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Financial skeptic

The more things change in the USA casino capitalism the more they stay the same

Cruise to Frugality Island for stock holding  401K Lemmings

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“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Note: Some thoughts  on 2019  added on Jan 3, 2019.

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. They are ideological. Like a country which adopted a certain religion follows a certain path, The USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

Some thoughts  on 2019

It was clear that 2017 stock market run was detached from fundamentals. Mostly speculative run. And the current stock market decline could well happen three months aerler or three month later but it was in the cards. It is difficult to estimate the power of inertia in such speculative runs. Also layoffs and decline of the standard liming of workers and lower middle class still can continue to improve the balance sheet until "Yellow Vests" moment stops them.

Jobs created now are mostly "inferior" low paid or temp/contractor jobs and the numbers just mask the cruel reality of the USA job market.

Which in reality is dismal, especially for young and old workers. several more or less paid specialties disappeared in 2018 due to automation (cash office worker is one). automatic cashier is supermarkets are also now more visible.  So spontaneous cases of vandalism, killings of coworkers and other form of "action of desperation" (as well as the rate of death from opioids -- which is yet another form of the same) would not be too surprising in such an atmosphere. Even with the power of the current national security state. Trump is playing with fire trying to cut on food stamps and implementing some other action in this program of "national neoliberalism" which is in internal policy is almost undistinguishable from neofascism.  He risk facing "Macron situation" sooner or later.

In any case at some point Minsky moment should arrive for the stock market. I am not sure that the current decline is that start of such an event. It might be postponed further down the line for a year or two.  But it will eventually come.  We can only guess what form it might take, but with the current Apple troubles and valuations of tech sector I think it might take the form of something similar to dot-com bubble deflation No.2

I do not see Amazon, Google, Facebook and Microsoft and other tech high flyers completely immune to the stock crash of 50% magnitude or more. For example, Google is overly dependent on advertising revenue which can grow only by strangulating small sites owners which use it as the advertizing platform (which it successfully implements fro several years now). But at some point owners might revolt and start dropping it for Microsoft or other platform.  Facebook might face a backlash, if people understand that selling data about them in the part of the business model, not an aberration.

One of the most unexplainable things that happened in 2018 was dramatic fall of oil prices in the Q4. This was quite surprising (and destructive) after the period of little or no capital investment in the new fields for three years or so.  Shale oil production increases in the USA are only possible if junk bonds can be produced along with it. Junks bonds that will never be paid. With the current debt load and prices below $50 most of the USA shale oil companies are zombies. Most if not all of thenm are losing money.  Only return of ~$70 oil prices can save them, if anything at all. WSJ touched this topic recently.

So this surprising fall of oil prices (from around $70 to around $43 WTI) looks connected to the speculations in the "paper oil" market.

Financialization allows for oil price to be completely detached from fundamentals for a year or even two (Saudis need over $80 I think to balance the budget, I think; this represents "fair price" as they are one of the three largest producers).

But you will never know this unless there are shortages at gas stations. The difference is covered by inflated statistics from IEA and similar agencies as well as "paper oil" -- future contracts which are settled in dollars.

This is the reality of "casino capitalism" ( aka neoliberalism ) with its rampant and destructive financialization.


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[May 25, 2020] Something's Wrong A Debt-Financed Recession by Joe Carson

Notable quotes:
"... The findings paint a grim picture of the devastating and lasting impact recession has on corporate performance. To be sure, a shocking seventeen percent of the companies failed, were acquired or decided to go private. ..."
"... Meanwhile, three years after the recession forty percent of the companies hadn't recovered to precession sales and profit levels. And, approximately 80% of public companies had not rebounded to their pre-recession growth rates in sales and profits a full three years after the recession. ..."
"... Almost all business people agree that the current crisis marks an inflection point. The business world has changed and firms need to remake (i.e., downsize) their organizations to fit in the new normal. Companies will operate with a smaller footprint, but more debt. ..."
May 24, 2020 | www.zerohedge.com

Submitted by Joe Carson , former chief economist at Allianz

The Fed's debt-bridge policy is designed to improve the flow of credit to businesses to avoid a devastating credit crunch. Never before has one of the monetary policy solutions to combat recession been to extend credit to struggling, profit losing businesses.

There is no precedent for record business borrowing during a recession. The scale of business failures during and after the economy exits recession will far exceed that of the Great Financial Recession.

The Fed's Debt-Bridge Policy

The traditional way for monetary policy to build a bridge from recession to recovery is through the lowering of official interest rates. In time, the reduction of interest rates triggers a refinancing cycle, lowering interest costs, and improving liquidity positions. The "reliquification" process enables firms (and individuals) to exit recession with stronger liquidity and lower debt burdens.

With official interest rates relatively low the "reliquification" process was not a viable policy option to combat the abrupt contraction in the economy. So policymakers were forced to support the flow of credit to the economy by purchasing securities and provide direct financing to sectors where it is not otherwise available or too costly.

So instead of contracting, which is the typical pattern during the recession, the flow of private credit has exploded to the upside. Since the start of 2020, commercial and industrial loans have increased over $750 billion to a record $3.1 trillion. That increase nearly matches the cumulative increase in corporate bank borrowing of the past 6 years.

At the same time, US corporations have tapped the capital markets for hundreds of billions of new debt. Through early May corporations have issued nearly $300 billion in new debt, twice as much as the comparable period one year ago.

An addition of $1 trillion of new liabilities over a few months is a big number in the best of times. Yet, record corporate borrowing during bad times increases the risk of business failures and defaults. Here's why.

A Harvard Business study released in 2010 analyzed corporate performance during three global recessions from 1980 to 2000. Sales and profit performance of 4700 public companies were analyzed three years before and three years after the recession.

The findings paint a grim picture of the devastating and lasting impact recession has on corporate performance. To be sure, a shocking seventeen percent of the companies failed, were acquired or decided to go private.

Meanwhile, three years after the recession forty percent of the companies hadn't recovered to precession sales and profit levels. And, approximately 80% of public companies had not rebounded to their pre-recession growth rates in sales and profits a full three years after the recession.

Almost all business people agree that the current crisis marks an inflection point. The business world has changed and firms need to remake (i.e., downsize) their organizations to fit in the new normal. Companies will operate with a smaller footprint, but more debt.

There is no precedent for record corporate borrowing during a recession. As a result, investors need to brace for an economy unlikely to resemble the one before, with an uneven and slow growth, and record corporate failures.

[May 24, 2020] The Black Death Killed Feudalism. What Does COVID-19 Mean for Capitalism - FPIF by John Feffer

Notable quotes:
"... The coronavirus crisis has thrown the global economy into cardiac arrest, and now you are acutely aware of the very markets that you had previously just assumed would function as normal. The first indication was the precipitous drop in the stock market that took place in late February. Then, as the United States began to enter quarantine, the labor market collapsed and hundreds of millions of people were suddenly out of work. Shortages in a few key commodities -- masks, ventilators, toilet paper -- began to appear. ..."
Apr 29, 2020 | fpif.org

How will the coronavirus transform the relationship between state and market? A look at oil, food, and finance.


You pay little attention to the systems of your body -- circulatory, digestive, pulmonary -- unless something goes wrong.

These automatic systems ordinarily go about their business, like unseen clockwork, while you think about a vexing problem at work, drink your morning cup of coffee, walk up and down stairs, and head out to your car to begin your morning commute. If you had to focus your attention on breathing, pushing blood through your veins, and metabolizing food, you'd have no time or energy to do anything else. The body abhors the micromanaging of the mind.

The same applies to the world's markets. They whir away in the background of your life, providing loans to your business, coffee beans to your nearby supermarket, labor to build your house, gas to fill your car. You take all of these markets for granted. All you have to concern yourself with is earning enough money to gain access to these goods and services. That's what it means to live in a modern economy. The days of hunting and gathering, of complete self-sufficiency, are long past.

And then, in a series of sickening shifts, the markets go haywire. As with a heart attack, you no longer can take the optimal performance of these systems for granted.

The coronavirus crisis has thrown the global economy into cardiac arrest, and now you are acutely aware of the very markets that you had previously just assumed would function as normal. The first indication was the precipitous drop in the stock market that took place in late February. Then, as the United States began to enter quarantine, the labor market collapsed and hundreds of millions of people were suddenly out of work. Shortages in a few key commodities -- masks, ventilators, toilet paper -- began to appear.

It is one of the central tenets of laissez-faire capitalism that markets behave like automatic systems, that an "invisible hand" regulates supply and demand. Market fundamentalists believe that the less the government interferes with these automatic systems, the better. They argue, to the contrary, that markets should increasingly take over government functions: a privatized post office, for instance, or Social Security accounts subjected to the stock market.

Market fundamentalists are like Christian Scientists. They refuse government intervention just as the faithful reject medical intervention. Much like God's grace, the invisible hand operates independent of human plan.

Then something happens, like a pandemic, which tests this faith. States around the world are now spending trillions of dollars to intervene in the economy: to bail out banks, save businesses, help out the unemployed. Countries are imposing export controls on key commodities. As in wartime, governments are directing manufacturers to produce critical goods to fill an unexpected demand for greater supply.

These are emergency interventions. The market fundamentalist looks forward to the day when stay-at-home restrictions are lifted, people go back to work, the stock market barrels back into bull mode, and the invisible hand, with perhaps a few Band-aids across the knuckles, returns to its job.

But some pandemics fundamentally alter the economy. In such emergencies, people realize that an economy is constructed and thus can be reconstructed. Are we now at just such a moment in world history? Will the coronavirus permanently transform the relationship between the state and the market?

Let's take a look at three key markets -- oil, food, and finance -- to measure the impact of the pandemic and the prospects for transformation.

Oil

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In 2007, Ecuadorian President Rafael Correa offered to forgo digging for oil beneath the Yasuni national park in exchange for $3.6 billion from the international community. No one took him up on the offer.

When the U.S. price of oil went below zero last week, I immediately thought of Correa's offer. The mainstream scoffed at the Ecuadorian leader back in 2007. How on earth could you possibly propose to keep oil under the earth? The world economy runs on fossil fuels. You might as well ask your kid to keep her Halloween candy uneaten in the back of the cupboard.

Today, however, the world is glutted with oil. The global recession has radically reduced the need for oil and gas.

In the United States, transportation absorbs nearly 70 percent of oil consumption. With airplanes grounded, fewer trains and busses in operation, and highways uncongested, the demand for oil has dropped precipitously. Businesses, too, are using less energy. It's not just oil. Companies devoted to pumping natural gas out of shale deposits are filing for bankruptcy as their market value drops precipitously: the price of a share of fracking giant Whiting Petroleum fell from $150 a couple years ago to 67 cents on March 31.

It's gotten to the point that you almost can't give away the stuff.

After all, if you somehow found yourself with a bunch of barrels of oil, where would you store it? Oil-storage tanks in the United State are near capacity. "Oil supertankers are looking like petroleum paparazzi, crowding the Los Angeles shoreline, either as floating storage or waiting on some kind of turn in sentiment," Brian Sullivan writes at CNBC . "With prices higher in coming months, for now it pays to sit on oil and hope to sell it for more money down the pipeline."

Oil-producing nations, after years of boosting their supplies, finally agreed in mid-April to cut production by 10 percent -- about 10 million gallons a day. In other words, they are deciding to leave oil in the ground. Now, however, it doesn't even qualify as a half-measure, since demand has dropped by 35 percent. The oil producers are awaiting the end of recession, when the quarantined go back to work, and everyone jumps on their transport of choice to make up for lost travel. They are awaiting a return to normal.

But the market for fossil fuels is not normal. The notion that the invisible hand will steer economies in a sustainable direction is hogwash. We are long past the moment when we should have paid Correa and everyone else to leave the oil and gas in the ground and move toward a world powered entirely by clean energy. The market treats the environment either as a commodity like any other or as an "externality" that doesn't factor into the final price of goods and services. That is so nineteenth century.

Climate change demands an intervention into the energy markets with restrictions on production, subsidies for clean energies like solar, and government purchases of electric cars. Returning to "normal" after the pandemic is not a viable option.

Food

Shutterstock

Like the oil exporters, food producers in the United States are restricting production as well.

In Delaware and Maryland, chicken producers are euthanizing two million chickens because the processing plants don't have enough workers. Sickness and death in these facilities, which has caused closures that are disrupting the supply chain, has prompted Trump to classify such plants as "critical infrastructure" that needs to remain open. Meanwhile, thousands of acres of fruits and vegetables are rotting in the fields in Florida because of the suspension of bulk food sales to schools, theme parks, and restaurants. The shortage of pickers -- often migrant laborers whose mobility has been restricted -- is complicating harvests.

Unlike oil, however, the overall demand for food remains high. The grocery business is booming . Food banks are overwhelmed by a surge unlike any in recent decades. The U.S. Department of Agriculture ordinarily could swoop in and buy up surplus production -- as it did for soybean growers during the trade war with China -- for use in food banks and other distribution programs. But as with so many other government agencies in the Trump era, the USDA has been slow to act , despite repeated pleas from growers and governors.

The pandemic is highlighting all the problems that have long plagued the food supply. First, there is the mismatch between supply and demand. Around 820 million people globally didn't have enough to eat in 2018, a figure that had been rising for three years in a row, and contrasts with another rising number: the 672 million obese people in the world. In the United States, fully 40 percent of food goes to waste every year. So, obviously the invisible hand does a pretty poor job of achieving market equilibrium.

Second, despite a growing movement to eat locally and seasonally, the food system still eats up a huge amount of energy. The problem lies not so much with bananas arriving by cargo ship, which is relatively efficient, but with perishable items delivered by plane . And it's what we eat, rather than where the products come from, that matters most. "Regardless of whether you compare the footprint of foods in terms of their weight (e.g. one kilogram of cheese versus one kilogram of peas); protein content; or calories, the overall conclusion is the same," writes Hannah Ritchie. "Plant-based foods tend to have a lower carbon footprint than meat and dairy. In many cases a much smaller footprint."

Third, because of economies of scale and abysmal labor practices, food in the industrialized world is too often grown by agribusiness, processed by transnational corporations, and picked or handled by workers who don't even make close to a living wage.

Returning to this kind of food system after the pandemic fades would be truly unappetizing. The livable wage campaign must spread to the countryside, meat substitutes must get an additional lift through government and institutional purchases, and innovative programs like the Too Good to Go app in Europe -- which sells extra restaurant and supermarket food at a discount -- must be brought to the United States to cut down on food waste and get meals to those in need.

Finance global-financial-crisis-capitalism-globalization-finance

Shutterstock

The financial crisis of 2008-2009 exposed the fragility and fundamental inequality of the global financial system. But all along the invisible hand has been pickpocketing poor Peter to pay prosperous Paul. Bankers, stockbrokers, and financial gurus have constructed a casino-like system that occasionally doles out a few pennies to the people playing the slots even as it enriches the house -- the top 1-2 percent -- at every turn.

The most outrageous part of this scheme is that the financial crisis demonstrated just how bad the financiers were at their own game. Not only did they not go to prison for illegal activities, they were with a few exceptions not even punished economically for their market failures. They were either too big, too rich, or too powerful for the government to allow them to fail.

In The New Yorker , Nick Paumgarten quotes a prominent investment banker at a bond fund:

"In the financial crisis, we won the war but lost the peace." Instead of investing in infrastructure, education, and job retraining, we emphasized, via a central-bank policy of quantitative easing (what some people call printing money), the value of risk assets, like stocks. "We collectively fell in love with finance," he said.

After the last financial crisis, the wealthy, who are heavily invested in the stock market, did quite well, while everyone else took a hit. Explains Colin Schultz in Smithsonian magazine: "While families hovering around the average net worth lost 36 percent over the past decade -- dropping from $87,992 in 2003 to $56,335 in 2013 -- people in the top 95th percentile actually gained 14 percent in the same tumultuous period -- going from $740,700 in 2003 to $834,100 in 2013."

The Trump administration is clearly in love with finance. Even before the pandemic hit, Trump's tax reform provided the top six U.S. banks with $32 billion in savings . That's more than what the 2008 bank bailout provided (and remember, banks mostly paid back those earlier loans). The stock market also benefited from an unprecedented upswing in stock buybacks -- $2 trillion combined in 2018 and 2019 -- that enriched shareholders at the expense of workers.

The $2 trillion in initial stimulus funds that the U.S. government is providing this time around has gone to individuals (those Trump-signed checks in the mail), small businesses (except when it went to big businesses), hospitals, and unemployed workers. There's also money for farmers, schools, food stamps, and (alas) the Pentagon. Future rounds of stimulus spending might include infrastructure, more aid to states and localities, and funds for smaller banks.

There's not much enthusiasm, at least publicly, to bail out Wall Street. Stock buybacks were explicitly excluded from the stimulus package. Meanwhile, the stock market has begun to climb out of the basement in the last couple weeks, largely on the strength of the news of all this new money being pumped into the economy.

But just as the tax bill was a covert giveaway to financial institutions, so have been several of the administration's pandemic responses. Quantitative easing, by which the Federal Reserve buys bonds and mortgage-backed securities, has increased the amount of liquidity available to financial institutions.

In the latest effort, the Fed announced that it will buy $500 billion in corporate bonds, but without any of the strings attached to other assistance such as limits on stock buybacks or executive compensation. The banks are even nickel and diming people by seizing stimulus check deposits to cover overdrawn accounts.

Out of a total pie of around $6 trillion in potential stimulus spending, banks and major corporations are well-placed to grab the lion's share. Writes Nomi Prins at TomDispatch:

In the end, according to the president, that could mean $4.5 trillion in support for big banks and corporate entities versus something like $1.4 trillion for regular Americans, small businesses, hospitals, and local and state governments. That 3.5 to 1 ratio signals that, as in 2008, the Treasury and the Fed are focused on big banks and large corporations, not everyday Americans.

Invisible hand? Hardly. That's the very visible hand of government tilting the financial markets even more in favor of the rich. As for the invisible enrichment that goes on beneath the surface, otherwise known as corruption, the Trump administration has gutted the oversight mechanisms that could bring those abuses to light.

It's time to end America's love affair with finance. That means, in the short term, higher taxes on the very rich, limitations on CEO pay built into all bailouts, and reviving all the reasonable proposals for reforming the financial sector that were either left out of or didn't get full implemented in the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in the wake of the last financial crisis.

Post-Pandemic Economics

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The Black Death depopulated Europe, killing as much as 60 percent of the population in the middle of the fourteenth century. Feudalism depended on lots of peasants working the land to support the one percent of that era. By carrying off so many of these workers, the Black Death made a major contribution to eroding the foundations of the dominant economic system of the time.

The coronavirus will not kill anywhere near as many people as the Black Death did. But it may well contribute to exposing the failures of "free markets" and the scandal of governments intervening in the economy on behalf of this era's one percent. The pandemic is already, thanks to huge stimulus packages, undermining the "small government" canard. A state apparatus deliberately hobbled by the Trump administration -- after earlier "reforms" by both parties -- did a piss-poor job of dealing with this crisis. That doesn't bode well for dealing with the even larger challenge of climate change.

The short-term fixes described above in the oil, food, and finance sectors are necessary but insufficient. They shift the balance more toward the government and away from the "free" market. They're not unlike the New Deal: reforming capitalism to save capitalism. But this pandemic is pointing to an even more fundamental transformation, to a new definition of economics.

The tweaking of markets to achieve optimal performance is much like the rejiggering of earth-centric models of the universe that took place in the Middle Ages. These models became more and more complex to account for new astronomical discoveries. Then along came Copernicus with a heliocentric model that accounted for all the new data. It took some time, however, for the old model to lose favor, despite its obvious failures.

The global economy remains market-centered, even though the evidence has been mounting that these markets are failing us and the planet. Tweaking this model isn't good enough. We need a new Copernicus who will provide a new theory that fits our unfolding reality, a new environment-centered economics that can maximize not profit but the well-being of living things. John Feffer is the director of Foreign Policy In Focus.

[May 24, 2020] Private Equity Is Ruining Health Care, Covid Is Making It Worse: Investors have been buying up doctor s offices, cutting costs, and, critics say, putting pressure on physicians by Heather Perlberg

Highly recommended!
So not only ambulance service was destroyed by private equity, they now added other specialties. I wonder is those criminals who insert unnecessary stents in patients are connected to private equity.
Images removed
Notable quotes:
"... "You can't serve two masters. You can't serve patients and investors" ..."
"... Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system, which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight. ..."
"... But some doctors say that the private equity playbook, which involves buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked at U.S. Dermatology Partners , a big private equity-backed chain. "You can't serve two masters. You can't serve patients and investors." ..."
"... Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a newly created company, which handles administrative tasks such as billing and marketing. ..."
"... Businessweek ..."
"... When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices or to join as employees. ..."
"... Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put, and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened. ..."
"... At Advanced Dermatology & Cosmetic Surgery , the largest private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after Audax Group bought a controlling stake in what was then a much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs. ..."
"... Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping the entire chain of revenue in-house. ..."
"... Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely inconvenient and some potentially dangerous. ..."
"... A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze, antiseptic solution, and toilet paper. Even before the great toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably ran out. The company declined to comment. ..."
"... One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who would otherwise die alone, and in some cases dying themselves -- private equity-backed staffing companies and hospitals have been cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective procedures and have been forced into wrenching compromises. ..."
"... For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms, according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says. ..."
"... Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working in the surrounding area. ..."
May 20, 2020 | www.bloomberg.com

Not long after Gavin Newsom, the governor of California, ordered the state's 40 million residents to stay home to stop the spread of the new coronavirus, Dr. Greg Morganroth called his team of doctors and said their dermatology group was staying open.

Morganroth is chief executive officer of the California Skin Institute , which he founded in 2007 as a single office in Mountain View. He's since expanded to more than 40 locations using a financing strategy that's become exceedingly common in American health care: private equity. In this case, he took out a loan from Goldman Sachs Group Inc. that could eventually convert to an equity stake. CSI is now the largest dermatology chain in California.

But the Covid-19 pandemic put Morganroth in a precarious position. Most medical procedures were characterized as nonessential by government officials and practitioners. Doctors were closing offices, and patients were staying away to limit their potential exposure to the virus.

CSI took a different approach. Morganroth explained his thinking on April 2 in a Zoom call with more than 170 dermatologists from around the country organized by the Cosmetic Surgery Forum, an industry conference. Contrary to what they might have heard, Morganroth told them, they should consider staying open during the pandemic. "Many of us are over-interpreting guidelines," he said.

For a moment there was an awkward silence. Doctors had thought they were signing up for advice on how to apply for government money that would help them meet payroll while they were shut down; they hadn't expected to be told not to shut down at all. Morganroth continued: "We are going to be in a two-year war, and we need to make strategic plans for our businesses that enable us to survive and to rebound."

Back at CSI, the company's front-office staff was working the phones, calling patients in some of the worst-hit areas and reminding them to show up for their appointments, even for cosmetic procedures such as Botox injections to treat wrinkles. During the videoconference, Morganroth argued that offering Botox in a pandemic wasn't so different from a grocery store allowing customers to buy candy alongside staples.

"If I had a food supply company and had to stay open, and I had meat, bread, and milk, would I stop making lime and strawberry licorice?" Morganroth asked. "I would make everything and go forward."

From a public-health point of view, some of the doctors believed, this was questionable. Common reasons for visiting a dermatologist's office -- skin screenings, mole removals, acne consultations -- aren't particularly time sensitive. Serious matters, such as suspected cancers and dangerous rashes, can be handled, at least initially, with telemedicine consultations . Then doctors can weigh the risks for their patients and determine who needs to come in. In a statement, CSI says that it followed local and state laws for staying open, while providing "necessary care" for patients, and that it had not required doctors to come to work.

"You can't serve two masters. You can't serve patients and investors"

Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system, which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight.

Over the past five years, the firms have invested more than $10 billion in medical practices, with a special focus on dermatology, which is seen as a hot industry because of the aging population. Baby boomers suffer from high rates of two potentially lucrative conditions: skin cancer and vanity. Some estimates suggest that private equity already owns more than 10% of the U.S dermatology market. And firms have started to expand into other specialties, including women's health, urology, and gastroenterology.

There's nothing inherently wrong with any of this. But some doctors say that the private equity playbook, which involves buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked at U.S. Dermatology Partners , a big private equity-backed chain. "You can't serve two masters. You can't serve patients and investors."

Investment firms, and the practices they fund, say these concerns are overblown. They point out that they're giving doctors a financial shelter from the rapidly changing medical environment, a particularly attractive prospect now, and that money from private equity firms has expanded care to more patients. But they've also made it next to impossible to track the industry's impact or reach. Firms rarely announce their investments and routinely subject doctors to nondisclosure agreements that make it difficult for them to speak publicly. Bloomberg Businessweek spoke to dozens of doctors at 10 large private equity-backed dermatology groups. Those interviews, along with information obtained from other employees, investors, lawyers, court filings, and company records, reveal how the firms operate, and why they sometimes fail patients.

The process is never exactly the same, but there are familiar patterns, which tend to play out in five steps.

Step 1: Marriage

The strange thing about private equity money in medicine is that for-profit investors have long been prevented from buying doctor's offices. Corporate ownership goes against a doctrine set by the American Medical Association , the main trade group for doctors in the U.S., and is prohibited by law in many states, including Texas and New Jersey. For most of the past 100 years, if you wanted to make money on a medical practice, you needed to have a medical license.

Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a newly created company, which handles administrative tasks such as billing and marketing.

In practice, though, investors expect some influence over medical decision-making, which, after all, is connected to profits. "When we partner with you, it's a marriage," said Matt Jameson, a managing director at BlueMountain Capital, a $17 billion firm that recently invested in a women's health company, while speaking at a conference in New York in September. "We have to believe it. You have to believe it. It's not going to be something where clinical is completely not touched." (When contacted by Businessweek , Jameson asked to clarify his comments. "Doctors and other qualified healthcare professionals at the providers we've invested in make medical decisions," he said in a statement.)

The typical buyout starts with the acquisition of a big, popular practice, often with multiple doctors and several locations, for as much as $100 million. (Investors typically pay between 9 and 12 times annual profit.) This practice functions as an anchor, like a name-brand department store at a shopping mall, attracting patients and doctors to the new group as it expands. Then comes the roll-up: The private equity firm purchases smaller offices and solo practices, giving the group a regional presence.

As part of the new structure, investors deal with paperwork and save money by buying medical supplies in bulk. Crucially they also negotiate higher insurance reimbursement rates. One dermatologist who sold her practice to the California Skin Institute says she was surprised to find out the bigger group's payouts from insurers were $25 to $125 more per visit.

When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices or to join as employees.

At first, doctors are generally thrilled by all of this. They have financial security and can focus on treating patients without the stress of running a business. Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put, and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened.

Step 2: Growth

The promise of more patients is a big draw for doctors. By sharing marketing costs and adding locations, the new companies can advertise more and attract customers. Private equity-owned practices have been diligent users of social media, announcing newly added doctors and posting coupons on Twitter and Instagram. But these practices can be aggressive in ways that make some doctors uncomfortable.

At Advanced Dermatology & Cosmetic Surgery , the largest private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after Audax Group bought a controlling stake in what was then a much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs.

In some of the company's Florida offices, the doctor alleged, medical assistants responded to the bonus structure by ticking extra boxes on exam reports, stating that doctors checked many more areas of the body than they actually had. That led to higher patient bills, defrauding the government under its Medicare program, according to the lawsuit. The federal government declined to join the case, and it was dismissed about a year after it was filed. Advanced and Audax declined to comment.

One-Stop Skin Care

By buying up labs and adding specialists, private equity-owned dermatology groups get paid at every step of a patient's treatment.

Data: Estimated Medicare reimbursement rates for the Miami area, Sensus Healthcare sales presentation

Private equity-backed practices also try to increase revenue by adding more-lucrative procedures, according to doctors interviewed by Businessweek . In dermatology, this means more cosmetics, laser treatments, radiation, and especially Mohs surgeries -- a specialized skin cancer procedure that removes growths from delicate areas like the face and neck one layer at a time, to limit scarring. The surgery involves expensive equipment and specialized doctors, so some large medical groups keep costs down by assembling traveling Mohs teams, who fly in from other states. Others create mobile labs in vans that set up in clinics' parking lots.

Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping the entire chain of revenue in-house. This takes advantage of a regulatory quirk that has made dermatology, and a handful of other specialties, attractive to private equity. Under the 1989 Stark Law, doctors aren't allowed to make patient referrals for their own financial gain. An exception was made for some fields because it's more convenient for patients, explains Dr. Sailesh Konda, a Mohs surgeon and professor at the University of Florida. "But that can be abused."

Step 3: Synergy

Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely inconvenient and some potentially dangerous.

A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze, antiseptic solution, and toilet paper. Even before the great toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably ran out. The company declined to comment.

