Update: Bitcoin has now topped $5800 amid unconfirmed rumors that China will restore cryptocurrency trading (perhaps in a more regulated environment) following the forthcoming National Congress.
As it seems the rest of the crypto space is being sold to fun BTC buying…
* * *
Having smashed through the old record high this morning, Bitcoin has blasted above $5600 as the Asian session begins. The cryptocurrency is now up 30% since the Chinese returned from their Golden Week holiday…
Bitcoin is now 16% above its previous record high…
In an interview with CNBC's Fast Money, Novogratz called the emerging landscape a "revolution," stating:
"I never thought I'd come out of retirement but the space is so exciting right now I decided to build a business, hire a whole bunch of smart guys, and we're gonna to raise a fund … and hopefully take advantage of what I see as a revolution, actually. A decentralised revolution."
As a store of value, Novogratz likened bitcoin to digital gold, and said the technology is beginning to make "more and more sense" as we move increasingly into the digital.
Novogratz continued to say that, while bitcoin is a bubble, the mania is justified, because it is a technological advancement that promises to fundamentally alter our lives.
"I can hear the herd coming" Novogratz said.
And bubble or not, Novogratz concluded eloquently on the extreme nature of cryptocurrencies' potential…
“Remember, bubbles happen around things that fundamentally change the way we live,” he said.
“The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.”
Bitcoin is set to become "the biggest bubble of our time," he added, and could reach $10,000 very soon due to fast-building interest.
Just hours after signing an executive order that implicitly begins unwinding ObamaCare, Politco reports, citing two people familiar with the matter, that President Trump plans to cut off critical subsidy payments to insurers selling Obamacare coverage.
Earlier today, Trump signed an executive order expanding access to more loosely regulated insurance options with low premiums, a move that could undermine the ACA insurance markets.
“We’ve been hearing about the disaster of Obamacare for so long,” Trump said in signing the order at a White House ceremony. “For a long time, I’ve been hearing repeal, replace, repeal, replace.”
He then said that the order is "starting that process" to repeal ObamaCare.
It will be the "first steps to providing millions of Americans with ObamaCare relief."
And now, as Politico reports, the process appears to accelerating as Trump's decision to end the payments, estimated at $7 billion this year, marks the president's most aggressive move yet to dismantle Obamacare after months of failed GOP repeal efforts on Capitol Hill.
As Reuters notes, Trump has repeatedly threatened to stop the payments, which are made directly to insurance companies to help cover out-of-pocket medical expenses for low-income Americans enrolled in individual healthcare plans under Obamacare.
The move is likely to draw lawsuits and may put pressure on Congress to appropriate funding for the subsidies.
This latest move is likely to throw healthcare markets into chaos, and will infuriate Democrats – effectively closing the 'Chuck and Nancy' channel of communications – leaving a deal to avert government shutdown on or after Dec 8th (when the currenct extension deal runs out) increasingly doubtful.
It will be a crash like we’ve never seen before.
SLL has been accused of trafficking in “doom porn.” Guilty as charged. If you don’t like doom porn, don’t read this article, it’s hard core. If you prefer feel good and heartwarming, there are plenty of Wall Street research reports and mainstream media stories about the economy available. Enjoy!
In 1971, President Nixon closed the “gold window,” which allowed foreign governments to exchange their dollars for gold. This severed the last link between any government and central bank-created debt and the real economy. Debt could be conjured at whim, and governments and central banks have done so for the last 46 years.
Not surprisingly, credit creation without restraint has papered the globe with the greatest pile of debt mankind has ever amassed, measured in nominal terms or relative to the underlying economy. A measure of how extraordinary this situation is: most people regard it as normal, if they think of it all. Debt is a first mover, a financial constant. Any exigency small or large can be met from an unlimited credit pool that will always be with us. How to rebuild Houston, Florida, and Puerto Rico? No problem, borrow.
