Wednesday, June 10, 2020

WALL STREET CELEBRATES THE TRUMP DEPRESSION

At the same time, they can use the rise in unemployment levels to post-war records as a sledgehammer to drive down workers’ wages and conditions, as they restructure their operations, using new technologies to employ fewer workers at much reduced rates of pay.

Last week, the US Congressional Budget Office warned, contrary to claims by President Trump and others that the economy will come “roaring back,” that the on-going effects of the pandemic will last for at least a decade.

The paradox of the Wall Street surge

10 June 2020

Monday saw the emergence of what appears to be a striking paradox. On that day, the National Bureau of Economic Research declared the US to be in recession—an economic contraction that will turn out to be the steepest since the Great Depression—while Wall Street indexes returned to the levels they had reached at the start of the year.

Since plummeting in mid-March, as financial markets in the US and internationally froze across the board, Wall Street has enjoyed a spectacular rise. The Dow has risen by 48 percent since March 23, the tech-heavy Nasdaq is up by 45 percent and is now 1,000 points higher than at the start of the year, and the S&P 500, having also risen 45 percent, is back to where it was before the COVID-19 pandemic struck.

The rise of the market, taking place in the

midst of the greatest health crisis in a century,

as the infection rate and death toll from the

coronavirus continues to rise in the US and

internationally, stands in stark contrast to the

underlying real economy.

People walk past an electronic board showing Hong Kong share index outside a local bank in Hong Kong, Tuesday, March 3, 2020. (AP Photo/Kin Cheung)

Estimates of the effect of the pandemic on the five largest European economies put the UK contraction at 14 percent, Spain at 11.6 percent, France at 10.3 percent, Italy at 9.2 percent and Germany at 6.1 percent. The World Bank has forecast that global GDP will contract by 5.2 percent this year.

Under these conditions, traditional metrics for determining stock prices, such as price-to-earnings ratios, have been cast aside, as shares in companies that are either recording losses, or cannot even provide a forward estimate of their revenue because of the pandemic, are continuing to rise.

What accounts for this speculative mania in the midst of death, the destruction of millions of jobs and the growing impoverishment of ever broader masses of the working population?

The answer is to be found in the response of the ruling class to the pandemic. From the outset, it treated COVID-19 not as a health crisis, to be dealt with by the application of scientifically based measures, but as a blow to profit accumulation, and acted accordingly.

The Trump administration, with the support of

the entire political establishment, organized a

more than $3 trillion bailout of the

corporations under the CARES Act, while the

Fed stepped in to inject trillions of dollars of

free money into the financial markets.

Having already lifted its holdings of financial assets from $800 billion to more than $4 trillion in the wake of the global financial crisis of 2008, the Fed has now further increased its holdings to $7 trillion, with the expectation this will rise to $9 trillion. Fed Chairman Jerome Powell has made clear there is “no limit” to the US central bank's actions. The Fed now functions as the guarantor for financial markets across the board.

Its actions are being replicated around the world. According to a paper published by the Bank for International Settlements, the combined effect of measures by the world’s five major central banks means their balance sheets will grow to as much as 23 percent of GDP before the end of 2020, compared to a rise of 10 percent after the 2008 crisis, and will remain at these historically unprecedented levels indefinitely.

People wait in line for help with unemployment benefits at the One-Stop Career Center in Las Vegas (Credit: AP Photo/John Locher)

From the standpoint of the Wall Street finance houses and speculators, the pandemic has been a win-win situation. They have been emboldened by the homicidal return to work drive and the knowledge that they have the full backing of a political establishment that openly upholds the primacy of corporate revenues and profits over workers’ lives.

They also know that if there is any significant fall in the stock market, the Fed will intervene to make still more free money available.

In addition, they recognize that there are enormous gains to be made from the economic devastation. It provides the conditions where large corporations can gobble up firms that go under, thereby increasing the size and profits of those that survive.

At the same time, they can use the rise in unemployment levels to post-war records as a sledgehammer to drive down workers’ wages and conditions, as they restructure their operations, using new technologies to employ fewer workers at much reduced rates of pay.

In short, the ruling corporate and financial oligarchs are learning they can not only live with the coronavirus, but thrive and profit from it.

However, there are objective limits to the bacchanalia of speculation. The mountain of fictitious capital created by the injection of money with the press of a computer button does not in and of itself create real value. Financial assets, including inflated share portfolios, represent a claim on future value that has to be extracted from the labour of the working class.

This requires the intensification of the exploitation of the working class to unprecedented heights. The ruling classes, in the US and around the world, are making their preparations for the massive class confrontation this entails.

This is the underlying and motivating force behind the drive by the Trump administration for the establishment of a military-police dictatorship and the scrapping of constitutional norms. To use the words of Trump’s defense secretary, Mark Esper, the process of profit accumulation is the “battle space” that the capitalist state must forcefully “dominate.”

The eruption of protests against the police murder of George Floyd is a preview of even bigger class confrontations to come. The last words he uttered, “I can’t breathe,” have resonated throughout the US and internationally because they encapsulate the situation facing workers everywhere.

It is becoming increasingly impossible to “breathe,” that is, to live under the capitalist system, as the ruling classes seek to preserve their profit system by all means necessary, no matter what the cost.

The burning issue facing the working class is to consciously grasp the objective logic of the situation it now confronts and the nature of the struggle in which it is already engaged against a murderous and dictatorial ruling class.

The American Declaration of Independence invoked the inalienable right to life in the very first place. Today, the achievement of that right can be taken forward only through a conscious struggle for political power—the overthrow of the profit system and the establishment of a workers’ state as the first and most decisive step in the reconstruction of the economy on socialist foundations.

At the same time, the ruling class has utilized

the pandemic to organize a transfer

of trillions of dollars to the financial markets

through the Federal Reserve. The total assets

on the balance sheet of the US central bank

rose this week to more than $6.7 trillion, up

from less than $4 trillion before the pandemic

hit. Every day, the Fed is spending $80 billion

to buy up assets from banks and

corporations to fuel the market rise.

Depression USA

9 May 2020

Yesterday, the US Labor Department released its April unemployment report, revealing a level of joblessness that is without historical precedent. On the same day, the stock market rose sharply, with the Dow Jones Industrial Average finishing up more than 450 points, or nearly two percent. Wall Street continues not only to feast on death, as the toll from the coronavirus continues to grow, but to profit from the mass social misery that the pandemic has produced.

The Labor Department report recorded a drop of employment of 20.5 million people. Not only is this the largest monthly collapse in history, it exceeds the previous record more than 10 times over. The official unemployment rate increased from under 4 percent to 14.7 percent, far above anything seen since the Great Depression of the 1930s.

As bad as these numbers are, they significantly underestimate the scale of the social dislocation. The April report is based on estimates calculated during the middle of last month, so they do not take into account the millions of people who have lost their jobs over the last three weeks. Some 33.5 million have filed for unemployment claims since the beginning of state and federal lockdowns seven weeks ago.

