICU beds were occupied. In one of the most widely-cited quotes of the nation’s new COVID wave, Dallas County Judge Clay Jenkins told area parents that, “We have zero ICU beds left for children. That means if your child is in a car wreck, if your child has a congenital heart defect and needs an ICU bed or, more likely, if they have COVID and need an ICU bed, we don’t have one. Your child will wait for another child to die. Your child will not get on a ventilator.”

If you want to know what an empire in decline looks like, that’s it. There are hundreds of millions of people living outside of rich nations who would kill to get their hands on the Moderna or Pfizer shot for themselves and their families. In America, we can’t even give the damn things away anymore.

And all because tens of millions of people have been duped by faux libertarians and a disgraced demagogue into believing that a handful of “Founding Fathers” (many of whom the same Americans who won’t get vaccinated can’t even name), are nodding approvingly from beyond the grave as the country they founded destroys itself in the name of principles they espoused. This conjuncture belongs in the dictionary next to the entry for “tragicomedy.”

Speaking of empires in decline, twenty years after the US toppled the Taliban for harboring al-Qaeda, America’s top negotiator found himself asking the group to wait until all US personnel were evacuated from Kabul before — and I don’t know any other way to put this — waltzing in and reclaiming the capital without a fight.

Helicopters carried US embassy staff away as Taliban fighters, under instruction from the leadership, waited on the outskirts of the city. In just three weeks, the group captured virtually every piece of territory it didn’t already control thanks to a dizzying offensive that found the country’s US-trained military disintegrating, while a hodgepodge of legendary warlords threw in the towel, apparently consigned to the inevitable.

The Taliban declared victory Sunday, using the most diplomatic language they could muster. “The Islamic Emirate instructs all its forces to stand at the gates of Kabul, not to try to enter the city,” an official statement read. “Negotiations are under way to ensure that the transition process is completed safely and securely, without putting the lives, property and honor of anyone in danger.”

Later, they strolled into the presidential palace, stood around a desk, took some pictures and said Afghanistan will soon be declared “The Islamic Emirate of Afghanistan.”

There wasn’t a “transition process.” The group didn’t take the capital by force because they didn’t have to. There wasn’t anyone left to fight.

All remaining US personnel will likely make it out safely. At this point, it would be ludicrous for the Taliban to risk a confrontation with the additional troops the White House deployed to protect American citizens leaving the country.

The Biden administration will take the blame, but consider that “experts” generally believed it would take the Taliban months, if not years, to reestablish complete control. Instead, it took just days.

Given that, it’s fair to say the Afghan military and local police were never prepared to put up a real fight, where “prepared” can mean a lack of wherewithal, but also a lack of conviction, endemic corruption or simply the fatalism that goes along with fighting an enemy that never goes away. It didn’t help that Ashraf Ghani was known to willfully harbor delusions about the inevitability of a return to Taliban rule. On Sunday, he left the country for Tajikistan.

More generally, there’s no mission in Afghanistan anymore. Nation-building failed, as it almost always does. Life will be a version of hell under the Taliban for many Afghans, especially those not old enough to remember what it was like previously. Sociopolitical gains for women, for example, will surely be rolled back entirely.

It’s difficult to dispute the notion that from a purely selfish perspective, there’s little utility in maintaining the American troop presence. While it doubtlessly served as a deterrent, it didn’t stop civilians from being killed in suicide attacks, and there’s a very plausible argument to be made that America’s capacity to conduct targeted operations isn’t severely diminished by pulling up the stakes.

Short of annexing the country or else committing the full resources of the US military machine to wiping the Taliban out entirely (which isn’t politically possible given regional power dynamics), there’s little else America can accomplish. Everyone knows that, even if they won’t admit it.

As for public opinion, the GOP will take the opportunity to call this Biden’s Saigon moment. But Americans have a tendency to be apathetic when it comes to Afghanistan. As I put it previously, it’s not the disinterested aloofness the public demonstrates towards other conflict zones. Rather, it’s a kind of fatalistic despondency brought about by two decades of war.

As for America’s youngest adults, they weren’t even alive on 9/11. They know why American troops are in Afghanistan. But in a strictly literal sense, they don’t remember why.

The same is true of so many twentysomethings warned daily about the perils of buying equities at “dot-com multiples.” They were toddlers when the Towers fell and toddlers when the dot-com bubble burst.

Maybe they should worry about valuations. But, coming full circle, it won’t be the fall of Kabul to the Taliban that collapses what many believe is an “everything bubble” in markets. And, as we’ve seen time and again over the past year, it probably won’t be bad news on the pandemic front either.

Things are bad out there. “But nothing that should matter to markets.”

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