America Faces No Greater Threat Than Joe Biden and the Democrat Party. Their Assault to Our Borders Is As Great As Their Assault to Free Speech and Free Elections
Thursday, June 25, 2020
TUMP'S BULLSHIT 'V-SHAPED' RECOVER IS NOW THE TRUMP DEPRESSION
If you reopen it, they won’t necessarily come. Photo: JLN Photography/Shutterstock
The dream of a “V-shaped recovery” died Thursday of complications from coronavirus.
For months, Wall Street’s optimists have been betting that America’s bedridden economy would bolt upright as soon as the pandemic had passed: After all, the private sector had a clean bill of health before catching COVID-19. Months ago, America’s unemployment rate was near half-century lows, and analysts were expecting a “phase one” trade deal with China to further boost GDP growth. Today, the economy’s fundamentals remain sound; the fault is in our stars, not our financial system. Thus, once all epidemiological constraints are lifted, pent-up demand will be unleashed — and growth will rise as rapidly as it fell in March, painting a “V” across economists’ charts.
This scenario was always less likely than the bulls wanted it to be. True, the global economy had enjoyed a “V-shaped” recovery after the SARS outbreak in 2003. But SARS did not force most of the global economy to take a weeks-long hiatus. Even if Congress’s fiscal response had been flawless — which is to say, even if we gave every previously viable business the funds that it needed to weather the storm — widespread firm failures would still be inevitable. This is because the scale of the coronavirus shock was bound to foment (or accelerate) structural changes in commerce and consumption. Many movie theaters that were narrowly profitable in the pre-COVID world will not be in the post-COVID one. Now that every major firm in the world has been forced to give remote work and Zoom-only conferences a test-drive, demand for commercial real estate and hotels specializing in business functions is unlikely to return to its pre-crisis level. And such permanent changes in demand mean that millions of sidelined workers will not regain their old jobs. Rather, new jobs will need to be created following the reallocation of capital across firms and sectors. That is an inherently gradual process. And in the interim, the resilience of elevated unemployment will dampen consumer spending, further delaying full recovery.
Of course, Congress’s fiscal response has not actually been perfect. Although the CARES Act’s unemployment-insurance provisions have been a laudable success — allowing poverty in the U.S. to fall even as joblessness hit Great Depression levels — its aid to small businesses was inadequate and poorly structured, while its failure to cover state and municipal budget shortfalls is fueling massive cuts in public spending and employment. Meanwhile, absent another relief package, enhanced unemployment benefits and a moratorium on evictions for Americans in publicly subsidized housing will expire by August, triggering a spike in poverty and homelessness.
But the biggest flaw in the V-shaped forecast was that it relied on a set of improbably rosy assumptions about the pandemic itself. Put simply, you can’t have a V-shaped recovery if your nation’s chart of new coronavirus cases looks like a bunch of Ws.
Earlier this month, data confirming the CARES Act’s efficacy in keeping households afloat, combined with encouraging economic numbers from freshly reopened states, lent the bullish outlook a patina of plausibility. But now, in Texas, Florida, and Arizona, hasty reopenings have spurred resurgent outbreaks — which have effectively re-shuttered much of the economy. As a Bloomberg analysis of restaurant-reservation data from OpenTable shows, demand for dining out has fallen back into decline through much of the South and Midwest.
Graphic: OpenTable/BloombergNews
Baby boomers supply roughly one-third of all consumer spending in the United States. Regardless of whether public officials order a second shutdown, if coronavirus is spreading exponentially through major population centers, older Americans are going to shop less, and low-margin businesses dependent on sales volume will fail. This was already ostensibly happening last month: Although the May jobs report showed (surprisingly) robust payroll growth, those gains came overwhelmingly from the reversal of temporary layoffs, as reopened businesses recalled furloughed workers. By contrast, the number of workers permanently fired in May was actually 295,000 higher than it had been in April. If COVID-19’s resurgence leaves reopened businesses with fewer customers than they anticipated, many workers who regained their jobs last month are likely to pass through a revolving door back onto the labor market’s sidelines — which are already quite crowded.