According to the report, moreover, 6.4 million additional workers have left the labor force entirely and are not counted as unemployed, bringing the labor force participation rate to its lowest level since 1973. Another 11 million workers reported that they were working part time because they could not find full-time work, an increase of 7 million people since before the pandemic.

When all factors are taken into account, something in the area of one third of the work force is out of work.

Mass joblessness is impacting nearly every sector of the working class. Employment in the leisure and hospitality sector was the most extreme, falling by nearly 50 percent, or 7.7 million people. There were 2.1 million job losses in business and professional services, 2.1 million in retail, 1.3 million in manufacturing and 1 million in construction.

Stunningly, amidst an expanding pandemic, there were 1.4 million job cuts in health care. And under conditions of an enormous social crisis, there were 650,000 job cuts in the social assistance sector.

The report notes, moreover, that mass unemployment has impacted workers of all races and genders. The unemployment rate among adult men soared to 13.0 percent, adult women to 15.5 percent, and teenagers to 31.9 percent. The rate was 14.2 percent for whites, 16.7 percent for blacks, 14.5 percent for Asians and 18.9 percent for Hispanics.

While a large number of the job cuts are categorized as “temporary,” a growing proportion are permanent, as corporations begin to implement mass layoffs. Indeed, there were two million permanent job losses in April. This, taken by itself, would be the largest increase in unemployment in post-World War II American history.

Tens of millions of workers live paycheck to paycheck and rely on credit cards and other forms of debt to make up for the difference between their income and their expenses. Household debt rose by 1.1 percent in the quarter ending March 31, to $14.3 trillion, a new record. This does not take into account the piling on of debt by tens of millions of people as the economic crisis intensified in April and into May.

With no savings and no government assistance, workers are turning in record numbers to food banks, which are running out of basic goods. A report by the Hamilton Project earlier this week found that 41 percent of families with children under the age of 12 are experiencing food insecurity—that is, they are unable to afford enough to eat.

The ruling class has no policy to deal with the social catastrophe. On Friday, the Trump administration declared that the jobs that have been destroyed “will be back and they’ll be back soon.” He added that “we’re in no rush” to pass a bill that would provide some assistance. The administration’s top economic advisor, Larry Kudlow, said that talks over further “stimulus” measures are “in a lull right now.”

As for the Democrats, while mouthing phrases about additional aid, they are haggling over minor measures that they know will never be passed by Congress. Both parties display a combination of indifference, bewilderment and reaction in the face of the greatest economic crisis since the Great Depression. Their proposals in response to this crisis make the US in the era of Herbert Hoover appear almost philanthropic.

Mass social immiseration is, in fact, a deliberate policy, supported by the entire political establishment. It is aimed at creating conditions in which: 1) the ruling class can force a return to work even as the pandemic continues to spread throughout the United States; and 2) workers will be compelled to accept sharp reductions in wages and benefits and an increase in exploitation to pay for the massive handout to the super-rich.

To pressure workers to endanger their lives by returning to work, the majority of the population is being systematically starved of resources. Six weeks after the passage of the CARES Act—the massive boondoggle to the corporations adopted unanimously by the Democrats and the Republicans—the majority of Americans have not received their $1,200 “stimulus” check.

States are going bankrupt and beginning to implement brutal austerity measures. A report from the Economic Policy Institute earlier this month found that 50 percent more people are unemployed than have even been able to file for unemployment benefits—the result of overburdened application systems and onerous restrictions. Millions who have filed for benefits have not received anything.

The approximately 11 million undocumented immigrants in the United States are excluded from receiving any benefits. Millions of workers in the “gig economy,” while supposedly able to qualify for federal assistance, face impossible barriers to obtaining it. In the state of Illinois, for example, these workers will be able to start applying only on May 11, and they will not have any possibility of getting assistance for several weeks thereafter.

At the same time, the ruling class has utilized

the pandemic to organize a transfer

of trillions of dollars to the financial markets

through the Federal Reserve. The total assets

on the balance sheet of the US central bank

rose this week to more than $6.7 trillion, up

from less than $4 trillion before the pandemic

hit. Every day, the Fed is spending $80 billion

to buy up assets from banks and

corporations to fuel the market rise.

The enrichment of the oligarchy through rising share values is premised on mass impoverishment and an intensification of the exploitation of the working class. The profits and wealth of the corporate-financial elite have been saved at the expense of society.

Two agendas stand opposed to each other. One is the defense of the financial oligarchy, which means both an expansion of the pandemic, with all the horrific consequences this will bring, and a further immiseration of the population. The other agenda is that of the working class, which wants to fight the pandemic, save lives and defend the interests of the vast majority of the population.

The fight against the pandemic is not just a medical question. It is a political struggle to mobilize the working class against the Trump administration, the entire political establishment and the capitalist system it defends.

The GOP Isn’t Cynical Enough to Save Us From a Depression

By Eric Levitz @EricLevitz

How Kudlow can they go? Photo: Shutterstock/Shutterstock

More than 30 million Americans have lost their jobs since mid-March. The U.S. unemployment rate is now officially 14.7 percent, the highest it’s been at any time since the Great Depression (and that official rate is almost certainly lower than the actual one). Small businesses all across the country are on the verge of collapse. Absent an expansion in the government’s grant program for such firms, a cascade of bankruptcies will eliminate them — severing functional matches between workers, employers, and commercial spaces in the process — and thus delaying the onset of economic recovery. Meanwhile, states and cities are being forced to deepen the downturn by laying off public workers as exploding public-health costs — and cratering sales and income tax revenues — lay waste to their budgets. Already, just weeks into the labor-market collapse, nearly 23 percent of U.S. households say they cannot afford enough food, according to a new survey from the Brookings Institution. During the Great Recession, that figure never exceeded 16 percent.

If the Republican Party wanted to maximize Donald Trump’s odds of winning election this November, it would be doing everything in its power to pass a fourth coronavirus stimulus package as quickly as possible. Historically, swing voters have consistently turned against incumbent presidents (and their parties down-ballot) when economic growth slows in an election year. And there’s reason to think that Trump may be more vulnerable to worsening economic conditions than most presidents: Throughout his time in office, voters have given Trump’s handling of the economy higher marks than the man himself. Although the president’s approval rating has yet to dip beneath its long-run average, it has declined along with the economy’s performance in recent weeks. Today, both public surveys and (reportedly) the Trump campaign’s own internal polling suggest that Joe Biden is on pace to make Donald Trump a one-term president.

But for Republicans, some things are more important than winning elections — and, apparently, denying government assistance to desperate workers and their underfed children is one of them.

Shortly after the Labor Department unveiled the worst jobs report in multiple generations Friday, Larry Kudlow told reporters that the White House will oppose the passage of any further stimulus legislation this month. Trump’s chief economic adviser argued that it was unclear whether further aid was necessary, as Congress had just made “another big infusion” of relief funds late last month and states were now beginning to reopen their economies.

Trump appeared to echo this message late Friday afternoon, saying of negotiations over the next stimulus package, “We’re in no rush, we’re in no rush.”