Although fiat credit creation by governments and central banks is unconnected to the real economy, its effects are not. Their debt becomes an asset within the financial system. Through fractional reserve banking, securitization, and derivatives it become the basis for a multiplication of the original debt. That multiplication is many times the multiplier (the reciprocal of the reserve requirement) taught in introductory macroeconomics classes whereby the debt is contained within the banking system.
Nominal global debt is reckoned at between $225 and $250 trillion, or about three times global GDP. Financial, debt-supported derivatives (financial instruments whose prices are derived from the prices of other financial instruments) are estimated at anywhere from $500 trillion to $1 quadrillion notational, or six to twelve times global GDP.
Overpriced houses did not cause the last financial crisis and almost bring down the world’s financial system, securitized packages of mortgages and their associated derivatives did. The Panglossian view of derivatives is that most of them can be netted out against offsetting derivatives, thus actual exposures are far less that notational amounts. The real world view is they can only be netted out as long as all counterparties remain solvent. As we learned in 2009, that is not always a correct assumption.
Globally, unfunded old age pension and medical liabilities, not counted as debt but still promises made that often have the force of law, sum to another $400 trillion. In the US, they are about $210 trillion, or about 11 times US GDP. Demographics amplify the liability: across the developed world, declining birth rates and extensions in life expectancies mean a shrinking pool of workers supports an expanding pool of beneficiaries. In the last month, SLL has posted four excellent articles by John Mauldin for those who want all the gruesome details. (Just enter John Mauldin in SLL’s search box and they’ll pop right up.)
This doom porn, the skeptics will say, is almost as old as Deep Throat (released in 1972). Markets crash from time to time, but they always bounce back. Central banks and governments come to the rescue with fiscal stimulus (increased government debt) and unlimited fiat debt.
Why should we worry now?
There are a number of reasons.
When the world was less indebted, a fiat currency unit’s worth of debt produced more than a fiat currency unit’s worth of expanded output of goods and services. Sometime within the last year or two, the marginal economic effectiveness of all that government and central bank debt reached zero, and is negative after debt service.
With the world saturated in debt, another fiat currency unit of debt produces no increase in output. Kick in the costs of servicing and repaying that debt, and increasing debt is actually retarding economic growth. It accounts for the long-term slowing growth trend, flat incomes, and “secular stagnation” that puzzle so many economists.
It also accounts for the lack of inflation that puzzles so many central bankers, at least in the price indexes they look at. They are looking at the wrong indexes. The relevant indices are stock, high-grade bond, real estate, and cryptocurrency prices, still at or close to record highs, and corporate and securitized-debt credit spreads to treasury benchmarks at record lows (indicating massive complacency about corporate credit risk). Here inflation—the speculative kind that blows bubbles—is alive and thriving.
With the Federal Reserve now taking steps to shrink its balance sheet and other central banks making noises about doing the same, global fiat debt creation may go into reverse for the first time in many years. Brandon Smith at Alt-Market.com argues that this is part of plan leading to a crash and global, centralized monetary control.
He may or may not be on to something, however, valuation extremes and sentiment indicators point to the same conclusion concerning a crash. SLL maintains financial markets are exercises in crowd psychology, impervious to government and central bank efforts to control them, designed to separate the maximum number of speculators from a maximum amount of their money.
Robert Prechter, of Elliott Wave International, has written the chapter and the verse on markets and psychology. (SLL reviewed his groundbreaking tome, The Socionomic Theory of Finance.) Consider the following from Elliot Wave International’s October “Financial Forecast.”
Every month another sentiment indicator seems to pop to a frothy new extreme. Last month it was the percentage of cash that members of the American Association of Individual Investors harbored in their investment portfolios. At 14.5%, it was the smallest allocation to this safe alternative since January 2000, the same month that the Dow Industrials began a 38% decline that lasted through October 2002. Last month, we also showed a new bullish extreme for the five-day average of Market Vane’s Bullish Consensus survey of advisors. On September 15, the average pushed to 71%, a new ten-year extreme.