Another 1.48 million Americans filed for initial unemployment benefits last week. This figure represents a modest decline from the previous week, but it is also significantly higher than economists had anticipated. The fact that the economy is still shedding jobs at such an extraordinary clip — months into the crisis, with most state economies at least partially reopened — is indicative of long-term structural damage to the economy. Earlier this month, analysts warned that a second-wave of layoffs was poised to wipe out millions of white-collar managerial jobs in hard-hit sectors like leisure, retail, and hospitality (and that projection was compiled at a time when America’s public-health outlook appeared lessominous than it does today). On Thursday, Macy’s announced that it will be shedding nearly 4,000 corporate jobs.
On Wednesday, the number of new confirmed cases of COVID-19 in the U.S. hit an all-time high. Twenty-four hours later, Texas governor Greg Abbott announced an official “pause” to his state’s reopening. America’s economic and epidemiological outlook isn’t uniformly bleak. If Congress covers state and municipal budget shortfalls, and extends enhanced unemployment benefits — while Republican leaders encourage public compliance with mask-wearing and social distancing protocols — we’ll have a good chance of averting a depression.
By contrast, if the GOP keeps pretending that the only things ailing America’s private sector are overly generous welfare benefits and negligent business owners’ exposure to liability lawsuits, then our economy is going to get sicker.
Financial crises are presented in the media and elsewhere as being about numbers. But behind the economic and financial data are the interests of two irreconcilably opposed social classes—the working class, the mass of society, and the ruling corporate and financial oligarchy whose interests are defended by the state of which the Fed is a crucial component.
As 2008 demonstrated, what emerges from a financial crisis is a deepening class polarisation. That will certainly be the outcome of the mid-March events. A massive social confrontation, already developing long before the pandemic arrived on the scene, is looming in which the working class will be confronted with the necessity to fight for political power in order to take the levers of the economy and financial system into its own hands.
IMF Predicts Worst Recession Since Great Depression
WASHINGTON (AP) — The International Monetary Fund has sharply lowered its forecast for global growth this year because it envisions far more severe economic damage from the coronavirus than it did just two months ago.
The IMF predicts that the global economy will shrink 4.9 percent this year, significantly worse than the 3 percent drop it had estimated in its previous report in April. The IMF said that the global economic damage from the recession will be worse than from any other downturn since the Great Depression of the 1930s.
For the United States, it predicts that the nation’s gross domestic product — the value of all goods and services produced in the United States — will plummet 8 percent this year, even more than its April estimate of a 5.9 percent drop. That would be the worst such annual decline since the U.S. economy demobilized in the aftermath of World War II.
The IMF issued its bleaker forecasts Wednesday in an update to the World Economic Outlook it released in April. The update is generally in line with other recent major forecasts. Earlier this month, for example, the World Bank projected that the global economy would shrink 5.2 percent this year.
“This is the worst recession since the Great Depression,” Gita Gopinath, the IMF’s chief economist, told reporters at a briefing. “No country has been spared.”
The IMF noted that the pandemic was disproportionately hurting low-income households, “imperiling the significant progress made in reducing extreme poverty in the world since 1990.”
In recent years, the proportion of the world’s population living in extreme poverty — equivalent to less than $1.90 a day — had fallen below 10 percent from more than 35 percent in 1990. But the IMF said the COVID-19 crisis threatens to reverse this progress. It forecast that more than 90 percent of developing and emerging market economies will suffer declines in per-capita income growth this year.
For 2021, the IMF envisions a rebound in growth, so long as the viral pandemic doesn’t erupt in a second major wave. It expects the global economy to expand 5.4 percent next year, 0.4 percentage point less than it did in April.
