Fear and uncertainty dominate Jackson Hole
central bankers’ meeting
31 August 2020
The annual Jackson Hole conclave of central bankers, which
concluded over the weekend, underscored the incapacity of global financial
authorities to devise any policies either to bring about economic growth or
counter the mounting contradictions in the financial system.
Reporting on the meeting, held in
virtual format this year because of the COVID-19 pandemic, the Financial
Times noted: “It was the head of Singapore’s monetary authority who
best summed up the biggest fear gripping the virtual Jackson Hole conference this
year.
“‘We’re not going back to the same world,’ Tharman
Shanmugaratnam warned.’”
The central initiative at the gathering was the decision by
the Fed’s key policy-making body to maintain interest rates at their ultra-low
levels for an indefinite period and keep pumping money into the financial
system.
The decision, announced by the Federal Open Market
Committee as the conclave opened and elaborated on in a keynote speech by Fed
Chair Jerome Powell, was in effect a guarantee to Wall Street that its demand
for “forward guidance”—lower interest rates for longer—would be met.
The Fed said it would no longer be guided by a 2 percent
inflation rate limit in determining its interest policy, but would instead
focus on an “average” rate of 2 percent, meaning that the cheap money regime
could continue even if prices rose above that level.
As for dealing with the slump in the global economy—the
most serious since the Great Depression—and combating the potential for further
storms in the financial system following the market meltdown in mid-March,
there were no answers, as underscored by the remarks of the Singapore finance
minister.
“We’ve got to avoid a prolonged period of high levels of
unemployment, and it’s a very real prospect,” he said. “It is not at all assured
that we will get a return of tight labour markets even with traditional
macroeconomic policy being properly applied.”
It was a significant comment because one of main themes in
remarks by central bank chiefs was that monetary policy alone would not be sufficient
to restore growth, and government intervention was needed to boost the economy.
But, as Shanmugaratnam noted, even if “properly applied,” there were no
guarantees of success.
According to the Financial
Times, the notion that central bankers “need to face the reality of
permanent upheaval and long-term economic damage” was the “main theme” of the
event.
One of the most frequently cited academic papers produced
for the meeting was prepared earlier this month by Colombia University academic
Laura Veldkamp on the long-term effects of the COVID-19 pandemic.
The paper said that the biggest economic effects of the
pandemic “could arise from changes in behaviour long after the immediate health
crisis is resolved.” A potential source of such a long-lived change was a shift
in the “perceived probability of an extreme, negative shock in the future,” and
that “long-run cost for the US economy from this channel is many times higher
than the estimates of the short-run losses in output.”
The paper continued: “This suggests that, even if a vaccine
cures everyone in a year, the COVID-19 crisis will leave its mark on the US
economy for many years to come.”
In other words, the pandemic was not only a trigger event,
acting on the contradictions that had built up in the economy and financial
system, but a transformative one as well.
With the Fed now having formally committed itself to the
endless supply of cheap money to Wall Street, attention will turn to the
European Central Bank (ECB), which is also conducting a strategic policy
review, to see whether it goes down the same road.
While the governing council, under the presidency of
Christine Lagarde, may be inclined to move in the same direction as the Fed, it
would face certain opposition from Germany’s Bundesbank, which has expressed
opposition to the easing of monetary policy.
A member of the governing council told
the Financial Times, “we will look at it,” but the Bundesbank
would be “very nervous” about it.
“We are not out of firepower by any means, and to be honest,
it looks from today’s vantage point that we were too cautious about our
remaining firepower pre-COVID,” he said, adding that there are times when we
“need to go big and go fast.”
The actions of the Fed have done nothing to boost the real
economy, as an increasing number of companies announce that temporary layoffs
will be made permanent.
The Wall Street Journal reported
Saturday that a survey conducted by Randstad RiseSmart found that “nearly half
of US employers that had furloughed or laid off staff because of COVID-19 are
considering additional workplace cuts in the next 12 months.”
This indicates that the pandemic has been a trigger for a
major restructuring of employment conditions.
The effects of the Fed’s policies and the further monetary
easing to come are focused on the stock market, with Wall Street indexes rising
to the record levels they achieved in February. The main beneficiaries have
been the high tech companies—Apple, Microsoft, Alphabet (the owner of Google)
and Facebook—which together comprise more than a fifth of the Nasdaq index.
The extent of their rise and growing financial and monopoly
power is indicated by the results of an analysis carried out by Bank of America
Global Research, reported by the business channel CNBC. It found that the
market capitalization of the major US tech firms, now standing at $9.1
trillion, was greater than the market capitalization of the entire European
market, including the UK and Switzerland, at $8.9 trillion. In an indication of the
massive shift that has taken place, the research note pointed out that in 2007,
total European market capitalization was four times that of US technology
stocks.
Josh Hawley: GOP Must Defend Middle Class
Americans Against ‘Concentrated Corporate Power,’ Tech Billionaires
JOHN
BINDER
The Republican Party must defend
America’s working and middle class against “concentrated corporate power” and
the monopolization of entire sectors of the United States’ economy, Sen. Josh
Hawley (R-MO) says.
In an interview on The Realignment podcast,
Hawley said that “long gone are the days where” American workers can depend on
big business to look out for their needs and the needs of their communities.
Instead, Hawley explained that increasing “concentrated
corporate power” of whole sectors of the American economy — specifically among
Silicon Valley’s giant tech conglomerates — is at the expense of working and
middle class Americans.