The most recent Commitment of Traders Report shows that Large Speculators in futures on the CBOE Volatility Index (VIX) have amassed a record net- short position of 172,395 contracts.
This record bet on subdued volatility sets the stage perfectly for the period of “high volatility” that EWFF called for in August.
…Large Speculators in the E-mini DJIA futures have pushed their net-long position to 95,976 contracts, more than four times the number of contracts they held in January 2008, shortly after the Dow started its largest percentage decline since 1929. So, investors are betting to a record degree that the stock market will continue to rise and volatility will continue to remain subdued. Paradoxically, these measures indicate that exact opposite.
…Various media accounts confirm that a rare complacency now dominates the stock market.
One doesn’t have to buy in to socionomics to realize that virtually everyone is now on the same side of the boat, a condition generally followed by the boat capsizing. Using conventional valuation measures, the only time stocks have been more highly valued is just before the tech wreck in 2000.
If one does buy into socionomics, the last few upward squiggles in the stock market will put the finishing touches on intermediate, primary, cycle, supercycle, and grand supercycle Elliot Waves dating back to 2016, 2009, 1974, 1932, and the 1780s, respectively. In other words, this is going to be a crash for the ages.
Given the unprecedented level of global debt, that appears to be the most likely scenario. Every financial asset in the world is either a debt claim or an even less secure equity claim—a claim on what’s left after debt is paid. Much of the world’s real, tangible assets are mortgaged.
When the debt bubble implodes, a global margin call will prompt forced selling, driving down all asset prices precipitously. Most of what is currently regarded as wealth will vanish. Opening up the world’s fiat debt spigots full force won’t stop this one. The notions that governments and central banks have speculators’ backs, that problems caused by excessive debt can be solved with more debt, will be revealed as monumental follies. And markets will not come back, at least in our lifetimes.
Long-time readers will point out that SLL has been issuing warnings for years. Again, guilty as charged. However, we’ll join Mr. Prechter and company in their prediction that US equity markets top out before the end of this year. (They called last year’s top in the government bond market, adding to an impressive list of correct calls.) If we’re wrong, it won’t be the first or last time. If we’re right, given the magnitude of what’s coming, being a few years early won’t matter at all.
Our concluding clichés: fear is stronger than greed and markets go down much quicker than they go up.
The White House wasn’t going to let minor details like the fact that Congress hasn’t appropriated any money to fund construction of President Trump’s promised border wall stop it from building eight prototypes in Otay Mesa, near San Diego.
And with few expecting the Democrats to accept the White House’s demands relating to a tentative deal that Trump struck with “Chuck and Nancy” last month to avert a shutdown and secure some border wall funding in exchange for enshrining DACA, it’s possible that the Trump administration will never secure the funds, given rumors that a handful of Republican lawmakers privately oppose it.
Nevertheless, construction on the prototypes, which were selected by the Department of Homeland Security back in August, began two weeks ago. And now, DHS has released the first images of the partly finished designs.
— CBP San Diego (@CBPSanDiego) September 27, 2017
Several Border Wall Prototypes are taking form or are near completion. pic.twitter.com/aFg9uq1f5c
— CBP San Diego (@CBPSanDiego) October 11, 2017
— CBP San Diego (@CBPSanDiego) October 11, 2017
— CBP San Diego (@CBPSanDiego) October 6, 2017
Wall Prototype construction continues in#OtayMesa along the border. pic.twitter.com/wAkDStCPK6
— CBP San Diego (@CBPSanDiego) October 2, 2017
Plans for the prototypes that were selected by DHS after a bidding process that began in the spring were published in late August.
The prototypes are meant to be a “menu of designs” that might be used for the wall, should it be built. Four of the prototypes are made of concrete, while the other four are made of other materials, the Blaze reports. They range from 18 to 30 feet high and are “designed to deter illegal crossings,” says the Border Protection office. They are expected to cost $3.6 million.
