A new survey finds nearly half the households in America — 46% — report facing serious financial pain during the pandemic — a problem that is more acute in the four largest U.S. cities, and among Latino and Black households. The poll also says hundreds of billions in government stimulus and other support did not make a significant dent in their struggles.
“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.”
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.”
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 BINDERThe
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.
Fed resets
monetary policy framework to meet Wall Street’s demands
28 August 2020
The US Federal Reserve has announced a major shift in its
official framework for determining monetary policy to bring it into line with
its existing practice of supporting financial markets, following the 2008
financial crisis and now the pandemic, and to assure them such support will
continue indefinitely.
The shift was announced in a statement released by the
policy-making Federal Open Market Committee (FOMC) yesterday morning before a
keynote address by Fed chair Jerome Powell to the Jackson Hole conference of
central bankers.
The FOMC said in future its interest rate policy would be
formulated with the aim of seeking to ensure the inflation rate achieved an
“average” of 2 percent over time, removing the concern in the markets that the
Fed would look to lift rates once the inflation rate went above 2 percent.
The effect of this change is to assure Wall Street that the
Fed rate, and the interest rate structure of the entire financial system based
on it, will remain at their present ultra-low levels for a long time.
To bolster this assurance, the FOMC also made clear that
because low official unemployment rates in the period prior to the pandemic had
not produced significant wage rises or set off inflation the Fed would not look
to lift interest rates if the labour market tightened.
The breakdown in the previous relationship is largely the
result of changes in the labour market in the past decade through the increased
use of gig economy employment, part-time working and casualisation which have
been the major source of increased employment rather than full-time jobs.
Announcing its new policy framework, the FOMC said the
“updates reflect changes in the economy over the past decade and how
policymakers are taking these changes into account in conducting monetary
policy.”
That was an accurate assessment as far as it went. But the
rest of the statement and the address delivered by Powell explaining the change
was largely an exercise in covering up the real driving forces of the shift.
Powell spoke of the need to ensure the achievement of the
Fed’s congressionally mandated goals of achieving price stability and maximum
employment “in service to the American people,” together with the claim that
through its “listening” program it had been taking into account their views and
those of their communities.
There was no reference to the most significant change over
the past period, especially in the wake of the financial crisis of 2008, that
is, the growing divorce of Wall Street from the underlying real economy and the
accumulation of wealth in the hands of a financial oligarchy at the expense of
the rest of society.
This process—epitomised by the news on Wednesday that the
wealth of Amazon chief Jeff Bezos has now reached $200 billion as he rakes in
$321 million per day—has seen the institutionalisation of mechanisms whereby
profit is accumulated via speculation, share buy backs and other forms of
“financial engineering.”
These mechanisms, which involve the siphoning of ever
increasing amounts of wealth produced by the labour of hundreds of millions of
workers into the coffers of a tiny financial elite, depend above all on the
guaranteed maintenance of ultra-low interest rates and a Fed commitment that it
will step in to back the markets whenever rampant speculation threatens a
financial crisis.
This has been the actual practice of the Fed, going back to
the stock market crash of October 1987 and accelerating after the meltdown of
2008.
But to the extent it was not formally codified and there
was any degree of ambiguity in the central bank’s policy framework statement
the financial markets demanded that changes be made in the interests of
so-called “forward guidance.” That demand has now been met.
In his Jackson Hole speech, Powell recalled that the review
of the Fed’s monetary policy statement was initiated in early 2019.
The timing is significant. From December 2015, the Fed had
begun to raise interest rates from the near-zero levels it had sent in place
following the 2008 crash. This was in line with the claim that the measures it
had introduced, including the purchases of trillions of dollars of Treasury
bonds, were of an emergency character and would be gradually withdrawn once the
economy started to return to “normal.”
In 2017 and 2018 there was a brief upturn in the US and
world economy with the largest increase in gross domestic product since the
period just prior to the financial crash and the Fed decided to press on in
order to provide it with some room to manoeuvre in the event of another sharp
downturn.
In 2018, it carried out four interest rate rises, each of
0.25 percentage points, and indicated there would be a further three such rises
in 2019. It also stated it would continue winding down its holdings of
financial assets, which had accumulated from around $800 billion prior to 2008
to more than $4 trillion, at the rate of $50 billion per month. In October
2019, Powell said the program of asset reductions was on “auto pilot.”
However, the orgy of financial speculation that had
accelerated after 2008 had now become deeply entrenched in Wall Street and the
entire financial system.
This meant that even very gradual moves to anything resembling
what had previously been regarded as “normal” and the merest hint the supply of
ultra-cheap money was an emergency measure, to be withdrawn at some point,
produced a violent reaction.
It took the form of a sell-off on Wall
Street in December 2018, recording its worst result for that month since 1931
in the midst the Great Depression. Together with a campaign in sections of the
financial press, especially the Wall Street Journal, as well as
the continued denunciations of Powell by US President Trump for keeping
interest rates too high, this led to a U-turn.
In a speech in January 2019, Powell made clear that
interest rate rises were off the agenda and the reduction of the Fed’s assets
would be put on hold. This was followed by cuts in rates from the middle of
2019.
But Powell and the FOMC recognised this was not sufficient
so long as there was even a trace of ambiguity remaining in the Fed’s policy
framework. This led to the policy review the results of which were announced
yesterday—a guarantee to the financial oligarchy that the ultra-cheap monetary
policy, so essential to its operations, would continue indefinitely.
In his speech, Powell did not specifically deal with the
measures initiated by the Fed in response to the meltdown of the financial
system in mid-March when the Fed stepped in to act as the backstop for every
area of the market.
It announced further massive purchases of Treasury bonds,
the buying up of student loan and credit card debt, short-term commercial paper
and initiating, for the first time, a program of buying corporate bonds,
including from companies that had been junk-rated as a result of the pandemic
There were more than enough reassurances for Wall Street in
the speech that these measures, described as temporary and to be withdrawn at
some point, would also be permanent.
Powell noted that in previous times expansions in the
economy typically ended in overheating and rising inflation but in the past
period long expansions had been more likely to end with financial instability
“prompting essential efforts to substantially increase the strength and
resilience of the financial system.”
In another part of the speech, he said Fed policy was
determined by risks to the economic outlook, “including potential risks to the
financial system that could impede the attainment of our goals” and that to
“counter these risks, we are prepared to use our full range of tools.”
There can be mistaking the essential content of the Fed’s
adjustment to its statement of objectives. It makes clear that the orgy of
speculation, leading to the creation of fabulous wealth at one pole and
increasing poverty and misery at the other, is the official policy of the
central financial arm of the capitalist state.
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