At the country's second-biggest skin-care group, U.S. Dermatology Partners , a former doctor says a regional manager switched to a cheaper brand of needles and sutures without consulting the medical staff. The quality was so poor, she says, they would often break off in her patients' bodies. Mortified, she'd have to dig them out and start over. She complained to managers but couldn't get better supplies, she says. Paul Singh, U.S. Dermatology's CEO, says the company uses a "reputable, global vendor for medical supplies." "While our group may have standardized purchasing processes, individual providers have the autonomy to procure specific supplies that they need for a particular patient situation or patient population," he says in a statement.

Doctors who join a private equity-backed group generally sign contracts that state they'll never have to compromise their medical judgment, but some say that management began to intervene there, too. Dermatologists at most of the companies say they were pushed to see as many as twice the number of patients a day, which made them feel rushed and unable to provide the same quality of care. Others were forced to discuss their cases with managers or medical directors, who asked the doctors to explain why they weren't sending more patients for surgery. Multiple practices also encouraged doctors to send home Mohs surgery patients with open wounds and have them come back the next day for stitches -- or to have a different doctor do the closure the same day -- because that would allow the practice to collect more from insurers.

That's if doctors are performing the procedures at all. At Advanced Dermatology, several doctors say they were asked to claim that physician assistants, or PAs, were under their supervision when they weren't seeing patients in the same building, or even the same town. Because PAs are paid less than dermatologists, this allowed the company to keep costs low while growing the business. In a statement, Eric Hunt, Advanced's general counsel and chief compliance officer says that having PAs on staff enables the company to "provide access to quality dermatological care to more patients."

Step 4. Rolling Up the Roll-Up

Advanced Dermatology was sold in 2016 by Audax to Harvest Partners LP , following a pattern that's typical in the industry. At some point, after costs have been cut and profits maximized, most private equity-owned medical groups will be sold, often to another private equity firm, which will then try to somehow make the company even more profitable.

Having reduced most of the obvious costs, Advanced Dermatology began skimping on more important supplies, including Hylenex, according to doctors and other employees. The drug is an expensive reversal agent used when cosmetic fillers, which are supposed to make skin look plumper, go wrong. Not having enough is dangerous: Patients who get an injection that inadvertently blocks a blood vessel can be left with dead sections of skin or even go blind if they don't get enough Hylenex in a matter of hours. The company says that it stocks Hylenex in every office that performs cosmetic procedures, and that it "has no records of any provider being denied an order for this medication."

Advanced Dermatology also started giving even more authority to PAs, according to doctors and staff. Without enough oversight some were missing deadly skin cancers, they say. Others were doing too many biopsies and cutting out much larger areas of skin than necessary, leaving patients with big scars. Doctors who complained about the bad behavior say they saw PAs moved to other locations rather than fired or given more supervision. Hunt, the company's lawyer, says that all PAs get six months of training and are supervised by experienced doctors.

The staff coined a new medical diagnosis, "pre- pre- pre-cancer"

Advanced Dermatology also put more pressure on doctors to send biopsies to in-house labs. The move made sense financially, but some of the doctors didn't trust the lab. One of its two pathologists in Delray Beach, Fla., Steven Glanz, had a history of misdiagnosing benign tumors, which led patients to undergo surgeries that were later found to be unnecessary, according to doctors who worked with him. Dermatologists who warned that Glanz was a danger to patients say that their complaints to Dr. Matt Leavitt, the group's founder and CEO, were ignored. More procedures, doctors knew, brought in more money.

Glanz, who had been with the practice since its early days, was known to read slides under a microscope with a pistol on his desk. After he was arrested with a handgun, a folding knife, and a vial of methamphetamine crystals, he was fired and Florida's state medical board fined him $10,000, requiring him to complete a five-hour course on ethics before he could resume practicing. But his former colleagues were unsettled; they knew Glanz's signature was on years of reports that determined treatment for patients. Some slides were reevaluated, and pathologists noticed mistakes. Managers told some doctors and their staff that patients, even those who'd been misdiagnosed and had unnecessary procedures, were not to be told. Glanz pleaded guilty to stalking and a firearms violation and was sentenced to probation. When a reporter called his office and identified herself, the receptionist hung up. Further attempts to reach Glanz were unsuccessful. Advanced's Hunt says that he was "formally released from employment three years ago," but did not comment further.

Of course, some doctors pushed ethical boundaries long before private equity came into the picture. But critics of the industry, including doctors and investors, say management teams put in place by private equity firms tend to look the other way as long as a medical practice is profitable. Of the dermatologists with the highest biopsy rates in the country (between 4 and 11 per patient, per year), almost 25% were affiliated with private equity-backed groups, according to Dr. Joseph Francis, a Mohs surgeon and data researcher at the University of Florida.

Medical providers may have also been blurring ethical lines at U.S. Dermatology Partners, which was until recently on its second private equity owner, Abry Partners LLC . At four of the company's offices in Texas, a doctor and his PAs were doing more biopsies than necessary, according to employees. These employees say the staff routinely called patients with benign lichenoid keratosis, small brownish blotches that usually go away on their own, and told them the growths should be removed. Under instruction from the doctor, the staff coined a new medical diagnosis, "pre- pre- pre-cancer," and then talked patients into coming in for removal, employees say. Singh, the U.S. Dermatology CEO, says that the company trusts doctors to make the right decisions and that it monitors them through routine audits.

Step 5: Sell-Off

In some cases the cost-cutting either becomes impossible or leads to compromises in care too obvious to ignore. In 2016 a DermOne LLC office in Irving, Texas, had been using a faulty autoclave machine to sterilize surgical equipment -- the state and county health departments identified 137 patients that needed to get tested for blood-borne diseases such as HIV and hepatitis. By 2018, DermOne's backer, Westwind Investors, wanted out.

Westwind had been one of the earliest firms to build a big dermatology business -- with practices in five states -- but others had grown larger. After the debacle in Irving, the Nevada-based firm sold DermOne's medical records and patient lists, as well as some of its offices, to other groups. It dissolved the remaining offices, leaving some patients abruptly without care. Westwind did not respond to repeated requests for comment. Two other private equity-backed groups, TruDerm and Select Dermatology LLC, have also gone out of business in the past two years.

The surviving chains have been saddled with large piles of debt they're now struggling to repay. In January, U.S. Dermatology Partners defaulted on a $377 million loan, meaning the private equity backer, Abry Partners, had to hand over the keys to its lenders, Golub Capital , Carlyle Group , and Ares Management , which will now oversee a chain with almost 100 locations, receiving 1 million visits from patients a year. Abry did not respond to requests for comment .

For the medical groups that make it, the game plan is to eventually sell to the largest players, such as KKR , Blackstone Group , and Apollo Global Management . Pioneering investors, including Audax, are now buying practices in other fields -- a concerning development to critics who note that the areas that are currently attracting investment, such as urology, generally involve more invasive procedures. Should doctors performing vasectomies be thinking about the dollar-rate returns for KKR -- or any private investor?

"It's ultimately going to backfire," says Dr. Jane Grant-Kels, a veteran dermatologist and professor at the University of Connecticut School of Medicine. "There's a limit to how much money you can make when you're sticking knives into human skin for profit."

One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who would otherwise die alone, and in some cases dying themselves -- private equity-backed staffing companies and hospitals have been cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective procedures and have been forced into wrenching compromises.

For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms, according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says.

Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working in the surrounding area.

As governors throughout the nation ease restrictions on businesses, Advanced Dermatology is opening its most profitable offices first. The company received an undisclosed sum under the Cares Act, as part of the government relief package intended for health-care workers. Hunt, Advanced's chief compliance officer, told employees in an email earlier this month that the money would be used for protective gear, such as masks, and to replace "millions of dollars" in lost revenue.

The group had closed most of its offices since the stay-at-home orders were issued in March, cutting pay for doctors and furloughing staff. With cities and states beginning to consider reopening, doctors and PAs say they've been told they should be prepared for a full schedule. Hunt says the company is following the appropriate safety measures, but employees fear it will be nearly impossible to keep patients apart in waiting rooms. Opening in a reduced capacity, they understand, is not an option.

Read more: Private Equity Ate Finance, and Now It's Taking Over the World

[May 24, 2020] Coronavirus Conspiracies by Israel Shamir

May 24, 2020 | www.unz.com

Now we are coming to the new Digital Revolution, with workers being replaced by smart computers and an AI future. Millions of office workers already function as a human interface to the computer. You may have noticed this as you talk with them: they are trained to avoid making decisions; they say sentences that were scripted for them, and the decisions are made by the computer that was programmed to do their master's will. As lockdown had forced millions to communicate with computers directly, a lot of workers became superfluous.

The process of shedding millions of workers in the existing economic system is likely to be painful for the unemployed. The virus-blamed lockdown and digital control allows the owners of the digital companies to carry out the revolution with minimal risks for them. What would need an army and police involvement against riotous unemployed workers, can be achieved with greater ease under threat of the pandemic. The economy will be modernized and made more efficient. Alas, for us this script presages the fate of highly qualified weavers in 18 th century England, even if we shall avoid the total AI takeover Terminator-style.

Probably the scariest piece of news is not about the numbers of "infected". It is a meaningless word, for there are persistent carriers who do not succumb to disease; the vast majority of the "infected" are asymptomatic, meaning they aren't sick and aren't infectious; the number of "infected" is in direct proportion to the number of tests; the tests are dubious at best, and none is verified by the methods accepted in pre-corona medicine, while the methodology approved and enforced by the WHO can't be described as scientific. It is not about deaths, for we do not experience more deaths than in 2018. Moreover, in many countries, notably in France and in Norway there are 30% fewer deaths in certain weeks of April and May in this year than in the last year.

The scariest piece of news is that Zoom is worth more than the seven biggest airlines . These airlines with their accumulated labour (millions of working hours, hundreds of thousands of employees, highly trained pilots, masses of sophisticated equipment) just can't be worth as much as a job done in a month by a few programmers and which can be done anew in a month. Money and stock market prices are useful tools if they measure human efforts; they do not that anymore. What began with bankers earning more money in a day than a hundred qualified workers and engineers in their lifetime, ended with the hi-tech lords earning more than a million workers in their lifetime. It means that Money had banked on the Digital Economy, a Union made in Hell, while the real economy came up for grabs. Money decided that we won't fly anymore. They, the new masters, will fly in their private jets; the era of mass access is over. You will get satisfied with Zoom and PornHub, instead of the real thing.

Added to this the negative oil future price and the emission centres issuing more and more money, trying to smother the fire with gasoline, and you will get a picture of the coming world. There is probably no place for you and me in this world.

Is the great AI update of technology an objective need, and will it eventually bring good for mankind? Perhaps. But it does not mean the process should be drafted by Money and the Digital Economy, explained by MSM, justified by bio-horrors and carried on at public expense. It has to be done differently if we want to preserve the achievements of the long (1945-2020) peace stretch.

[May 24, 2020] Trump is mostly concerned with giving handouts to the MIC because he thinks "the economy" is based on jobs in the MIC since that is what they tell him is where US manufacturing is now based

May 24, 2020 | www.moonofalabama.org

Piotr Berman , May 23 2020 19:01 utc | 7

Trump is mostly concerned with giving handouts to the MIC because he thinks "the economy" is based on jobs in the MIC since that is what they tell him is where US manufacturing is now based.
Posted by: Kali | May 23 2020 18:16 utc | 2

To a degree, it is true. However, the problem with MIC as an economic stimulant is rather pitiful multiplier effect. For starters, the costs are hopelessly bloated. Under rather watchful Putin, Russia does its piece of arms race at a very small fraction of American costs. By the same token, pro-economy effects of arms spending in USA are seriously diluted -- the spending is surely there, but the extend of activity is debatable For example, in aerospace, there is a big potential for civilian applications of technologies developed for the military. Scant evidence in Boeing that should be a prime beneficiary. The fabled toilet seat (that cost many thousands of dollars) similarly failed to find civilian applications. Civilians inclined to overpriced toilets, like Mr. Trump himself, rely on low-tech methods like gold-plating.

A wider problem is shared by entire GOP: aversion to any government programs, and least of all industry promoting programs, that could benefit ordinary citizens. This is the exclusive domain of the free market! Once you refuse to consider that, only MIC remains, plus some boondogles like interstate highways. Heaven forfend to improve public transit or to repair almost-proverbial crumbling dams and bridges.


Charles D , May 23 2020 19:19 utc | 11

We have to ask cui bono - who benefits from a new nuclear arms race? General Electric, Boeing, Honeywell International, Lockheed Martin, Northrop Grumman et al. No one else really. Since these corporations also own the Congress and have zillions to fund Trump's re-election, they will probably get the go-ahead to spend the rest of the world into oblivion.
vk , May 23 2020 19:42 utc | 12
Apart from the obvious fact that the MIC is the only viable engine of propulsion of the American "real economy" (a.k.a. "manufacturing"), there's the more macabre fact that, if we take Trump's administration first military papers into consideration, it seems there's a growing coterie inside the Pentagon and the WH that firmly believes MAD can be broken vis-a-vis China.

Hence the "Prompt Global Strike" doctrine (which is taking form with the commission of the new B-21 "Raider" strategic bomber, won by Northrop Grumman), the rise of the concept of "tactical nukes" (hence the extinction of the START, and the Incirlik Base imbroglio post failed coup against Erdogan) and, most importantly, the new doctrine of "bringing manufacture back".

The USA is suffering from a structural valorization problem. The only way out is finding new vital space through which it can initiate a new cycle of valorization. The only significant vital space to be carved out in the 21st Century is China, with its 600 million-sized middle class (the world's largest middle class, therefore the world's largest potential consumer market). It won two decades with the opening of the ex-Soviet vital space, but it was depleted in the 2000s, finally exploding in 2006-2008.

How many decades does the Americans think they can earn by a hypothetical unilateral destruction of China?

DontBelieveEitherPr , May 23 2020 19:58 utc | 15
Having a treaty that limits power (in this case nuclear) on the same level for the US and any other country is simply totally against the ideology of US Superority/Exeptionalism.
That seems to be the driving (psychological and ideological) factor behind this charade.
And like this sick ideology always ends: It too will backfire.

@gepay: another problem is people that disagree with Bernhard on COVID, but then use this disagreement to not read his artciles anymore.
So many people only want to read what they want to hear, and run away at the first real different view.
The narcissism, that our neoliberal societies inducded in its people the last decade shows.. And seeing both sides and everything in between is not possible anymore for a majority it seems.
And living in a bubble is so comforting and easy in todays world. On MSM and on Alt Media alike.

bevin , May 23 2020 20:33 utc | 19
"...that may well fit Trump's plans of pushing all arms control regimes into oblivion."
It's not just arms control regimes, as the WHO business showed. This is the Roy Cohn agenda showing up again- the old GOP objection to the UN and all other international organisations. It is pure ideology-the US has gained immensely from dominating the organisations of which it is a part, leaving them makes no sense at all.

As to 'spending China to oblivion". This only works when every Pentagon dollar spent forces China or Russia to spend a dollar themselves. In such a contest the richest country wins. But that only works in the context of pre-nuclear warfare. With the nuclear deterrent it becomes possible to opt out of all the money wasting nonsense represented by the Pentagon budget, sit back and say, as the Chinese diplomat evidently did, "Just try it."
Which adds up to the conclusion that it is wholly irrational of the United States to denounce treaties designed to reduce the likelihood of nuclear weapons being used: it is to the advantage of Washington that other powers, potential rivals, are forced to build up conventional forces because they are bound by treaty not to rely on nuclear weapons.
So, again: pure ideology designed for domestic consumption and advanced by the most reactionary elements in American society- the Jesse Helms good ol' boys who make the neo-cons look almost human.

Piotr Berman , May 23 2020 20:38 utc | 21
He likes economic war (against everybody), they want actual war. Laguerre | May 23 2020 20:17 utc

Trump has a primitive mercantile mind. There is nothing inherently wrong about mercantilism, but a primitive version of anything tends to be mediocre at best. Thus he loves war that give profit, like Yemen where natives are bombed with expensive products made in USA (and unfortunately, also UK, France etc., but the bulk goes to USA). Then he loves wars the he thinks will give profit, like "keeping oil fields in Syria". Some people told him that oil fields are profitable (although they can go bankrupt just like casinos).

Privately, I think that Trump wanted to make a war with Iran, but the generals explained him what kind of disaster that would be.

One difference is that Democrats are aligned with uber Zionist of slightly less rabid variety than Republicans. A bit like black bears vs grizzlies. Unfortunately, like in the animal kingdom, when the push comes to shove, black bears defer to grizzlies, so on the side of Palestinians etc. there is no difference.

Jen , May 23 2020 21:17 utc | 24
Billingslea's "spending ... into oblivion" statement reflects the belief, still widespread among US neocon political / military elites, that the Soviet Union was brought down and destroyed by its attempts to keep up with US military spending throughout the 1980s. This alone tells us how steeped in past fantasy the entire US political and military establishment must be. Compared to Rip van Winkle, these people are comatose.

Spending the enemy into oblivion may be "tried and true" practice but only when the enemy is much poorer than yourself in arms production and in one type of weapons manufacture. That certainly does not apply to either Russia or China these days. Both nations think more strategically and do not waste precious resources in parading and projecting military power abroad, or rely almost exclusively on old, decaying technologies and a narrow mindset obsessed with always being top dog in everything.

[May 24, 2020] While the official lockdowns undoubtedly led to a contraction in economic activity, a huge portion (probably most) of the economic damage would be incurred anyway.

May 24, 2020 | www.unz.com

reiner Tor , says: Show Comment May 21, 2020 at 6:08 pm GMT

@Bert

The most important aspects of economic life can proceed with only those modifications.

Tourism is some 10% of world GDP. It's going to take a massive hit, lockdown or no lockdown. Air travel took a massive hit before the lockdown, empty planes were flying often. While the official lockdowns undoubtedly led to a contraction in economic activity, a huge portion (probably most) of the economic damage would be incurred anyway. For example I will personally not be eating out in the foreseeable future (a vaccine would change that), and I did so at least every other month. It's not very frequent, but I visited relatively expensive restaurants, so my reduced consumption probably disproportionately hits the higher end jobs in the sector. I know people who used to eat out more frequently (and in expensive restaurants), who are now staying home. Lazy people who had a gym membership to soothe their conscience will now feel less guilty if they just cancel it.

Some people believe that if we just restrict or basically shut down huge sectors of the economy, then the rest can still carry on as if nothing happened. That's just wrong. People who work in restaurants or gyms are now going to reduce their own consumption, for example they won't be buying new cars any time soon. This in turn reduces consumption by people employed (or previously employed) in those sectors.

So unfortunately no, I don't think the rest of the economy could carry on like before.

endthefed , says: Show Comment May 21, 2020 at 7:54 pm GMT
@Anatoly Karlin The lockdown actions in the US were, by my estimation, about 6 weeks too late. 6 weeks earlier and maybe actions could have been phased in (monitor results) and not blanket panic. Even in that time frame we had serious suspicion of asymptomatic spread. We could have started masks for everyone, restricting air travel and cruises, isolated nursing home and started shutting down schools. Yes, I know children don't get the large complications however, it beggars belief that stuffed in schools then going home; kids would not be vectors.

In any case the US economy was primed to collapse anyway. Losing the China supply chain was significant and would have happened even if no virus was found in the US.

P.S. I think it's going to get worse; (I'm surprised it already hasn't) but I think unemployment is going to be bankrupting states.

[May 23, 2020] Neoliberalism promised freedom instead it delivers stifling control by George Monbiot

Highly recommended!
From comments: " neoliberalism to be a techno-economic order of control, requiring a state apparatus to enforce wholly artificial directives. Also, the work of recent critics of data markets such as Shoshana Zuboff has shown capitalism to be evolving into a totalitarian system of control through cybernetic data aggregation."
"... By rolling back the state, neoliberalism was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more oppressive than the system it replaced. ..."
"... Workers find themselves enmeshed in a Kafkaesque bureaucracy , centrally controlled and micromanaged. Organisations that depend on a cooperative ethic – such as schools and hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The introduction of private capital into public services – that would herald a glorious new age of choice and openness – is brutally enforced. The doctrine promises diversity and freedom but demands conformity and silence. ..."
"... Their problem is that neoliberal theology, as well as seeking to roll back the state, insists that collective bargaining and other forms of worker power be eliminated (in the name of freedom, of course). So the marketisation and semi-privatisation of public services became not so much a means of pursuing efficiency as an instrument of control. ..."
"... Public-service workers are now subjected to a panoptical regime of monitoring and assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The bureaucratic quantification of public administration goes far beyond an attempt at discerning efficacy. It has become an end in itself. ..."
Notable quotes:
"... By rolling back the state, neoliberalism was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more oppressive than the system it replaced. ..."
"... Workers find themselves enmeshed in a Kafkaesque bureaucracy , centrally controlled and micromanaged. Organisations that depend on a cooperative ethic – such as schools and hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The introduction of private capital into public services – that would herald a glorious new age of choice and openness – is brutally enforced. The doctrine promises diversity and freedom but demands conformity and silence. ..."
"... Their problem is that neoliberal theology, as well as seeking to roll back the state, insists that collective bargaining and other forms of worker power be eliminated (in the name of freedom, of course). So the marketisation and semi-privatisation of public services became not so much a means of pursuing efficiency as an instrument of control. ..."
"... Public-service workers are now subjected to a panoptical regime of monitoring and assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The bureaucratic quantification of public administration goes far beyond an attempt at discerning efficacy. It has become an end in itself. ..."
"... The other point to be made is that the return of fundamentalist nationalism is arguably a radicalized form of neoliberalism. ..."
"... Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist ideologies and an order of market feudalism. In other words, neoliberalism's authoritarian orientations, previously effaced beneath discourses of egalitarian free-enterprise, become overt. ..."
"... The market is no longer an enabler of private enterprise, but something more like a medieval religion, conferring ultimate authority on a demagogue. Individual entrepreneurs collectivise into a 'people' serving a market which has become synonymous with nationhood. ..."
Apr 10, 2019 | www.theguardian.com

Thousands of people march through London to protest against underfunding and privatisation of the NHS. Photograph: Wiktor Szymanowicz/Barcroft Images M y life was saved last year by the Churchill Hospital in Oxford, through a skilful procedure to remove a cancer from my body . Now I will need another operation, to remove my jaw from the floor. I've just learned what was happening at the hospital while I was being treated. On the surface, it ran smoothly. Underneath, unknown to me, was fury and tumult. Many of the staff had objected to a decision by the National Health Service to privatise the hospital's cancer scanning . They complained that the scanners the private company was offering were less sensitive than the hospital's own machines. Privatisation, they said, would put patients at risk. In response, as the Guardian revealed last week , NHS England threatened to sue the hospital for libel if its staff continued to criticise the decision.

The dominant system of political thought in this country, which produced both the creeping privatisation of public health services and this astonishing attempt to stifle free speech, promised to save us from dehumanising bureaucracy. By rolling back the state, neoliberalism was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more oppressive than the system it replaced.

Workers find themselves enmeshed in a Kafkaesque bureaucracy , centrally controlled and micromanaged. Organisations that depend on a cooperative ethic – such as schools and hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The introduction of private capital into public services – that would herald a glorious new age of choice and openness – is brutally enforced. The doctrine promises diversity and freedom but demands conformity and silence.

Much of the theory behind these transformations arises from the work of Ludwig von Mises. In his book Bureaucracy , published in 1944, he argued that there could be no accommodation between capitalism and socialism. The creation of the National Health Service in the UK, the New Deal in the US and other experiments in social democracy would lead inexorably to the bureaucratic totalitarianism of the Soviet Union and Nazi Germany.

He recognised that some state bureaucracy was inevitable; there were certain functions that could not be discharged without it. But unless the role of the state is minimised – confined to defence, security, taxation, customs and not much else – workers would be reduced to cogs "in a vast bureaucratic machine", deprived of initiative and free will.

By contrast, those who labour within an "unhampered capitalist system" are "free men", whose liberty is guaranteed by "an economic democracy in which every penny gives a right to vote". He forgot to add that some people, in his capitalist utopia, have more votes than others. And those votes become a source of power.

His ideas, alongside the writings of Friedrich Hayek , Milton Friedman and other neoliberal thinkers, have been applied in this country by Margaret Thatcher, David Cameron, Theresa May and, to an alarming extent, Tony Blair. All of those have attempted to privatise or marketise public services in the name of freedom and efficiency, but they keep hitting the same snag: democracy. People want essential services to remain public, and they are right to do so.

If you hand public services to private companies, either you create a private monopoly, which can use its dominance to extract wealth and shape the system to serve its own needs – or you introduce competition, creating an incoherent, fragmented service characterised by the institutional failure you can see every day on our railways. We're not idiots, even if we are treated as such. We know what the profit motive does to public services.

So successive governments decided that if they could not privatise our core services outright, they would subject them to "market discipline". Von Mises repeatedly warned against this approach. "No reform could transform a public office into a sort of private enterprise," he cautioned. The value of public administration "cannot be expressed in terms of money". "Government efficiency and industrial efficiency are entirely different things."

"Intellectual work cannot be measured and valued by mechanical devices." "You cannot 'measure' a doctor according to the time he employs in examining one case." They ignored his warnings.

Their problem is that neoliberal theology, as well as seeking to roll back the state, insists that collective bargaining and other forms of worker power be eliminated (in the name of freedom, of course). So the marketisation and semi-privatisation of public services became not so much a means of pursuing efficiency as an instrument of control.

Public-service workers are now subjected to a panoptical regime of monitoring and assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The bureaucratic quantification of public administration goes far beyond an attempt at discerning efficacy. It has become an end in itself.

Its perversities afflict all public services. Schools teach to the test , depriving children of a rounded and useful education. Hospitals manipulate waiting times, shuffling patients from one list to another. Police forces ignore some crimes, reclassify others, and persuade suspects to admit to extra offences to improve their statistics . Universities urge their researchers to write quick and superficial papers , instead of deep monographs, to maximise their scores under the research excellence framework.

As a result, public services become highly inefficient for an obvious reason: the destruction of staff morale. Skilled people, including surgeons whose training costs hundreds of thousands of pounds, resign or retire early because of the stress and misery the system causes. The leakage of talent is a far greater waste than any inefficiencies this quantomania claims to address.

New extremes in the surveillance and control of workers are not, of course, confined to the public sector. Amazon has patented a wristband that can track workers' movements and detect the slightest deviation from protocol. Technologies are used to monitor peoples' keystrokes, language, moods and tone of voice. Some companies have begun to experiment with the micro-chipping of their staff . As the philosopher Byung-Chul Han points out , neoliberal work practices, epitomised by the gig economy, that reclassifies workers as independent contractors, internalise exploitation. "Everyone is a self-exploiting worker in their own enterprise."

The freedom we were promised turns out to be freedom for capital , gained at the expense of human liberty. The system neoliberalism has created is a bureaucracy that tends towards absolutism, produced in the public services by managers mimicking corporate executives, imposing inappropriate and self-defeating efficiency measures, and in the private sector by subjection to faceless technologies that can brook no argument or complaint.

Attempts to resist are met by ever more extreme methods, such as the threatened lawsuit at the Churchill Hospital. Such instruments of control crush autonomy and creativity. It is true that the Soviet bureaucracy von Mises rightly denounced reduced its workers to subjugated drones. But the system his disciples have created is heading the same way.

George Monbiot is a Guardian columnist


Pinkie123 , 12 Apr 2019 03:23

The other point to be made is that the return of fundamentalist nationalism is arguably a radicalized form of neoliberalism. If 'free markets' of enterprising individuals have been tested to destruction, then capitalism is unable to articulate an ideology with which to legitimise itself.

Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist ideologies and an order of market feudalism. In other words, neoliberalism's authoritarian orientations, previously effaced beneath discourses of egalitarian free-enterprise, become overt.

The market is no longer an enabler of private enterprise, but something more like a medieval religion, conferring ultimate authority on a demagogue. Individual entrepreneurs collectivise into a 'people' serving a market which has become synonymous with nationhood.