There do appear to be some divisions among Republicans, both in the White House and Senate. Although Trump downplayed the need for stimulus Friday, he had described a payroll tax cut and infrastructure package as economic necessities earlier in the week. Recent reports have suggested that the White House favors sending out an additional round of relief checks. On Capitol Hill, meanwhile, a few Republican lawmakers from hard-hit regions have called for substantial fiscal aid to states and more generous wage subsidies for companies.

But the dominant view in Mitch McConnell’s caucus seems to be one of callous complacency. Asked whether he would support another round of cash payments to working-class households, Louisiana Republican John Kennedy told The Hill, “Well, people in hell want ice water too. I mean, everybody has an idea and a bill, usually to spend more money. It’s like a Labor Day mattress sale around here.”

Wisconsin senator Ron Johnson and South Carolina’s Lindsey Graham have also expressed opposition to further cash aid. And McConnell’s top deputies, John Barrasso and John Cornyn, have echoed Kudlow’s line that it’s premature to discuss new relief measures.

It’s possible — perhaps even probable — that this is a negotiating posture. If McConnell can frame the conservative position as “let the economy burn,” then suddenly relief of any kind, no matter how limited or regressively targeted, becomes a concession to Democrats. Nevertheless, this would not be a politically optimal pose to strike. If Republicans want to maximize the U.S. economy’s performance in the second half of this year, they need to keep businesses solvent and consumers financially secure now. Recessions are self-reinforcing. As Roosevelt Institute economist J.W. Mason writes, “once economic units have run through their reserves of liquidity, and/or start changing their beliefs about future income, the fall in spending will continue under its own power, regardless of what started it.”

In the Trump era, many liberals have commented on the GOP’s opportunistic embrace of deficits and expansionary monetary policy. When the unemployment rate was nearly 10 percent — and a Democrat was in the White House — Republicans cried out for balanced budgets and interest rate hikes. Once Donald Trump took the reins of an economy closing in on full employment, the GOP paired a $1.5 trillion tax cut with large increases in federal spending and calls for the Federal Reserve to expand the money supply.

But there are limits to Republicans’ ideological opportunism. The party may prioritize delivering returns to their investors in the billionaire class and military-industrial complex over balancing the federal budget. But the conservative movement’s commitment to increasing the dependence of labor on capital, crushing public-sector unions, and discrediting state-level experiments with social democracy is real and deep. And a significant portion of the party’s lawmakers seem to genuinely believe that recessions are self-correcting phenomena that government intervention will only prolong.

For these reasons, Republicans appear hell-bent on allowing the $600 federal increase in unemployment benefits to expire in July and denying states and municipalities the level of aid necessary for averting steep reductions in public employment, education, and other basic services. From the perspective of a Randian libertarian, COVID-19 looks like a cure for municipal workers’ pensions and blue state pre-kindergarten programs. So why not let the virus accomplish what the “red state model” failed to? After all, more free handouts aren’t actually necessary for ensuring that Trump won’t be campaigning in a depressed economy this fall — coercing workers back to their (epidemiologically hazardous) jobs forthwith will make America grow again. Besides, the S&P 500 is up 30 percent since late March — so how bad can things be?

This reasoning is economically delusional. In practice, state governments did not shut down their economies, their residents did. As Raj Chetty and his team of economists demonstrate in a new paper, in states across the country, economic activity declined before lockdown orders took effect — and has not picked up much in those places where they’ve been lifted. International data lends credence to these findings: Sweden’s economy has suffered at least as badly as its neighbors’, even though it made the aberrant decision to allow its nonessential businesses to remain in operation.

Derek Thompson

✔@DKThomp

Raj Chetty et al are using private data to track economic activity across the countryhttps://opportunityinsights.org/wp-content/uploads/2020/05/tracker_paper.pdf …

Conclusion 1: Govt shutdowns didn't shut down the economy; people did. And state "re-openings" haven't re-opened much, either.

466

9:29 AM - May 8, 2020

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Whether the GOP’s stance is politically insane is more ambiguous. If America were a functioning, majoritarian democracy, then the party’s position would surely be untenable. Democrats currently lead Republicans in the congressional generic ballot by eight points. Virtually every poll suggests Biden is on course to win the popular vote by a comfortable margin. But then, if America were a majoritarian democracy, Republicans would not be in power to begin with. The GOP can afford to prioritize its ideological mission over its electoral best interests because America’s electoral institutions structurally overrepresent its predominately white, nonurban coalition. By holding up further stimulus, Republicans are taking a massive political risk and significantly reducing Trump’s odds of reelection. But it remains conceivable that the president will be able to squeak by on the strength of his Electoral College advantage, even as his party actively deepens a historic recession so as to economically disempower the majority of Americans who must work for a living.

A more cynical GOP would prioritize Trump’s reelection over denying “ice water” to “people in hell.” Unfortunately for America, actual Republicans put plutocracy before party.

Why Our Economy May Be Headed for a Decade of Depression

By Eric Levitz

The worst is yet to come?

In September 2006, Nouriel Roubini told the International Monetary Fund what it didn’t want to hear. Standing before an audience of economists at the organization’s headquarters, the New York University professor warned that the U.S. housing market would soon collapse — and, quite possibly, bring the global financial system down with it. Real-estate values had been propped up by unsustainably shady lending practices, Roubini explained. Once those prices came back to earth, millions of underwater homeowners would default on their mortgages, trillions of dollars worth of mortgage-backed securities would unravel, and hedge funds, investment banks, and lenders like Fannie Mae and Freddie Mac could sink into insolvency.

At the time, the global economy had just recorded its fastest half-decade of growth in 30 years. And Nouriel Roubini was just some obscure academic. Thus, in the IMF’s cozy confines, his remarks roused less alarm over America’s housing bubble than concern for the professor’s psychological well-being.

Of course, the ensuing two years turned Roubini’s prophecy into history, and the little-known scholar of emerging markets into a Wall Street celebrity.

A decade later, “Dr. Doom” is a bear once again. While many investors bet on a “V-shaped recovery,” Roubini is staking his reputation on an L-shaped depression. The economist (and host of a biweekly economic news broadcast) does expect things to get better before they get worse: He foresees a slow, lackluster (i.e., “U-shaped”) economic rebound in the pandemic’s immediate aftermath. But he insists that this recovery will quickly collapse beneath the weight of the global economy’s accumulated debts. Specifically, Roubini argues that the massive private debts accrued during both the 2008 crash and COVID-19 crisis will durably depress consumption and weaken the short-lived recovery. Meanwhile, the aging of populations across the West will further undermine growth while increasing the fiscal burdens of states already saddled with hazardous debt loads. Although deficit spending is necessary in the present crisis, and will appear benign at the onset of recovery, it is laying the kindling for an inflationary conflagration by mid-decade. As the deepening geopolitical rift between the United States and China triggers a wave of deglobalization, negative supply shocks akin those of the 1970s are going to raise the cost of real resources, even as hyperexploited workers suffer perpetual wage and benefit declines. Prices will rise, but growth will peter out, since ordinary people will be forced to pare back their consumption more and more. Stagflation will beget depression. And through it all, humanity will be beset by unnatural disasters, from extreme weather events wrought by man-made climate change to pandemics induced by our disruption of natural ecosystems.