The money for building the prototypes came from $20 million that Congress has allowed the Department of Homeland Security to pull from other areas of its budget. That followed an executive order President Donald Trump signed in January directing the federal government to begin construction on the border wall as soon as possible.
While the final cost of a border wall would depend on which design is chosen, estimates range from the upper end of $70 billion from a report by Senate Democrats, to $21.6 billion estimated by the US Department of Homeland Security.
The biggest open-secret in Hollywood was that Harvey Weinstein was a Grade-A pervert. And his ‘coming out party’ this week is incredibly intriguing. Hollywood is a dirty place.
It’s Chinatown, squared.
And, at this point it’s what we don’t know that is more interesting than what we’ve heard so far. But, staying focused on Harvey Gropeman, Producer at Large, his position has been to act as one of the main enforcers of the status quo in all of the power centers of the United States.
From the casting couches of Hollywood to the banks on Wall St. to the grubby think tanks in D.C., this story won’t have all the twists and turns of L.A. Confidential, but it will have the same implications.
Weinstein, in effect, was perfectly suited for his role. He is a man of infinite appetites with poor impulse control. A pathetic loser with power over hot, young women desperate for fame.
And these women made the trade willingly. “Small price to pay, right?” Wrong.
Look at the women most opposed to Trump, the Ashley Judds, the Gwynneth Paltrows. They were all used by Weinstein or someone like him. More will come out every day.
Ben Affleck is next because he couldn’t handle fame and power any better than the rest of them did. He’s also Batman and Disney will not pass up the opportunity to bloody Warner Bros. nose.
The story is perverted by the desperate need of the powerful to maintain their power at all costs. Weinstein’s film companies acted like money laundering operations for the DNC. How many millions did he raise for people like Obama, Hillary, Pelosi, Feinstein?
How many millions were added to the budgets of performer’s salaries to be funneled from Wall St. financiers to those same people?
The whole thing is an internecine nightmare of quid pro quo and the shadiest of finances.
And Steve Bannon just attacked all of it. In real time.
Yes, you heard me. Steve Bannon is the Dr. Evil in this movie. He’s the mastermind behind this. Except that Bannon isn’t the villain (well, to Harvey Weinstein he is) but the protagonist. Think about it for two seconds.
Who else has motive, means, opportunity and, most importantly, the will to take on the biggest, most powerful (and pathetic) people in the world.
And he doesn’t want money. Bannon’s already rich. Remember, as Bannon left the White House he said that there he had influence, but at Breitbart he has power.
We’re seeing the first effects of his deploying that power.
Go through it like Jake Gittes or Sam Spade
Motive? Bannon, for whatever faults he has, is a patriot. He’s a disciple of Andrew Breitbart who routinely castigated Hollywood to ‘stop raping the children.’ Bannon joined Trump’s campaign and turned the messaging into a pale reflection of his film, “Generation Zero.”
Bannon understands the cultural and generational imperatives of this moment in time. If you haven’t watched that film then you don’t know who Steve Bannon is.
Means? The man runs Breitbart.
Opportunity? Bannon made millions as a producer on Seinfeld. He worked in Hollywood for years. Bannon also saw all sorts of stuff while working for Trump.
Remember, I told you on the outside he would be Trump’s Secret Agent, using his newly-found knowledge (cue the Hero Cycle!) from the Underworld of Washington to deploy sump pumps in the swamp.
Will? That’s my guess. Spending time in Washington changes everyone. It corrupts the venal and galvanizes the principled. Bannon didn’t want to cut deals to govern. He wasn’t interested in governing the U.S. with Trump, he was interested in blowing up the vile status quo. He runs Breitbart.
How do I know Bannon was behind this? The headlines today are all about how Bannon did some business with Weinstein over a decade ago. A minor company that Bannon ran into the ground. It went bankrupt. Simple guilt by ironic association.
Here’s a better question? Who hasn’t worked with Weinstein in Hollywood? This story is simply chum to feed to the loony left’s Facebook feeds. It will alienate even more people from that pillar of thought control.