For the United States, the IMF predicts growth of 4.5 percent next year, 0.2 percentage point weaker than in its April forecast. But that gain wouldn’t be enough to restore the U.S. economy to its level before the pandemic struck. The association of economists who officially date recessions in the United States determined that the economy entered a recession in February, with tens of millions of people thrown out of work from the shutdowns that were imposed to contain the virus.
The U.S. government has estimated that the nation’s GDP shrank at a 5 percent annual rate in the January-March quarter, and it is widely expected to plunge at a 30 percent rate or worse in the current April-June period.
In its updated forecast, the IMF downgraded growth for all major countries. For the 19 European nations that use the euro currency, it envisions a decline in growth this year of 10.2 percent — more than the 8 percent drop it predicted in April — followed by a rebound to growth of 6 percent in 2021.
In China, the world’s second-largest economy, growth this year is projected at 1 percent. India’s economy is expected to shrink 4.5 percent after a longer period of lockdown and a slower recovery than was envisioned in April.
In Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to shrink 9.1 percent and 10.5 percent, respectively.
A steep fall in oil prices has triggered deep recessions in oil-producing countries, with the Russian economy expected to contract 6.6 percent this year and Saudi Arabia’s 6.8 percent.
The IMF cautioned that downside risks to the forecast remain significant. It said the virus could surge back, forcing renewed shutdowns and possibly renewed turmoil in financial markets similar to what occurred in January through March. The IMF warned that such financial turbulence could tip vulnerable countries into debt crises that would further hamper efforts to recover.
Its updated forecast included a downside scenario that envisions a second major outbreak occurring in early 2021. Under this scenario, the global economy would contract again next year by 4.9 percent, it estimates.
Amazon CEO Jeff Bezos, who is rescinding a $2-an-hour hazard pay increase for his warehouse workers at the end of the month, led the pack, increasing his personal wealth by $34.6 billion since the onset of the pandemic. Facebook CEO Mark Zuckerberg was close behind, adding $25 billion to his fortune. Tesla CEO Elon Musk, who reopened his California auto plant in defiance of state regulators and with the support of President Trump, saw a 48 percent increase in his wealth to $36 billion in just eight weeks as the stock market rebounded from its collapse. All told, the nation’s 620 billionaires now control $3.382 trillion, a 15 percent increase in two months.
US unemployment claims approach 40 million since March
22 May 2020
The United States Department of Labor reported on Thursday that more than 2.4 million Americans applied for unemployment insurance last week, bringing the total number of new claims to 38.6 million since mid-March, when social distancing measures and statewide stay-at-home orders were first implemented in an effort to slow the spread of the coronavirus.
Even with the push by the Trump administration since then to reopen the economy and the easing of lockdown orders in all 50 states—despite a continued rise in COVID-19 infections and deaths—the US marked its ninth straight week in which more than 2 million workers filed for unemployment. While this is down from the peak at the end of March when 6.8 million applied for unemployment insurance, it still dwarfs the worst weeks of the Great Recession in 2008.
It is expected that the official unemployment rate for May, which is to be reported by the federal government in the first week of June, will approach 20 percent, up from 14.7 percent last month. This is a significant undercount, with millions of unemployed immigrants unable to apply for benefits, and many other workers who are not currently looking for work and therefore are not counted as unemployed.
A man looks at signs of a closed store due to COVID-19 in Niles, Ill., Thursday, May 21, 2020. (AP Photo/Nam Y. Huh)
Fortune magazine estimates that real unemployment has already hit 22.5 percent, which is nearing the peak of unemployment reached during the Great Depression in 1933, when the rate rose above 25 percent. Millions more are expected to apply in the coming weeks, pushing the numbers beyond those seen during the country’s worst economic crisis.
But even these figures do not capture the extent of the crisis now unfolding across the country. Millions have been blocked for weeks from applying for unemployment compensation because of antiquated computer systems, and a significant share of those who have applied have been denied any payments. On top of this there are significant delays in processing applications in multiple states, including Indiana, Missouri, Wyoming and Hawaii. Meanwhile, Florida, which has some of the most stringent restrictions, has refused to extend its paltry three-month limit on payments for the few who manage to qualify.