Roubini allows that, after a decade of misery, we may get around to developing a “more inclusive, cooperative, and stable international order.” But, he hastens to add, “any happy ending assumes that we find a way to survive” the hard times to come.

Intelligencer recently spoke with Roubini about our impending doom.

You predict that the coronavirus recession will be followed by a lackluster recovery and global depression. The financial markets ostensibly see a much brighter future. What are they missing and why?

Well, first of all, my prediction is not for 2020. It’s a prediction that these ten major forces will, by the middle of the coming decade, lead us into a “Greater Depression.” Markets, of course, have a shorter horizon. In the short run, I expect a U-shaped recovery while the markets seem to be pricing in a V-shape recovery.

Of course the markets are going higher because there’s a massive monetary stimulus, there’s a massive fiscal stimulus. People expect that the news about the contagion will improve, and that there’s going to be a vaccine at some point down the line. And there is an element “FOMO” [fear of missing out]; there are millions of new online accounts — unemployed people sitting at home doing day-trading — and they’re essentially playing the market based on pure sentiment. My view is that there’s going to be a meaningful correction once people realize this is going to be a U-shaped recovery. If you listen carefully to what Fed officials are saying — or even what JPMorgan and Goldman Sachs are saying — initially they were all in the V camp, but now they’re all saying, well, maybe it’s going to be more of a U. The consensus is moving in a different direction.

Your prediction of a weak recovery seems predicated on there being a persistent shortfall in consumer demand due to income lost during the pandemic. A bullish investor might counter that the Cares Act has left the bulk of laid-off workers with as much — if not more — income than they had been earning at their former jobs. Meanwhile, white-collar workers who’ve remained employed are typically earning as much as they used to, but spending far less. Together, this might augur a surge in post-pandemic spending that powers a V-shaped recovery. What does the bullish story get wrong?

Yes, there are unemployment benefits. And some unemployed people may be making more money than when they were working. But those unemployment benefits are going to run out in July. The consensus says the unemployment rate is headed to 25 percent. Maybe we get lucky. Maybe there’s an early recovery, and it only goes to 16 percent. Either way, tons of people are going to lose unemployment benefits in July. And if they’re rehired, it’s not going to be like before — formal employment, full benefits. You want to come back to work at my restaurant? Tough luck. I can hire you only on an hourly basis with no benefits and a low wage. That’s what every business is going to be offering. Meanwhile, many, many people are going to be without jobs of any kind. It took us ten years — between 2009 and 2019 — to create 22 million jobs. And we’ve lost 30 million jobs in two months.

So when unemployment benefits expire, lots of people aren’t going to have any income. Those who do get jobs are going to work under more miserable conditions than before. And people, even middle-income people, given the shock that has just occurred — which could happen again in the summer, could happen again in the winter — you are going to want more precautionary savings. You are going to cut back on discretionary spending. Your credit score is going to be worse. Are you going to go buy a home? Are you gonna buy a car? Are you going to dine out? In Germany and China, they already reopened all the stores a month ago. You look at any survey, the restaurants are totally empty. Almost nobody’s buying anything. Everybody’s worried and cautious. And this is in Germany, where unemployment is up by only one percent. Forty percent of Americans have less than $400 in liquid cash saved for an emergency. You think they are going to spend?

Graphic: Financial Times

You’re going to start having food riots soon enough. Look at the luxury stores in New York. They’ve either boarded them up or emptied their shelves, because they’re worried people are going to steal the Chanel bags. The few stores that are open, like my Whole Foods, have security guards both inside and outside. We are one step away from food riots. There are lines three miles long at food banks. That’s what’s happening in America. You’re telling me everything’s going to become normal in three months? That’s lunacy.

Your projection of a “Greater Depression” is premised on deglobalization sparking negative supply shocks. And that prediction of deglobalization is itself rooted in the notion that the U.S. and China are locked in a so-called Thucydides trap, in which the geopolitical tensions between a dominant and rising power will overwhelm mutual financial self-interest. But given the deep interconnections between the American and Chinese economies — and warm relations between much of the U.S. and Chinese financial elite — isn’t it possible that class solidarity will take precedence over Great Power rivalry? In other words, don’t the most powerful people in both countries understand they have a lot to lose financially and economically from decoupling? And if so, why shouldn’t we see the uptick in jingoistic rhetoric on both sides as mere posturing for a domestic audience?

First of all, my argument for why inflation will eventually come back is not just based on U.S.-China relations. I actually have 14 separate arguments for why this will happen. That said, everybody agrees that there is the beginning of a Cold War between the U.S. and China. I was in Beijing in November of 2015, with a delegation that met with Xi Jinping in the Great Hall of the People. And he spent the first 15 minutes of his remarks speaking, unprompted, about why the U.S. and China will not get caught in a Thucydides trap, and why there will actually be a peaceful rise of China.

Since then, Trump got elected. Now, we have a full-scale trade war, technology war, financial war, monetary war, technology, information, data, investment, pretty much anything across the board. Look at tech — there is complete decoupling. They just decided Huawei isn’t going to have any access to U.S. semiconductors and technology. We’re imposing total restrictions on the transfer of technology from the U.S. to China and China to the U.S. And if the United States argues that 5G or Huawei is a backdoor to the Chinese government, the tech war will become a trade war. Because tomorrow, every piece of consumer electronics, even your lowly coffee machine or microwave or toaster, is going to have a 5G chip. That’s what the internet of things is about. If the Chinese can listen to you through your smartphone, they can listen to you through your toaster. Once we declare that 5G is going to allow China to listen to our communication, we will also have to ban all household electronics made in China. So, the decoupling is happening. We’re going to have a “splinternet.” It’s only a matter of how much and how fast.

And there is going to be a cold war between the U.S. and China. Even the foreign policy Establishment — Democrats and Republicans — that had been in favor of better relations with China has become skeptical in the last few years. They say, “You know, we thought that China was going to become more open if we let them into the WTO. We thought they’d become less authoritarian.” Instead, under Xi Jinping, China has become more state capitalist, more authoritarian, and instead of biding its time and hiding its strength, like Deng Xiaoping wanted it to do, it’s flexing its geopolitical muscle. And the U.S., rightly or wrongly, feels threatened. I’m not making a normative statement. I’m just saying, as a matter of fact, we are in a Thucydides trap. The only debate is about whether there will be a cold war or a hot one. Historically, these things have led to a hot war in 12 out of 16 episodes in 2,000 years of history. So we’ll be lucky if we just get a cold war.

Some Trumpian nationalists and labor-aligned progressives might see an upside in your prediction that America is going to bring manufacturing back “onshore.” But you insist that ordinary Americans will suffer from the downsides of reshoring (higher consumer prices) without enjoying the ostensible benefits (more job opportunities and higher wages). In your telling, onshoring won’t actually bring back jobs, only accelerate automation. And then, again with automation, you insist that Americans will suffer from the downside (unemployment, lower wages from competition with robots) but enjoy none of the upside from the productivity gains that robotization will ostensibly produce. So, what do you say to someone who looks at your forecast and decides that you are indeed “Dr. Doom” — not a realist, as you claim to be, but a pessimist, who ignores the bright side of every subject?