The left crowed when they thought they’d chased Bannon from the White House. They thought they had Trump cornered and without friends. But, Bannon’s leaving the White House wasn’t the end of the movie, it was, simply the end of a smaller arc.
The Weinstein Turn
In writing, there is something called the “Mid-Point Turn.” It is the moment when someone does something so singular, usually bad, that it ensures things can never go back to the way they were at the beginning.
The fall of Harvey Weinstein is the ‘Mid-Point Turn’ for this part of the story. The lid has been blown off the abuse cycle in Hollywood. Someone finally is going down for their crimes. The guy behind the outing is still in power and the dominoes will continue to fall.
Trump was right to lean on the NFL like he did. It galvanized his base. It exposed the hypocrisy of a hyper-violent sport played by criminals and financed by taxpayers. They think they can just stop taking a knee for a few weeks and all will be forgiven.
No. It won’t. The same thing with the image handlers in Hollywood. They think that isolating Weinstein, putting out rumors of rehab, etc. will make this thing go away. Harvey Weinstein is going to jail. He’s a sex offender.
But, the real story is how much this disrupts the money laundering cycle of the entertainment industry to maintain control over the narrative. Trump’s base already didn’t like Hollywood. Now they hate it.
George Clooney recently ranted about Steve Bannon saying,
“Steve Bannon is a failed f**king screenwriter, and if you’ve ever read [his] screenplay, it’s unbelievable. Now, if he’d somehow managed miraculously to get that thing produced, he’d still be in Hollywood, still making movies and licking my a$$ to get me to do one of his stupid-a$$ screenplays.”
Well, George, Bannon is right now producing one of the best screenplays I’ve read in a long time. He has power and your boy Harvey has lawyers. How’s that for an act reversal?
Once again, an out-of-control industry is threatening public health on a mammoth scale
Over a 40-year career, Philadelphia attorney Daniel Berger has obtained millions in settlements for investors and consumers hurt by a rogues’ gallery of corporate wrongdoers, from Exxon to R.J. Reynolds Tobacco. But when it comes to what America’s prescription drug makers have done to drive one of the ghastliest addiction crises in the country’s history, he confesses amazement.
“I used to think that there was nothing more reprehensible than what the tobacco industry did in suppressing what it knew about the adverse effects of an addictive and dangerous product,” says Berger.
“But I was wrong. The drug makers are worse than Big Tobacco.”
The U.S. prescription drug industry has opened a new frontier in public havoc, manipulating markets and deceptively marketing opioid drugs that are known to addict and even kill. It’s a national emergency that claims 90 lives per day. Berger lays much of the blame at the feet of companies that have played every dirty trick imaginable to convince doctors to overprescribe medication that can transform fresh-faced teens and mild-mannered adults into zombified junkies.
So how have they gotten away with it?
A Market for Lies
The prescription drug industry is a strange beast, born of perverse thinking about markets and economics, explains Berger. In a normal market, you shop around to find the best price and quality on something you want or need – a toaster, a new car. Businesses then compete to supply what you’re looking for. You’ve got choices: If the price is too high, you refuse to buy, or you wait until the market offers something better. It’s the supposed beauty of supply and demand.
But the prescription drug “market” operates nothing like that. Drug makers game the patent and regulatory systems to create monopolies over every single one of their products. Berger explains that when drug makers get patent approval for brand-name pharmaceuticals, the patents create market exclusivity for those products—protecting them from competition from both generics and brand-name drugs that treat the same condition. The manufacturers can now exploit their monopoly positions, created by the patents, by marketing their drugs for conditions for which they never got regulatory approval. This dramatically increases sales. They can also charge very high prices because if you’re in pain or dying, you’ll pay virtually anything.
Using all these tricks, opioid manufacturers have been able to exploit the public and have created a whole new generation of desperate addicts. They monopolize their products and then, as Berger puts it, “market the hell out of them for unapproved and dangerous uses.”