Sparked by the pandemic, the greatest economic crisis since the 1930s is already having a devastating impact on the millions who have seen their jobs suddenly disappear, while millions more will see wages, benefits and hours dramatically curtailed whenever they are able to return to work. Optimistic projections that the US economy would quickly bounce back once stay-at-home orders were lifted are now becoming much gloomier.
A University of Chicago analysis from earlier this month projects that 42 percent of lost jobs will be permanently eliminated. At the current record number, this will mean a destruction of 16.2 million jobs, nearly double the number of jobs which were lost during the Great Recession just over a decade ago.
“I hate to say it, but this is going to take longer and look grimmer than we thought,” Nicholas Bloom, a Stanford University economist and one of the co-authors of the study, told the New York Times.
A survey by the Census Bureau carried out at the end of April and beginning of this month found that 47 percent of adults had lost employment since March 13 or had someone in their household do so, and 39 percent expected that they or someone else in the home would lose their job in the next month. Nearly 11 percent reported that they had not paid their rent or mortgage on time and more than 21 percent had slight or no confidence that they would do so next month.
With millions missing their rent or mortgage payments, tens of thousands of families will be thrown out on the street in the coming weeks and months, leading to a dramatic rise in homelessness even as the coronavirus continues to spread. While many states took steps in March to place a moratorium on evictions, and eviction notices were unable to be filed due to court closures, those measures are now expiring and courts are reopening.
The Oklahoma County Sheriff announced Tuesday via their Twitter page that the department would resume enforcing evictions on May 26. Nearly 300 eviction cases were filed in Oklahoma City between Monday and Tuesday. This process is being repeated in cities and counties across the country. Evictions are also set to resume in Texas next week, where many families were ineligible for aid due to the undocumented status of one or another parent. The CARES Act provision, which blocks evictions from properties with federally subsidized mortgages, expires on July 25; in Texas this only accounts for one-third of homes.
Meanwhile, another wave of layoffs and furloughs is expected by the Congressional Budget Office at the end of June, when the multi-billion-dollar Payment Protection Program (PPP) expires. Sold as a bailout which would help small businesses keep workers on their payroll in the course of necessary shutdowns, the PPP was in fact a boondoggle for large corporations, their subsidiaries and those with connections to the Trump administration. Many small business owners have not seen any aid, and many do not qualify for loan forgiveness.
Amid historic levels of social misery in the working class, times have never been better for those at the heights of society, with America’s billionaires adding $434 billion to their total net worth since state lockdowns began. Financial markets have soared, underwritten by $80 billion per day from the Federal Reserve.
Amazon CEO Jeff Bezos, who is rescinding a $2-an-hour hazard pay increase for his warehouse workers at the end of the month, led the pack, increasing his personal wealth by $34.6 billion since the onset of the pandemic. Facebook CEO Mark Zuckerberg was close behind, adding $25 billion to his fortune. Tesla CEO Elon Musk, who reopened his California auto plant in defiance of state regulators and with the support of President Trump, saw a 48 percent increase in his wealth to $36 billion in just eight weeks as the stock market rebounded from its collapse. All told, the nation’s 620 billionaires now control $3.382 trillion, a 15 percent increase in two months.
US unemployment claims approach 40 million since March
22 May 2020
The United States Department of Labor reported on Thursday that more than 2.4 million Americans applied for unemployment insurance last week, bringing the total number of new claims to 38.6 million since mid-March, when social distancing measures and statewide stay-at-home orders were first implemented in an effort to slow the spread of the coronavirus.
Even with the push by the Trump administration since then to reopen the economy and the easing of lockdown orders in all 50 states—despite a continued rise in COVID-19 infections and deaths—the US marked its ninth straight week in which more than 2 million workers filed for unemployment. While this is down from the peak at the end of March when 6.8 million applied for unemployment insurance, it still dwarfs the worst weeks of the Great Recession in 2008.