When you reshore, you are moving production from regions of the world like China, and other parts of Asia, that have low labor costs, to parts of the world like the U.S. and Europe that have higher labor costs. That is a fact. How is the corporate sector going respond to that? It’s going to respond by replacing labor with robots, automation, and AI.

I was recently in South Korea. I met the head of Hyundai, the third-largest automaker in the world. He told me that tomorrow, they could convert their factories to run with all robots and no workers. Why don’t they do it? Because they have unions that are powerful. In Korea, you cannot fire these workers, they have lifetime employment.

But suppose you take production from a labor-intensive factory in China — in any industry — and move it into a brand-new factory in the United States. You don’t have any legacy workers, any entrenched union. You are going to design that factory to use as few workers as you can. Any new factory in the U.S. is going to be capital-intensive and labor-saving. It’s been happening for the last ten years and it’s going to happen more when we reshore. So reshoring means increasing production in the United States but not increasing employment. Yes, there will be productivity increases. And the profits of those firms that relocate production may be slightly higher than they were in China (though that isn’t certain since automation requires a lot of expensive capital investment).

But you’re not going to get many jobs. The factory of the future is going to be one person manning 1,000 robots and a second person cleaning the floor. And eventually the guy cleaning the floor is going to be replaced by a Roomba because a Roomba doesn’t ask for benefits or bathroom breaks or get sick and can work 24-7.

The fundamental problem today is that people think there is a correlation between what’s good for Wall Street and what’s good for Main Street. That wasn’t even true during the global financial crisis when we were saying, “We’ve got to bail out Wall Street because if we don’t, Main Street is going to collapse.” How did Wall Street react to the crisis? They fired workers. And when they rehired them, they were all gig workers, contractors, freelancers, and so on. That’s what happened last time. This time is going to be more of the same. Thirty-five to 40 million people have already been fired. When they start slowly rehiring some of them (not all of them), those workers are going to get part-time jobs, without benefits, without high wages. That’s the only way for the corporates to survive. Because they’re so highly leveraged today, they’re going to need to cut costs, and the first cost you cut is labor. But of course, your labor cost is my consumption. So in an equilibrium where everyone’s slashing labor costs, households are going to have less income. And they’re going to save more to protect themselves from another coronavirus crisis. And so consumption is going to be weak. That’s why you get the U-shaped recovery.

There’s a conflict between workers and capital. For a decade, workers have been screwed. Now, they’re going to be screwed more. There’s a conflict between small business and large business.

Millions of these small businesses are going to go bankrupt. Half of the restaurants in New York are never going to reopen. How can they survive? They have such tiny margins. Who’s going to survive? The big chains. Retailers. Fast food. The small businesses are going to disappear in the post-coronavirus economy. So there is a fundamental conflict between Wall Street (big banks and big firms) and Main Street (workers and small businesses). And Wall Street is going to win.

Clearly, you’re bearish on the potential of existing governments intervening in that conflict on Main Street’s behalf. But if we made you dictator of the United States tomorrow, what policies would you enact to strengthen labor, and avert (or at least mitigate) the Greater Depression?

The market, as currently ordered, is going to make capital stronger and labor weaker. So, to change this, you need to invest in your workers. Give them education, a social safety net — so if they lose their jobs to an economic or technological shock, they get job training, unemployment benefits, social welfare, health care for free. Otherwise, the trends of the market are going to imply more income and wealth inequality. There’s a lot we can do to rebalance it. But I don’t think it’s going to happen anytime soon. If Bernie Sanders had become president, maybe we could’ve had policies of that sort. Of course, Bernie Sanders is to the right of the CDU party in Germany. I mean, Angela Merkel is to the left of Bernie Sanders. Boris Johnson is to the left of Bernie Sanders, in terms of social democratic politics. Only by U.S. standards does Bernie Sanders look like a Bolshevik.

In Germany, the unemployment rate has gone up by one percent. In the U.S., the unemployment rate has gone from 4 percent to 20 percent (correctly measured) in two months. We lost 30 million jobs. Germany lost 200,000. Why is that the case? You have different economic institutions. Workers sit on the boards of German companies. So you share the costs of the shock between the workers, the firms, and the government.

In 2009, you argued that if deficit spending to combat high unemployment continued indefinitely, “it will fuel persistent, large budget deficits and lead to inflation.” You were right on the first count obviously. And yet, a decade of fiscal expansion not only failed to produce high inflation, but was insufficient to reach the Fed’s 2 percent inflation goal. Is it fair to say that you underestimated America’s fiscal capacity back then? And if you overestimated the harms of America’s large public debts in the past, what makes you confident you aren’t doing so in the present?

First of all, in 2009, I was in favor of a bigger stimulus than the one that we got. I was not in favor of fiscal consolidation. There’s a huge difference between the global financial crisis and the coronavirus crisis because the former was a crisis of aggregate demand, given the housing bust. And so monetary policy alone was insufficient and you needed fiscal stimulus. And the fiscal stimulus that Obama passed was smaller than justified. So stimulus was the right response, at least for a while. And then you do consolidation.

What I have argued this time around is that in the short run, this is both a supply shock and a demand shock. And, of course, in the short run, if you want to avoid a depression, you need to do monetary and fiscal stimulus. What I’m saying is that once you run a budget deficit of not 3, not 5, not 8, but 15 or 20 percent of GDP — and you’re going to fully monetize it (because that’s what the Fed has been doing) — you still won’t have inflation in the short run, not this year or next year, because you have slack in goods markets, slack in labor markets, slack in commodities markets, etc. But there will be inflation in the post-coronavirus world. This is because we’re going to see two big negative supply shocks. For the last decade, prices have been constrained by two positive supply shocks — globalization and technology. Well, globalization is going to become deglobalization thanks to decoupling, protectionism, fragmentation, and so on. So that’s going to be a negative supply shock. And technology is not going to be the same as before. The 5G of Erickson and Nokia costs 30 percent more than the one of Huawei, and is 20 percent less productive. So to install non-Chinese 5G networks, we’re going to pay 50 percent more. So technology is going to gradually become a negative supply shock. So you have two major forces that had been exerting downward pressure on prices moving in the opposite direction, and you have a massive monetization of fiscal deficits. Remember the 1970s? You had two negative supply shocks — ’73 and ’79, the Yom Kippur War and the Iranian Revolution. What did you get? Stagflation.

Now, I’m not talking about hyperinflation — not Zimbabwe or Argentina. I’m not even talking about 10 percent inflation. It’s enough for inflation to go from one to 4 percent. Then, ten-year Treasury bonds — which today have interest rates close to zero percent — will need to have an inflation premium. So, think about a ten-year Treasury, five years from now, going from one percent to 5 percent, while inflation goes from near zero to 4 percent. And ask yourself, what’s going to happen to the real economy? Well, in the fourth quarter of 2018, when the Federal Reserve tried to raise rates above 2 percent, the market couldn’t take it. So we don’t need hyperinflation to have a disaster.