Opioids are a drug class that includes opium derivatives like heroin (introduced by German drug maker Bayer in 1898), synthetics like fentanyl, and prescription painkillers like oxycodone (brand name: OxyContin). A number of factors are aggravating the addiction crisis: There has been a movement in medicine to treat pain more aggressively, while at the same time wide-ranging economic distress has generated a desire to escape a dismal reality. But a key driving force is doctors—who have been wooed by pharmaceutical marketing reps—overprescribing for chronic pain.
“For the first time since the years after heroin was invented,” writes investigative journalist Sam Quinones in Dreamland: The True Tale of America’s Opiate Epidemic, “the root of the scourge was not some street gang or drug mafia but doctors and drug companies.”
Doctors were once reluctant to write prescriptions for opioids. The U.S. drug regulator, the Food and Drug Administration (FDA), would only approve such drugs for severe cases like cancer patients in chronic agony or certain people in short-term pain after, say, an operation. But representatives of Connecticut-based drug maker Purdue, which released OxyContin in 1996, along with other companies, began to flood doctors’ offices with reports asserting that using the drug for off-label purposes was harmless. Often the targets were primary care physicians with little training in addiction. Have a chronic arthritis case? Give your patient OxyContin. Tell folks take it every day, for weeks, even years, to treat just about any kind of chronic pain. The upshot was addiction —typically not because people were getting high for fun, but because they used a legal drug in precisely the way the doctor ordered.
Purdue and others whisked doctors to stylish retreats to push them to prescribe drugs for uses not approved by U.S. regulators—a marketing strategy banned by federal law. They even created fake grassroots organizations to make it seem as though patients were demanding more prescriptions. Pharmaceutical companies like to dodge responsibility for the opioid crisis by blaming dishonest distributors and pointing out that they’re not the ones prescribing or handing out drugs to patients. True enough: They don’t need to, because they’ve done their work hooking you long before the drug is in your hands.
“The marketing is not only fraudulent; it’s incredibly elaborate,” says Berger.
“Fake scientific studies promote the lie that opioids are better than other medications for pain. They’ve gone to just about any length. Bribery, you name it. It’s outrageous.”
OxyContin is so addictive that it can create physical dependency in a matter of weeks. As drug makers and doctors who began to dole out pills by the handful in pain clinics learned, addicts do not behave like ordinary consumers. They don’t “choose” to buy or to wait until next week. They need their drug right away and will do anything to get it because if they don’t, they will suffer excruciating symptoms.
A Los Angeles Times report shows that among the lies Purdue spread about OxyContin was that one pill subdued pain for twelve hours. Except that for many patients it wears off much sooner, exposing them to horrific pain and withdrawal. Purdue knew this, but feared lower sales if it admitted the truth. So sales reps advised doctors to just give stronger doses, which increased the addiction risk.
As the money from hooked patients piled up, so did the bodies. So many bodies that earlier this year the Ohio Coroner’s Office found nowhere to store them.
In 2007, Purdue pleaded guilty in federal court in Virginia to misleading doctors and patients about OxyContin’s safety and paid a $600 million fine. But that sum was hardly an annoyance. From 1995 to 2015, Purdue made $35 billion from OxyContin sales alone. The Sacklers, who own the company, are now one of the richest families in America, as revealed by this triumphant Forbes spread. They know that lax regulation keeps the heat off, and that even litigation and criminal prosecutions can do little to stop them. Berger says that until such legal programs are massive in scale and scope, companies will go on with business as usual.
“We have to have injunctive relief [a court order to stop a behavior] that bans the marketing to doctors of opioids completely for unapproved uses, as well as an expansion of the FDA and DEA [Drug Enforcement Agency] to specifically target the drugs,” says Berger. His law firm, Berger & Montague, is involved in the effort to seek relief for the city of Philadelphia, which has seen above-average opioid prescribing and suffered the highest rates of fatal drug overdoses in the state last year.