It is expected that the official unemployment rate for May, which is to be reported by the federal government in the first week of June, will approach 20 percent, up from 14.7 percent last month. This is a significant undercount, with millions of unemployed immigrants unable to apply for benefits, and many other workers who are not currently looking for work and therefore are not counted as unemployed.
A man looks at signs of a closed store due to COVID-19 in Niles, Ill., Thursday, May 21, 2020. (AP Photo/Nam Y. Huh)
Fortune magazine estimates that real unemployment has already hit 22.5 percent, which is nearing the peak of unemployment reached during the Great Depression in 1933, when the rate rose above 25 percent. Millions more are expected to apply in the coming weeks, pushing the numbers beyond those seen during the country’s worst economic crisis.
But even these figures do not capture the extent of the crisis now unfolding across the country. Millions have been blocked for weeks from applying for unemployment compensation because of antiquated computer systems, and a significant share of those who have applied have been denied any payments. On top of this there are significant delays in processing applications in multiple states, including Indiana, Missouri, Wyoming and Hawaii. Meanwhile, Florida, which has some of the most stringent restrictions, has refused to extend its paltry three-month limit on payments for the few who manage to qualify.
Sparked by the pandemic, the greatest economic crisis since the 1930s is already having a devastating impact on the millions who have seen their jobs suddenly disappear, while millions more will see wages, benefits and hours dramatically curtailed whenever they are able to return to work. Optimistic projections that the US economy would quickly bounce back once stay-at-home orders were lifted are now becoming much gloomier.
A University of Chicago analysis from earlier this month projects that 42 percent of lost jobs will be permanently eliminated. At the current record number, this will mean a destruction of 16.2 million jobs, nearly double the number of jobs which were lost during the Great Recession just over a decade ago.
“I hate to say it, but this is going to take longer and look grimmer than we thought,” Nicholas Bloom, a Stanford University economist and one of the co-authors of the study, told the New York Times.
A survey by the Census Bureau carried out at the end of April and beginning of this month found that 47 percent of adults had lost employment since March 13 or had someone in their household do so, and 39 percent expected that they or someone else in the home would lose their job in the next month. Nearly 11 percent reported that they had not paid their rent or mortgage on time and more than 21 percent had slight or no confidence that they would do so next month.
With millions missing their rent or mortgage payments, tens of thousands of families will be thrown out on the street in the coming weeks and months, leading to a dramatic rise in homelessness even as the coronavirus continues to spread. While many states took steps in March to place a moratorium on evictions, and eviction notices were unable to be filed due to court closures, those measures are now expiring and courts are reopening.
The Oklahoma County Sheriff announced Tuesday via their Twitter page that the department would resume enforcing evictions on May 26. Nearly 300 eviction cases were filed in Oklahoma City between Monday and Tuesday. This process is being repeated in cities and counties across the country. Evictions are also set to resume in Texas next week, where many families were ineligible for aid due to the undocumented status of one or another parent. The CARES Act provision, which blocks evictions from properties with federally subsidized mortgages, expires on July 25; in Texas this only accounts for one-third of homes.
Meanwhile, another wave of layoffs and furloughs is expected by the Congressional Budget Office at the end of June, when the multi-billion-dollar Payment Protection Program (PPP) expires. Sold as a bailout which would help small businesses keep workers on their payroll in the course of necessary shutdowns, the PPP was in fact a boondoggle for large corporations, their subsidiaries and those with connections to the Trump administration. Many small business owners have not seen any aid, and many do not qualify for loan forgiveness.
Amid historic levels of social misery in the working class, times have never been better for those at the heights of society, with America’s billionaires adding $434 billion to their total net worth since state lockdowns began. Financial markets have soared, underwritten by $80 billion per day from the Federal Reserve.