In other words, you’re saying that because of structural weaknesses in the economy, even modest inflation would be crisis-inducing because key economic actors are dependent on near-zero interest rates?

For the last decade, debt-to-GDP ratios in the U.S. and globally have been rising. And debts were rising for corporations and households as well. But we survived this, because, while debt ratios were high, debt-servicing ratios were low, since we had zero percent policy rates and long rates close to zero — or, in Europe and Japan, negative. But the second the Fed started to hike rates, there was panic.

In December 2018, Jay Powell said, “You know what. I’m at 2.5 percent. I’m going to go to 3.25. And I’m going to continue running down my balance sheet.” And the market totally crashed. And then, literally on January 2, 2019, Powell comes back and says, “Sorry, I was kidding. I’m not going to do quantitative tightening. I’m not going to raise rates.” So the economy couldn’t take a Fed funds rate of 2.5 percent. In the strongest economy in the world. There is so much debt, if long-term rates go from zero to 3 percent, the economy is going to crash.

You’ve written a lot about negative supply shocks from deglobalization. Another potential source of such shocks is climate change. Many scientists believe that rising temperatures threaten the supply of our most precious commodities — food and water. How does climate figure into your analysis?

I am not an expert on global climate change. But one of the ten forces that I believe will bring a Greater Depression is man-made disasters. And global climate change, which is producing more extreme weather phenomena — on one side, hurricanes, typhoons, and floods; on the other side, fires, desertification, and agricultural collapse — is not a natural disaster. The science says these extreme events are becoming more frequent, are coming farther inland, and are doing more damage. And they are doing this now, not 30 years from now.

So there is climate change. And its economic costs are becoming quite extreme. In Indonesia, they’ve decided to move the capital out of Jakarta to somewhere inland because they know that their capital is going to be fully flooded. In New York, there are plans to build a wall all around Manhattan at the cost of $120 billion. And then they said, “Oh no, that wall is going to be so ugly, it’s going to feel like we’re in a prison.” So they want to do something near the Verrazzano Bridge that’s going to cost another $120 billion. And it’s not even going to work.

The Paris Accord said 1.5 degrees. Then they say two. Now, every scientist says, “Look, this is a voluntary agreement, we’ll be lucky if we get three — and more likely, it will be four — degree Celsius increases by the end of the century.” How are we going to live in a world where temperatures are four degrees higher? And we’re not doing anything about it. The Paris Accord is just a joke. And it’s not just the U.S. and Trump. China’s not doing anything. The Europeans aren’t doing anything. It’s only talk.

And then there’s the pandemics. These are also man-made disasters. You’re destroying the ecosystems of animals. You are putting them into cages — the bats and pangolins and all the other wildlife — and they interact and create viruses and then spread to humans. First, we had HIV. Then we had SARS. Then MERS, then swine flu, then Zika, then Ebola, now this one. And there’s a connection between global climate change and pandemics. Suppose the permafrost in Siberia melts. There are probably viruses that have been in there since the Stone Age. We don’t know what kind of nasty stuff is going to get out. We don’t even know what’s coming.

Job losses continue to mount in US despite reopenings

28 May 20204

Roughly 2.1 million Americans applied for unemployment benefits last week despite the gradual reopening of businesses around the country, bringing the running total since the coronavirus shutdowns took hold in mid-March to about 41 million and increasing concerns that the scourge is doing deep and potentially long-last damage to the economy

WASHINGTON (AP) — The coronavirus crisis threw at least 2.1 million Americans out of work last week despite the gradual reopening of businesses around the country, stoking fears Thursday that the scourge is doing deep and potentially long-lasting damage to the U.S. economy.

Amid a few glimmers of hope, most of the latest economic news from around the globe was likewise grim, as some of the world’s most populous countries continued to report rising infections and deaths. The confirmed U.S. death toll topped 100,000, the highest in the world, on Wednesday.

The latest job-loss figures from the U.S. Labor Department bring to 41 million the running total of Americans who have filed for unemployment benefits since the coronavirus shutdowns took hold in mid-March.

There were some encouraging signs: The overall number of Americans currently drawing jobless benefits dropped for the first time since the crisis began, from 25 million to 21 million. And first-time applications for unemployment have fallen for eight straight weeks, as states gradually let stores, restaurants and other businesses reopen and the auto industry starts up factories again.

But the number of U.S. workers filing for unemployment is still extraordinarily high by historical standards, and that suggests businesses are failing or permanently downsizing, not just laying off people until the crisis can pass, economists warn.

“That is the kind of economic destruction you cannot quickly put back in the bottle,” said Adam Ozimek, chief economist at Upwork.

The U.S. unemployment rate was 14.7% in April, a level not seen since the Depression, and many economists expect it will be near 20% in May.

The figures come amid an intensifying debate in Congress over whether to extend $600 in extra weekly federal unemployment benefits, provided under rescue legislation passed in March but set to expire July 31.

Democrats have proposed extending the payments, while Republicans have argued that the extra money could discourage laid-off workers from returning to jobs that pay less than they are getting on unemployment.

Kelly Kelso, a 30-year-old roadie from Nashville for the rock group Foreigner, got her first unemployment check last week after more than eight weeks of waiting. She said she is still receiving far less in benefits than the $1,250 per week or more that she made on tour.

Though she is reluctant to leave the music industry, she said, “I have a cosmetology license. If all else fails, I could go back to doing hair.”

Another looming storm cloud: Economists say the sharp loss of tax revenue for state and local governments is likely to compound the damage from the shutdowns by forcing additional public-sector layoffs in the coming weeks.

Those layoffs have just recently started showing up in the weekly jobless claims report. Washington state, for example, reported layoffs of government employees.

Job cuts are also appearing far beyond the initially hit industries such as restaurants and stores, a sign that the damage is spreading even as businesses reopen. Washington state said it saw layoffs in insurance, and New York state reported job cuts by information technology companies.

Economists say many of the jobs lost are never coming back, and double-digit unemployment could persist through 2021.

And as discouraging as the numbers are, the real picture may be worse. The government counts people as unemployed only if they’re actually looking for a job, and many Americans probably see no point in trying when so many businesses are shut down.

Airlines and aircraft manufacturers are struggling after air travel plummeted early in the outbreak. Boeing is cutting more than 12,000 U.S. jobs through layoffs and buyouts, many expected to be in the Seattle area. European budget airline Easyjet said it will cut up to a third of its 15,000 employees. American Airlines plans to eliminate about 5,100 jobs.

Amtrak likewise announced it will lay off about 20% of its 18,000 workers amid a collapse in train ridership.

A number of European countries have strong safety-net programs that are underwriting the wages of millions of workers and keeping them on the payroll instead of adding them to the ranks of the unemployed. But the economic damage is mounting there, too.

Nissan is rolling back production in Spain in a move the government said could lead to 3,000 direct job cuts and thousands more losses at the automaker’s suppliers. And French unemployment claims jumped 22% in April, with 843,000 more people seeking work.