A corporate state emerges, free of the regulatory fetters of democracy. The final restriction on the market - democracy itself - is removed. There then is no separate market and state, just a totalitarian market state.

glisson , 12 Apr 2019 00:10
This is the best piece of writing on neoliberalism I have ever seen. Look, 'what is in general good and probably most importantly what is in the future good'. Why are we collectively not viewing everything that way? Surely those thoughts should drive us all?
economicalternative -> Pinkie123 , 11 Apr 2019 21:33
Pinkie123: So good to read your understandings of neoliberalism. The political project is the imposition of the all seeing all knowing 'market' on all aspects of human life. This version of the market is an 'information processor'. Speaking of the different idea of the laissez-faire version of market/non market areas and the function of the night watchman state are you aware there are different neoliberalisms? The EU for example runs on the version called 'ordoliberalism'. I understand that this still sees some areas of society as separate from 'the market'?
economicalternative -> ADamnSmith2016 , 11 Apr 2019 21:01
ADamnSmith: Philip Mirowski has discussed this 'under the radar' aspect of neoliberalism. How to impose 'the market' on human affairs - best not to be to explicit about what you are doing. Only recently has some knowledge about the actual neoliberal project been appearing. Most people think of neoliberalism as 'making the rich richer' - just a ramped up version of capitalism. That's how the left has thought of it and they have been ineffective in stopping its implementation.
economicalternative , 11 Apr 2019 20:42
Finally. A writer who can talk about neoliberalism as NOT being a retro version of classical laissez faire liberalism. It is about imposing "The Market" as the sole arbiter of Truth on us all.
Only the 'Market' knows what is true in life - no need for 'democracy' or 'education'. Neoliberals believe - unlike classical liberals with their view of people as rational individuals acting in their own self-interest - people are inherently 'unreliable', stupid. Only entrepreneurs - those close to the market - can know 'the truth' about anything. To succeed we all need to take our cues in life from what the market tells us. Neoliberalism is not about a 'small state'. The state is repurposed to impose the 'all knowing' market on everyone and everything. That is neoliberalism's political project. It is ultimately not about 'economics'.
Pinkie123 , 11 Apr 2019 13:27
The left have been entirely wrong to believe that neoliberalism is a mobilisation of anarchic, 'free' markets. It never was so. Only a few more acute thinkers on the left (Jacques Ranciere, Foucault, Deleuze and, more recently, Mark Fisher, Wendy Brown, Will Davies and David Graeber) have understood neoliberalism to be a techno-economic order of control, requiring a state apparatus to enforce wholly artificial directives. Also, the work of recent critics of data markets such as Shoshana Zuboff has shown capitalism to be evolving into a totalitarian system of control through cybernetic data aggregation.


Only in theory is neoliberalism a form of laissez-faire. Neoliberalism is not a case of the state saying, as it were: 'OK everyone, we'll impose some very broad legal parameters, so we'll make sure the police will turn up if someone breaks into your house; but otherwise we'll hang back and let you do what you want'. Hayek is perfectly clear that a strong state is required to force people to act according to market logic. If left to their own devices, they might collectivise, think up dangerous utopian ideologies, and the next thing you know there would be socialism. This the paradox of neoliberalism as an intellectual critique of government: a socialist state can only be prohibited with an equally strong state. That is, neoliberals are not opposed to a state as such, but to a specifically centrally-planned state based on principles of social justice - a state which, to Hayek's mind, could only end in t totalitarianism. Because concepts of social justice are expressed in language, neoliberals are suspicious of linguistic concepts, regarding them as politically dangerous. Their preference has always been for numbers. Hence, market bureaucracy aims for the quantification of all values - translating the entirety of social reality into metrics, data, objectively measurable price signals. Numbers are safe. The laws of numbers never change. Numbers do not lead to revolutions. Hence, all the audit, performance review and tick-boxing that has been enforced into public institutions serves to render them forever subservient to numerical (market) logic. However, because social institutions are not measurable, attempts to make them so become increasingly mystical and absurd. Administrators manage data that has no relation to reality. Quantitatively unmeasurable things - like happiness or success - are measured, with absurd results.

It should be understood (and I speak above all as a critic of neoliberalism) that neoliberal ideology is not merely a system of class power, but an entire metaphysic, a way of understanding the world that has an emotional hold over people. For any ideology to universalize itself, it must be based on some very powerful ideas. Hayek and Von Mises were Jewish fugitives of Nazism, living through the worst horrors of twentieth-century totalitarianism. There are passages of Hayek's that describe a world operating according to the rules of a benign abstract system that make it sound rather lovely. To understand neoliberalism, we must see that it has an appeal.

However, there is no perfect order of price signals. People do not simply act according to economic self-interest. Therefore, neoliberalism is a utopian political project like any other, requiring the brute power of the state to enforce ideological tenets. With tragic irony, the neoliberal order eventually becomes not dissimilar to the totalitarian regimes that Hayek railed against.

manolito22 -> MrJoe , 11 Apr 2019 08:14
Nationalised rail in the UK was under-funded and 'set up to fail' in its latter phase to make privatisation seem like an attractive prospect. I have travelled by train under both nationalisation and privatisation and the latter has been an unmitigated disaster in my experience. Under privatisation, public services are run for the benefit of shareholders and CEO's, rather than customers and citizens and under the opaque shroud of undemocratic 'commercial confidentiality'.
Galluses , 11 Apr 2019 07:26
What has been very noticeable about the development of bureaucracy in the public and private spheres over the last 40 years (since Thatcher govt of 79) has been the way systems are designed now to place responsibility and culpability on the workers delivering the services - Teachers, Nurses, social workers, etc. While those making the policies, passing the laws, overseeing the regulations- viz. the people 'at the top', now no longer take the rap when something goes wrong- they may be the Captain of their particular ship, but the responsibility now rests with the man sweeping the decks. Instead they are covered by tying up in knots those teachers etc. having to fill in endless check lists and reports, which have as much use as clicking 'yes' one has understood those long legal terms provided by software companies.... yet are legally binding. So how the hell do we get out of this mess? By us as individuals uniting through unions or whatever and saying NO. No to your dumb educational directives, No to your cruel welfare policies, No to your stupid NHS mismanagement.... there would be a lot of No's but eventually we could say collectively 'Yes I did the right thing'.
fairshares -> rjb04tony , 11 Apr 2019 07:17
'The left wing dialogue about neoliberalism used to be that it was the Wild West and that anything goes. Now apparently it's a machine of mass control.'

It is the Wild West and anything goes for the corporate entities, and a machine of control of the masses. Hence the wish of neoliberals to remove legislation that protects workers and consumers.

[May 23, 2020] Academies are unaccountable bureaucracies with very expensive layers of management while teachers are badly paid and are being laid off

Notable quotes:
"... Meanwhile - as Public Services are devalued and denuded in this system the private sector becomes increasingly wealthy at the top while its workers become poorer and less powerful at the bottom ..."
"... Education is a prime example of where neoliberalism has had a negative effect. ..."
May 23, 2020 | discussion.theguardian.com

Luxgeoff , 11 Apr 2019 12:42

It's the same in education. Academies are unaccountable bureaucracies with very expensive layers of management while teachers are being laid off in some of the most deprived areas of the country, exemplified by this story from Sheffield

https://www.thestar.co.uk/news/latest/strike-at-sheffield-school-over-plans-to-make-15-teachers-redundant-1-9653749

JohnS58 , 11 Apr 2019 06:15
Only the greedy, selfish, well off, egotistical and share holders believe that Public Services should, could and would benefit from privatisation and deregulation.

Education and Health for example are (in theory) a universal right in the UK. As numbers in the population rise and demographics change so do costs ie delivery of the service becomes more expensive.As market force logic is introduced it also becomes less responsive - hence people not able to get the right drugs and treatment and challenging and challenged young people being denied an education that is vital for them in increasing numbers.

Meanwhile - as Public Services are devalued and denuded in this system the private sector becomes increasingly wealthy at the top while its workers become poorer and less powerful at the bottom.

With the introduction of Tory austerity which punishes the latter to the benefit of the former there is no surprise that this system does not work and has provided a platform for the unscrupulous greedy and corrupt to exploit Brexit and produce conditions which will take 'Neiliberalism' to where logic suggests it would always go - with the powerful rich protected minority exerting their power over an increasingly poor and powerless majority.

Olympia1881 -> Centrecourt , 11 Apr 2019 05:46
Education is a prime example of where neoliberalism has had a negative effect. It worked well when labour was pumping billions into it and they invested in early intervention schemes such as sure start and nursery expansion. Unfortunately under the tories we have had those progressive policies scaled right back. Children with SEND and/or in care are commodities bought and sold by local authorities. I've been working in a PRU which is a private company and it does good things, but I can't help but think if that was in the public sector that it would be in a purpose built building rather than some scruffy office with no playground. The facilities aren't what you would expect in this day in age. If we had a proper functioning government with a plan then what happens with vulnerable children would be properly organised rather than a reactive shit show.

[May 22, 2020] COVID Kills Hospitality Industry, Crushes NYC Hotels, Triggers CMBS Implosion

May 22, 2020 | www.zerohedge.com

COVID Kills Hospitality Industry, Crushes NYC Hotels, Triggers CMBS Implosion by Tyler Durden Fri, 05/22/2020 - 09:15 The global hospitality industry is facing one of the worst crashes in history, and New York City, the epicenter of COVID-19 in the US, has seen its tourism industry decimated. With no rebound in sight, the second great depression for commercial real estate is ahead and could lead to a massive default wave of shopping malls and luxury hotels.

Judging by the ongoing collapse in commercial real estate, as we recently noted , CMBX 6, which track 25 commercial-mortgage-backed securities with high exposure to 2012 shopping mall loans, has tumbled during lockdowns, resulting in a handsome payout for the likes of Carl Icahn, McNamara and others who were short the tranche.

Last week we said, "keep a close eye on CMBX 9" with its "outlier exposure to hotels which have quickly emerged as the most impacted sector from the pandemic, this may well be the next big short."

The various CMBX series are shown in the chart below, with CMBX 9 most notable for its 17% exposure to hotels.

While the broader market has rebounded, CMBX 9 has experienced a swan dive.

Several key observations in the Manhattan hotel industry have been seen this month, suggest the tide is turning for the industry. Let's start with the newest piece of information is that The Times Square Edition, a newly constructed multi-million dollar hotel located in Midtown Manhattan, is set to pull the plug on operations by late summer.

Marriott International Inc. operates the hotel under the Edition brand, says it "has provided advance notice to employees, government officials and union officials" that all operations on the property will grind to a halt on August 13.

This suggests Marriot doesn't see a V-shaped recovery in the tourism industry this year. Maybe Marriot is taking advice from Scott Minerd, the CIO of Guggenheim Investments, who recently said a recovery in the economy could take upwards of "four years ."

Bloomberg reviewed new documents in the ongoing foreclosure proceeding show Marriot informed owner Maefield Development in March that "a cash shortfall due to the outbreak could put the developer in default on its contract with the lodging giant."

Moody's Investors Service valued the mixed-use property at more than $2.4 billion in 2018 -- considering the economic crash and commercial real estate implosion, the value of the property is likely much lower.

Even when New York City reopens, hotels in Manhattan generally rely on international travel and large conferences, which are several things that may not return to 2019 activity trends for several years. This has made it challenging for hotel operators to cover debt payments and labor costs, suggesting defaults and closures could be dead ahead.

Jonathan Falik, CEO at JF Capital Advisors, recently told Bloomberg that too many rooms are empty in the city and warns not all hotels will survive.

Read : NYC Hotel Loans Defaulting At Alarming Rate As Room-Rates Plunge, Tourism Tumbles

Last week, Sunstone Hotel Investors Inc. wrote down its Hilton Times Square hotel to less than its $77 million mortgage. Sunstone is currently in discussions with lenders to either restructure or handover the property.

Data firm Trepp said $1 billion dollars in late payments were seen in CMBSs used to finance New York hotels. The second great depression in commercial real estate has arrived, many shopping malls and hotels may not survive.

[May 22, 2020] Is This Controlled Demolition all over Again, by Gilad Atzmon

Notable quotes:
"... This whole crisis is all about recapitalization or restructuring the debt. The Fed is bailing out the creditors (Big Surprise!) and forcing corporate America through bankruptcy. ..."
May 22, 2020 | www.unz.com

paranoid goy , says: Website Show Comment May 22, 2020 at 1:34 pm GMT

We understood ourselves as the means that make the rich richer.

Then came the latest wisdom: "Money makes money." They have come to believe their own lies, and those lies are being subsidised by our taxes. The moment when "everything" will belong to One Account seems to be upon us. I expect foreclosures and bankruptcies amongst the non-investing classes. All shortfalls to be augmented by tax money. Next, we await Zion unveiling our new King. Once again, not one atom of deviation from the plan as laid out in the Protocols. it is of utter importance that we do not turn upon another. In that sense, I suggest more of Unz's readers start looking at Black people as possible comrades in this engagement, we are confronted by a common enemy, the one that taught us the "value" of racism in the first place. They have divided us, now they will conquer.
Or we can just stand together. If we refuse to fight, it will be us against Bill Gates' robots, and his microcephalic pilots are still too young to be drafted. This is, however, our last chance, I be thinking.
Been wondering some years now, why 'retailing' is such a popular investment, when nobody has no money left to buy stuff with. Now we know.

MrFoSquare , says: Show Comment May 22, 2020 at 1:45 pm GMT
Gilad, these are some thoughts I jotted down a few weeks ago.

This whole crisis is all about recapitalization or restructuring the debt. The Fed is bailing out the creditors (Big Surprise!) and forcing corporate America through bankruptcy. The Virus is being used as a pretext for forcing the economy into a kind of controlled depression (demolition) and debt restructuring. The Virus and China are being used as the fall guys for the collapse. In 2008-09 the Banks and WS were bailed out and not forced into bankruptcy. The Fed then reinflated and drove up asset prices along with more than doubling the debt from levels that were already overextended. In The Great Restructuring that's taking place now, the Money Boys are basically transferring the income and assets of Main Street to the Creditors as they deflate the debt and bail themselves out. The whole scam could more accurately be called "The Great Heist" or the Money Power's perverted or mammonic version of a Debt Jubilee.

[May 22, 2020] With 36 Million Newly Out of Work, Trump Says He s Willing to Let Boosted Unemployment Benefits Expire

Notable quotes:
"... Washington Post ..."
May 22, 2020 | www.commondreams.org

President Donald Trump told Republican senators during a private lunch Tuesday that he is willing to let expanded unemployment benefits expire at the end of July, a decision that would massively slash the incomes of tens of millions of people who have lost their jobs due to the Covid-19 crisis.

The Washington Post reported Tuesday that the president "privately expressed opposition to extending a weekly $600 boost in unemployment insurance for laid-off workers affected by the coronavirus pandemic, according to three officials familiar with his remarks."

House Democrats passed legislation last week that would extend the beefed-up unemployment benefits through January of 2021 as experts and government officials -- including Federal Reserve chair Jerome Powell -- warn the U.S. unemployment rate could soon reach 25%. The unemployment insurance boost under the CARES Act is set to expire on July 31, even as many people have yet to receive their first check.

"With nearly 1 in 5 Americans out of work, Donald Trump's plan is to cut off the boost to unemployment benefits and shower his wealthy buddies with more tax cuts," Sen. Ron Wyden (D-Ore.), one of the architects of the unemployment insurance expansion, told HuffPost . "This is the worst economic crisis in 100 years and Donald Trump is doubling down on Herbert Hoover's economic playbook and pushing workers to risk their health for his political benefit."

Sen. Lindsey Graham (R-S.C.) -- who declared earlier this month that Congress will only extend the boosted unemployment insurance "over our dead bodies" -- said after the private lunch that Trump believes the benefits are "hurting the economic recovery." Graham was one of several Republican senators who opposed the initial expansion of unemployment benefits as too generous.

An analysis released last week by the Hamilton Project, an initiative of the Brookings Institution, found that expanded unemployment benefits offset "roughly half of lost wages and salaries in April." Unemployment insurance has "been essential to families, and is vital for keeping the economy from cratering further," the authors of the analysis noted.

Ernie Tedeschi, a former Treasury Department economist, estimated that "come July 31, if the emergency UI top-up isn't extended, unemployed workers will effectively get a pay cut of 50-75% overnight."

"It's increasingly looking like there won't be enough labor demand to hire them all back at that point," Tedeschi tweeted.

The latest Labor Department statistics showed that more than 36 million people in the U.S. have filed jobless claims since mid-March as mass layoffs continue in the absence of government action to keep workers on company payrolls. Despite the grim numbers, the Post 's Jeff Stein reported Tuesday that the White House is " predicting a swift economic recovery " as it resists additional efforts to provide relief to frontline workers and the unemployed.

On top of rejecting an extension of enhanced unemployment insurance, Trump last month publicly voiced opposition to another round of direct stimulus payments, instead advocating a cut to the tax that funds Social Security and Medicare.

[May 21, 2020] The Collapse Will Be Very Visible For Lease And Space Available Signs Are Going Up All Across America

May 21, 2020 | www.zerohedge.com

The Collapse Will Be Very Visible: "For Lease" And "Space Available" Signs Are Going Up All Across America by Tyler Durden Thu, 05/21/2020 - 14:50 Authored by Michael Snyder via TheMostImportantNews.com,

Initially, we were told that the coronavirus lockdowns would just "temporarily" disrupt the U.S. economy, but now it is becoming clear that a lot of the damage will be permanent.

We are starting to see businesses go belly up all over the country, and this includes some of the most iconic names in the retail world. When J.C. Penney announced that it would be declaring bankruptcy and closing hundreds of stores , I warned that would just be the tip of the iceberg , and that has definitely turned out to be the case. In fact, on Wednesday many analysts were absolutely shocked when news broke that Victoria's Secret has decided to shut down about 250 stores

Victoria's Secret plans to permanently close approximately 250 stores in the U.S. and Canada in 2020, its parent company L Brands announced Wednesday.

L Brands also plans to permanently close 50 Bath & Body Works stores in the U.S. and one in Canada, according to information the company posted online as part of its quarterly earnings.

If this pandemic had passed quickly, perhaps those stores wouldn't have needed to be shut down. But at this point it has become obvious that this virus is going to be with us for a long time to come. In fact, the WHO just announced that on a global basis we just witnessed the largest number of newly confirmed cases on a single day so far.

Another major retailer that is closing down stores is Pier 1 Imports. In fact, it is being reported that not a single one of their locations will survive

Pier 1 Imports, which previously said it would close half of its fleet of stores, now plans to close all of its locations.

The retailer, based in Fort Worth, Texas, announced in a news release Tuesday that it was seeking bankruptcy court approval to begin an "orderly wind-down" when stores are able to reopen "following the government-mandated closures during the COVID-19 pandemic."

I was never a huge fan of Pier 1 Imports, but my wife liked to visit and see what they had, but now we will never be able to do that again.

Something about that really saddens me.

Of course it isn't just retailers that are collapsing. Car rental giant Hertz "is on the verge of bankrutpcy" , and things are not looking good at all

Hertz is on the verge of bankruptcy. At the end of April, it disclosed it had missed a large amount of lease payments on its rental cars. Since then, it has entered into forbearance and waiver agreements with these lenders that give it until May 22 to come up with the money and a plan. Its cars, now parked at various parking lots around the country, are collateral for this debt.

Some of you old timers might remember the old Hertz commercials featuring O.J. Simpson . Those were much simpler times, and to be honest I really miss them.

Unfortunately, times have really changed, and I seriously doubt that Hertz will be able to survive much longer in this very harsh economic environment.

Needless to say, a lot of businesses are going to die in the weeks and months ahead of us. As I discussed the other day , it is now being projected that approximately one out of every four restaurants in the United States will be closing down permanently.

Can you imagine what this is going to look like?

We are going to have abandoned buildings all over the place, and this will especially be true in our more impoverished communities.

The only chance we have of pulling out of this economic death spiral is if there is a full scale return to normal economic activity all across America, but that isn't going to happen any time soon.

Fear of COVID-19 is going to paralyze small and big businesses alike for the foreseeable future, and every new outbreak is going to spark more overreactions.

For instance, Ford just shut down two major production facilities just a few days after "reopening" them

Just days after reopening its American assembly plants, Ford temporarily shut down two separate factories because employees tested positive for Covid-19.

One plant in Chicago that builds the Ford Explorer, the Lincoln Aviator and the Ford Interceptor police car stopped operations Tuesday afternoon after two employees tested positive for Covid-19. Then, Ford's plant in Dearborn Michigan that makes its bestselling F-150 pickup, shut down Wednesday.

If we keep shutting things down every time someone gets sick, our economic problems are just going to get worse and worse.

Look, the truth is that lots more people are going to get sick and lots more people are going to die. In fact, one new study has concluded that the U.S. death toll will more than triple by the end of 2020 "even if current social distancing habits continue for months on end"

A new study suggests the number of Americans who will die after contracting the novel coronavirus is likely to more than triple by the end of the year, even if current social distancing habits continue for months on end.

The study, conducted by the Comparative Health Outcomes, Policy and Economics Institute at the University of Washington's School of Pharmacy, found that 1.3 percent of those who show symptoms of COVID-19 die, an infection fatality rate that is 13 times higher than a bad influenza season.

Of course it certainly doesn't help that we continue to allow people from other countries where COVID-19 is raging to fly into the U.S. without any special screening whatsoever

A glamorous Russian blogger says she has proved that the US is open for foreign tourism again, despite the pandemic, according to video obtained by DailyMail.com .

Sofia Semyonova, 33, a fitness model, told how she traveled on a crammed Aeroflot flight with 500-plus passengers with 'no social distancing' from Moscow to New York City.

She used her B2 tourist visa to enter America from Russia's coronavirus epicentre 'in 30 seconds without any extra questions'.

I don't know how this could possibly be happening, but apparently it is.

Eventually, COVID-19 will literally be just about everywhere, and almost everyone in the entire country will be exposed to it.

And fear of this virus will paralyze our economy for the foreseeable future.

So the truth is that the "for lease" and "space available" signs that you are now seeing are just the start.

A lot more are coming, and it is going to be a very dark chapter for our nation.

[May 20, 2020] Due to Coronavirus the Grim Reaper was deprived of his seasonally adjusted mortality quota missing 21K in 12 weeks by David Stockman

Highly recommended!
Apr 28, 2020 | ronpaulinstitute.org

According to the CDC's long established mortality models, 687,000 Americans were supposed to die during the 12 weeks between February 1 and April 18.

But only 666,000 actually complied. So the Grim Reaper was deprived of his seasonally adjusted mortality quota, even as 21,000 families were spared, at least temporarily, of the loss and grief which accompanies the passing of a loved one.

Either way, how in the hell does that square with Lockdown Nation -- an unprecedented government ordered economic heart attack purportedly designed to prevent a Black Plague of illness and death?

To be sure, a better than garden variety recession was already due after a record 129- month long business expansion. But it was the sudden, virulent eruption of the Covid Death Hysteria in the halls of government that turned a scheduled business cycle contraction into a monumental catastrophe.

[May 19, 2020] If the American Dream is alive and well, why would MSM need to repeat it again and again?

Notable quotes:
"... 1978 was the last year real wages showed significant growth in real terms in the USA. After that, came the great stagnation of the neoliberal era (1978-2008), 30 consecutive years of frozen earns for the American working classes. This era is not marked by a slow down in consumption, though. On the contrary: consumption continued to rise, but, this time, it was mainly debt-fueled. Americans wages stagnated, but they didn't want to give up their hyperconsumption privileges, so they contracted debt after debt. ..."
"... As the timeline shows, it is a myth neoliberalism begun in the USA only with Reagan's election in 1980. Most neoliberal reforms begun during Jimmy Carter's second half of his lonely term (1978-1980). It was Jimmy Carter, for example, who hired (nominated) Paul Volcker to the Fed. Other essential Acts that paved the way to neoliberalism were also passed during Jimmy Carter's later part of the reign. ..."
"... I heard some politician suggest that while many of the jobs will never come back that people can learn to code. We need drug testing for our politicians. I 'code' and I'm wetting my pants. It's not because I think that it's so easy I an be easily replaced but but we still need demand. If everyone is losing their jobs ... terrifies me. ..."
May 19, 2020 | www.moonofalabama.org
If it were true why would they need to repeat it again and again?

vk , May 19 2020 13:22 utc | 21

If it were true why would they need to repeat it again and again? The American Dream died in 1969 - the last year of the post-war miracle in the USA. For the following five years, the country continued to flourish, but at a clear slower pace. With the oil crisis of 1974-5, the American Dream definitely died, albeit some indicators (e.g. real wages) still showed some improvements.

1978 was the last year real wages showed significant growth in real terms in the USA. After that, came the great stagnation of the neoliberal era (1978-2008), 30 consecutive years of frozen earns for the American working classes. This era is not marked by a slow down in consumption, though. On the contrary: consumption continued to rise, but, this time, it was mainly debt-fueled. Americans wages stagnated, but they didn't want to give up their hyperconsumption privileges, so they contracted debt after debt.

As the timeline shows, it is a myth neoliberalism begun in the USA only with Reagan's election in 1980. Most neoliberal reforms begun during Jimmy Carter's second half of his lonely term (1978-1980). It was Jimmy Carter, for example, who hired (nominated) Paul Volcker to the Fed. Other essential Acts that paved the way to neoliberalism were also passed during Jimmy Carter's later part of the reign.


Jen , May 19 2020 10:58 utc | 6

Not only does the headline "The American Dream is Alive and Well" need to be repeated ad nauseam but also the narrative it promotes, of the immigrant family that succeeds through sheer hard work and dedication and nothing else - no help from government subsidies or relatives already in the country, no dependence on bank loans that help start a business or put teenagers through college, no discrimination whatsoever - has to be hammered constantly over and over, even when everyone can see that the story template no longer has any legs if it ever had any.

For all the sophisticated techniques and tools of propaganda that the likes of Edward Bernays and his followers in the PR industry bequeathed to the US, the elites and their mass media lackeys can't even get the repetition to look and sound more than banal and one-dimensional.

William Gruff , May 19 2020 12:58 utc | 18
Jen @6: "For all the sophisticated techniques and tools of propaganda that the likes of Edward Bernays and his followers in the PR industry bequeathed to the US, the elites and their mass media lackeys can't even get the repetition to look and sound more than banal and one-dimensional."

Nice observation that incompetence is pervasive even among the empire's most important servants. It must be asked, though, if better talent is really necessary? The propaganda and brainwashing may be ham fisted and blunt as a hammer, but it does seem to work nonetheless.

Anyway, the more sophisticated brainwashing is not in the infotainment field but rather in the supposedly pure entertainment domain. Redneck dynasties built upon the monster retail bonanza from selling duck lures, for example. Those implant "The American Dream" directly into the subconscious without the need for awkward capitalist ideological exposition, bypassing any potential bullshit filters that the typical media consumers might possess.

lizard , May 19 2020 12:56 utc | 17
I wonder what America would have become if sociopaths like Allen Dulles hadn't relocated to Nazi braintrust after WWII. maybe it was inevitable that we would become the 4th reich.

David Talbot's book The Devil's Chessboard should be required reading for all Americans.

William Gruff , May 19 2020 12:58 utc | 18
Jen @6: "For all the sophisticated techniques and tools of propaganda that the likes of Edward Bernays and his followers in the PR industry bequeathed to the US, the elites and their mass media lackeys can't even get the repetition to look and sound more than banal and one-dimensional."

Nice observation that incompetence is pervasive even among the empire's most important servants. It must be asked, though, if better talent is really necessary? The propaganda and brainwashing may be ham fisted and blunt as a hammer, but it does seem to work nonetheless.

Anyway, the more sophisticated brainwashing is not in the infotainment field but rather in the supposedly pure entertainment domain. Redneck dynasties built upon the monster retail bonanza from selling duck lures, for example. Those implant "The American Dream" directly into the subconscious without the need for awkward capitalist ideological exposition, bypassing any potential bullshit filters that the typical media consumers might possess.

Linda Amick , May 19 2020 12:59 utc | 19
We all know these main stream media outlets do little more than pump out propaganda to the ignorant masses who need someone to tell them what they want to hear.
Christian J Chuba , May 19 2020 13:01 utc | 20
May 2020, seriously???

Wow, those guys were phoning it in. 1. Their dreamland pieces were identical to the ones in 2015, 2. the bottom 20% who they claim either don't have it so bad or can easily improve their lot, have been gutted like a fish and left out to dry. Did people write these opinion pieces or robots, robots could easily replace their jobs, pity their jobs won't be automated but I really don't see why they couldn't be. Actually Neocons could be replaced by automatons.

Recent contributions, burger flippers => code slingers

I heard some politician suggest that while many of the jobs will never come back that people can learn to code. We need drug testing for our politicians. I 'code' and I'm wetting my pants. It's not because I think that it's so easy I an be easily replaced but but we still need demand. If everyone is losing their jobs ... terrifies me.

Richard Steven Hack , May 19 2020 12:02 utc | 15
As an aside that is nonetheless relevant, dealing as it does with issues of the responsibility that banks have for the mess in this world, I recommend watching the TV series, "Devils", described here on Wikipedia:

Devils (TV series)
https://tinyurl.com/yb8cbwsq


Plot

London, 2011. The Italian Massimo Ruggero is the head of trading at the banking giant American New York - London Bank (NYL). While the financial crisis is raging across Europe, Massimo is making hundreds of millions thanks to speculation. His mentor is Dominic Morgan, the American CEO of NYL and the closest thing to a father Massimo has ever had. He fully supports it, the talented trader seems to be the first choice in the run for vice-CEO. But when Massimo is unwillingly involved in a scandal that sees his ex-wife implicated as an escort, Dominic denies him the promotion, instead choosing the old school banker Edward Stuart.