Even though prescriptions have been slightly reduced across the country since 2012, Philadelphia is finding out what happens to many people hooked on opioids when they can’t get a prescription or find the price too high: They turn to smack. Fatal overdoses of heroin, oxycodone’s close cousin, have been skyrocketing since 2007 across the country.
“Landscapes of Despair”
The opium poppy has been part of human history since at least 3,400 B.C. when it was cultivated in Mesopotamia as the “joy plant.” Derivates, such as laudanum and morphine, offered more convenient and, people wrongly believed, safer ways to get the plant’s benefits. Bayer originally touted heroin as a non-addictive substitute for morphine, even for children, until it was outlawed in the U.S. in 1925. Rendering it illegal did not stop it from destroying the lives of many of America’s most celebrated artists, from Billie Holiday to Philip Seymour Hoffman.
Drug overdoses now kill more people than gun homicides and car crashes combined. In 2015, nearly two-thirds of all overdoses had one thing in common: opioids. As more and more names appear in the obituaries linked to opioid overdoses, most recently Buddhist teacher Michael Stone, Americans begin to wonder who is next.
Syracuse University’s Shannon Monnat, a sociologist focused on rural issues and an INET grantee, has been studying the epidemic and how it impacts various populations. Her research reveals that the rise in drug-induced deaths has been especially sharp among middle-aged people (45-55), with prescription opioid overdoses increasingly impacting both middle-aged and older populations. Heroin, whose sedating and euphoric effects are very similar to prescription opioids, looks to be the culprit in more young adult overdoses.
Monnat considers how the opioid crisis points to bigger societal problems impacting the economy, educational institutions, the health care system, political systems, and communities. Her work centers on investigating the characteristics of what she calls “landscapes of despair”—places where people are hurting economically and socially, like Appalachia, the Industrial Midwest, and parts of New England. She points out that persistent disadvantage and long-term poverty are clearly connected to the opioid crisis, noting that many of the areas most impacted were once robust centers of manufacturing before jobs moved to other countries.
Opioid addiction seems to thrive in downwardly mobile small cities in rural areas—but not all of them.
“What’s fascinating is that some of these areas have very high mortality rates from drug overdose, like Appalachia,” say Monnat.
“But others, like the Southern “Black Belt” [a region which stretches across Alabama and Mississippi], have not seen such rises.”
Originally named for its rich, dark, soil – which attracted cotton planters in the 19th century – the Black Belt has a large African American population. The area has a history of unremitting poverty, low incomes, high unemployment, and high mortality. Yet despite many hardships, which are linked the legacy of slavery, Monnat says that the region is also distinct for its “very tight-knit communities, strong kinship networks, and other networks where people can find emotional support.” It seems that when people have somewhere to turn in hard times, they may build up immunity to an epidemic like the opioid scourge.
Ironically, another factor that may have protected these communities is prejudice, as Quinones discusses in Dreamland. The low-profile heroin dealers originating from a small municipality on Mexico’s west coast who are associated with the current opioid scourge have tended to fear black Americans, preferring to target white communities. They also avoid big cities where large cartels are already established. So small, predominately white towns are their sweet spot.
Appalachia is known for kinship networks, but it also has a legacy of isolation and an outlaw tradition associated with the history of moonshining and bootlegging which can feed into today’s underground selling and distribution of opioid drugs. In this region, much of the struggling white working class has experienced economic distress with little hope of relief from America’s political system. Democrats often openly disdain “rednecks” and “hillbillies” while concentrating on identity politics rather than economic hardship. Republicans promote policies of free trade and deregulation that cast the region further into destitution.
Monnat has found that counties with large numbers of people employed in physical labor—especially occupations with higher rates of disability—have higher rates of drug fatalities. These are places where coal miners work in backbreaking positions and military veterans suffer the pain of injuries. She observes that drug companies have besieged these areas with aggressive marketing of pain pills. “In Appalachia, you’d see mining companies with physicians on staff prescribing opioids to keep people in pain working,” she says. “That was happening before OxyContin, but companies like Purdue targeted these communities to push OxyContin as a safer alternative to other pain medications.”