“One of the things Republicans need to recover today is a
defense of an open, free-market, of a fair healthy competing market and the
length between that and Democratic citizenship,” Hawley said, and continued:
At the end of the day, we are trying to support and sustain
here a great democracy. We’re not trying to make a select group of people rich.
They’ve already done that. The tech billionaires are already billionaires, they
don’t need any more help from government. I’m not interested in trying to help
them further. I’m interested in trying to help sustain the great middle of this
country that makes our democracy run and that’s the most important challenge of
this day.
“You have these businesses who for years now have said
‘Well, we’re based in the United States, but we’re not actually an American
company, we’re a global company,'” Hawley said. “And you know, what has driven
profits for some of our biggest multinational corporations? It’s been … moving
jobs overseas where it’s cheaper … moving your profits out of this country so
you don’t have to pay any taxes.”
“I think that we have here at the same time that our
economy has become more concentrated, we have bigger and bigger corporations
that control more and more of our key sectors, those same corporations see themselves
as less and less American and frankly they are less committed to American
workers and American communities,” Hawley continued. “That’s turned out to be a
problem which is one of the reasons we need to restore good, healthy, robust
competition in this country that’s going to push up wages, that’s going to
bring jobs back to the middle parts of this country, and most importantly, to
the middle and working class of this country.”
While multinational corporations monopolize industries,
Hawley said the GOP must defend working and middle class Americans and that big
business interests should not come before the needs of American communities:
A free market is one where you can enter it, where there
are new ideas, and also by the way, where people can start a small family
business, you shouldn’t have to be gigantic in order to succeed in this
country. Most people don’t want to start a tech company. [Americans] maybe
want to work in their family’s business, which may be some corner shop in a
small town … they want to be able to make a living and then give that to
their kids or give their kids an option to do that. [Emphasis added]
The problem with corporate concentration is that it tends
to kill all of that. The worst thing about corporate concentration is that it
inevitably believes to a partnership with big government. Big business and
big government always get together, always. And that is exactly what has
happened now with the tech sector, for instance, and arguably many other
sectors where you have this alliance between big government and big business …
whatever you call it, it’s a problem and it’s something we need to address.
[Emphasis added]
Hawley blasted the free trade-at-all-costs doctrine that
has dominated the Republican and Democrat Party establishments for decades,
crediting the globalist economic model with hollowing “out entire industries,
entire supply chains” and sending them to China, among other countries.
“The thing is in this country is that not only do we not
make very much stuff anymore, we don’t even make the machines that make the
stuff,” Hawley said. “The entire supply chain up and down has gone overseas,
and a lot of it to China, and this is a result of policies over some decades
now.”
As Breitbart News reported, Hawley detailed in the interview
how Republicans like former President George H.W. Bush’s ‘New World Order’
agenda and Democrats have helped to create a corporatist economy that
disproportionately benefits the nation’s richest executives and donor class.
The billionaire class, the top 0.01 percent of earners, has
enjoyed more than 15 times as
much wage growth as the bottom 90 percent since 1979. That economy has been
reinforced with federal rules that largely benefits the wealthiest of wealthiest
earners. A study released last month
revealed that the richest Americans are, in fact, paying a lower tax rate than
all other Americans.
John Binder is a reporter for Breitbart News. Follow
him on Twitter at @JxhnBinder.
House Democrats Poised to Recommend Breaking Up Big Tech Platforms
The Wall Street Journal reports that House Democrats are planning to issue recommendations to rein in some of the biggest companies in the world, including Google, Facebook, and Apple. These could include breaking up the companies’ online platforms — and may possibly set the stage for action if the party wins the presidency and Senate in November.
For more than a year, the House Antitrust Subcommittee has been investigating the companies for engaging in possibly anticompetitive activities. This includes Amazon offering its own products that compete with those of third-party sellers, and Google promoting its own offerings on its dominant search engine. When four of the most powerful tech CEOs testified before Congress in July — representing Amazon, Microsoft, Apple, and Google — they strenuously defended their business practices, claiming that customers had plenty of choices online regardless of their market positions.
But Rhode Island representative David Cicilline, who runs the House Antitrust Subcommittee, was not convinced. His report is likely to recommend steps that would reduce the dominance of the companies, which may include forcing the businesses to separate their profit-making businesses from the platforms on which they promote competitors as well as increasing funding for antitrust enforcement.
The issue didn’t even come up at Tuesday night’s presidential debate, but if Democrats take the Senate in November, the party could make good on its increasingly aggressive posture toward big tech — following the lead of European governments, many of which have been more adversarial in their dealings with technology giants than the United States has. Republicans, while often acknowledging that companies like Facebook are too powerful, have generally taken a more laissez-faire approach, though some, like Senator Josh Hawley, advocate much more aggressive tactics. (The Trump administration’s Department of Justice has opened an antitrust investigation into Google, but seems more focused on platforms’ supposed bias against conservatives than they are on on breaking up monopolies.)
Antitrust fervor has swept through the progressive wing of the Democratic Party in recent years, as big tech, once generally viewed as a mostly benign force by the party, has grown increasingly powerful and burrowed into the lives of almost all Americans. As with many issues that animate the left, though, Joe Biden has taken a moderate approach, making clear that he is not in favor of breaking up large companies — at least not yet.
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