Massimo is amazed: his father turns his back on him. Convinced that he has been set up, Massimo is determined to bring out the truth, but when Edward suddenly dies, Massimo realizes that something bigger is at stake. With the help of his team and a group of hackers, Massimo will discover the plot hidden behind apparently unrelated events such as the Strauss-Kahn scandal, the war in Libya and the PIIGS crisis. Finding himself in front of the Devils who pull the ropes of the world, Massimo will have to choose whether to fight them or join them.

The series is well-written and well-acted. If you have access to it (I get it off the Internet, but it does not appear to be available in the US market yet), it's well worth watching. It is in some ways better than "Deep State", the spy series that was on a season or two ago. It has already been renewed for a second season.

[May 19, 2020] Accoding to sharo goverment statisitcs site, since GHW Bush's recession, the real economy of the US Empire's shrunk

May 19, 2020 | www.moonofalabama.org

karlof1 , May 18 2020 17:29 utc | 39

I suggest you read this Atlantic article , "We Are Living in a Failed State: The coronavirus didn't break America. It revealed what was already broken."

And either before or during, take a gander at this Real GDP graph that still understates the genuine amount of GDP shrinkage since parasitic financial "gains" are added to GDP instead of subtracted as a cost to the real economy.

Essentially since GHW Bush's recession, the real economy of the Outlaw US Empire's shrunk about 1.5% annually or @45% overall with the vast majority of economic gains accruing to the top 10%. That grim reality is the #1 reason why Trump won in 2016, and why he stands a very good chance of losing in 2020--"It's the economy, stupid."

[May 18, 2020] Donald Trump says Americans won't stand for stay-at-home orders anymore

May 18, 2020 | www.washingtontimes.com

me name=

President Trump said Wednesday the coronavirus crisis is worse than the 9/11 terrorist attacks, and Americans won't allow it to go on any longer.

"I don't think people will stand for it," Mr. Trump told reporters in the Oval Office. "The country won't stand for it. It's not sustainable."

He said the pandemic "is worse than Pearl Harbor."

...Asked about soaring unemployment being a potential liability for him in an election year, the president replied, "Nobody's blaming me for that. I built the greatest economy and I'm going to rebuild it again. This was an artificially induced unemployment."

[May 17, 2020] US Coronavirus Bailout Scam is $6 Trillion Giveaway to Wall Street by Michael Hudson

May 17, 2020 | www.unz.com

US Coronavirus "Bailout" Scam Is $6 Trillion Giveaway to Wall Street Michael Hudson April 21, 2020 6,800 Words 73 Comments Reply

Facing the Covid-19 pandemic, the US Congress rammed through the CARES Act -- which economist Michael Hudson explains is not a "bailout" but a massive, $6 trillion giveaway to Wall Street, banks, large corporations, and stockholders.

Max Blumenthal and Ben Norton discuss the enormous financial scam with Hudson, who reveals how the economy actually works, with the Federal Reserve printing money so rich elites don't lose their investments.

Michael Hudson's website: michael-hudson.com

Michael Hudson, " A debt jubilee is the only way to avoid a depression ," The Washington Post, March 21, 2020

https://www.youtube.com/embed/N-8m5fBbLgQ?feature=oembed

Transcript

(Teaser – 0:03)

MICHAEL HUDSON: Just think of when, in the debates with Bernie Sanders during the spring, Biden and Klobuchar kept saying, 'What we're paying for Medicare-for-All will be $1 trillion over 10 years.' Well, here the Fed can create $1.5 trillion in one week just to buy stocks.

Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it's not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea is that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose -- not for medicine, not for schools, not for personal budgets, not for full employment -- but only to give to the 1 percent.

People hesitate to think that. They think, 'It can't possibly be this bad.' But for those of us who have worked on Wall Street, for 60 years in my case, that's what the numbers show.

But you don't have the media talking about actual numbers. They talk about just words, and they use euphemisms. It's a kind of Orwellian vocabulary, describing an inside-out world.

(Intro – 1:58)

BEN NORTON: The world is suffering right now from one of the worst economic crises in modern history. Definitely the worst crisis since the 2008 financial crash. And many economics experts are saying that we're living through the worst recession actually since the Great Depression of 1929.

Well joining us to discuss this today, we have one of the best contemporary economists, who is really well prepared to explain what has been going on in this global recession during the coronavirus pandemic. And specifically today we're gonna talk about the $6 trillion bailout package that the US Congress has passed.

The Trump administration is basically taking Obama's corporate bailout on steroids, and injecting trillions of dollars into the corporate sector. And today to discuss what exactly the coronavirus bailout means, we are joined by the economist Michael Hudson.

He is the author of many books. And in the second part of this episode we're gonna talk about his book Super Imperialism: The Economic Strategy of American Empire . So that'll be much more in the vein of kind of traditional Moderate Rebels episodes, where we talk about imperialism, US foreign policy, and all of that.

Michael Hudson is also a former Wall Street financial analyst, so he's very well prepared to talk about the financial thievery that goes on on Wall Street. And he is a distinguished research professor of economics at the University of Missouri, Kansas City.

So Michael, let's just get started here. Can you respond to this global depression that we're living through right now amid the Covid-19 pandemic? And what do you think about this new bailout that was passed?

(3:50)

MICHAEL HUDSON: Well the word bailout, as you just pointed out, really was used by Obama and only applies to the banks. The word coronavirus is just put in as an advertising slogan.

Banks and corporations, airlines, have a whole wish list that they had their lawyers and lobbyists prepare for just such an opportunity. And when the opportunity comes up -- whether it's 9/11 with the Patriot Act, or whether it's today's coronavirus -- they just pasted the word coronavirus onto an act, which should be called a giveaway to the big banking sector.

Let's talk about who's not bailed out. Who's not bailed out are the small business owners, the restaurants, the companies that you walk down the street in New York or other cities, and they're all shuttered with closed signs. Their rent is accumulating, month after month.

Restaurants, gyms and stores are small-markup businesses, small-margin businesses, where, once you have no sales for maybe three months and rent accruing for three months, they're not going to have enough money to earn the profits to pay the rents that have mounted up for the last three months.

The other people that are not being bailed out are the workers -- especially the people they call the prime necessary workers, which is their euphemism for minimum-wage workers without any job security. There have been huge layoffs of minimum-wage labor, manual labor, all sorts of labor.

They're not getting income, but their rents are accruing. And their utility bills are accruing. Their student loans are accruing. And their credit card debts are mounting up at interest and penalty rates, which are even larger than the interest rates. So all of these debts are accruing.

The real explosion is going to come in three months, when all of a sudden, this money falls due. The governor of New York has said, "Well we have a moratorium on actually evicting people for three months." So there are restaurants and other people, individuals, wage-earners, who are going to be able to live in their apartments and not be evicted. But at the end of three months, that's when the eviction notices are going to come. And people are going to decide, is it worth it?

Well, especially restaurants are going to decide. And they're going to say, "There is no way that we can make the money to pay, because we haven't had the income to pay." They're going to go out of business. They're not going to be helped.

The similar type of giveaway occurred after 9/11. I had a house for 20 years in Tribeca, one block from the World Trade Center. The money was given by the government to the landlords but not to the small businesses that rented there -- the Xerox shops and the other things. The landlords took all of the ostensible rent loss for themselves, and still tried to charge rent to the xerox shops, the food shops, and ended up collecting twice, and driving them out.

So you're having the pretense of a bailout, but the bailout really is an Obama-style bailout. It goes to the banks; it goes to those companies that have drawn up wish lists by their lobbyists, such as the airlines, Boeing and the large banks.

The banks and the real estate interests are going to be the biggest gainers. They have changed the real estate law so that the real estate owners, for a generation, will be income tax free. They are allowed to charge depreciation, and have other fast write-offs to pretend that their real estate is losing value, regardless of whether it's going up and up in value.

Donald Trump says that he loves depreciation, because he can claim that he's losing money, and gets a tax write-off, even while his property prices go up.

So there's a lot of small print. The devil is in the small print of the giveaway. And then President Trump has his own half-a-trillion-dollar slush fund that he says he doesn't have to inform a Congress or be subject to any Freedom of Information law. He gets to give to his backers in the Republican States.

And states and municipalities are left broke. Imagine New York City and other states. Most states and cities, have balanced budget constitutional restrictions. That means they're not allowed to run a deficit.

Now if these states and cities have to pay unemployment insurance, and have to pay carrying charges on the schools and public services, but are not getting the sales taxes, not getting the income taxes, from the restaurants and all the businesses that are closed, or from the workers that are laid off, they're going to be left with a huge deficit.

Nothing is done about that. There has been no attempt to save them. So three months from now, you're going to have broke states, broke municipalities, labor that cannot, whose savings was wiped out.

As I'm sure you've reported on your show, the Federal Reserve says that half of Americans do not have $400 for emergency saving. Well now they're going to be running up thousands of dollars of rent and monthly bills.

So the disaster is about to hit. They will not be bailed out. But no major investor, really will lose. You've seen last week, the stock market made the largest jump since the depression -- the largest jump in in 90 years. And that's because Trump says, "The economy is the stock market, and the stock market is the One Percent."

So from the very beginning, his point of reference for the market and for the economy is the One Percent. The 99 Percent are simply overhead. Industry is an overhead. Agriculture is an overhead. And labor is an overhead, to what really is a financialized economy that is writing the whole bailout.

It's not a bailout -- it's a huge giveaway that makes them richer than they ever were before.

(10:48)

BEN NORTON: Yeah and Michael, related to that -- you mentioned that fine print is important. But I also have a kind of bigger question. And I don't really know where exactly these numbers come from.

Officially the bailout is $2 trillion. Many media outlets reported it as effectively $4 trillion. But actually, according to Larry Kudlow -- who is the director of the US National Economic Council, he's the Trump administration's kind of chief economist -- Larry Kudlow is now saying that it's actually $6 trillion in total, which is a quarter of all of US GDP.

And that includes $4 trillion in lending power for the Federal Reserve, as well as $2 trillion in the aid package.

So there is discussion of this aid package, but actually the aid package of $2 trillion is actually half the size of the $4 trillion that is given to the Federal Reserve.

What exactly is that $4 trillion that the Federal Reserve has? Is this some kind of slush fund, or how does it work?

(11:52)

MICHAEL HUDSON: No, the Federal Reserve was given special powers to create 10 times as many loans or swaps as others. The Federal Reserve represents the commercial banks and commercial investors.

Now here's the problem: a lot of companies were issuing junk bonds. They were going way down in price, especially junk bonds for the fracking industry. The Federal Reserve says, "We're going to be backed up by the Treasury. We can just create -- as you know, Modern Monetary Theory -- we can just create money on a computer, and swap. So we will, say, 'Give us your poor.' It's like the Statue of Liberty: 'Give us your poor, your oppressed,' or Aladdin's old lamps for new: Give us your junk bonds, and we will give you a bona fide Federal Reserve deposit."

So the Federal Reserve has been pumping trillions and trillions of dollars into the stock market. That's what's been pushing up the stock market, the Federal Reserve. The bailout has gone to the stock market. As if the stock market got coronavirus! Stocks don't get coronavirus! They don't get sick on the virus! And yet it's the stock market that's going up through the Federal Reserve.

There's also another $2 trillion dollars, $2 to $4 trillion that the US government has, over and above the $2 trillion that's going to the people. So most of the calculations that have been published cite it as a $10 trillion bailout. Of which the newspapers, to avoid embarrassing Mr. Trump, only refer to the money given to the the wage earners. And they're sort of embarrassed that the vast majority are given to the financial sector that doesn't need a bailout, but that doesn't want to lose a single penny from the virus.

So when you see the stock market recovered almost to what it was before the virus, while the economy is going down, you realize, wait a minute they're saving the 1 percent, or the 10 percent of the population that own 85 percent of the stocks and bonds. They're saving the banks. They're not saving the people, and they're not saving the economy; they're not saving industry; and they're not saving small businesses.

So it's an amazing hypocrisy that the mainstream press is not discussing, which is why your show is so important.

(14:29)

MAX BLUMENTHAL: Yeah and here in Washington, DC, we got I think $500 million from the, I guess what you accurately describe as the stock market bailout. And that's a lot less than a number of red states that are less populous than Washington, DC got. So there's a massive shafting here.

And then the city has only been able to provide for certain parts of the economy. Undocumented immigrants, who do a lot of work here, got nothing from the city. Vendors, which are a big part of the informal economy in DC, even though they have to be regulated, got nothing.

And then you mention all of these sectors of the economy -- young people, college-educated young people who are deep in debt, and therefore less inclined to spend -- are getting shafted here.

So you have called for a solution -- well I guess, knowing so many of those people, they contribute so little to the economy because they can't; they're just putting all their money into debt. So you have called for a debt jubilee.

You say that debts that can't be paid won't be, and this is the best way out.

Maybe you can explain to our viewers and listeners what that is and why it would be the best remedy?

(15:42)

MICHAEL HUDSON: Well here's what happens if you don't write down the debts that are just going to accrue in the next three months: If you don't say, "The rents will not have to be paid, and workers will not have to pay the debts that mount up," if you leave those debts on the books, and you make the workers liable to keep paying the student debts, and the other debts, and the mortgage debts, and the rents, then they're not going to have any money left to buy goods and services.

When it's all over, they're going to get their paychecks, and off the top is going to be the wage withholding, and the tax withholding, and the Medicare, and if they don't want to get kicked out of their houses, they're going to have to pay all of this money that's accrued while they're not making an income.

So you're going to have a shrinkage of the economy, a vast shrinkage. How can they afford to buy anything but the most basic necessities, the cheapest food, the necessary transport? Obviously they're not going to buy the kinds of goods and services that are supposed to be part of the circular flow.

Economics textbooks say employers pay the workers so the workers can have enough money to buy what they produce. But the workers don't spend their income only on what they produce. They spend most of their income on rent, on debt service, on taxes, on finance, insurance, and real estate. And this is the only part of the economy that is being enabled to survive.

So how can you have the superstructure of rents and debts, of insurance charges, on an economy that doesn't have the income to buy goods and services? And if they can't buy goods and services, you're going to have the stores closing down, because people can't afford to buy what the stores are selling.

You're going to have a whole wave of closures. And you're going to go down the streets, and certainly in cities like New York, or where I live in Queens, just outside of Manhattan, where block after block, they're going to be "For rent" signs. It's going to be empty.

And the only way to avoid that is for a debt write-down.

Now you've had this occurring for 5,000 years. I'll give you an example that may be easy to understand.

In Babylonia, we have the Laws of Hammurabi, in 1800 BC. One of the laws says that when you would buy beer or other things, they would write it on a tab in the bar, in the ale house, and all the debts were owed when the harvest was in. You'd pay the debt seasonally.

Well Hammurabi said, if there's a drought, or if there's a flood, then you don't have to pay the debts. Most debts were owed to the palace, and others.

The implied policy is that, "The reason we're doing this is, if we don't do that, then you're going to have these debtors become debt servants, bond servants to the creditors; they're going to owe their labor to the creditors; they're going to lose their land to the creditors; and they won't be able to work on public infrastructure projects; they won't work for Babylonia; they won't serve in the army, and we can be invaded; and they won't be able to use their crops as taxes, because they'll owe the crops as debts. So we're going to write it down."

So the whole idea for thousands of years, of every Near Eastern ruler starting his reign by writing down the debts, was to begin everything in balance.

Because they realized, just mathematically, debts grow at compound interest. You've seen the coronavirus increase at an exponential rate. That's how debts accumulate interest, at an exponential rate.

But the economy grows in an S-curve, and then it tapers off. The American economy, the GDP since the Obama bailouts of 2008, the entire growth of the GDP has only accrued to 5 percent of the population. 95 percent of the GDP. But the population for 95 percent, the industry and agriculture, that's actually gone down.

So we're already in a 12-year depression, the Obama depression, that they like to call a recession, because most of the media are Democratic Party people.

But you're going to have this recession turn into a genuine depression, and it will continue until the public debt, that is state and local debts, are written down; the mortgage debts written down; and the personal debts written down, starting with the student loans, the most obviously unpayable debt.

And the choice is, do you want to depression, or do you want the banks to be able to collect all the economic surplus for themselves? Well Donald Trump, supported unanimously by the Democratic Congress, says, "We want to protect the banks, not the population, not the economy. Let the economy shrink, as long as our constituents, the donor class, are able to avoid making a loss. Let's make the loss borne by the 99 percent, not our donor class."

(21:17)

BEN NORTON: Yeah, and Michael, you mentioned something, getting back to the Federal Reserve and understanding how this whole system works. I mean frankly it seems to me to kind of be a house of cards.

But you mentioned this idea of Modern Monetary Theory and just kind of creating money out of nothing. Can you talk more about that? You know this is a term that's become more prominent, especially on the left: MMT, modern monetary theory.

There are socialists who argue in support of MMT and then there are others who are kind of skeptical of the whole notion that you can just print all this money to fund these social programs that you want to create, and that it won't create inflation.

But at the same time, you and other people point out that that's exactly how the economy already works. Where for instance, you want to fund a war, there's never -- you know frequently when someone on the left asks for universal health care or free public education, members not only of the Republican Party but many neoliberal Democrats often say, "Well yeah, where are you gonna get the money from?" And the response of some of the MMT supporters is, "Well we just fund the program, and we just create the money because we control the creation of the dollar."

And we see that same attitude used actually by the Federal Reserve right now, but to bail out Wall Street. "Yeah we're just gonna print" -- they printed $1.5 trillion, and then just gave it, they just injected it right into Wall Street.

So does that not create inflation, or what exactly is happening economically there? I mean to me, it seems like a scam; it seems like totally a scam.

(22:59)

MICHAEL HUDSON: Since 2008, you have had the greatest inflation of money in history. And you have also had the greatest inflation in history, but it's entirely asset price inflation.

You're absolutely right: the money has gone into the stock market and the bond market, to support bond prices, meaning you've had the biggest bond boom in history. You've had a huge stock market boom. But consumer prices have gone down. So here you have an enormous amount of money creation, and consumer prices and real wages have been drifting down.

So they are really two economies. The question is, are you going to create money for public purposes by spending it into the economy, on industry, agriculture, and the goods and service production and consumption economy Or, are you going to put it into the financial economy?

Well the whole way of our banking system is that banks create credit. If you go into a bank and you take out a loan, you say, I'm gonna borrow $5,000 for something. The banker doesn't go and say, let me see if we have any money to loan you; he says, okay I will write a loan on my computer. I will credit your deposit with $5,000, and you will sign this IOU, and we have an asset. And the asset is $5000, on which we're going to charge interest on what we pay you.

So it's just done by computer, on a balance sheet. And as long as money is created on a computer, the only cost is the electricity used to make that debt record.

Now the banks, when they make loans, 80 percent are against real estate. So they say, in case you can't pay, you're pledging your real estate – the home you're buying, or the commercial building you're buying, as collateral. So we'll lend you up to 80 percent, maybe 100 percent, of the value of what you're buying, and that's the collateral we have.

So they lend against collateral. Well, if you lend the money against collateral to buy a building, or to buy stocks and bonds, which are the other collateral, then obviously this money you're creating to buy houses, or commercial real estate, or stocks and bonds are going to bid the price up.

Banks don't give loans for people who say, I want to go shopping and buy more goods because I need the money. That may be a little bit, that's what credit cards are for, but that's a small portion of the overall money supply. So banks don't make loans to buy goods and services; they make loans to buy assets that obviously inflate the price of assets.

And the more money that you pay for houses that are rising in price, or medical insurance, or stocks and bonds, to make a retirement income for your pension fund; the more money you pay for houses that are inflating in price because of bank credit, the less money you have to buy goods and services.

So actually, the more money they create, the more consumer prices for goods and services fall. It's the exact opposite of the usual theory.

On my website I have many articles about that, and I have something today in Counterpunch on that. It's on how the economy works the opposite of the way the textbook says.

Now unfortunately the left-wing doesn't really study finance and money much. The discussion of finance and money has been monopolized by the right-wing, so left-wingers think, they don't realize that they're picking up a kind of junk theory of monetary relations and debt relations that's all picked up from the right-wing of the political spectrum.

It's a kind of parallel universe. That's not how the economy really works, but in a way that sort of is easy to understand. And it's very easy to make an erroneous, oversimplified view of the world easy to understand.

And when it's repeated again and again and again, in the media, the New York Times and MSNBC, people really think that, well, maybe that's how the world works -- more money is going to push up prices, so we better not push for it, we better go along with trickle-down theory.

And most of the left believes in trickle-down theory. The Democratic Party leadership is absolutely convinced, if you just give enough money to the top 1 percent, or 5 percent, or Wall Street, it'll all trickle down.

(27:49)

BEN NORTON: Well of course the Democratic Party is not the left.

MICHAEL HUDSON: That's right, but it pretends to be. And it has crowded out the left. You can see in the recent election primaries that its job is to protect the Republican Party from any critique by the left, interjecting itself in between the Republican Party and any possible reform movement.

BEN NORTON: Exactly.

(28:20)

MAX BLUMENTHAL: Well they stood up really strongly against the bailout -- I mean what was it, 96 to nothing? And in the voice vote, I was listening to the voice vote last night in the House; I didn't hear AOC's voice against it.

MICHAEL HUDSON: They did a voice so that everybody could say, "Oh it wasn't me!"

MAX BLUMENTHAL: No, no! So you mentioned that foreclosure king Steve Mnnuchin gets like a $500 billion slush fund. I haven't heard much discussion about that. What will he do with this sort of opaque slush fund, and how will this -- I mean it's a leading question, but how will this kind of reinforce or consolidate inequality for the next generation?

(29:10)

MICHAEL HUDSON: Well gee, I hope he gives some of it to Kamala Harris, who was the attorney general who let him do all of this, and who thoroughly backed him and led the foreclosure, was the iron fist behind his foreclosure program. So I'm sure he'll press for Kamala to be the vice president on the ticket.

The Democrats have a problem. How can they guarantee that they have their candidate win? Their candidate is Donald Trump. How can they make sure that they have such a weak candidate that he's sure to lose to Donald Trump? And the choice is, we'll get a vice president that's so unpopular that they're sure to lose.

Now it's a race between Kamala Harris and the Minnesota lady.

MAX BLUMENTHAL: Klobuchar? The one who throws staplers at her staff. She seems very charming.

MICHAEL HUDSON: Uh, I don't know about that. But my wife can't even look at her on television. But I think that the pretense is that she'll help get Minnesota, as if Minnesotans, where I'm from, are so dumb just to vote for somebody from there. But by getting Minnesota, they'll lose the whole rest of the country.

So I think she'll be the vice president, because that guarantees a Trump victory. And that will enable the Democrats to say, here -- they'll have the president they want, that is for their donor class, but they can say, "That's not us; that's the Republicans." So that's the Democratic strategy.

MAX BLUMENTHAL: Right, then they can raise loads of money for the "Resistance," and all of the outside think tanks. And that was the old Republican, William F. Buckley strategy, is we're better throwing rocks outside the building and raising a ton of money for the National Review than actually having to govern. And that seems like the Democratic strategy.

But I guess I was asking about how you see the economy transforming, because the Obama bailout sort of transformed it or consolidated the gig economy, where everyone has to work three to five jobs, and what was supposed to be a highly educated middle class is deeply in debt.

Where do you see it after this next tranche of stock market bailouts?

(31:29)

MICHAEL HUDSON: Ok, let's look at three months from now. Smaller companies are going to be squeezed, because all of their expenses are going to go up. Small companies have had to run up debts, and they have all sorts of other problems, and their earnings, their prospective profits, are not going to look that good. Because there's not going to be a market for the things that they sell, because of the debt deflation that I talked about.

So what's going to happen? You're going to have a bonanza for private equity capital. The liquid, the 1 percent that have access to bank credit and have their own equity capital are going to come in and pick up a lot of real estate that's going to be defaulted on -- just like they did after Obama evicted his constituency, the mob with pitchforks, and evicted them.

Blackstone will pick up more real estate. Big companies are going to pick up small companies. You're going to emerge with a highly monopolized economy, much more centralized.

The important thing to realize about free-market economics and libertarianism, is libertarians advocate central planning, The Chicago School of monetarists advocate central planning; the free marketers want central planning. But the banks are to be the planners, not the government. They want to exclude the government from planning, except to the extent that they can take over the government, as Trump has done, and plan all of the income to be transferred to themselves from the rest of the economy.

So we're going to have a much more centrally planned by a coalition of monopolies and the government. In the 1930s, that was called fascism.

MAX BLUMENTHAL: It's what we call a "public-private partnership" or something.

MICHAEL HUDSON: Right.

MAX BLUMENTHAL: Just really quickly, and maybe we can kind of transition after this, but you mentioned Blackstone. I think this is one of the key components of the bailout. They own so much stake in so many of the companies getting bailed out. Can you just describe their role and what they are?

(33:38)

MICHAEL HUDSON: It's appropriate that they were put in charge of bailout. So if they're the largest company buying up defaulted real estate and buying, picking up the weak -- it's called moving assets from the weak hands to the strong -- then they might as well be put in charge, because they're going to be the company doing all the grabbing. So of course they're in charge of it.

It's called grabitization. That was the Russian word for privatization in the 1990s. So grabitization is I think a better word than public-private partnership. It's not really a partner; it's sort of a one-way partnership; there's one subsidiary partner. It's really financialization and grabitization.

MAX BLUMENTHAL: Right, just the looting of state assets.

BEN NORTON: Going back one step here, Michael, you were talking about the way that people should think about how the economy actually works. And I mentioned MMT. Can you kind of just walk through that again? Because you were talking about how actually, when the Fed creates -- I mean really to me, as someone, I'm definitely not an economics expert, I just don't understand really how this whole process works, because to me it just seems simply like, they're literally just creating money and just giving it to banks, and corporate elites, and rich people.

I mean maybe that's what it is. But I don't understand, this is like the biggest scheme I can imagine, where the Federal Reserve is creating all of this money, printing -- they're physically printing money is my understanding. And then they're just giving it to these banks, to bondholders. And then, but you said that what does is, instead of actually creating inflation, all that does is, if I understood correctly, it boosts the value of assets like real estate, while at the same time deflating wages and commodity prices.

So if that's the case, then how should people who are advocating for socialized programs like Medicare for All, free public education, and maternity leave, and childcare, and all of these programs that the Bernie Sanders campaign and movement have been advocating for, how should we talk about the way to pay for all of those programs, if the reality of the economy is that the Fed is printing trillions of dollars, and then just giving that cash to banks?

(36:11)

MICHAEL HUDSON: Well I think the reason you're having trouble understanding MMT is because what you described is what's happening, but you think, "But that's unfair!" And there's a tendency to think, if it's unfair --

MAX BLUMENTHAL: It's not just unfair. It's the biggest scheme I can imagine. There's no other word other than just a con scheme.

MICHAEL HUDSON: Yes, and the brain recoils from thinking, "Can the government really be doing that to us?" Well, yes it can.

And just think of when, in the debates with Bernie Sanders during the spring, Biden, and Klobuchar keep saying, 'What we're paying for Medicare-for-All will be $1 trillion over 10 years.' Well here the Fed can create $1.5 trillion in one week just to buy stocks.

Why is it okay for the Fed to create $1.5 trillion to buy stocks to prevent rich people from losing on their stocks, when it's not okay to print only $1 trillion to pay for free Medicare for the entire population? This is crazy!

The idea that only the rich should be allowed to print money for themselves, but the government should not be allowed to print money for any public purpose, any social purpose -- not for medicine, not for schools, not for personal budgets, not for full employment -- but only to give to the 1 percent.

People hesitate to think that. They think, 'It can't possibly be this bad.' But for those of us who have worked on Wall Street, for 60 years in my case, that's what the numbers show.

But you don't have the media talking about actual numbers. They talk about just words, and they use euphemisms. It's a kind of Orwellian vocabulary, describing an inside-out world that they're talking about.

They will buy stock; they'll say we're going to buy a million shares of Boeing; they'll just write a check, and the check will be from the Federal Reserve, and Boeing will get the money. The Federal Reserve can create a deposit, just like a banker will write you a loan when you go in and borrow. It's done on a computer – without levying taxes. The Fed can do the same thing.

Stephanie Kelton, my department chairman for many years at the University of Missouri at Kansas City, describes this. The University of Missouri's website, New Economic Perspectives has a description of it. So if people want to google either her, UMKC, or what I've written, or Randall Wray at the Levy Institute, you'll get walked through.