Elsewhere around the world, India saw another record daily jump in coronavirus cases. Russia reported a steady increase in its caseload, even as the city of Moscow and provinces across the vast country moved to ease restrictions in sync with the Kremlin’s political agenda.

And South Korea reported its biggest jump in infections in more than 50 days, a setback that could erase some of the hard-won gains that have made it a model for the rest of the world.

Worldwide, the virus has infected more than 5.7 million people and killed over 355,000, with the U.S. having the most confirmed cases and deaths, according to a tally by Johns Hopkins University. Europe has recorded about 170,000 deaths.

The true dimensions of the disaster are widely believed to be significantly greater, with experts saying many victims died without ever being tested.

___

Sewell reported from Cincinnati. Associated Press reporters from around the world contributed to this report.

___

Follow AP pandemic coverage at http://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak

Government Agencies Still Hiring H-1B Visa Employees for American Jobs

Evan Vucci/Associated Press

NEIL MUNRO

27 May 2020151

13:48

Government agencies around the country are hiring thousands of foreign H-1B workers to fill well-paid government jobs needed by U.S. graduates.

The governments’ hidden workforces of roughly 18,000 H-1B employees are an easy target for President Donald Trump as he searches for ways to open up good jobs for the many American graduates who have been forced out of jobs by the coronavirus crash.

Trump also needs to do something because he has yet to begin to deliver any part of his dramatic 2016 campaign trail promise: “I will end the use of the H-1B as a cheap labor program forever, and institute an absolute requirement to hire American workers first for every visa and immigration program. No exceptions.”

The H-1Bs are being imported and hired at all levels of government throughout the United States.

A small share of the H-1Bs is hired directly by government offices, via a deliberately complex and lengthy process managed by the Departments of Labor, State, and Homeland Security (DHS), plus a small army of immigration lawyers.

For example, roughly 130 foreign H-1B employees are being hired by organizations with “department” in their names. They include the California Department of Corrections and Rehabilitation, the New York Police Department, and the Arkansas Department of Public Safety, according to the Labor Department data.

Many more H-1Bs are imported by U.S. or Indian staffing companies and are then leased by government agencies. So the federal data from October to late March shows that roughly 3,000 H-1Bs have been requested or leased by government departments from various staffing firms.

The departments include transportation, agriculture, labor, health and human services, and interior. Roughly 85 H-1Bs are being sought for the federal and state Labor Departments, including the Labor Departments in Vermont, Idaho, Georgia, and Pennsylvania.

Many of the imported H-1B employees are being hired to maintain and operate computer systems, at promised salaries above $90,000, even as those tasks can be done by many American graduates.

The state-level departments who want H-1Bs from staffing companies include the Georgia Department of Transportation, Washington’s Department of Corrections, the Ohio Department of Job & Family Services, and Maryland’s Department of Human Services.

Roughly 100 foreigners are being requested for rental to taxpayer-backed commissions, including the Palm Beach County Board of County Commissioners the Washington Suburban Sanitary Commission, and the Texas Health and Human Services Commission.

More H-1Bs are requested by counties and boards, including the Pennsylvania Liquor Control Board, the election boards in New York and in North Carolina, the Palm Beach County Governmental Center, and the Superior Court of Orange County.

An additional 400-plus H-1Bs are being rented by government “offices.” These include the Colorado Governor’s Office of Information Technology, the U.S. Government Publishing Office, and the NYC Financial Information Services Agency and Office of Payroll Administration.

This set of almost 3,000 leases and hires is just the six-month tip of an iceberg.

Each H-1B lasts three years. So if 3,000 H-1Bs are being hired or extended during a period of six months, then another 15,000 H-1Bs were likely hired or rented during the prior two-and-half years of the three years.

The data only reveals the H-1Bs who were imported for scheduled work in government offices. It does not show or count the many H-1Bs who were imported by staffing companies for a different job and were subsequently reassigned to a staffing job in a government center. That reassigned H-1B population may be larger than the 15,000 shown in the data. A large population of reassigned H-1Bs would help explain the many anecdotal reports that Indian visa workers are a majority in many federal computer centers.

The iceberg goes much deeper, however, because many contractors also import H-1Bs and other visa workers to help build software for government agencies. For example, four states hired a Minneapolis-based software company that includes many H-1B workers to build websites where state residents could file for unemployment benefits. Amid the coronavirus crash, the H-1B software provided by Sagitec Solutions proved inadequate.

Business insists that India's H-1B visa workers are vital to the Fortune 500 economy.
But evidence shows little innovation & much chaos, largely b/c the H-1Bs work under oppressive cultural, legal & corp. pressures.
IOW, professionalism is better.#H1B https://t.co/URX7rB6nof

— Neil Munro (@NeilMunroDC) May 13, 2020

Similarly, the underperforming and overbudget Obamacare website was a political disaster for President Barack Obama. Klick.com reported:

There is some evidence that this project was, at least in part, off-shored and that H-1B (temporary foreign worker) visas were used extensively. This seems to have led to decisions such as the code supporting the obscure Indian Gujarati language and comments being written in a style consistent with offshore programmers.

But this huge iceberg of visa workers is a huge profit center for the layers of staffing companies. The staffing companies take large commissions from each H-1B hire, both legally and — according to accounts provided by Indian H-1Bs — not so legally.

For example, Company A may win a contract to deliver 100 H-1Bs to a government agency. Company A then rents the 100 H-1Bs from subcontractors B, C, and D. But those subcontractors can rent H-1Bs from each other before renting them to Company A. This hidden back-scratching process would allow the companies’ executives to take three bites from each workers’ $100,000 salary — and also to hire lobbyists to protect the lucrative H-1B process.

Many H-1Bs also have to pay kickbacks to their managers to ensure they are not sent home, usually to India. The managers “get a back cut,” said Vikram from Texas, a former H-1B worker who is now a citizen. “It happens all the time,” he said.

The H-1B numbers in this article are drawn from Labor Department data.

The Labor Department’s data includes the names of the hiring company, promised wage levels, job location, and job title. Crucially, the data also includes the “secondary entity business name,” which displays at least one expected workplace for each H-1B imported by staffing companies.

The data includes requests for new hires, as well as requests for three-year extensions of current workers’ initial three-year visa. The numbers in this article include new hires and visa extensions.

Few hiring requests by agencies are denied — even when the jobs are in critical infrastructure, or allow foreign access to private information, such as tax receipts and health data.

Federal law says non-profit groups — including government agencies — are exempt from the supposed annual cap of 85,000 H-1B new workers. Nationwide, roughly 90,000 “Cap Exempt” H-1Bs are employed by non-profit groups, including agency, research laboratories, universities, and hospitals.

DHS officials do deny many requests by staffing companies for H-1Bs. But the denials have little impact because the staffing companies make sure to ask for many extra H-1Bs, usually after collecting letters from companies that say the extra H-1Bs are needed.

Companies game this approval process to ensure they have extra H-1Bs on hand to win new contracts in bidding competitions against firms that only hire Americans, including legal immigrants.