The National Institutes of Health (NIH) report that the opioid epidemic, which started as a regional crisis, is now a national crisis. It casts a pall over far more than individual lives; it is now decimating communities and even helping to reshape the American political landscape. Monnat finds a relationship between the landscapes of despair and the 2016 presidential election. Voting patterns show that areas in which President Trump did better than expected, like Pennsylvania and Ohio, were also places where opioid overdoses and deaths from alcohol and suicide occurred at high rates over the past decade.
During his campaign, Trump expressed concern for people in regions like Appalachia and flung stinging barbs at the politicians who had failed them. These voters supported him in high numbers, and yet sadly, his policies will likely give more power to the pharmaceutical companies that have turned their suffering into stock windfalls.
Profit Trumps People
Trump the campaigner shook his fist at Big Pharma for “getting away with murder” – one of those statements that occasionally drops from his lips with atomic accuracy. But Trump the President has done an about-face. As journalist David Dayen has pointed out, a draft of an executive order on drug prices (which never materialized) called for deregulation of the FDA and favors to industry. It was written by none other than a pharmaceutical lobbyist.
In March, President Trump issued an executive order creating a commission to study drug addiction and the opioid epidemic. The commission, headed by New Jersey Governor Chris Christie, has so far released recommendations which locate the overprescribing problem “in doctor’s offices and hospitals in every state in our nation,” while making nary a mention of pharmaceutical marketing departments. The panel suggests insufficient remedies like new treatment facilities and educating schoolchildren on the dangers of opioids, along with ineffective ones like more funds to Homeland Security. Regulation of Big Pharma? Nope.
The federal government did announce that it would team up with drug makers to research and generate non-opioid pain medications and additional medication-assisted treatment options. Among the participants? Purdue.
Economist William Lazonick of the University of Massachusetts Lowell and an INET grantee, agrees with Berger that the way the pharmaceutical industry operates amounts to a catastrophe for the public.
“It’s crazy that each and every drug is not treated like a regulated monopoly,” he says. “Taxpayers fund much of the research that goes into creating these drugs through the NIH and other public research facilities. Moreover, the companies are gifted with a monopoly through patents which last two decades.”
Lazonick notes that Big Pharma claims that it needs high profits to keep inventing new drugs, but it spends more of its profits buying back its own stock than increasing investment in R&D on new drugs. Executives running drug companies are incentivized to make profits any way they can because they are rewarded by high stock prices. Lazonick explains that they stoke those stock prices by gouging patients or lying about the safety of products—whatever it takes.
He observes that for the past several decades America has undergone a devastating experiment based on the philosophy of economist Milton Friedman, who claimed that the only social responsibility of a company is to make a profit. Untimely deaths from tobacco-related illnesses, auto safety failures, and now, harmful opioid drugs, prove that the experiment is a tragic failure.
Lazonick sees the need for nothing less than a new structure of corporate governance that ensures the ethical responsibly of drug makers to do what they are supposed to do: create high-quality, low-cost products that are safe. The current structure, based on the misguided idea that companies should be run for the sole purpose of enriching shareholders, is particularly perverse when it comes to products that are potentially fatal. The problem with this model is that when shareholders are the only people who matter, the rest of us suffer.
Since taxpayers support pharmaceutical companies by funding public research and many other things they require to do business, Lazonick says it is only fair and logical that someone representing the public sit on their boards. Berger adds that companies should be required to make drugs widely available at affordable prices in return for their use of publicly-funded, basic research at no cost whatsoever.
America, for the time being, stands out among nations in letting pharmaceutical companies run amok to inflate drug prices, advertise and market drugs without proper regulation, and use taxpayer resources while exposing them to egregious harm.
“The only thing America’s drug companies are competitive about,” says Lazonick, “is getting people addicted."