If you're not already thinking in terms of balance sheets, which most people don't, you have to sort of just read it again and again, and then all of a sudden, "Ah, now I get. It's a ripoff! It's created out of nothing. Now I get it."

BEN NORTON: It's just a house of cards. To me it proves the kind -- there used to be this kind of very blunt orthodox Marxist view that the economy strictly follows politics, and it seems to me this is a case where the economy is just created by politics.

MICHAEL HUDSON: That's true, and that's not an un-Marxist position. Marx did distinguish between oligarchies and democracies, and finance capitalist economies and industrial capitalist economies.

MAX BLUMENTHAL: Right. And the $17 billion for "urgent national security measures" was straight into the pockets of Boeing, which had its 737 maxes falling out of the sky, and had been clamoring for this bailout for a long time.

I mean you saw 3M, the maker of these masks which are suddenly unavailable, gained a total exemption from lawsuits, if the masks that it mass-produced now somehow failed.

So all of these things stuffed into the bailout were what industry and finance had been clamoring for for years. And they finally had the opportunity to do it.

(Outro – 40:38)

BEN NORTON: All right, we're gonna take a pause there. That was the end of part one of our interview here with the economist Michael Hudson. He is a Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri Kansas City, and of course the author of many books on economics.

You can find some of his work at michael-hudson.com . We will link to that in the show notes. He has interviews with transcripts and articles.

You can also find some of his economics work and the work of some of his like-minded colleagues at the economics department at the University of Missouri Kansas City website. I will link to that as well in the show notes. You can find the show notes at moderaterebels.com .

In part two of this episode, we're going to continue our discussion of the house of cards that is the international financial system, the economic system. And in the second part we're going to talk about his book "Super Imperialism: The Economic Strategy of American Empire."

This is an incredible book. You know here at Moderate Rebels, Max and I frequently talk about the political and military side of imperialism. Michael Hudson just spells out, in easy-to-understand terms, how imperialism works at an economic level, how the US government and the Treasury, through the backing of military force, force countries around the world to buy US bonds, Treasury bonds, and how there's basically just a con scheme where countries pay for their own US military occupation through buying US Treasury bonds.

Michael Hudson explains that all in really simple terms. And we also talk about the rise of China, and how China does pose a so-called threat, in scare quotes, to not the American people but rather to the hegemony of the US financial system -- and the main financial instruments, the weapons that the US uses to maintain that hegemony, the International Monetary Fund, the IMF, and the World Bank.

And Hudson describes how, in his terms, the IMF, and the World Bank, specifically, are some of the most evil institutions that are really maintaining the American dictatorial, authoritarian chokehold on the global financial system.

If you want to support this program, Moderate Rebels, and the kind of independent interviews we do like this, giving a platform to some of these voices who you're never going to hear in mainstream corporate media, you can go to Patreon.com/ModerateRebels . Please consider supporting us. And definitely join us in part. See you soon.

[May 17, 2020] Questions, questions: Was the COVID-19 epidemic used for the second bail-out of overleveraged financial sector, which was in troble already in September, 2019

May 17, 2020 | www.moonofalabama.org

jared , May 17 2020 17:54 utc | 16

Oh and seems increasingly evident that the response to the virus was planned and exaggerated in effort to distract from imminent financial collapse and provide cover for yet again another bank and government bailout. While the people cower in their hovels the bankers are popping champagne poolside on private refuges.

This effect is most notable in US maybe the erstwhile sole remaining "solvent" western nation - only because they own the printer for worlds currency.

[May 16, 2020] Reopening Isn't only about Reopening -- It's also about forcefully removing people from unemployment insurance by Peter Dorman

May 16, 2020 | www.nakedcapitalism.com

By Peter Dorman, professor of economics at The Evergreen State College. Originally published at Econospeak

Donald Trump, cheering on his "warriors" who demand that states lift their lockdown and distancing orders (where they have them), would have you believe this is about bringing the economy back to life so ordinary people can get their jobs and normal lives back. Elitist liberals who work from home and have country estates to retreat to don't care, but "real" people do.

The reality is different. The shuttering of stores, restaurants, hotels and workplaces didn't begin with government orders and won't end with them. If the rate of new infection and death is too high, a lot of people won't go along. Not everyone, but enough to make a huge economic difference. Ask any small business owner what it would mean for demand to drop by 25-50%. Lifting government orders won't magically restore the economic conditions of mid-winter. So what's it about? Even as it makes a big PR show of supporting state by state "liberation" in America, the Trump administration is advising state governments on how to remove workers from unemployment insurance once orders are lifted. Without government directives, employers can demand workers show up, and if they refuse they no longer qualify. And why might workers refuse? Perhaps because their workplaces are still unsafe and they have vulnerable family members they want to keep from getting infected? Not good enough -- once the state has been "liberated".

How should we respond to this travesty? First, of course, by telling the truth that an anti-worker, anti-human campaign is being conducted under the guise of defending workers. If the Democrats weren't themselves such a tool of business interests we might hear that narrative from them, but the rest of us are free to speak out and should start doing it, loudly, wherever we can.

Second, one of the laws of the land is the Occupational Safety and Health Act of 1970, which gives workers the right to refuse imminently hazardous work. This hasn't been used very often, nor is there much case law around it, but the current pandemic is a good reason to pull it out of storage.

If there are public interest law firms looking for something useful to do during distancing, they could advertise their willingness to defend workers who need to stay home until work is safe -- while still getting their paycheck. If employers thought the choice was between public support for workers sitting out the pandemic or their support for them we might hear less about "liberation".


none , May 14, 2020 at 10:30 am

They want to throw people off of unemployment while using the virus threat to stop any serious protests against that. It is literally biological warfare against working people. Same class war as before, but now with CBW.

Rod , May 14, 2020 at 10:47 am

Taught it for years. This is the biggest net and is the # 1 Cited Violation for 1910/1926 and MSHA–ever.

OSHA 654 5(a)1 The General Duty Clause.

OSHA Laws & Regulations OSH Act of 1970
OSH Act of 1970
Table of Contents
General Duty Clause
Complete OSH Act Version ("All-in-One")
SEC.
5.
Duties
(a)
Each employer --
(1)
29 USC 654
shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees;
(2)
shall comply with occupational safety and health standards promulgated under this Act.
(b)
Each employee shall comply with occupational safety and health standards and all rules, regulations, and orders issued pursuant to this Act which are applicable to his own actions and conduct.

And 'Recognized' totes a lot of water.

Rod , May 14, 2020 at 10:53 am

Quick Take –Two way street.
Employers mus t mitigate hazards. Employees must comply with mitigation.
No Employer Mitigation=Breaking the Law=No Employee requirement to work in Unsafe Conditions.

L , May 14, 2020 at 11:16 am

"Lifting all boats" was always a lie. It was simply a way to sell trickle down by claiming that the objectively observable inequality it produced would somehow help everyone, eventually, sort of. There was not and has never been a plan by the Conservative Movement to lift all boats. Only a plan to feign interest in doing so.

Librarian Guy , May 15, 2020 at 12:02 pm

I agree with most of your comment except the "smarter" part.

They don't seem smart to me, they openly plunder and loot and spit in the populace's faces. They don't even pretend to believe in or work for a "common good" anymore, really. That is the story of the 21st Century in the US, starting with Baby Bush II. (Okay, I get that the Obama crew seemed "smart" or sophisticated to the PMC and comfortable liberals, but how smart were they if they led to the open Kleptocratic Disruption of Trumpism and the God Emperor?)

What the Elites have that the proles don't is in-group solidarity. (And a captured Media establishment.) They protect their own, while the hoi polloi fight one another for scraps.

Hoppy , May 14, 2020 at 12:54 pm

What is the death rate among the working age population?

Seem like a tough hill to die on given the curve has flattened, hospitals are not overflowing, and the economy is teetering on the edge of depression.

No one has a vaccine, this isn't going away any time soon. It's time to focus on protecting the most vulnerable instead of pretending this effects everyone equally.

Allow states to cut benefits? Come on, UI benefits are taxed for pete's sake. 'Available to work' basically means you have start at 8am the next day which is doesn't align with any reality of hiring except in low end service sector jobs.

campbeln , May 14, 2020 at 3:25 pm

> and the economy is teetering on the edge of depression

This was baked in the cake already, COVID was simply the spark that ignited all that dead wood on the forest floor.

cripes , May 15, 2020 at 12:16 am

campbeln:

Yes.

I thought the quiet transfer of trillions in helicopter money to the banksters in the last half of 2019, way before the covid craze was telling.

How convenient.

Wally , May 14, 2020 at 1:49 pm

The other really significant thing is that 're-opening' doesn't necessarily mean returning to business. For example, Musk insists on re-opening Tesla the assumption being that sales are there to be had if they re-open. But if not no sales, no need for employees back down the drain we go.
Same for restaurants. retail, hotels, transit and white collar jobs – attorneys, architects, CPAs

DHG , May 14, 2020 at 5:48 pm

Yup, the smart and shrewd will conceal themselves as much as possible and live, the stupid will rush out and most likely die.

JBird4049 , May 15, 2020 at 1:20 am

The poorest and the most desperate actually. Some people still have not received any money from the state or federal governments. The quarantine started about two months ago. So no job, no income, no money, and no joke. No matter how shrewd or smart you are sometimes you are not making the decisions. Reality makes them for you.

KFritz , May 14, 2020 at 3:24 pm

There's another possible reason to reopen. If the country officially reopens, there's no need for any more federal stimulus!

campbeln , May 14, 2020 at 3:26 pm

Bankers got their TRILLIONS?

Pack it up, boys! We're done here.

J.k , May 14, 2020 at 5:06 pm

Well till the markets crashes again and they need to save the assets of the wealthiest.

I just got a text from a buddy who is an electrician. His company just told him they are not expecting to take any major work till second quarter of next year. They will only be taking emergency calls. This is in Chicago.

LawnDart , May 14, 2020 at 6:28 pm

Your buddy might be able to use this link:

https://wepoweramerica.org/hotjobs.cgi

Granted, it's a union site, but one point that they make is how union saturation raises the wages for all workers within a given region.

In Appalachia, I was offered $15hr. to work as an electrician. In Chicagoland, starting wages were close to or more than double that. Guess where I went in order to establish a salary history? And no, the cost of living is really not too different between those two places, but opportunities sure were.

(moderators: in response to an "Eat the Rich!" comment, I posted a link with recipes: I apologize for this. Admittedly, it was in poor taste.)

[May 16, 2020] Wall Street's Useful Idiot Financial Times Shills for CLOs....as Fed Hasn't Bailed Them Out

May 16, 2020 | www.nakedcapitalism.com

It's not a popular position to point out that a particular financial risk is overblown. But when everyone in Corporate America and investor-land is in "Where's my bailout?" mode, the usual motivations are reversed. Normally, "Nothing to see here, move along" is the default position when the great unwashed public worries about too much leverage, opacity, and tricky practices. But when central banks are doling out trillions, sounding alarms, whether warranted or not, is the way to get someone else to eat the risks you took for fun and profit. And as we'll demonstrate, the Financial Times looks to have become an unwitting tool of CLO (collateralized loan obligation) investors who haven't yet gotten their Fed handout.

The article in question is headlined: CLOs: ground zero for the next stage of the financial crisis? The headline and the breathless tone set the reader up for the idea that these complex structures will blow up the financial system, just the way their cousins, collateralized debt obligations, did in the financial crisis.

But as we'll explain, the absolute size of the CLO market, and banks' not-much exposure to the risky parts of it, means that absent fraud (or a systemically important bank and wobbly bank having gotten high and binged, and the pink paper and others would likey have gotten wind of that by now), there's no risk to the banking system. And in the hoary old days of the crisis just past and its predecessors, that was the justification for throwing official money in big volumes to clean up bad lending decisions: that as much as it would seem proper to let incompetent institutions go tits up, letting banks fail tends to engulf even healthy banks, since no one can tell from the outside very well how solvent a particular institution is, and hurts innocents like depositors (even with deposit insurance, it is pretty much impossible for a business of any size not to have way above the guaranteed amount in its accounts regularly, if nothing else when it issues payroll).

So what the Financial Times piece is effectively getting worked out about is that some investors will lose money. Newflash! Investing involves risk! Who'd have thunk it!

In other words, this Financial Times piece is implicitly selling the idea that the consequences of some deep pockets taking hits is just oh-too-dangerous. This is Greenspan put thinking on steroids. And sadly, it seems to be treated as a reasonable line of thinking. Wealth must be spared. The hell with those who live from labor income.

What CLOs Are and Why Comparisons to CDOs Are Spurious

By way of background, a pet peeve of ours is that the financial crisis is widely depicted as a housing crisis when it was in fact a derivatives crisis. If we had merely had subprime and Alt-A loans go bust, the result would have been on the order of the S&L crisis plus maybe another 50%. Bad but nothing like the seize up of the global financial markets that took place in September 2008.

As we explained long-form in ECONNED, collateralized debt obligations consisting substantially of the risky tranches of subprime mortgage bonds (the BBB and BBB- layers) dressed up the part of of subprime securitizations that no one wanted to buy. The top tranches of those CDOs, comprising 60+% of par value, were rated AAA.

But even that wasn't sufficient to blow up the global financial system. Demand by subprime shorts and banks seeking protection for the loans they were advancing to the likes of subprime lenders like New Century and IndyMac led to the use of substantially synthetic (made mainly of credit default swaps rather than tranches of actual bonds with actual mortgage loans behind them) as a way to generate artificially cheap insurance on the riskiest rated layer of subprime debt. Those derivate exposure have been estimated at 4-6X the real economy exposures. The reason the financial system blew up is that the side bets were a significant multiple of real economy activity, and the parties on the wrong side of those wagers were systemically important, highly leveraged players like AIG, the monolines, Eurobanks, Citigroup, and Merrill.

It is also important to remember the base line. Banks have repeatedly managed to blow themselves up in entirely conventional ways, with good old fashioned loans. Remember the Latin American debt crisis? The commodities bust of the early 1990s, which crated energy and real estate lenders in the oil patch? The afore-mentioned S&L crisis? The not as well publicized LBO loan crisis of the late 1980s and early 1990s? Oh, and how about one of the mothers of bad lending, the Japanese commercial (and to a lesser degree residential) real estate bubble and bust?

Now let's look at CLOs. They are intrinsically less risky than asset-backed-securities CDOs, which the press took to calling just "CDOs".

Those CDOs were resecuritizations. They were created from the riskiest parts of mortgage securitizations made of risky loans, as in subprime or Alt-As. Those tranches usually represented only 3% of the entire deal. They'd be worth 100% if the losses on the subprime RMBS was 8% or less, and totally wiped out if the losses were higher than 11%. Since subprime losses averaged more like 40%, nearly all these CDOs were complete wipeouts.

By contrast CLOs are made from risky corporate loans, so-called "leveraged loans" typically made when a private equity firm is buying a portfolio company. So they are more analogous to a subprime RMBS (residential mortgage backed securitization) in terms of the risk level of the assets. 1 Note that even with the high level of subprime losses, AAA tranches of RMBS lost only 0.42% on average .

Even though there was a tidal wave of risky "leveraged loans" to fund deals at sky-high prices right before the last crisis, and a lot of them wound up in CLOs, while their value traded down afterwards there were no losses. Admittedly, the Fed dropping interest rates and manipulating long-term rates lower allowed many of the pre-crisis loans to be refied at lower rates. But the Fed didn't engage in measure intended to rescue corporate borrowers; they were just lucky beneficiaries.

Nevertheless, CLO structures have been made more conservative since the last crisis. See here for geeky details .

But with the bottom dropping out of the entire economy, a lot of former sure-looking bets won't work out so well.

But should we even care about CLOs? First, the market isn't all that large. S&P in early 2020 pegged it at $675 billion. By contrast, the subprime market, depending on whether or not you included Alt-As, was estimated back in the day at $1.3 trillion to a bit over $2 trillion. And US GDP was $14.5 trillion in 2007 versus $21 trillion in 2019. Using Pimco's forecast of 5% contraction for the full year, you still get roughly $20 trillion, showing that the relative importance of subprime lending has fallen even further. And that's before you factor in the way that credit default swaps greatly magnified the real economy exposures and concentrated them at systemically important, fragile players.

This chart from Guggenheim Investors is a little dated, since it shows a smaller CLO market size but it gives a good idea of who buys what:

The key bit: what do banks own? They are the ones that have to be saved even when they do really dumb things; the other players are supposed to be savvy investors who can take losses.

You can see that banks are the big owners of the AAA tranches, which have shown over time to have enough loss protection that you'll get all your money. And they are listed third as owners of other investment grade tranches, which means they are less important players than insurers and money managers.

More detail from S&P in March 2020 :

CLO holdings at U.S. banks increased by roughly 12% in 2019, to $99.5 billion, with a number of banks growing their CLO securities exposure by double-digit rates, according to year-end filings with the Federal Reserve .

What is perhaps most striking about the results is the high degree of concentration of CLO debt inside the three banking entities, relative to the rest of the banking sector. At $80.2 billion, the three largest holders make up nearly 81% of all U.S. bank CLO holdings.

However, the size of CLO holdings as a percentage of the top-three banks' investment portfolios is relatively small. For JPMorgan Chase, Wells Fargo, and Citigroup, CLOs as a percentage of total securities on book are 7.5%, 6.9%, and 6.0%, according to Y-9C data.

Now, at just under $100 billion, total U.S. bank exposure represents roughly 15% of the $675 billion CLO market. Assuming that U.S. CLO AAA supply is around $400 billion and that most of U.S. bank CLO holdings are AAA, then U.S. banks can be said to hold roughly 25% of all AAA supply, according to researchers from Wells Fargo.

Japanese banks can also be expected to hold near the same amount, or around 25% of the total AAA supply of U.S. CLOs, according to Wells Fargo.

So who is at risk? Apparently the equity tranche, the bottom 8.5% in the chart above:

Waterfall of payments in CLOs, via Morgan Stanley, which estimates that 85% of outstanding CLOs in the U.S. may fail their junior over-collateralization (OC) tests as leveraged loans default. pic.twitter.com/cx2GFlAXL5

-- Tracy Alloway (@tracyalloway) May 7, 2020

To translate: securitizations have risk buffers in the form of overcollateralization and excess spread. "Overcollateralization" results from the fact that the loans in a securitization have a higher principal amount that than the total par amount of all the tranches. Say $100 of loans have $103 of loans. The $3 is the overcollateralization and the CLO documents describe who gets how much benefit from it. 2

What the tweet is saying is that the losses on the loans look like they'll get to be high enough that the equity layer in some (many? most?) CLOs will stop getting interest payments. But again, why should we care? If all the equity tranches stop paying out, that was shy of $60 billion in par value. And it's not a total bust since they got payments in full before their investment crapped out. And the owners are primarily hedge funds. This is just not worth getting lathered up about, particularly in comparison to all the other exploding loss-bombs.

Likely Reason for the Financial Times' Hyperventilating

Despite being a "Long Read," meaning it presents itself as having more reporting behind it than a typical story, it's remarkable to see the Financial Times duck the real story, private equity leverage, which predictably leads lots of lenders holding the bag at the end of every financial cycle.

And the article also sidesteps another key question: did CLOs make the situation worse than the old-fasioned approach of syndicating leveraged loans (which foreign banks took down in size in the first LBO wave in the 1980s)? Quite honestly, I suspect you can argue it both ways. On the one hand, unless the benefit of CLO risk slicing and dicing went entirely to the sponsors and packagers (possible), investors presumably were willing to accept lower interest rates to get more finely tuned risk exposures. That would somewhat lower the cost of private equity lending, but it's not clear that this made anything more than a marginal difference. 3

On the other, CLOs per the discussion above really did move a lot of the risky exposures out of the hands of usually self-destructive banks and over to investors who bill themselves as sophisticated and able to take risk.

The Financial Times account does provide market size (using JP Morgan data, which gives a slightly higher level that S&P did), albeit a bit of the way into the piece, but no distribution of exposures by rating or who the various investors are. And before the authors get to that, they hand wring over a debt restructuring of medical staffing company Envision Health. As vlade pointed out by e-mail:

The headline is fearmongering and a lot of comments lapped it up.

Thinking about it, the picking of the health company and saying how it's going to suffer is also there, implying "if you don't bail out the debt, look at how bad things will happen."

Vlade is not exaggerating. The article waves the "saving us from coronavirus" flag:

In the midst of a global pandemic, emergency rooms across the US have fallen strangely quiet as patients with other illnesses have stayed away for fear of contracting Covid-19. As a result, one of the surprising corporate casualties of the coronavirus crisis could be some of the companies that provide staff for hospitals.

Envision, one of the largest medical staffing companies, completed a restructuring of its roughly $7bn of debt this month as it moved to stave off bankruptcy.

US readers of this site know better than to see Envision as a good actor. As we've written several times, based on the gumshoe work of private equity expert Eileen Appelbaum, KKR-owned Envision and Blackstone's Team Health have been lead players in the "surprise billing" and other price gouging schemes. The fact that Congress and some states have been working on legislation to end surprise billing is why Envision's bonds are in trouble. And that reaction also shows how important the fleecing is to the company's bottom line.

In fact, one has to wonder if the Envision staffing cuts mentioned later in the piece are a shot across legislators' bows: "Nice ERs you have. Shame if something were to happen to them."

This chart also serves to exaggerate how bad things are:

The viewer's eye naturally goes to the top line, for the BB tranches the yields have risen the most. Those BB instruments are a mere 3-4% of the total value of the CLO market! They are rounding error. By contrast, the AAA tranches are yielding pretty much what they did in later 2019. Yes, they aren't trading the same as other AAA instruments, but seasoned structured credit investors ought to know that these AAA creations can and often do trade down in crises, unlike Treasuries and government guaranteed credits.

Moreover, eyeballing the charts, yields have improved since mid-late April, meaning investors are less edgy, when even then, Reuters reported that new CLO deals were getting done on reasonable terms. From an April 22 story :

There has been US $39.4bn of US CLOs arranged this year through April 19, inline with the US$38.7bn sold during the same period last year, according to the data from LPC, a unit of Refinitiv. A record US$128.1bn of US CLOs was arranged in 2018.

US CLO issuance this year has been challenged as spreads on Triple A tranches, the largest and most senior piece of the funds, have continued to widen, hitting an average of 136.2bp in March, slightly tighter than the more than two-year wide of 138bp in February, according to the data. The wide spreads can cut into returns paid to equity holders, who are paid last after all other debtholders receive their distributions, and may cut into overall issuance.

"Spread levels on US CLOs still look relatively attractive compared to other securitized products and corporates," Collin Chan, a CLO strategist at Bank of America Merrill Lynch, said in an email

"Although the arbitrage for new-issue deals has compressed, (CLOs) are still getting done because equity investors still find the levels acceptable," Chan said. "Insofar that we do not see significant spread tightening in the loan market while CLO spreads stay wide, dealflow could certainly continue."

Now as the Financial Times article points out, some CLOs are more wobbly:

More than 100 CLOs were failing at least one trigger brought on by escalating triple C loans, according to April data compiled by Barclays, with 40 failing tests for their triple B rated tranche or higher -- debt that is regarded as investment grade. Twelve have also failed tests up to the double-A rated tranche, according to BofA.

It's hard to know how significant this is without having dollar values. The Financial Times also warns that one-third of the BBB tranches are on review for a downgrade, but again, I find it hard to be sympathetic. If you bought BBB paper, you knew there was decent risk it would decay into junk. However some of these bonds are held by life insurers, who are restricted in how much they hold in non-rated/non-investment grade assets. They usually max out that bucket with real estate. So if their BBBs get downgraded, they'd probably have to sell.

So why all this unseemly whining? The most obvious explanation is that the Fed isn't doing much for CLOs. One has to wonder if money men have been playing up how bad things supposedly are to get more rescue money. From the Wall Street Journal on April 22 :

The Federal Reserve will lend $2.3 trillion to support the economy The Fed excluded some securities tied to corporate loans and commercial real estate that were among the newest, fastest-growing segments of the bond markets

The [$100 billion] TALF program won't include the vast majority of a popular structured security known as a collateralized loan obligation, which is made up of corporate debt generally used to finance buyouts. The program does include so-called static CLOs which don't allow for reinvestment of loan proceeds, but those account for only a small share of the market. The vast majority of CLOs allow such reinvestment and aren't included.

The central bank threw some small additional bones to the CLO market earlier this week, but still left most CLOs ineligible. From Bloomberg :

The Federal Reserve revised its Term Asset-Backed Securities Loan Facility to allow CLOs that hold a broader range of leveraged loans to be used as collateral.

The Fed will now accept new AAA CLOs with leveraged loans, including refinanced loans, that priced as far back as January 2019, according to a statement Tuesday on the central bank's website. Previously, eligible collateralized loan obligations could only hold newly-originated loans .

Yet the changes will only go so far, market watchers say. The terms still require eligible CLOs be static vehicles wherein managers can't actively trade the loans underpinning the deals, a structure that makes up only a small portion of the market.

It is really a shame to see what has happened to the Financial Times. It was the only major media outlet before the crisis where quite a few writers, particularly Gillian Tett but also John Authers, Martin Wolf, and John Dizard, saw that risk was being underprices across all credit markets and sent clear warnings that things could end very badly, when the US financial press was uniformly in la-la land.

Since the crisis, the paper has gone firmly neoliberal, and perhaps due to the lack of time to do reporting on top of being now the US editor, Tett veers from doing extremely insightful pieces reminiscent of her glory days as capital markets reporter, to doing far too many articles that have all the hallmarks of her having spent too much time with people talking their book. Similarly, this CLO article does show the authors did a lot of legwork, yet somehow missed or chose not to address the most important questions.

_____

1 And remember, at least so far, we don't have evidence of widespread lending fraud, a big feature of the subprime mania. However, a key difference is that with mortgage-backed securities, the mortgages are transferred through several intermediaries to a trust and they stay there. Certificates are then sold that represent the rights to interest and principal payments made to that trust. With CLOs and CDOs, they can be "static" meaning the loans (or RMBS tranches) are set at the get-go and don't change, or "active," meaning a manager can trade assets in and out from time to time, subject to overall restrictions. Most CLOs are active.

2 I haven't seen any actual CLO documents, so some of my interpretations from CDOs and RMBs may be a bit wide of the mark. RMBS had distinct waterfalls for principal and interest payments. This chart covers only interest payments. It doesn't mention that the deals almost certainly had "excess spread", meaning that loans that paid, say, an average of 7.5% across the CLO would have total interest payments of only 7.2% across all CLO tranches. This chart presupposes that the excess spread is already gone and required interest payments are at risk, so the equity tranche takes the hit first.

The article does have good detail on this issue. Basically, downgrades of loans are producing breaches of collateral quality tests, and that looks set to cut interest payments to the equity layer:

Typically, CLOs are permitted under their own rules to hold up to 7.5 per cent of their assets in triple C rated debt. If they stay within this threshold then managers of the CLOs can treat the loans they own as if they are worth 100 cents on the dollar.

This is because when a CLO is created, the underlying portfolio of loans is larger than managers need to pay off debt investors. This is known as over-collateralisation. So long as the number of loans that are near to defaulting remains below the 7.5 per cent threshold, the portfolio is treated as though there will be enough money left at the end to pay investors.

However, if a CLO exceeds its triple C bucket, as many now have, then the lowest priced loans above the threshold are required to be valued at a market price. In a crisis, with loan prices having fallen sharply, this lowers the overall value of the portfolio of loans reported by the CLO. That in turn can impact how investors are paid.

If the value of excess collateral slips by more than a few percentage points, managers typically first cut off 50 per cent of any interest payments on the underlying loans that would have gone to equity holders and use it to buy more loans, with the aim of increasing the value of the portfolio and correcting the breach.

If the value of the underlying loans falls further, then all money is cut off to equity investors. That money is used not only to pay interest to debt investors but to start paying back the principal of the debt, beginning with the triple A rated bonds.

3 Even if private equity firms could achieve somewhat higher leverage levels, that's not a big bennie. Private equity has for many years been sitting on tons of "dry powder," meaning uncalled capital. So their equity isn't a scarce commodity. Thus the gain is a marginal decrease in interest charges. Helpful but hard to see as significant.


vlade , May 15, 2020 at 7:13 am

The article is actually fascinating case of journalism.

It's obvious it's a reasonably well researched and all, but the main conclusions (CLOs will kill us all, and securitised products per se are nuke equivalents) it draws (which are actually not spelled out in the article as explicitly as in the headline) are just nothingburgers when it could have been a great article on the PE leverage and how it makes the current economic crisis worse.

One has to wonder whether the authors are dumb (unlikely, as the article has a lot of detail), naive, or actively shilling for the investors (remember, FT is now owned by Nikkei, and largest CLO holder is a Japanese bank) or some combination.