Amazon CEO Jeff Bezos, who is rescinding a $2-an-hour hazard pay increase for his warehouse workers at the end of the month, led the pack, increasing his personal wealth by $34.6 billion since the onset of the pandemic. Facebook CEO Mark Zuckerberg was close behind, adding $25 billion to his fortune. Tesla CEO Elon Musk, who reopened his California auto plant in defiance of state regulators and with the support of President Trump, saw a 48 percent increase in his wealth to $36 billion in just eight weeks as the stock market rebounded from its collapse. All told, the nation’s 620 billionaires now control $3.382 trillion, a 15 percent increase in two months.
Further details emerge on the extent of the mid-March financial crisis
By Nick Beams 22 May 2020
An article in the Wall Street Journal (WSJ) earlier this week provided further details on how close financial markets came to a meltdown in the middle of March.
Entitled “The Day Coronavirus Nearly Broke the Financial Markets,” the article recorded how markets in financial assets, usually regarded as being almost as good as cash, froze when “there were almost no buyers.”
“The financial system has endured numerous credit crunches and market crashes, and the memories of 1987 and 2008 crises set a high bar for marker dysfunction. But long-time investors … say mid-March of this year was far more severe in a short period. Moreover, the stresses to the financial system were broader than many had seen,” it said.
Traders work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)
In testimony and interviews, US Federal Reserve chair Jerome Powell has been at pains to emphasise that regulatory mechanisms and policies introduced after the 2008 crisis have strengthened the financial system.
In his interview on the CBS “60 Minutes” program last Sunday, for instance, Powell downplayed the threat of unemployment reaching levels not seen since the Great Depression. In the 1930s, he said, the financial system had “really failed,” but that today “our financial system is strong [and] has been able to withstand this. And we spent ten years strengthening it after the last crisis. So that’s a big difference.”
In his interview on the CBS “60 Minutes” program last Sunday, for example, when asked about the prospect of US unemployment rising to levels not seen since the Great Depression, Powell stated that at that time the financial system “really failed.”
He claimed that in contrast to the 1930s, “Here, our financial system is strong [and] has been able to withstand this. And we spent ten years strengthening it after the last crisis. So that’s a big difference.”
In fact, Powell’s reassurances are contradicted by the Fed’s own Financial Stability Report issued last Friday. Focusing on the mid-March crisis, it noted: “While the financial regulatory reforms adopted have substantially increased the resilience of the financial sector, the financial system nonetheless amplified the shock, and financial sector vulnerabilities are likely to be significant in the near term.”
The events in mid-March revealed what has actually taken place. While the Fed has taken limited measures to try to curb some of the riskier activities of the banks that sparked the 2008 crash, the dangers have simply been shifted to other areas of the financial system.
The speculation of the banks may have been curtailed somewhat, but it is now being carried out by hedge funds and other financial operators. They are financed with ultra-cheap money provided by the Fed through its low-interest rate regime and market operations, such as quantitative easing and, more recently, its massive interventions into the overnight repo market.
The WSJ report, based on interviews with Wall Street operatives, provided some insights into how the financial system “amplified” the shock of the pandemic.
Ronald O’Hanley, CEO of the investor services and banking holding company State Street, recounted the situation that confronted him on the morning of Monday, March 16. On Sunday evening, before markets opened, the Fed had announced it was cutting its base rate to zero and was planning to buy $700 billion in bonds, but with no effect.
According to the report, a senior deputy told O’Hanley that “corporate treasurers and pension managers, panicked by the growing economic damage from the COVID-19 pandemic, were pulling billions of dollars from certain money-market funds. This was forcing the funds to try to sell some of the bonds they held. But there were almost no buyers. Everybody was suddenly desperate for cash.”
The article noted that rather than take comfort from the Fed’s extraordinary Sunday evening actions, “many companies, governments, bankers and investors viewed the decision as reason to prepare for the worst possible outcome from the coronavirus pandemic.” The result was that a “downdraft in bonds was now a rout.”
It extended into what had been regarded as the most secure areas of the financial system.