Fortune 500 lobbyists warn Trump that any pro-American reform of the visa-worker programs may lead to discrimination.
As if the current system does not incentivize and deliver discrimination against millions of Americans.#H1B https://t.co/9GVu0THsli

— Neil Munro (@NeilMunroDC) May 25, 2020

The Labor Department data cited in this article is presented on a site operated by Virgil Bierschwale, a Texas-based software expert who says he cannot find a job amid the flood of Indian and Chinese visa workers. Many Americans have been sidelined because employers are eager to use the growing number of college graduate illegals, many of whom have overstayed their visas, he said.

“Some of us can’t work anymore because there are so many state and federal agencies using H-1Bs. … Government agencies using our tax revenues to basically displace us,” Bierschwale said.

The flood of foreign workers allows companies to discriminate against older Americans, and to exclude young American graduates, he said. “You used to be used to be to climb the ladder and work your way up — there is no climbing the ladder anymore because the [visa workers] are getting all jobs,” he said.

“It’s very difficult” to get jobs in a crashed labor market that was already flooded with imported workers, said an Indian-born citizen who formerly worked as an H-1B worker. “I don’t see a chance — I might need to leave my IT career and work at Walmart or something,” he said May 27.

Companies have imported roughly 750,000 H-1Bs for a very wide variety of jobs needed by American graduates. In addition, at least 700,000 other foreign graduates hold jobs via the uncapped L-1, OPT, CPT, H4EAD, and TN visa programs while roughly 800,000 Americans will graduate from four-year colleges with skilled degrees in 2020.

Many former H-1B and other visa workers overstay expired visas and create an extra pool of illegal college graduate labor. Also, companies allegedly use the little-monitored B-1 visa to sneak white-collar illegals into U.S. workplaces, further reducing salaries and opportunities for U.S. graduates.

Most of the H-1Bs are working software jobs in exchange for pay and the chance of citizenship. But no U.S. graduates are exempt from the H-1B competition. The list of targeted jobs include doctors, psychologists, marketing analysts, architects, fashion designers, editors, designers, creative writers, managers, engineers, and much else.

“Young kids have no clue that it could happen to them,” said Bierschwale. “When I was 40 years old, I had the best skills out there, but two years later, the manager said, ‘If I can get ten people for the price of you, it does not matter what skills you have.’”

For example, the Centers for Disease Control and Prevention (CDC) has asked to hire or extend 19 H-1Bs in fiscal 2020. The CDC’s 19 H-1Bs include two biologists, five epidemiologists, and three statisticians. The CDC also wants to hire or extend three H-1Bs from staffing companies, including Leidos Inc. and IShift Corp.

In 2019, CDC hired 18 foreign employees at an average salary of $82,195, according to the H1BData.info website, which also relies on government data. That pre-coronavirus 2019 inflow of foreign workers included 12 epidemiologists and six economists.

An email to the CDC was not returned.

According to a database held by DHS’s U.S. Citizenship and Immigration Services agency, the CDC has applied for five foreign H-1B workers and to extend work visas for four other foreign employees. Since 2018, the agency has filed for at least 51 foreign employees, the DHS site says.

Many U.S. executives also prefer H-1Bs because the H-1Bs know they will get sent home if they argue with their managers, unlike U.S. professionals, said Bierschwale. “If somebody like me sees something wrong, I’ll tell them it is wrong, and they don’t want that. [U.S. executives] want Indians and Chinese who stay quiet.”

Bierschwale’s website shows that two government-backed businesses use a large share of federal H-1Bs.

The Federal National Mortgage Association, dubbed Fannie Mae, wants to hire or extended 575 H-1Bs, including H-1Bs imported by Accenture, Cognizant, Ernst & Young, HCL Global, Hexaware Technologies, and Mastech Digital, many at $120,000-per-person costs.

The Federal Home Loan Mortgage Corporation, or Freddie Mac, wants to hire or extend 141 from staffing companies, at salaries around $100,000.

This data matches data from nine months of 2019, presented in October 2019 by Bloomberg:

Data indicate Fannie Mae and Freddie Mac, which are directed by the Federal Housing Finance Agency under a conservatorship, are the most popular destinations among federal agencies for H-1B workers placed by third-party companies. Together, the two account for at least 1,340 H-1B workers sponsored by more than 460 different third-party companies.

Also high on the list is the Health and Human Services Department (at least 290 H-1B workers), Amtrak (at least 60 H-1B workers), the Commerce Department (at least 60 H-1B workers), and the National Aeronautics and Space Administration (at least 40 H-1B workers).

The Pentagon and the armed forces do not hire visa workers directly, according to the data.

The inflow of India's visa-workers creates a huge 'bonded la

Car rental giant Hertz files for bankruptcy protection with $19BILLION of debt after share prices plummet and 10,000 staff are laid off amid the coronavirus pandemic

· Hertz filed for bankruptcy protection Friday after skipping car-lease payments last month

· The coronavirus pandemic has crippled the Florida-based company, which was already struggling with billions of dollars in debt

· The company laid off around 10,000 North American workers amid the coronavirus crisis and their share price has plummeted more than 80% this year

Car rental company Hertz filed for Chapter 11 on Friday after failing to reach a standstill agreement with its top lenders.

The Wall Street Journal reports that Hertz has roughly $19 billion of debt.

That staggering amount is made up of '$4.3billion in corporate bonds and loans and $14.4 billion in vehicle-backed debt held at special financing subsidiaries'.

Florida-based Hertz began bankruptcy protection proceedings in the U.S. Bankruptcy Court in Wilmington,

Delaware, in an attempt to avoid a forced liquidation of its vehicle fleet after bookings dropped off overnight due to the coronavirus pandemic.

'Today's action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future,' Chief Executive Paul E. Stone said.

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

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)

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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US unemployment claims approach 40 million since March

22 May 2020

US unemployment claims approach 40 million since March

22 May 2020

Further details emerge on the extent of the mid-March financial crisis

By Nick Beams
22 May 2020

No comments:

Blog Archive

Search This Blog

Wednesday, June 10, 2020

WALL STREET CELEBRATES THE TRUMP DEPRESSION

At the same time, they can use the rise in unemployment levels to post-war records as a sledgehammer to drive down workers’ wages and conditions, as they restructure their operations, using new technologies to employ fewer workers at much reduced rates of pay.

The paradox of the Wall Street surge

10 June 2020

Depression USA

9 May 2020

The GOP Isn’t Cynical Enough to Save Us From a Depression

Why Our Economy May Be Headed for a Decade of Depression

Job losses continue to mount in US despite reopenings

Government Agencies Still Hiring H-1B Visa Employees for American Jobs

Car rental giant Hertz files for bankruptcy protection with $19BILLION of debt after share prices plummet and 10,000 staff are laid off amid the coronavirus pandemic

US unemployment claims approach 40 million since March

22 May 2020

US unemployment claims approach 40 million since March

22 May 2020

Further details emerge on the extent of the mid-March financial crisis

By Nick Beams 22 May 2020

No comments:

Search This Blog

By Nick Beams
22 May 2020