Colonel Smithers , May 15, 2020 at 9:32 am

Thank you, Vlade.

I know some of the FT's journalists. From conversations with them over the past dozen years, your final phrase is spot on.

Shilling is probably the main cause. Why? Some of the younger journalists see colleagues like Martin Wolf, Gillian Tett and Rana Foroohar on the celebrity circuit, appearing on talk shows and at Davos and getting commissions from publishers. They wish to join these circles, but financial institutions and other investors are gatekeepers, so they must cooperate.

If they can't join that celebrity circuit, they can advise governments and lecture at Harvard like Camilla Cavendish, who never stops bragging about being responsible for the UK's sugar tax and wagging her upper middle class finger at us plebs, or they can head public affairs at big corporations or act as public relations advisers to oligarchs.

There are two classes of journalists at the FT. It does feel class based. There are the reporters on the daily output, e.g. the banking team, and the weekly shills like Simon Kuper, Robert Shrimsley and Jim Pickard.

Editorial control is more tightly exercised by Nikkei as time goes on.

Do you remember the FT's expose of the Presidents' Club a few years ago? That gathering had been going on for thirty years and was an open secret. In order to show its right on credentials and target a new readership, the FT deployed a dozen plus hacks, well, hackettes, to infiltrate the gathering.

vlade , May 15, 2020 at 10:19 am

I'd add another class to the FT journous – FT Alphaville. For me, FTA is the only part of FT worth reading. Paradoxically, it's the only one that's free.

H. Alexander Ivey , May 15, 2020 at 8:07 pm

As a regular reader of FT Alphaville and a subscriber to FT itself, I have to agree with Ives' and vlade's observations on what once was a reasonable mainstream paper. They have drunk the kool-aid.

But don't give up totally on the comments, there're plenty of ankle biters out there.

Harry , May 15, 2020 at 7:48 am

So I will put my quibbling hat on, and I should prophylactic-ally note I pretty much agree with everything you wrote subject to a couple of caveats.

I wrote something up as a consultancy exercise on this early last year, which is why I am under the misapprehension that I know a little about it. Also I know Mr. Rosner has been all over this subject for a year, at least! Indeed definitely longer. Indeed Mr. Rosner has been warning about the risks associated with this, and the BDC-type lending for quite some time! But that is his "victory lap" to take.

1) BoE estimated global leveraged loan market as being around $3.2bn. They would have agreed with Guggenheim about around 45%-50% of that market being CLOs. So its probably a bigger market than S&P estimated. I think the BIS suggested $2.4bn for LL and once again about 50% of that being CLOs. I suspect S&P were looking at only North America. But I would still have guessed that $600bn number is too small. Europe?

2) Lobbying for free money! Yup, thats exactly why you hire financial PRs. If everyone else is getting bailed out then, the Fin PRs need to show they are doing something. Call Tracey Alloway! I am told the trade groups in DC are lobbying like crazy on behalf of the shadow banks too! MBS REITS etc.

3) Totally agree re private equity being behind the push to rescue these guys. Personally, I think they do have a nasty problem. The underlying leveraged loans need to eventually be refinanced. If you deplete the pool of equity in the deals you will struggle to find more. The CLOs will enter run-off mode and will not participate in new financings. That will happen around 7.5% CCC content. The PE guys desperate need the CLOs to remain alive. In this kind of structured credit, a shortage of any type of credit, either equity, mezz or one of the higher credit tranches will kill new or rollover deals. So if you want to prevent a cascading series of defaults resulting in pretty much ALL CLOs going into runoff mode, then you need the Fed to step in.

4) Vlade is right. Japan in the form of Norinchukin or Japan Post own about 10% of all the AAA tranches. The FSA did a review and suggested they lighten up a while back. Last time i looked they had been doing so the glacial way, by allowing maturities to slowly reduce their position.

It looks a lot like a death spiral too me.

All that said, I have a very tiny violin in my hands. While I dont blame our PE overlords for trying to steal more money from the tax payers, I dont know why the tax payer should play ball. Apologies for the inevitable typos and forgive if I have misunderstood or misreported myself.

vlade , May 15, 2020 at 9:37 am

I think the whole CLO market is around 1trln (give or take a few hundred bln). So still a small fraction of say junk bonds market, or even RMBS market.

The important thing is as Yves notes, in 2008 the RMBS market was overlaid by massive derivative positions. I'm not aware of the CLO derivative market being there much. I know that 15 years ago you had a lot of synthetic CLOs, but those went out of favour as the CDS market liquidity (and especially CDS on leveraged loans) evaporated. They did start coming back a bit, not still nowhwere near the glory days of 2005-6.

Anything with a substantial leverage will kill the financial system. Conversely, only a few things that are not levered will.

My worry on EU banks are actually covered bonds. If the EU RE market tanks, it would kill covered bond markets where they often require 80 or better LTV in the pool. And covered bonds are a crucial funding vehicle for a lot of EU banks, so the states would have to step in (if they were allowed to).

Colonel Smithers , May 15, 2020 at 1:43 pm

Thank you, Vlade.

I agree with you about covered bonds, hence their prudential treatment being less expensive under the EU's Capital Requirements Directive IV.

Harry , May 15, 2020 at 9:37 pm

Yes, I agree all your points. FWLTW of course!

Colonel Smithers , May 15, 2020 at 1:48 pm

Thank you, Harry.

Working for two of the scummiest originators, I know well about the two Japanese banks you name. For some reason, they allow another Japanese securities house to advise them into this abyss.

Harry , May 16, 2020 at 11:28 am

Its not much fun being an investor these days. What exactly are you gonna buy?

A fortiori for Japanese real money!

TomDority , May 15, 2020 at 9:14 am

Because interest rates should be indicative of risk – at least I think that is how it used to work – then no bail for investors as all risk can have loss and total loss at that.
The reason the last crisis was so bad in 2008 was, in my opinion and for the reason as follows –
All business, all consumers, all people need certain basics to survive – Food – Water -Shelter and Land upon which to do all the above.
-- -- So with all the lending – as much as possible then and today with PE and leverage; risk be damned as they knew bailouts would be used in that great con and it's new version of the old today- -- Its only outcome was to raise the cost of housing – rent (land), business overhead, farm land prices thus products therefrom and everything produced on the planet (people playing the real estate game and realtors and all associated, wrongly believed they were gaining wealth but – it was zero gain because if you wanted to continue living you had to pay the higher costs wrought by the great con game – this con perpetrated by financial puffers and criminals – aided by many of the rest of us who were conned into thinking this great inflation of assets was and is the only way – the brave, heroic, patriotic – survival of the fittest, smartest, hard earned way to get ahead – and be damned those who didn't jump on board the great gravy train robbery –
Of course, as this is all now the norm, and all made proper by great grants made to the institutions of higher learning (to make sure the proper economic and finance learning is taught) and larger grants made to the institutions of government (to make sure the proper economic and financial governing is practiced) so the rest of can be assured that the criminals the corruption and fraud is protected by law and the aristocracy is free to do as they wish – as of course is their inherited right.

So the planet burns and a virus is showing us how the (current false definition) Free Market has – and continues to screw the vast majority of the planet out of the planet.

I hope that more people really start to examine and propose alternatives to the current FIRE sector Free Market which is and continues to be the true and only impediment to solving the worlds problems IE sixth extinction event and global geochemical disaster (global warming is one).

I propose taxing the crap out of rentier activities and financial predation – Tax the crap out of those things known to cause asset price inflation and are destructive to the planet and raise the cost of living.
The Free Market needs to mean Free From Rentier, Preditory, and Unnecessary overhead tolls.
Currently the negative is taxed lightly and the positive is burdened –
Switch the burdens around and the easy money would be made by doing the right thing – it would make earning money through financial predation much more difficult.
Anyway – some random thought to chew on –
And yes – should investors ever take losses on money lent on interest? – sure they should – why I thought that is why interest was charged – shows ya how little I know.
And if investors take losses based on False Warranties and Representations made by the financial engineers – well let them engineers make it up to the investors – instead of what happened in 2008 when Obama (I voted for him which makes me a sucker) saved em from pitchforks.

Mary Lou Isaacson , May 15, 2020 at 10:40 am

Thank you for your well articulated comments! You expressed my thoughts better than I could ever have done.

JTMcPhee , May 15, 2020 at 10:11 am

Any betting on whether the CLO holders or the public comes out on top in this game?

JohnnyGL , May 15, 2020 at 10:54 am

Hi all, this one is right in my wheelhouse as I spent 10+ years working for one of the big CLO Trustees.

Yves' take is generally correct. What I find most comforting is that there was never a return of structures that incorporated a ton of CDS contracts. In fact, I haven't seen any kind of return of CDS contracts at all. Good riddance! Those things were poison!

Lehman did a ton of those pre-crisis and when they went bust, they left a big legal and financial mess as the deals couldn't function without Lehman in the middle of them. They had way too many conflicting roles. I suspect a lot of them were created for Lehman to lay off risk onto their wealth management customers and other marks.

vlade , May 15, 2020 at 10:57 am

CDSese trade, especially the indices and names that are in the indices, but those generally tend to have a fairly liquid underlying bond market. And the overall CDS market is fraction of what it used to be.

Fortunately though the more idiotic CDSes (like the LCDS – CDS on leveraged loans) are gone, and as you say, the synthetic CLOs too..

Susan the other , May 15, 2020 at 11:19 am

Thank you for these details. A little surprising. And as if I didn't already hate PE enough. One of the surprising things is that the Fed did actually show some restraint. I hope it holds. I think we need to emancipate PE from the Market altogether.

Peter Canning , May 15, 2020 at 1:44 pm

wow Yves! great takedown in the Swiftian style (hilaris in triste) of savage indignation.

rd , May 15, 2020 at 2:26 pm

Some economists have studied what happened to those $1,200 stimulus checks. People who made less than $1,000/month spent them quickly while people making over $5,000/month mainly saved the stimulus money. https://www.marketwatch.com/story/this-is-how-fast-americans-are-spending-their-stimulus-checks-and-heres-a-breakdown-of-what-theyre-buying-2020-05-15?mod=home-page

The obvious conclusion from this study is that future stimulus money should be focused on the wealthy so they can keep their asset base intact.

flora , May 15, 2020 at 3:54 pm

Great post and comments. Thanks.

Sound of the Suburbs , May 16, 2020 at 3:42 am

How did we get here?

Economics, the time line:
Classical economics – observations and deductions from the world of small state, unregulated capitalism around them
Neoclassical economics – Where did that come from?
Keynesian economics – observations, deductions and fixes for the problems of neoclassical economics
Neoclassical economics – Why is that back again?

We thought small state, unregulated capitalism was something that it wasn't as our ideas came from neoclassical economics, which has little connection with classical economics.
On bringing it back again, we had lost everything that had been learned in the 1930s, by which time it had already demonstrated its flaws.
The Mont Pelerin society developed the parallel universe of neoliberalism from neoclassical economics.

FDR saved capitalism from itself with the New Deal.
Many right wingers weren't happy about this at all and longed for the good old days when they had the economic freedom to make lots of money and bring capitalism to its knees.
Of course, they didn't take any responsibility for the problems they had caused and they plotted to get back to the way things had been before.
In the 1980s they succeeded, but all the old problems would re-emerge.

1929 and 2008 look so similar because they are, it's the same economics and thinking.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.

As a CEO, I can use the company's money to do share buybacks, boost the share price, cash in my share options and get my bonus.
Share buybacks were found to be a cause of the 1929 crash and made illegal in the 1930s.
What lifted US stocks to 1929 levels in 1929?
Margin lending and share buybacks.
What lifted US stocks to 1929 levels in 2019?
Margin lending and share buybacks.
A former US congressman has been looking at the data.
https://www.youtube.com/watch?v=7zu3SgXx3q4

At the end of the 1920s, the US was a ponzi scheme of over-inflated asset prices.
The use of neoclassical economics and the belief in free markets, made them think that over-inflated asset prices represented real wealth accumulation.
1929 – Wakey, wakey time

Let's have another go.
Oh blimey, it's still the same.

Why did it cause the US financial system to collapse?
Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
What could possibly go wrong?
Bankers do need to ensure the vast majority of that money gets paid back, and this is where they keep falling flat on their faces.
Banking requires prudent lending.
If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.
As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.
They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.
The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.
When this little lot lost almost all its value overnight, the Western banking system became insolvent.
Western taxpayers had to recapitalise the banks and make up for all the loses the bankers had made on bad loans they had made to inflate asset prices.

Sound of the Suburbs , May 16, 2020 at 3:44 am

Free market thinking split into two separate paths in the 1930s.
We took the wrong path.

In the 1930s, Hayek was as the London School of Economics trying to put a new slant on old ideas, while the Americans were working out what had gone wrong in the 1920s.
The University of Chicago had worked out what had gone wrong with free market thinking before, but we followed Hayek who hadn't.

In the 1930s, the University of Chicago realised it was the bank's ability to create money that had upset their free market theories.
The Chicago Plan was named after its strongest proponent, Henry Simons, from the University of Chicago.
He wanted free markets in every other area, but Government created money.
To get meaningful price signals from the markets they had to take away the bank's ability to create money.

Henry Simons was a founder member of the Chicago School of Economics and he had worked out what was wrong with his beliefs in free markets in the 1930s.
Banks can inflate asset prices with the money they create from bank loans.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."
https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons
Real estate lending was actually the biggest problem lending category leading to 1929.
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.
"Stocks have reached what looks like a permanently high plateau." Irving Fisher 1929.
This 1920's neoclassical economist that believed in free markets knew this was a stable equilibrium. He became a laughing stock, but worked out where he had gone wrong.
Banks can inflate asset prices with the money they create from bank loans, and he knew his belief in free markets was dependent on the Chicago Plan, as he had worked out the cause of his earlier mistake.
Margin lending had inflated the US stock market to ridiculous levels.

The IMF re-visited the Chicago plan after 2008.
https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Sound of the Suburbs , May 16, 2020 at 3:55 am

" . they plotted to get back to the way things had been before."

I've got a good idea, you'll like this.
You can attract modern liberals to dodgy, old, 1920's neoclassical economics if you bolt on identity politics.

Inequality exists on two axes:
Y-axis – top to bottom
X-axis – Across genders, races, etc ..
The traditional Left work on the Y-axis and would be a problem as you want to increase Y-axis inequality.
The Liberal Left will work on the X-axis.
You can increase Y-axis inequality while the Liberal left are busy on the X-axis.

Sound of the Suburbs , May 16, 2020 at 5:23 am

The 1930's solution of the Chicago Plan was one way of keeping bank credit out of the markets.
There are other ways.

You could use the corset controls the UK used before 1980.
This kept bank credit away from financial speculation and debt grew with GDP.
https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png
Before 1980 – banks lending into the right places that result in GDP growth (business and industry, creating new products and services in the economy)
Debt grows with GDP
After 1980 – banks lending into the wrong places that don't result in GDP growth (real estate and financial speculation)
Debt rises faster than GDP

OR ..

Richard Werner worked out what went wrong in Japan.
The BoJ used to use window/credit guidance to steer bank credit away from financial speculation and towards business and industry.
This was the basis for all the Asian Tiger economies, until they discovered financial liberalisation and the Asian Crisis followed shortly after that.

OR ..

Germany uses small non-profit banks that are very local to communities and businesses.
There is no gain from financial speculation and they are closely tied to the people they serve.

Slim Sopata , May 16, 2020 at 11:33 am

Awesome piece, Yves! Remember your outstanding work from 10 years go) Couple of questions:

1. Dont you think the derivatives will be a problem again? This time due to corporate credit risk and FX moves? CDS exposure to GM, GE, Ford is many times their cash debt and should they go down (even if the Fed holds bonds) the CDS losses could be in many trillions if we account for all possible corporate defaults. Also, FX derivatives notional is orders of magnitude larger than credit one and large swings in euro/dollar etc could also kill a lot of players.

2. Isn't PE in trouble? Some of them are clearly OK but is it really true that all of PE players are sitting on mountains of cash? I am far from this market, could anybody opine on which PE firms could be hurt?)) TIA!))

[May 15, 2020] US Unemployment Update

Notable quotes:
"... @apenultimate ..."
May 15, 2020 | caucus99percent.com

apenultimate on Thu, 05/14/2020 - 9:50am The past week's unemployment claims came out today, and add another 2.98 million to the pile. This brings total unemployment claims for the past 8 weeks (two months or so) to 36.5 million.

Determining unemployment percentages depends on what data you use. The Bureau of Labor Statistics (BLS) shows the employment numbers for the United States in August 2019 as ~157 million ( https://www.bls.gov/cps/cpsaat08.htm ). Admittedly, that's not March 2020 statistics, but employment numbers would not change all that much in half of a year.

The St. Louis Federal Reserve has a different set of statistics that show 205.5 million Americans employed in March 2020 ( https://fred.stlouisfed.org/series/LFWA64TTUSM647S ). (They show the August 2019 period with employment at 206 million.)

Why the huge difference? I have no idea. But going forward, I'll use both to determine unemployment numbers. Remember that in early March 2020, unemployment was already around 3%.

Using the BLS statistics, we get an unemployment rate of 23.16% for the past 8 weeks. Add on the previous 3% of people unemployed, and you reach 26.16% unemployment.

Using the St. Louis Fed statistics, we get an unemployment rate of 17.76% for the past 8 weeks. Add on the previous 3% of people unemployed, and you reach 20.76% unemployment.

The peak rate of unemployment during The Great Depression was 24.9%. The peak rate of unemployment during the the Great Recession in 2008 was 10%.

According to BLS statistics, we are already greater than Great Depression unemployment numbers.

According to the St. Louis Fed, we are already more than double Great Recession numbers and only about 4 percentage points away from Great Depression peaks.

The Labor Department last week reported April unemployment for the United states at 14.7%, but this according to their own admission was undercounting the real rates. Be careful of any numbers coming out of the mainstream media or government sources.

https://www.sfchronicle.com/business/article/Coronavirus-job-loss-Weekly...

Some jobs will definitely come back, but many will not. For example, JC Penny's reported that they are permanently closing 200 of their 850 nationwide stores. Those jobs will not be coming back. There are weekly reports of many cafes, restaurants, and small businesses shuttering their doors for good. Those jobs will not be coming back.

Even for the companies that do not shut down, it may be a long haul before economic activity has picked up enough to bring workers back. In most cases, it will not be a quick recovery.

Hang on for a very rough ride. 2 users have voted.

ggersh on Thu, 05/14/2020 - 10:52am
This is the place to go for stats

@apenultimate and like everything else our govt does, the unemployment number is just pure BS

http://www.shadowstats.com/article/csfu1435

• Headline April 2020 Unemployment Really Was Around 20%, Not 15%
• Bureau of Labor Statistics Disclosed Erroneous Unemployment Surveying for a Second Month
• About 7.5 Million People in the April Household Survey Were Misclassified as Employed Instead of Unemployed, per the BLS
• Headline April U.3 Unemployment at 14.7%, Should Have Been 19.5%
• The BLS Had Disclosed the Same Surveying Error Last Month; Where Headline March 2020 U.3 Was 4.4%, It Should Have Been 5.3%
• Per the BLS, Headline Data Will Not Be Corrected: "To maintain data integrity, no ad hoc actions are taken to reclassify survey responses."
• Nonetheless, Headline April Unemployment Soared to Historic Highs from March: U.3 from 4.4% to 14.7%, U.6 from 8.7% to 22.8% and ShadowStats from 22.9% to 35.4%
• More Realistic, Those Same Unemployment Numbers, Corrected: U.3 from 5.3 % to 19.5%, U.6 from 9.6% to 27.7% and ShadowStats from 23.7% to 39.6%
• April 2020 Payrolls Collapsed by an Unprecedented 20.5 Million Jobs
• Annual Growth in April 2020 Money Supply Measures Soared to Historic Highs
• U.S. Economic Activity Has Collapsed to Great Depression Levels, with the Federal Reserve Creating Unlimited Money

apenultimate on Thu, 05/14/2020 - 10:58am
Nice

@ggersh

Thanks for that. Seems like a large percentage of the difference is that BLS says 7.5 million were mis-classified as employed.

At the very least, it seems the BLS does a bit of correcting, whereas the Fed does not.

gulfgal98 on Thu, 05/14/2020 - 1:13pm
Federal Reserve Chair Jerome Powell

stated in the very beginning of this video, that of people who were employed in February of this year, nearly 40% of those earning $40,000 or less have become unemployed. This is an unprecedented human tragedy that Congress in all their bailouts now totalling about $8 Trillion have seen fit to throw a one time pittance of $1,200. With mountains of cash going to corporations and lobbyists, Congress insultingly gave real suffering Americans a few pennies and in effect told them that their lives do not matter to Washington DC.

//www.youtube.com/embed/AROXMTDOkjw?modestbranding=0&html5=1&rel=0&autoplay=0&wmode=opaque&loop=0&controls=1&autohide=0&showinfo=0&theme=dark&color=red&enablejsapi=0

[May 15, 2020] April jobs report disastrous, but not as cataclysmic as feared; lower paid part time workers take the biggest hit

May 15, 2020 | angrybearblog.com

I am still highlighting these because of their leading nature for the economy overall. These were uniformly very negative:

  1. Amateur Socialist , May 9, 2020 8:43 am

    This disaster is only getting started. Uncertainty regarding employment stability is hitting health care workers. In the middle of a worldwide pandemic. People with relatively secure jobs are wondering about their families and loved ones needing additional support. Which will continue to limit discretionary spending and on it goes.

    I apologize for providing this link in two places but it's an important and sobering summary of how financialization of assets has failed. https://www.nakedcapitalism.com/2020/05/people-and-jobs-or-wealth-the-government-has-to-decide-which-to-prioritise-and-there-is-only-one-right-answer.html

    "Debts which cannot be repaid will not be repaid" as Michael Hudson has been warning for decades. The thing about capitalism is that it works fine as a theory but it's just not practical in the real world. The one that includes humans who are not economists.

the virus results to the population pale in comparison to the economic/social aspects.

We now know far more about Covid19 – the Lockdown should end

https://off-guardian.org/2020/05/08/we-now-know-far-more-about-covid19-the-lockdown-should-end/

Total N.Y. hospitalizations less than half of number at peak (down to 8,196, from more than 18,000) Bloomberg

NJ Hospitalizations have declined by 1,000 in the past week.

Evidence mounts that outside is safer when it comes to COVID-19 TheHill

Gottlieb pointed to a study, which has not yet been peer-reviewed, that examined outbreaks in 320 Chinese cities outside Hubei province, where the coronavirus is believed to have originated, between Jan. 4 and Feb. 11 and found only one outbreak that occurred outdoors.

New York City's iconic 24-hour subway has begun shutting down overnight for deep cleaning, the first deliberate closure in the system's history – a move triggered by the Covid-19 pandemic and a growing homeless presence on trains. Too little, too late Shock as NY subway cleaned overnight for FIRST time in 115 years amid Covid-19 crisis -- RT USA News

Lloyd Blankfein Explains Why Reopening The Economy Might Actually Save Lives Zero Hedge

But we digress: Blankfein actually made some good points about the situation facing the American economy during one of his longest and most casual interviews since leaving Goldman more than a year ago. The notion - pushed by CNN, MSNBC, etc - that President Trump is picking 'saving the economy' over 'saving lives' isn't really accurate, Blankfein explained, because - and he's parroting an argument made by an actual real-life ER doctor here - leaving the economy and more importantly the health-care system closed for months risks serious repercussions for the public health.

"It's really health vs health, because poverty, GDP is really a health issue," Blankfein said.

When I was in Sweden last summer, I was perplexed how unhealthy many Swedes look. The picture in Denmark was completely different. Curiously, the Covid-19 incidence rates in Denmark, Norway and Sweden mostly mirror my (superficial and subjective) impression of the health of the citizens of these countries. Lots of obesity in Sweden, lots of cyclists in Denmark.

Posted by: Lurk | May 6 2020 20:31 utc | 11

For people looking for numbers here is one..

here are the numbers of deaths " due" to corona in Switzerland .
00 -19 years old 0 death
20 -29 years old 1 death
30 -39 years old 4 deaths
40 -49 years old 2 deaths
50 -59 years old 23 deaths
60 -69 years old 84 deaths
70 -79 years old 243 deaths
80+ years old 776 deaths
Total for that country 1133

Posted by: Igor Bundy | May 6 2020 20:56 utc | 16

[May 15, 2020] "Lifting all boats" was always a lie. It was simply a way to sell trickle down by claiming that the objectively observable inequality it produced would somehow help everyone, eventually, sort of

May 15, 2020 | www.nakedcapitalism.com

L , May 14, 2020 at 11:16 am

"Lifting all boats" was always a lie. It was simply a way to sell trickle down by claiming that the objectively observable inequality it produced would somehow help everyone, eventually, sort of. There was not and has never been a plan by the Conservative Movement to lift all boats. Only a plan to feign interest in doing so.

Synoia , May 14, 2020 at 11:36 am

The rich were riding on the Boats being lifted by the workers.

orlbucfan , May 14, 2020 at 11:42 am

That pattern has appeared throughout recorded world history. How is it peacefully stopped?

Ed Miller , May 14, 2020 at 7:45 pm

I see the current situation more like the sinking of the Titanic (whether caused by the virus or shady financial dealing, it doesn't matter). The rich passengers get the lifeboats and the rest of the passengers get the ice water. A few survived in the water, so it's time to look to the future. Crony capitalism in a nutshell.

Bsoder , May 14, 2020 at 5:40 pm

Lifting all yachts.

[May 14, 2020] Leverage, neoliberalism and COVID-19

Notable quotes:
"... It should be obvious that if leverage is used to fund the purchase of financial assets those assets will inflate in price greatly. If the leverage is not used for financial assets and is used instead for funding new production then financial assets stay in proportion to GDP. That is of course currently the fundamental weakness in western economies. ..."
May 14, 2020 | www.moonofalabama.org

jinn , May 13 2020 20:35 utc | 245

guidomann wrote:

When augmented with leverage, the exponential dynamic inherent in debt guarantees that financial value runs away far ahead of any amount of GDP implied.
_________________________________________________
You changed the subject slightly.

It should be obvious that if leverage is used to fund the purchase of financial assets those assets will inflate in price greatly. If the leverage is not used for financial assets and is used instead for funding new production then financial assets stay in proportion to GDP. That is of course currently the fundamental weakness in western economies.

So when firms issue bonds and use the money to buy back their own stock then stocks become over-inflated while obviously production stagnates. That practice used to be illegal and will likely become illegal again when the recent damage this practice is eventually realized.

Richard Werner does a good job of explaining these malfunctions in the economy
https://www.youtube.com/watch?v=EC0G7pY4wRE

You are correct that the boom and bust cycles that are the direct consequence of the instability that results from the mismatch of financial assets to productive assets is the mechanism, for those who can take advantage of it, to transfer wealth from others to themselves.
But just like a virus if the parasites become too lethal to the host the parasites will die also.


[May 12, 2020] 'Immediate danger' Half of world's workforce could lose livelihood due to Covid-19, UN agency warns

www.defenddemocracy.press
The International Labour Organization (ILO) has warned that around half of the world's workforce, or 1.6 billion workers, are at imminent risk of losing their livelihood because of the economic impact of the coronavirus pandemic. In its latest report, the UN agency stated that those hardest hit by the financial effects of the Covid-19 outbreak have been 'informal economy' workers, including the self-employed and those on a short-term contract.

"The first month of the crisis is estimated to have resulted in a drop of 60 percent in the income of informal workers globally," the ILO said of the economic damage already caused by the pandemic.

The deepening crisis in many parts of the world has left more than 436 million businesses facing financial hardship and possible closure, the ILO stated, which will inevitably hurt workers. The report listed the worst-hit sectors as manufacturing, accommodation and food services, wholesale and retail trade, and real estate.

"For millions of workers, no income means no food, no security and no future," ILO Director-General Guy Ryder said of the stark impact of an economic dip.

He added that, according to ILO data, there is expected to be a "massive" rise in poverty levels worldwide, unless governments recognize the need to reconstruct their economies around better working practices and "not a return to the pre-pandemic world of precarious work for the majority."

Since the novel coronavirus emerged in China late last year, over 3.1 million cases have been confirmed around the world, and more than 216,000 people have died. Drastic lockdowns to limit its spread have taken a dire toll on the global economy, prompting market turmoil and numerous projections of the heavy recession to strike this year.

[May 12, 2020] Coronavirus To Decimate Colleges and Universities

May 12, 2020 | www.nakedcapitalism.com

Coronavirus To Decimate Colleges and Universities Posted on May 12, 2020 by Yves Smith "Decimate" might be too charitable a forecast for American higher educational institutions, since the word originated with the Roman army practice of killing one man in ten. Coronavirus is hitting pretty much all of the bad aspects of their business models at once.