The WSJ article continued: “Companies and pension managers have long-relied on money-market funds that invest in short-term corporate and municipal debt holdings considered safe and liquid enough to be classified as ‘cash equivalents.’ … But that Monday, investors no longer believed certain money funds were cash-like at all. As they pulled their money out, managers struggled to sell bonds to meet redemptions.”
So severe was the crisis that Prudential, one of the largest insurance companies in the world, was “also struggling with normally safe securities.”
The article provided a striking example of how, when a fundamentally dysfunctional and rotting system seeks to undertake a reform, it generally only exacerbates its underlying crisis. This phenomenon has been long-known in the field of politics, but the events of mid-March show it applies in finance as well.
On the Monday morning when the crisis broke, Vikram Rao, the head of the debt-trading desk at the investment firm Capital Group, contacted senior bank executives for an explanation as to why they were not trading and was met with the same answer.
“There was no room to buy bonds and other assets and still remain in compliance with tougher guidelines imposed by regulators after the previous financial crisis. In other words, capital rules intended to make the financial system safer were, at least in this instance, draining liquidity from the markets,” the WSJ report stated.
The crisis had a major impact on investors who had leveraged their activities with large amounts of debt—one of the chief means of accumulating financial profit in a low-interest rate regime.
According to the WSJ article: “The slump in mortgage bonds was so vast it crushed a group of investors that had borrowed from banks to juice their returns: real-estate investment funds.”
The Fed’s actions, have, at least temporarily, quelled the storm. But it has only done so by essentially becoming the backstop for all areas of the financial market—Treasury bonds, municipal debt, credit card and student loan debt, the repo market and corporate bonds, including those that have fallen from investment-grade to junk status.
And, as Powell made clear in his “60 Minutes” interview, the Fed plans to go even further if it considers that to be necessary.
“Well, there’s a lot more we can do,” he said. “I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”
The claim the Fed is supporting the “economy” is a fiction. It functions not for the economy of millions of working people, but as the agency of Wall Street, ready to pull out all stops so that the siphoning of wealth to the financial oligarchy, which it has already promoted, can continue.
An indication of what “more” could involve is provided in the minutes of the Fed’s April 28–29 meeting.
There was a discussion on whether the Fed should organise its purchases of Treasury securities to cap the yield on short and medium-term bonds. This is a policy employed by the Bank of Japan that has also recently been adopted by the Reserve Bank of Australia.
No immediate decision was reached, but the issue is certain to be raised again. Over the next few months, the US Treasury will issue new bonds to finance the operation of the CARES Act that has provided trillions of dollars to prop up corporations while providing only limited relief to workers.
By itself, the issuing of new debt would lead to a fall in the prices of bonds because of the increase in their supply, leading to a rise of their yields (the two move in opposite directions) and promoting a general rise in interest rates—something the Fed wants to avoid at all costs in the interests of Wall Street.
The only way the Fed can counter this upward pressure is to intervene in the market to buy bonds, thereby keeping their yield down. This would formalise what is already de facto taking place, where one arm of the capitalist state, the US Treasury, issues debt while another arm, the Fed, buys it.
This would further heighten the mountain of fictitious capital which, as the events of mid-March so graphically revealed, has no intrinsic value and is worth essentially zero.
The ruling class cannot restore stability to the financial system by the endless creation of still more money at the press of a computer button. Real value must be pumped into financial assets through the further intensification of the exploitation of the working class and a deepening evisceration of social programs.
Financial crises are presented in the media and elsewhere as being about numbers. But behind the economic and financial data are the interests of two irreconcilably opposed social classes—the working class, the mass of society, and the ruling corporate and financial oligarchy whose interests are defended by the state of which the Fed is a crucial component.
As 2008 demonstrated, what emerges from a financial crisis is a deepening class polarisation. That will certainly be the outcome of the mid-March events. A massive social confrontation, already developing long before the pandemic arrived on the scene, is looming in which the working class will be confronted with the necessity to fight for political power in order to take the levers of the economy and financial system into its own hands.
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