Let's list them:

Dependence on/preference for foreign students, often not for their accomplishments but for their ability to pay full and even premium fees . Chinese students accounted for one-third of the total. Their enrollment was already falling as of 2019.

.

But Chinese students' contribution to revenues is out of proportion to their numbers. From the New York Times in March :

Universities in English-speaking countries, especially Britain, Australia and the United States, have grown increasingly dependent on tuition from Chinese students, a business model that the virus could dismantle.

With qualifying exams postponed, travel bans spreading and anger rising among Chinese students and parents at the West's permissive attitude toward public health, enrollment could plummet in the coming years, experts said, potentially leaving countries with multibillion- dollar holes in their universities' budgets.

Foreign students were dismayed by the way US schools shut down abruptly and gave little to no help in helping get them back home.

Skyrocketing prices leading more students to question college or emphasize "practical" degrees . As with mortgages, access to debt has led to higher prices. And with student debt terms so draconian, more and more students are trading down: going to cheaper schools or focusing on programs that teach harder skills that hopefully translate into market value.

Bloated adminispheres and gold plated facilities . MBA parasites have colonized universities, with the justification often that they increase fundraising. For what purpose? To pay themselves better, and to create naming opportunities for donors with new buildings, and to justify high charges via plush dormitories. Apparently swanky gyms are common.

All those expensive buildings have become an albatross.

Now consider the impact of coronavirus.

Litigation over terminating on-campus instruction . This is probably the least of their worries. Plaintiffs are seeking refunds for the degradation of the educational product. The schools argue quite explicitly that they are not in the business of educating but of conferring credentials, and it is they alone that determine what is adequate for them to hand out a degree. There is precedent supporting the universities' arguments, albeit with less bad facts than these.

Low likelihood of resuming classes on campus this fall . My colleagues with contacts among university administrators say no one has any idea how to make dorms safe if coronavirus is still on the loose. This has many negative implications.

Why should students and/or their parents be willing to pay full prices for a degraded product? They won't get interaction with instructors. For science and engineering classes, they won't get lab work. They won't get to make connections and meet potential mates. They won't get tips from other students on career and summer job strategies. They won't get to participate in extracurricular activities, which is a low-stakes way to learn to work with other people. They won't learn how to grow up in a somewhat protected environment.

There is the very real possibility that employers will downgrade the value of degrees conferred during the plague years.

It's hard to see how colleges and universities escape cutting tuition, save perhaps the most elite. I can't see any schools besides the most elite can maintain their charges without seeing a big falloff in enrollment. And with them administering classes remotely, the cost of delivery has fallen. And that's before seeing students postponing or abandoning degrees due to the horrible state of the economy.

And what happens to university budgets due to the loss of room and board income?

Schools already looking at probable downgrades . Standard & Poors is already put a long list of higher educational institutions on its negative watch list. Bear in mind that S&P and Moody's tend not to downgrade before Mr. Market already has the bond trading at a lower rating level. From an April 30 Ratings Action :

The public and private colleges and universities affected by these actions include primarily those with lower ratings ('BBB' rating category and below), but also those entities that, in our opinion, have less holistic flexibility (from both a market position and financial standpoint) at their current rating level

While S&P Global Ratings' outlook on the U.S. not-for-profit higher education sector has been negative for three consecutive years now, we believe that the COVID-19 pandemic and related economic and financial impacts exacerbate pressures already facing colleges and universities. The financial impact on institutions from the loss of auxiliary revenue from housing and dining fees, and parking fees; as well as revenues from athletics, theater, and other events, is material for many. For schools with health care systems, lost revenue from cancelled elective surgical procedures could also be significant. The recently passed CARES Act will provide some budgetary relief to higher education institutions; however, despite this aid, we expect to see stressed operating budgets, the scope of which will ultimately be determined by the magnitude of lost revenues, the duration of the pandemic, fall 2020 mode of instruction, and ultimate enrollment figures.

Colleges and universities have reacted rapidly to the challenges presented by the pandemic. They have moved classes online to adhere to social-distancing rules, adjusted admission policies to accommodate disruptions to high school exams, and suspended academic conferences and travel. At the same time, many have implemented material expense cuts, including deferring capital expenditures, and imposing furloughs and layoffs, in some cases, with plans to continue to ramp up cost containment under various fall scenarios. Many colleges and universities have disclosed estimates of 2020 budget shortfalls, despite the inclusion of CARES stimulus funds. We expect that the colleges and universities we rate will face an unprecedented level of operating stress and tightened liquidity, which will worsen the longer and deeper the pandemic lasts.

It's bizarre to see S&P depict sports programs as a financial plus; college football programs in fact are money losers and I doubt basketball programs are enough to bring college sports into the black.

It is also not clear how much more help the Federal government will be willing to provide. Even though Congresscritters will be under pressure to help institutions in their district, the flip side is the Republicans know well that higher educational institutions are a Democratic party province, so they won't be high on their list of rescue priorities.\\

This section seems very much behind the curve, as if S&P talks to too many Wall Street types who are betting on a V shaped recovery:

Many of the colleges and universities that we rate have some headroom to absorb the impacts associated with COVID-19 at their current credit ratings, as they have built up reserves over recent years, hold solid balance sheets, and have relatively low debt levels. However, colleges and universities will face increased downward pressure on their current ratings depending on the extent to which economic disruptions associated with COVID-19 persist. If global travel restrictions are prolonged, or the imminent recession diminishes foreign students' financial means, then some could opt to study or work in their home countries instead. In our opinion, a fall 2020 with significantly fewer international students, as well as lower domestic enrollments overall, will cause serious operational pressures. At the same time, most U.S. colleges and universities depend on endowments and fundraising for a significant portion of revenues, and declining investment performance and endowment market values along with weaker fundraising results could negatively affect credit metrics during the outlook period.

I strongly suggest you look at the list. You'll see many familiar names. In particular, the ones at the very bottom group, which already had a negative outlook before coronavirus, are the most downgrade exposed. Interestingly, Northwestern, which went to the "hedge fund with a university attached" model early and has an AAA rating, is in that cohort. Did they have an even bigger than typical blow up in their portfolio?

Needless to say, this isn't cheery reading. While the universities set themselves for a big fall, a lot of people who had nothing to do with the bad policies will get hurt.


PlutoniumKun , May 12, 2020 at 7:16 am

As an aside, this is another reason why the 'we should relax lockdown as soon as possible' crowd are so very misguided. The education business, along with so many others, gears up after the August holidays right across the northern hemisphere. For many countries, there is a good chance of suppressing the virus between now and the summer so that there can be at least some sort of normalcy restored from August onwards. At the very least, this gives a chance of a normal academic year for students. But this is only a possibility if infection rates can be brought down to a 'track and trace' level over the summer. Failing to do this by September will be devastating for all education providers. The UK third level sector, already hit by Brexit, will be similarly wiped out if the virus is visibly not under control by then.

Another Scott , May 12, 2020 at 7:21 am

Regarding football programs.

Although they are unprofitable for almost all schools, I'm not sure that the impact from cancelling the season is as clear cut, especially for the large D-I programs. Many of the costs like million-dollar coaches, hundred million-dollar stadiums are fixed. Scholarships will likely continue as well. Schools can probably cut costs of the lower paid employees without contracts, like assistant coaches and trainers, but I don't think those are the biggest drivers of costs.

Gameday revenues are almost certainly cashflow positive for the schools (ushers and cleaners aren't paid very much); without them the football teams will be even bigger money losers for the school. The schools might even get fees from their broadcast partners, as is the case with many professional teams.

The Rev Kev , May 12, 2020 at 9:32 am

What happens with all these high-cost games like football and basketball if they cannot get crowds to watch them? Do these crowds off-set much of the costs of staging these games? I suppose that the institutes would be loath to drop them as they are such a "status" program to have but I fail to understand how a coach in such a place is entitled to a multi-million dollar salary as that money has to come from somewhere.

kevin , May 12, 2020 at 10:04 am

Most of their money is made through TV broadcasting rights, not in game ticket sales. People will still watch them. Arguably even more people will watch them, although I don't think that matters because the deals are already locked in with the various networks.

Left in Wisconsin , May 12, 2020 at 6:27 pm

TV is the king but game day revenues are not insignificant for most of the big programs that count on 70,000+ spectators times 7-8 home games a year.

Also agree with Another Scott that big-time college football especially has a lot of fixed costs that will not go away if the season is cancelled. On the other hand, once you get outside the big D1 programs, I do think cancelling football would be net cash flow positive.

SAKMAN , May 12, 2020 at 12:08 pm

Comments like, "Football programs lose money" are so poorly thoughtout I just cant believe they are posted here.

Honestly. . .

Huge amounts of dollars go through those programs and the benefit of that circulating money to sooo many people and companies is enormous. There are many people who want to see those programs continue.

If a Florida school thinks the price tag is too high, it is the begining of a series of price negotiations. . . thats it. Come on!

curlydan , May 12, 2020 at 1:07 pm

first, your "quoted" material wasn't a quote in this write up or comments, so you can take the quotes off. Second, look at the link Yves posted to see how football is a money pit for many D1 schools. Third, I think I understand what you're trying to say that there's tons of money flowing in and around college football, but the gist is that we're talking about the impact to and financial ratings of colleges and universities and not the impact to the Purple Porpoise in Gainesville, FL or similar establishments.

m sam , May 12, 2020 at 2:04 pm

You make it sound like it doesn't matter if they lose money, because with all that money sloshing around there then it's a net positive. The only problem is those universities aren't there to slosh money around in their football programs, they are there so our society can be an educated one. And when instead people start to think that the money sloshing around is more important (as in all areas of human life) the part that was point of the whole endeavor (as in, the education at the university) comes to look more like a cost. And what costs is what is cut. And what is cut is degraded, given a higher price, and otherwise forced to submit to those market forces that looks so good (well, at least when you have dollar signs tattooed on your eyes).

The point is, whether football programs lose money or make lots of money slosh around, this model is exactly the thing that is destroying our society, and exactly what needs to be dismantled. So comments like "Football programs lose money" are exactly why people come around here in the first place, and it seems you must be confused if you "can't believe they are posted here."

Merf56 , May 12, 2020 at 2:17 pm

AS A PSU grad and active alumnus I can attest that Penn State uses its massive football revenues to fund ALL other of the school's sports programs. Though not part of the topic being discussed, football Game day revenues also basically fund theTown of State College's Downtown businesses FOR THE YEAR. And the full fare Chinese student contingent absolutely 'makes' the bottom line there. Those of us involved in alumni activities and meet with Board members and others often are VERY worried .

Duke of Prunes , May 12, 2020 at 3:49 pm

If one reads the article, the key part of the statement about "most football programs lose money" is that it's referring to FCS (Football Championship Series) schools which are the "lower tier" Division 1 schools. Not Big10, SEC, etc. I don't think there's much in the way of TV revenue for FCS either, except when they get a cut of the deal when playing a major team (once or maybe twice a year).

Kirk Seidenbecker , May 12, 2020 at 5:56 pm

https://www.usatoday.com/story/sports/ncaaf/2020/04/14/college-football-major-programs-could-see-billions-revenue-go-away/2989466001/

Larry , May 12, 2020 at 7:25 am

My cousin attends Union and decided she'll take a leave of absence in the fall if they are still remote.

Northeastern in Boston has stated they'll be back in the fall. I believe they are deeply dependent on tuition revenue and have massive debts due to a campus expansion that must have been costly due to Boston real estate prices.

Colonel Smithers , May 12, 2020 at 7:58 am

Thank you, Yves.

Readers may be interested in this from the Guardian: https://www.theguardian.com/commentisfree/2020/may/06/coronavirus-uk-university-finances-student-numbers .

In the UK, Queen Mary, Manchester (labouring under at least a billion pound debt for a state of the art campus by the canals) and (private) Buckingham are teetering. Oxford is also experiencing some discomfort.

Yves Smith Post author , May 12, 2020 at 8:14 am

I made this post unduly US focused due to having the S&P analysis, so thanks for additional input on the UK. The New York Times article above made it clear that UK unis were even more dependent than American ones on Chinese students paying hefty fees.

Colonel Smithers , May 12, 2020 at 8:43 am

Thank you, Yves.

If I have time today and it's still "live", I will pipe up again.

Biologist , May 12, 2020 at 10:16 am

Thanks for that article. I've also heard that rumour about Queen Mary, is there any public information about them?

I wonder how many other UK universities will announce redundancies in the coming months. Would be interesting to know numbers of current vs. normal (last year) applications from Asia for the coming year.

oliverks , May 12, 2020 at 10:35 am

I believe Edinburgh university has already announced things look a bit bleak.

Musicismath , May 12, 2020 at 1:06 pm

Yes, Edinburgh's situation is well known. Other prominent Scottish universities are in similar positions, having gone all-in on rich international students to subsidise their "free tuition for Scottish students" model. They're all very exposed now.

In England, I've heard of a number of institutions this week setting up voluntary severance and redundancy schemes, with rather alarming stated goals for how many staff they want to shed. Big, prestigious universities, too -- again, it's that reliance on international students. The word I'm hearing repeatedly is "bloodbath."

rtah100 , May 12, 2020 at 8:38 pm

Interesting NYT article about Bath. We live on campus (our house is a former uni property) of another southwestern University, famous in no particular order for its campus being a botanic garden, its current vice chancellor being about to retire after 20 years of market-leading pay and it having closed its chemistry department, among others, 20 years ago to make savings to pay for other priorities.

Again in no particular order, we gave remarked in the last few months:
– just how many east Asian students and junior faculty the place has attracted. We have Japanese student lodgers!
– just how many purpose built student factory farms are being built in the city and, more financially perilously, on the campus (building a massive student dorm extension campus on farmland that was prime city centre green space and materially upgrading facilities at other student blocks) and how distorted the local housing market is
– just how long the grass is getting since lockdown. There's little infection risk on a single seater ride-on mower – the groundstaff, botanic garden not withstanding, have been furloughed / laid off to save money. One vice chancellor's salary could pay for them all. Austerity for thee, public subsidy for me.
– just how tone deaf the University is to assert its campus is now closed to the public, when public roads run through it and it is used as a cycling and pedestrian right of way to cross the northern half of the city. The buildings are closed and the students are in their hutches. There is no danger of infection from people taking a walk from their confines .

There is a big reckoning coming, with these bullying institutions suddenly acknowledging their public and local obligations in return for a bailout.

Ps: I don't think the reaction of bath students to avoid sharing an elevator with a Chinese student was racist. Just prudent. On a risk adjusted basis, a Chinese ethnicity student is most likely a Chinese expat and if returning from Christmas or CNY to campus represented a higher risk than a non-Chinese. I was very wary on my weekly commute in January from London, of the Chinese students with big suitcases tagged Heathrow who were all getting off at my stop . Tables have turned now, of course!

Steve H. , May 12, 2020 at 8:03 am

> They won't get to make connections and meet potential mates.

: Sherri Tepper: See. The word Festival. In the Onomasticon it carries the meaning 'opportunity for reproduction.' We talk of School House, but the book says, 'Protection of Genetic Potential.' We say True Game. The book says 'Population control.'

The university of my town had moved from offering professions to Learning How To Learn in the last couple decades. Along with that was the gilting, providing a shared cultural experience, more in line with Tepper's definitions than educational outcomes. The incoming cash provided support for community culture as well, restaurants, arts, weird shops. The fallout for our cosmopolitan lifestyle in a small city is unfathomable.

Deeper even still, in the middle of the last century, educator Frank Templeton wrote from the perspective that every citizen was like a brick, in the structure called a nation, and schools made for strong bricks.

The harsh partial truth is that primary and secondary schools were hollowed out as daycare centers to increase the labor pool. And many parents who were willing to pay to get the older kids out of the house are now forced with a calculation: what's the roi on the educational/professional dimension, and what's the roi on the social/Tepper dimension? If both are low, why pay in this time of great uncertainty?

ChrisPacific , May 12, 2020 at 4:59 pm

I would like to re-read The True Game sometime, but I can't find it anywhere.

nick , May 12, 2020 at 8:17 am

Chinese student applications are well down this year–this from direct knowledge at one school and anecdotal at a few more. Companies that operate in China to connect students to US institutions are laying off. And if numbers at any given school don't absolutely crater (50%+), know that the discounting will have had to have been ramped up to make that possible. Obviously there are health and safety concerns, but there is also a nasty political climate with racist/xenophobic stuff coming from the Republicans that has been in some cases matched by e.g. Biden campaign or NYT and that might clear the way for disastrous bans on student/post-grad visas, if not increased violence.

Shiloh1 , May 12, 2020 at 1:44 pm

University of Illinois "flagship" was prescient to purchase insurance from Lloyds Of London for fortuitous Chinese student reduction risk. International students pay top dollar rate. All good, their insurance broker should be commended!

Duke of Prunes , May 12, 2020 at 8:18 am

Yesterday, Northwestern announced they are laying off ~250 personnel and cutting administrative salaries 10 – 20% (so it must be serious). So much for the "safety" of a higher education job.

polecat , May 12, 2020 at 11:31 am

On a tangential tack, locally, a slight majority of voters in our city passed a school levy to firm-up/construct school dist. infrastructure – elementary/middle-school .. with the future goal of a new shiny high school to replace the old/failing one. In the recent years past, the school board and their boosters would put forth levies that amounted to Taj Maschool 'wish-lists' .. which the community rightfully voted down. Same for the towns within close proximity. So, the result of said measure .. even though it is lower that the previous ones, is the rise, by hundreds of $$ annually (a bond floated, to be pay off in X years .. only to have new one's brought forth after), to every property owner to achieve these goals .. dollars that many would find a true burden Before the pandemic will be hit even harder going forward. We are not what one would call a rich community .. unless one only considers the movers/shakers/boosters. We rely less and less on timber exports – happening in spades now! – with incoming revenue predicated on the vaunted idea of 'Tourism'. 'Sigh'
I see a failure of those same movers/shakers/boosters to consider that the whole college track gristmill is the wrong approach .. bring back hands-on vocational training instruction that was nixed years ago, having left it to the local college to do, with the added $-stream THAT entails .. and put much less emphasis on 'college for college sake' There are a plethora of skills that young folk are not being taught, that they will need for their very survival, in a conflicted and low resource world! Imo, the Federal Dept. Of Ed needs to be abolished, thus putting a end to it's often onerous 4 to 8 year changing 'mandates', and allow state and local communities to come up with their own models of instruction. Sure, some will no doubt fail, but I believe many others would in fact, thrive. There should of course be iron-clad restrictions on just who has sway on funding and 'pull' (no hedgefunds/private equity/ scoundrels, rakes, and thieves !) Leave to the locals to hash out!
A little over a century ago, we had that kind of evironment, where children actually learned of the world, whilst also becomeing proficient in the basics .. as well as taking on truly practical skillsets .. from often small school settings – just look at an any exam test-sheet from back then to get an idea of how badly we've handled things since. This pandemic has brought to light our learned follies for sure.

SouthSideGT , May 12, 2020 at 12:24 pm

Very true. I read that in EvanstonNow. Also saw a story from about a month ago about the Wildcats 2020 prospects which IIRC previewed the 2020 schedule. So I guess college football will go on even as colleges are decimated by the coronavirus. Priorities, indeed.

Jeff N , May 12, 2020 at 3:06 pm

I saw that. At least for now, those people are retaining their benefits and health insurance.

kareninca , May 12, 2020 at 4:55 pm

I looked this up. It does not appear to be as dire as you describe it. The staff members are being temporarily furloughed, not laid off. And it is "university leaders" and deans that are taking pay cuts. That is not administrative salaries generally. I am not saying it won't get worse, just that it is not quite so terrible yet.

"University leadership said approximately 250 staff members will be temporarily furloughed, the university will suspend 5% automatic and 5% match contributions to staff retirement plans, and university leaders will take a 20% pay cut.
NU deans will also take a 10% pay cut reduction."

https://abc7chicago.com/education/northwestern-university-furloughs-250-staff-announces-pay-cuts-due-to-covid-19-pandemic/6175678/

Kirk Seidenbecker , May 12, 2020 at 5:59 pm

https://dailynorthwestern.com/2019/05/23/sports/report-northwestern-received-big-ten-payout-of-roughly-54-million-for-fiscal-year-2018/

rusti , May 12, 2020 at 8:30 am

MBA parasites have colonized universities, with the justification often that they increase fundraising. For what purpose? To pay themselves better, and to create naming opportunities for donors with new buildings, and to justify high charges via plush dormitories. Apparently swanky gyms are common.

I wish it were unique to the Anglosphere. Even here in Sweden one of the technical universities in my city is in the midst of a big economic crisis. My friends who work there as researchers attribute it to obscene administrative bloat that they've seen growing rampant in the past decade. This is also after the implementation of big tuition fees for non-EU students in 2011 (there were no tuition fees before that) which dramatically lowered the quality of international applicants.

KLG , May 12, 2020 at 8:40 am

Athletic budgets (public institutions) in context:
https://sports.usatoday.com/ncaa/finances/
The far right column is the key: percent of athletic budget that is "allocated," which means the part of the budget that comes directly out of the hide of the institution and its students. About two dozen of the usual suspects make a "profit." My alma mater is way profitable but still takes several million from captives in "student fees." Private institutions in the black would include Notre Dame, Stanford, USC, and probably Duke (basketball, which disappeared this spring). Note what the athletic budget does to schools like UCONN, Rutgers, and UMASS, not to mention the smaller state schools. Something's gotta give. It won't be the athletic departments.

When I bring up these data with academic colleagues, especially from smaller institutions that have reestablished football as the prime money pit over the past 25 years, all I ever get is the bovine stare of disbelief.

kevin , May 12, 2020 at 10:13 am

To be fair, what this analysis doesn't take into account is how many students are going to the school (or how much more they are paying) who would not have gone if there were no sports teams

I know thats a dumb reason to choose a college, but remember these are 18 year olds making a decision. I suspect many more than you would assume include going to a "winner" and additional social tailgating events as part of their criteria

MLTPB , May 12, 2020 at 10:51 am

Good point. I was going to ask about that.

Additionally, I think there is a mentality, or pride, that you too can be like Duke in basketball or Notre Dame in football. But, first you have to commit to winning, or invest early.

KLG , May 12, 2020 at 11:09 am

Yes, this is the "intangibles, school spirit" argument, a perennial favorite of presidents and athletic directors and boards of trustees. It may be somewhat valid at the larger schools of the Power Five conferences (SEC; Big-10, where they apparently can't count to 14; ACC; Pac-12; Big-12, actually 10) but absolutely nowhere else except Notre Dame. And even in these conferences, the financial drain on some schools is huge. Way past time to realize the sunk costs associated with college sports are simply lost. Georgia Tech and Berkeley need big time college sports (i.e., football)? Really? Georgia Southern and Illinois State? Connecticut and Rutgers? Robert Maynard Hutchins to the white courtesy phone, please. Yes, I am unreasonable, but these are unreasonable times.

And except for a brief renascence under Lou Holtz, Notre Dame football hasn't been much since Ara Parseghian retired and the Boys from Chicago are still and forever nonplussed about that.

John Wright , May 12, 2020 at 1:19 pm

And there is the small irony of educational institutions promoting a sport that can cause serious head and bodily injury (American football).

Maybe some football programs do eventually pay for themselves via alumni contributions, but one wonders if there is a herd mentality in colleges NEEDING to have a football team.

I know of one University of Calif campus (UC Santa Barbara) that dropped its football team in the late 1960's, weakly woke it up in 1987 and then dropped it again in 1992.

https://en.wikipedia.org/wiki/UC_Santa_Barbara_Gauchos

"1985 a student referendum approved funding for a Division III, non-scholarship team. The team began play in 1987,.. with a 33-15 record from 1987 to 1991. However, in 1992 the NCAA decided to forbid schools playing in Division I in other sports from maintaining a lower level football program, and UCSB dropped the sport again."

Maybe other schools can learn from UCSB's experience?

juno mas , May 12, 2020 at 5:54 pm

My high school buddy played on the last 1960's football team at UCSB. As a student there, many of us were too busy protesting the war and burning the IV bank than attending football games.

John Wright , May 12, 2020 at 5:49 pm

I looked at the ncaa/finances link and saw the "allocated" section.

I find that focusing on the allocated % is misleading as a school with an athletic budget of only $100 that is not covered by gate receipts would show as %100 allocated.

This could be put in more perspective if the allocated dollar amount is divided by the number of students.

For example, the University of California, Davis shows up at a high 81.90% allocated with the allocated amount of $30,680,083.

UC Davis shows as having a student population of 35,186 per Google.

Per student, this is about $872 per student per year.

While Connecticut shows up at a seemingly better 49.23% allocation, but spreading the shortfall over the 32183 student body size of Connecticut gives a cost of $1213 per student per year.

One can wonder why the document did not give the per student cost and instead published a %allocation figure.

Bob's Your Uncle , May 12, 2020 at 9:38 am

These are historic times and one of the biggest sacrifices this generation of college students will have to make is sitting through Zoom classes.

Let's keep this in perspective. Missing college because you've been drafted to fight in a war across the Pacific is not the same as delaying your college education because you can't get drunk with your frat. In the coming years employers will look much favorably on students that stuck to their 4 year plan regardless of the troubles they were (or thought they were) facing.

PNWarriorWoman , May 12, 2020 at 9:50 am

The Chronicle is tracking individual colleges' plans. Currently the vast majority say they are planning for an in-person fall semester. This database is not behind a paywall Here's a List of Colleges' Plans for Reopening in the Fall We'll see when August rolls around.

CGKen , May 12, 2020 at 11:49 am

At my university, the Registrar calculated that our campus has only ONE room large enough to seat more than 50 students maintaining 6 feet of separation.

The rule of thumb is that covid capacity is 25-30% of normal capacity, so most classes will need to be capped at 20 students or fewer. Probably better for education, but very much not compatible with business as usual.

I don't see any way we reopen in any way approaching normal.

WJ , May 12, 2020 at 12:16 pm

My university is probably going to be requiring us to teach half of the students in a class in the classroom, then half of the students in the class online, alternating which group is taught in a classroom and online throughout the semester. Unless this doesn't work, in which case we might go all online, or all in person. What is being suggested–I kid you not–is that we design each of our courses for the Fall to be taught in any one of three, or more, ways. We're also taking pay cuts and losing the university's contribution to our 403b plans. Good news though, we're still going through with our application to the NCAA for division 1 status!!

The rot at the top of the university structure runs deep, I am afraid.

P.S. And, of course, our annual evaluations–usually the basis for a raise of between 1-1.5%–will continue, even though we're all taking pay cuts. Lol

David , May 12, 2020 at 10:16 am

Thank you for this, Yves. The problem is much bigger – and with more ramifications – than most people realise, even in the education world itself .

The Guardian article linked to by CS talks about some of the immediate financial problems this year. IN addition, huge numbers of students are going to consider putting off going to University, even in their own country, let alone abroad, because they can't be sure that the classes will start on time, or even at all. There's an increasing tendency, especially in Europe, for Universities to have highly complex exchange agreements with each other, especially at Master's level: I've taught classes with fifteen nationalities, the majority on exchange from elsewhere. At the best of times that's a logistic nightmare, and requires complex software to juggle. It's worse because the tendency over recent decades has been to replace traditional degrees with a few options, by Starbucks-style hand-made degrees assembled from bits and pieces. This works, as long as all the students who have signed up to come can and do arrive. Otherwise, it can mean empty classrooms or teachers with one student. Chaos is the kindest word one can use to describe what might happen in September. Courses will have to be cancelled and lecturers' contracts torn up. It's also going to make it permanently much more problematic to run courses on the expectation that you can attract foreign students and send your own abroad. I'm not sure, for example that I would now sign up for a four-year degree in (let's say) Japanese or Latin American Studies including a year abroad that might not materialise. Language degrees, indeed, are likely to be among the first casualties: it's almost impossible for one person to teach, say, Japanese grammar on line.

I've taught courses using Zoom, and to be honest it's better than nothing but not a lot better. It only works if everybody is approximately on the same timezone, and even then, once you get above twenty students you can't actually see all of them on the screen and you have no idea who's listening and who's doing their Facebook page. The students get no interaction with you, and if you are using Powerpoint or similar they may hardly see your face the whole time. It's not clear that students in future years will sign up for courses where face to face teaching could be suspended at any moment because the virus comes back. Remember that the virus is now pretty much everywhere and could reappear pretty much everywhere over the next few years. When you add to that that, even today, students expect to "go to" University rather than have it come to them, and to at least start to mature and find their feet, you have to wonder how attractive University is going to seem, especially given the frightening costs involved.

The situation is no better in Europe. In France, governments over the last decade have made a huge push to attract foreign students, not just at Universities, but at the elite Grandes Écoles like Sciences Po in Paris, where a third of the student body is from abroad and many courses are taught in English. (You can study for some degrees in France without speaking the language). Not many people will pay for the privilege of hearing French teachers teaching in English while cooped up in their parents' home in a country a long way away. For some institutions this is going to be catastrophic.

I have to say, though, as somebody who's been involved with Universities most of my life, that this isn't all bad. In the UK, for example, there are simply too many degree courses, and people who aren't really up to it are paying lots of money they can't afford for courses they don't need and won't use. This could be the start of a sanity check. It's interesting that the two universities mentioned in the Guardian article, including that of the author, didn't used to be universities at all. They were both Polytechnics, specialising in vocational teaching, magically transformed into universities about 25 years ago by giving them a new name. This has led to too many graduates chasing university jobs, and too many, frankly, sub-standard courses. There'll be some winnowing out. Partly for bad reasons – you can't put engineering courses entirely on line – and partly for good ones: do I really need that Master's degree in Intersectional Theory?

There's a lot more to say but that'll do for now.

PlutoniumKun , May 12, 2020 at 11:13 am

Thanks for the insight, David. As someone who did a Masters in one of the former Poly's (in Oxford) back in the 1990's I was astonished at the commercialisation and pressure on teachers in comparison to what I'd experienced doing under and post grad study in pre-crapified (if very under-resourced) Irish Universities in the 1980's. Even then, the pressure the junior lecturers were put under seemed extreme. I'm told by lecturer friends that its gotten much worse over the years. And don't get them started on the standard of some of the fee paying students .

I hope you are wrong, btw, about Japanese grammar, as I've just started online classes in precisely that topic!

David , May 12, 2020 at 12:44 pm

Sorry, badly expressed.You can indeed study languages online – in fact I've done so, including Japanese as it happens. What I was suggesting is that actually teaching languages at degree level entirely on line, and especially when you've got three writing systems to worry about, or when you have tonal systems, or non-standard sounds to memorise and practice, is going to be a hell of a problem. I think there's a substantial difference between studying a language online to use it, and studying it to degree level, which at least in theory qualifies you to teach it.

PlutoniumKun , May 12, 2020 at 1:08 pm

Don't worry, I know what you meant!

In fact, I was just thinking of that yesterday, when watching an online conversation between two YouTuber Japanese teachers who were discussing the different ways of approaching the language. It seems to me to be a golden age for language learning, there are so many great resources available cheap or almost free online (I'm still picking and choosing which method works best for me and which ones are worth supporting), but at the same time, I was wondering if this is positive or negative for the old fashioned academic method.

John Saari , May 12, 2020 at 11:39 am

Newton spent two years on the farm during the plague years and invented the calculus and some ground breaking physics. Not to be too optimistic but perhaps there are some young folks who can profit from a bit of time alone to think and tinker.

SouthSideGT , May 12, 2020 at 12:30 pm

Thanks, David. Lots to unpack there. Much appreciated. And my two cents is that out of this historic pandemic, maybe our great established universities and colleges will drive online huckster "universities" out of business.

ambrit , May 12, 2020 at 1:11 pm

In a general view from the cheap seats, the real bottleneck here is the elite's usage of "degrees" as gateway metrics for employment decision making. Thus, the above mentioned transformation of "Trades Schools" into "Universities." I personally have encountered marginally competent managers who owe their positions to their credentials, and not any displayed skills. I have also encountered grossly incompetent managers who are not replaced by upper management because said upper management will not consider slotting "up from the ranks" workers into positions that they are manifestly qualified for by virtue of hands on working experience, but lacked credentials.
This also highlights the mingling of both "Higher Education" programs with "Trade School" ones. As a rule of thumb, when one tries to be all things to all people, one ends up being nothing to anyone.

allan , May 12, 2020 at 10:25 am

One to keep an eye on is the University of Austrian Economics Chicago.
Under its current president, they have been spending like crazy, are heavily tuition dependent,
and (like Northwestern) have a large medical center which will have taken a massive hit
from the pause on elective surgeries.

But six years ago, Chicago already an outlier:

University of Chicago Is Outlier With Growing Debt Load [Bloomberg, 2014]

While the University of Chicago has about the same amount of debt as Yale University in New Haven, Connecticut, its $6.7 billion endowment is a third the size of the Ivy League school's $20.8 billion. Chicago's debt as a percentage of its endowment is 54 percent, compared with 17 percent for Yale.

Harvard, based in Cambridge, Massachusetts, and Stanford University, near Palo Alto, California, have the most notes and bonds among the 20 richest schools. Yet as a percentage of their endowments, the obligations represent about 17 percent and 26 percent, respectively.

It would be a damn shame if the home of expansionary austerity were to end up in the financial ICU,
on the receiving end of Dr. Market's shock therapy.

NoBrick , May 12, 2020 at 10:40 am

"The schools argue quite explicitly that they are not in the business of educating but of conferring credentials, and it is they alone that determine what is adequate for them to hand out a degree. There is precedent supporting the universities' arguments."

"What is adequate",
didn't arise as a product of public debate (as it should have in a democracy),
but as a distillation of private discussion. Their ideas contradict the original American charter
veneer (of/by/for) but that doesn't disturb them. After all, they are on a mission.
A "doctrine of faith" was/is their cognitive source

Dewey's Pedagogic Creed statement of 1897:
"Every teacher should realize he is a social servant set apart for the maintenance of the proper
social order and the securing of the right social growth. In this way the teacher is always the
prophet of the true God and the usherer in of the true kingdom of heaven."

Not to worry, if credentialism doesn't fly your kite, we have salvation by consumption, or
redemption via electoral saviors

Max , May 12, 2020 at 10:47 am

Student jobs are probably some of the first to go, definitely anybody with a job on campus is probably now out of work. My brother lives in a small college town and he says it's a ghost town. Their economy depends on students spending their loan/mom/dad's money.

If I were a student, I would be seriously thinking twice about taking a semester off, moving back with my parents and waiting for things to shake out. Who wants to do zoom classes? No way would I have been disciplined enough to self study at that age (or even now).

College is still in session in a lot of places. It would be interesting to know how many students have already disappeared.

juno mas , May 12, 2020 at 6:46 pm

My local California community college transitioned to online classes mid- Spring semester. Most of the foreign students (Chinese, Scandinavian, European, etc.) returned home pronto. Registration for Fall 2020 classes (likely to again be online) is way down.

Colleges are huge economic drivers in most towns. It sustains high rental income for landlords, lots of late's for Starbuck's, and retail stores soak up mucho dinero from them. Fortunately the wild and crazy driving antics around campus have abated.

lyman alpha blob , May 12, 2020 at 10:58 am

It would really be a shame if colleges and universities were forced to cut some of their bloated administrations in order to make up for the shortfall How would we ever get along without the people who go to meetings all day?

Alex Cox , May 12, 2020 at 12:52 pm

+1. CU Boulder just built a massive building which they call the Center for Academic Excellence. I thought the university was already such a center, but apparently not.

What goes on in the Center for Academic Excellence? Is any teaching done there? No. It's extra office space for the administrators/mbas.

KLG , May 12, 2020 at 2:28 pm

I remember a faculty member (an Australian, naturally) at my home institution commenting on our recently established Center for Excellence in Something-or-Other: Why don't they just go ahead and call it the Center for Mediocrity in Something-or-Other ? That one stuck with me during my subsequent peregrinations. I have been fortunate to avoid such centers during my career.

CGKen , May 12, 2020 at 4:42 pm

Well, no luck so far after the first round of furloughs. Some of the admin had their pay reduced (don't worry they'll still make well into six figures next year), but they all still have jobs.

DanB , May 12, 2020 at 11:07 am

I am in Mass., retired and teach part time at two local colleges, one private and one a community college. The private college has already cut some classes for the fall semester, which they are trying to find a way to hold on-campus this fall. They are hoping to reinstate some of these canceled classes if enrollments of incoming freshmen increase in the next several weeks. As for the community college, it is conceivable -but who knows?-enrollments will increase due to the low cost option it presents compared to private colleges and universities -and even to public universities.

allan , May 12, 2020 at 11:14 am

And on a completely unrelated note. /s

Protecting Art in College Collections [Inside Higher Ed]

Academic museum directors know their fortunes are tied to those of their parent institutions.
Some worry about the possibility that collections could be raided to raise funds.

Rather than worrying about this possibility, shouldn't they be embracing the disruption?
Campus art museums can be at the innovative cutting edge of modern higher ed finance.
For $35 million, shouldn't a job creator on the Board of Trustees get more than his name
(and it's usually a he) over the entrance to another cookie-cutter new dorm?

I'll take the small Turner for the master bath, the Modigliani for the dining room,
and a really big Rothko for the wine cellar.

Doug , May 12, 2020 at 11:18 am

I jokingly told my daughter no more Northwestern for you it's looking like Wuhan State.

anon in so cal , May 12, 2020 at 11:56 am

Here's the Chronicle's updated survey results from U.S. colleges and universities, concerning their tentative plans for the Fall 2020 semester:

https://www.chronicle.com/article/Here-s-a-List-of-Colleges-/248626?cid=wcontentgrid_hp_1b

L , May 12, 2020 at 12:15 pm

I am at a University and I can speak to the fact that it is shaping up to be complicated. Some institutions are clearly more leveraged than others but there has been another factor which is the increasing focus of institutions on branding. Some of the bigger names e.g. MIT and even some "state" schools such as Berkeley have long since shifted from serving their communities to being international brands. The others like mine have attracted large foreign populations which supplement some programs notably in STEM fields but also maintain mostly local students.

As a side note the risk for the non-US students is partially travel though Trump's behavior has already turned some off. It is also their own domestic economies. Despite the happy talk China's economy is taking a big hit from this and will continue to do so. Going abroad requires someone at home having the money to send you. That is less of a thing.

Going forward one route is already being shopped around in the groupthink of record (NYMag) The Coming Disruption Scott Galloway predicts a handful of elite cyborg universities will soon monopolize higher education. . The model here is neoliberal education on steroids or "MIT+Google" basically take the existing brands serve them up to 10,000 students and have the major brands survive by eating the weak. This of course completely sheds the idea of education or college as a public institution and doubles down on the credentialing concept with the assumption that students will prefer Amazon-approved educational materials delivered in the comfort of their home over learning from a live instructor.

Call it disaster education.

The idea is clearly an update of the "Moocs will kill education" argument and is being trotted out as "inevitable" by someone with extensive silicon valley connections who clearly believes that he will be one of the survivors. Interestingly there is no notion that this education will be better for anyone (except the smaller slice of winners) only that it will allow the already wealthy to survive. For all that the interviewee makes two points that are salient:

Let's look at Apple. It does something like $250 billion a year in revenue. Apple has to convince its stockholders that its stock price will double in five years, otherwise its stockholders will go buy Salesforce or Zoom or some other stock. Apple doesn't need to double revenue to double its stock price, but it needs to increase it by 60 or 80 percent. That means, in the next five years, Apple probably needs to increase its revenue base by $150 billion. To do this, you have to go big-game hunting. You can't feed a city raising squirrels. People ask if big tech wants to get into education and health care, and I say no, they have to get into education and health care. They have no choice. (emphasis mine)

So even the proponents are clear that this kind of eat-the-system approach is all about stock boosting.

That's the unfortunate part. When the government isn't able to bail out America, billionaires step in. But it always comes at a price. Those people become largely untouchable, and they can't be removed from office. Right now, we're in a situation where it's no longer NASA putting us on Mars or the CDC testing us for antibodies. It's Elon Musk and Jeff Bezos. Basically, thanks to billionaires, you're going to pay the lowest tax rates.

And again it all comes back to tax rates, although so far as I can tell it is not my rates that keep getting lowered. Whether the economy is working for everyone? Who cares.

That said there is of course another alternative which is to treat education as a service again and to fund the government again so that we can actually build the nation not in a few power centers but everywhere. This would be driven by the recognition that the students taking MIT+Google online gain no real benefit if they continue to live in a community with no jobs and that such an eat the young approach will only speed the slow death of the states. But that is not Wall Street's concern.

Rebuilding communities would mean making sustained community investments and paring down our obsession with branded elites in favor of local institutions. But doing that requires governing for Americans not Wall St.

flora , May 12, 2020 at 1:26 pm

+1. Thanks for this comment.

flora , May 12, 2020 at 12:15 pm

My uni's admin sent out an email saying something along the lines of "our uni isn't a 'place', it's an intellectual endeavor that continues even when we're apart. We're a global enterprise that can be joined and participated in from anywhere." They're trying to convince parents and students that remote online learning has the same value as in-person classes, lab work, and faculty mentoring. (Not to mention the 'college experience' and meeting people in your age group who you may meet again in your career.)

I'm afraid the uni's sales pitch is running into strong headwinds. Parents have no interest in paying full, high dollar tuition for half a college experience. Students have no interest in paying full, high dollar tuition for online only classes.

flora , May 12, 2020 at 12:39 pm

adding: a few years ago, the admin went all in on a public-private debt financed real estate development campus buildings scheme that has left it in a world of financial hurt, even with full enrollment and high tuition. For some reason the endowment (huge) is never touched as a funding source for dire times. Nor are the sports programs' funding. odd.

Alex Cox , May 12, 2020 at 12:39 pm

Higher education in the US is not necessarily a Democrat environment. The professoriat may be liberal, but the regents and administration can be extremely right wing – as is the case of the University of Colorado, where I taught.

Swamp Yankee , May 12, 2020 at 1:38 pm

The President of Northwestern, Morty Schapiro, was the President of my undergrad alma mater (Williams College) back in the early 2000s. I personally tousled with him, made fun of him on the dais as Class Commencement Speaker at graduation, called him names in the school paper -- because then, I saw, though I may not have had a fully adult consideration of it, that he was a tool for The Money Power. Outright contempt for the scholarship kids who couldn't get donations.

Scuttlebut from Professors, with whom I was close, both in the humanities and stories I heard from my friends in the Sciences, was that while "Morty" (as he demanded to be jocularly known) led a building wave that tore down much of a quaint semi-rustic campus and put the endowment funds in the hands of banksters, which came a'cropper in 2008 when he had providentially moved on to better and brighter opportunities . at Northwestern!

It seems he did much the same there.

On a tangential note, I was a grad student during the Great Financial Crisis of '08, and in the State of Michigan, which was among the worst hit (poor Michigan, so far from God, so close to the United States .), the differences that a hit to endowment reserves entailed were immediately and viscerally felt. A good example: food. Before the Crisis, we'd be treated to sumptuous, delicious spreads, Indian, Middle Eastern, quiches and cakes, you name it. After the crisis -- if there was anything beyond coffee and rolls, you might be lucky to grab some pizza or fruit. It was night and day. And that was at a relatively rich institution.

As someone who teaches at a community college that was holding on by the skin of its teeth beforehand, I am not optimistic as to its long-term viability.

We shall see. Stay safe and healthy, everyone.

L , May 12, 2020 at 2:20 pm

Yes stay safe. College presidents have a way of behaving like CEOs.

Jeff N , May 12, 2020 at 3:07 pm

Sad that all the big Illinois public colleges are found in the last list in that link, under "schools which already had a negative outlook"

kareninca , May 12, 2020 at 4:43 pm

If your family still has the money for this sort of thing, and there is a college that is very hard to get into that you would like to attend – in one manner or another – this would be a good year to apply. There will be less competition for admission.

Maybe the pandemic will bring a partial reprieve to small local rural colleges. People with money may decide to send their children to someplace like St. Olaf (if they live in that state). It is easier to arrange physical distancing when you have lots of open space – rather than eg. at NYU or Columbia. And if the kids have to come home in a hurry, they will still be in-state. And they won't be bringing back big city exposure.

Shiloh1 , May 12, 2020 at 7:52 pm

St. Olaf very good for cross country running.

flora , May 12, 2020 at 7:57 pm

St. Olaf is a very good small private college in Minnesota. Much respect to them. This doesn't diminish the sudden new larger requirements for the larger world, as is. imo.

[May 11, 2020] The global economy is in deep trouble was evident in 2019 and it is now enduring a sliding down into the abyss. The frantic 2008 policy of propping up Asset (Debt) prices with easy liquidity through Bank Money now meets the reality that Main Street is being poleaxed even more than hitherto.

Notable quotes:
"... Hospital chains in USA are in the hands of private equity as are Care Homes and whole swathes of infrastructure. Where PE does not hold the equity, management has simply leveraged to the hilt as at Boeing. Using Debt to fund Share Buybacks is the biggest waste of capital and puts business in run-off like a Mutual Fund. In the time Covid-19 has been in the Media most Western governments could have set up a Manufacturing Facility to produce PPE to any specified design. It is not like starting a space program. ..."
"... The truth is that Politics is full of lawyers - nice schools, nice universities, nice offices with the highest-tech product being a PC and a Webcam. In the days when military service was combat related rather than pen pushing and degree chasing, and people actually knew how trucking functioned and machines ran in factories - it was evident how the command system worked from desk to shop-floor. ..."
"... Today it is all Windbaggery. Failure is too well rewarded and Success easily wiped from the Doers by the Talkers. ..."
"... They wondered if Wuhan was China's "Chernobyl Moment"...- in fact it is the Chernobyl for The Western Societal Model. After all, Wall Street should be able to fix this situation - Masters of The Universe - they are where the Physics grads go to program trading systems - that is where the talented are sucked into the Brave New World. Why hasn't Wall Street solved it. What has Jamie Dimon done - he is always ready with comments ..."
May 11, 2020 | www.moonofalabama.org

Paul Greenwood , May 10 2020 7:57 utc | 49

I tend to ignore academic articles contrasting 21st Century pandemics with those in predominantly agrarian economies centuries ago. They are interesting in their own right but not prescriptive in any way unless you are obsessed with Labour Theory of Value and Ricardian Rent Theory.

That the global economy is in deep trouble was evident in 2019 and it is now enduring a step-change down into the abyss. The frantic 2008 policy of propping up Asset (Debt) prices with easy liquidity through Bank Money now meets the reality that Main Street is being poleaxed even more than hitherto.

Hospital chains in USA are in the hands of private equity as are Care Homes and whole swathes of infrastructure. Where PE does not hold the equity, management has simply leveraged to the hilt as at Boeing. Using Debt to fund Share Buybacks is the biggest waste of capital and puts business in run-off like a Mutual Fund. In the time Covid-19 has been in the Media most Western governments could have set up a Manufacturing Facility to produce PPE to any specified design. It is not like starting a space program.

The truth is that Politics is full of lawyers - nice schools, nice universities, nice offices with the highest-tech product being a PC and a Webcam. In the days when military service was combat related rather than pen pushing and degree chasing, and people actually knew how trucking functioned and machines ran in factories - it was evident how the command system worked from desk to shop-floor.

Today it is all Windbaggery. Failure is too well rewarded and Success easily wiped from the Doers by the Talkers.

They wondered if Wuhan was China's "Chernobyl Moment"...- in fact it is the Chernobyl for The Western Societal Model. After all, Wall Street should be able to fix this situation - Masters of The Universe - they are where the Physics grads go to program trading systems - that is where the talented are sucked into the Brave New World. Why hasn't Wall Street solved it. What has Jamie Dimon done - he is always ready with comments

Time to Re-Engineer these Societies towards Substance and away from Speculation

[May 10, 2020] Lockdowns May Aggravate America's Next Health Crisis An Explosion Of Deaths Of Despair, Study Finds

Notable quotes:
"... Polls of life satisfaction taken since the outbreak began have reflected a rapid erosion as 33 million Americans have joined the unemployment rolls over the last months. NY Gov Andrew Cuomo said during a recent daily briefing that NY is seeing a spike in drug and alcohol abuse as people sit around all day with nothing to do and nowhere to go. ..."
"... But of course the tremendous levels of financial uncertainty coupled with the unique characteristics of this crisis make it pretty much impossible to model - any research is really an educated guess, at best. ..."
"... "Unemployment is going to have a very important impact on deaths of despair." ..."
"... His proposed strategies including investing more resources in helping unemployed people find meaningful work, and/or training the armies of contact tracers that de Blasio has now promised to hire to spot people at risk of self-harm. ..."
May 10, 2020 | www.zerohedge.com

Doctors , scientists policymakers and even 'non-experts' posting on social media have argued that shuttering the health-care system to all non-emergency care risks sparking other public health crises from a spike in heart attacks and advanced cancer diagnoses, to so-called "deaths of despair."

In some areas, a spike in suicides has already been recorded since the start of the outbreak. And now, a newly published paper released Friday has attempted to quantify deaths that might occur because of the mental-health ramifications of widespread economic chaos caused by the crisis. The research - which hasn't yet been peer-reviewed - found the isolation, grief and economic hardship related to COVID-19 are conspiring to supercharge America's already-burgeoning mental-health crisis, likely setting the stage for tens of thousands of suicides down the line.

Specifically, the researchers tabulated that as many as 75k additional "deaths of despair" could be caused by the outbreak and the economy-crushing measures implemented to stop the spreads. "Deaths of despair" typically refer to suicides and substance-abuse-related deaths, according to Bloomberg .

The research was carried out by the Well Being Trust and researchers affiliated with the American Academy of Family Physicians. One of the report's authors said he hopes the research is eventually proven to be incorrect.

"I hope in 10 years people look back and say, 'Wow, they way overestimated it,'" said John Westfall, director of the Robert Graham Center for Policy Studies in Family Medicine and Primary Care, who co-wrote the report.

But the sizable spike in suicides, overdoses etc since the last major crisis (the financial crisis) is reason to be concerned.

Even as the American economy rebounded after the last recession, suicides and overdoses cut into Americans' life expectancy. Mental health experts worry that the economic uncertainty and social isolation of the pandemic will make things worse at a time when the health care system is already overwhelmed. The suicide rate in the US has already been rising for two decades, and in 2018 hit its highest level since 1941, Bloomberg reported, citing a piece published by JAMA Psychiatry (a prestigious medical journal) back in April.

"There's a paradox," said Jeffrey Reynolds, president of a Long Island-based nonprofit social services agency, the Family and Children's Association. " Social isolation protects us from a contagious, life-threatening virus, but at the same time it puts people at risk for things that are the biggest killers in the United States: suicide, overdose and diseases related to alcohol abuse."

Polls of life satisfaction taken since the outbreak began have reflected a rapid erosion as 33 million Americans have joined the unemployment rolls over the last months. NY Gov Andrew Cuomo said during a recent daily briefing that NY is seeing a spike in drug and alcohol abuse as people sit around all day with nothing to do and nowhere to go.

"One of the main things people should take away from this paper is that employment matters," said Benjamin Miller, chief strategy officer at the Well Being Trust and a clinical psychologist who worked on the paper. "It matters for our economic livelihood, and for our mental and emotional health."

But of course the tremendous levels of financial uncertainty coupled with the unique characteristics of this crisis make it pretty much impossible to model - any research is really an educated guess, at best.

Still, the researchers believe it's a useful warning, and something important for policy makers to keep in mind.

"It's useful to have a wake-up call," said Ken Duckworth, chief medical officer at the National Alliance on Mental Illness. "Unemployment is going to have a very important impact on deaths of despair."

Benjamin Miller, chief strategy officer at the Well Being Trust and a clinical psychologist who worked on the paper, proposed several solutions that could be enacted to, uh, depress the number of suicides.

His proposed strategies including investing more resources in helping unemployed people find meaningful work, and/or training the armies of contact tracers that de Blasio has now promised to hire to spot people at risk of self-harm.

[May 10, 2020] April Jobs Report 42 Million Unemployed 25.5% Unemployment Rate

May 10, 2020 | www.zerohedge.com

Here Is The Real April Jobs Report: 42 Million Unemployed, by Tyler Durden Sun, 05/10/2020 - 15:30 Friday's job report - according to which a record 20.5 million jobs were lost in April, some 10x more than the depths of the Great Depression, resulting in a 14.7% unemployment rate - was ugly enough as is, the NYT summarizing the catastrophic nature of the economic collapse with the following creative front page.

The truth, unfortunately is even uglier.

While it is true that what the BLS reported that the April unemployment rate (UR) was less than expected (14.7% versus consensus of 16.0%) and the drop in payroll employment of 20.5 million was also less than the 22.0 million expected, Standard Chartered bank has calculated that adjustments to the headline unemployment rate push the effective number of unemployed to 42 million and the effective UR rate to 25.5%, higher even than the U-6 underemployment rate of 22.8%. Worse, if one treats underemployed in line with the U-6 methodology, the true April unemployment number would rise to an mindblowing 27.5%.

How does one get these numbers? As the bank's chief FX strategist Steve Englander explains, start with the 23.1 million unemployed as published by BLS. To this add 8.1mn people who have dropped out of the labor force since February (previously the labor force had been growing steadily, so these are likely unemployed).

Add back 7.5MM workers classified as 'employed but not at work for other reasons' – BLS states that these workers are likely misclassified as employed, when they are in fact unemployed. Involuntary part-time work for economic reasons has gone up by 6.6MM and we treat these as half-unemployed (i.e., a contribution of 3.3MM).

This totals almost 42 Million effectively unemployed. Keep the civilian labor force denominator at February's 164.5 million, which results in a 25.5% estimate for effective unemployment, and if Englander treated involuntary part-time workers as completely unemployed, the resulting unemployment rate would be at 27.5%.

Commenting on the April BLS report, Englander writes that "bad data for the mid-March to April period is largely anticipated by investors; these data were neither good nor bad enough to force investors to adjust expectations." He also expects the May labor data to show deterioration at a slower pace, but think that investors are looking at the balance between initial and continuing claims to assess the pace at which reopening would lead to better labor-market outcomes.

And while a slowdown in the collapse is to be expected - after all, there are only so many workers that can be fired - don't expect it any time soon. As we first noted on Friday, White House economic adviser Kevin Hassett - who said two weeks ago that Q2 GDP would be the biggest negative number since the great depression - has set the groundwork for an even scariee number next month as the statistics catch up to the reality, warning that unemployment could hit 20% in May, up from 14.7% in April, or rather down from the real 27.5% unemployment rate.

" I think just looking at the flow of initial claims, it looks like we're probably going to get close to 20 percent in the next report ," Hassett told CNN 's "State of the Union" on Sunday, refusing to admit that the actual number when one eliminates the BLS fudges is already far higher.

He added that the rate will depend on whether the virus "has really abated" and if economies are "really going again."

"I would guess middle of summer is when we're going to start to go into the transition phase," said Hassett, adding that he hopes the third and fourth quarters will bring "very strong" growth.

"Just looking at the flow of initial claims that it looks like we're probably going to get close to 20% in the next report," senior White House economic adviser Kevin Hassett says about US unemployment. #CNNSOTU pic.twitter.com/bTN85AJaMD

-- State of the Union (@CNNSotu) May 10, 2020

Looking ahead at the May data, Englander is similarly gloomy and warns that initial claims have totaled 7 million since the April survey week and there is no sign that continuing claims are turning down due to rehiring or reopening, adding that "at this point it does not look like May employment data will show improvement or even stability. "

The incoming data look consistent with the baseline UR breaching 20% in May , especially if the responses on "employed but not at work for other reasons" change.

In summary, the Trump admin is hoping that within a few months the bottom will be in for the economy, it is also hoping that the official government reports eventually catch down to reality, and that at some point the two series - the actual economy and how the government actually represents it - will converge. The question is when, and just how massive the discrepancy between truth and the "official data" will grow until that happens.

[May 10, 2020] The burger-flipping part of US servant economy isn't coming back, and it might be decades before America can rebuild a significant manufacturing economy

May 10, 2020 | www.moonofalabama.org

William Gruff , May 10 2020 12:50 utc | 66

"This [real workers going back to work for their bosses' profits] must happen now, or we are all doomed."

I really laughed at that.

What is doomed is the American empire. It will take a few years for that doom to play out, but history books will likely put the date for the demise of the empire back in March.

The burger-flipping servant economy isn't coming back, and it will be decades before America can rebuild a significant manufacturing economy. Get used to this "Greater Depression" because it will be with us a while, particularly after the next couple waves of the covid hit.

Hint: If you don't have a big 75" wall screen TV yet and want one, you might want to make that investment before the "decoupling" goes any further. They will cost a year or two salary afterwards.

[May 10, 2020] One Bank Explains Why QE No Longer Stimulates The Economy And Only Leads To Higher Stock Prices

May 10, 2020 | www.zerohedge.com

Even some of the most ardent supporters of the fraud that is Keynesian economics now admit the entire modern economic system is on the verge of collapse for one main reason: the marginal utility of debt is collapsing, with ever more debt required to generate an increase in underlying GDP.

And tied to that, is another reason why any day now the current system may be the last: the marginal utility of every new QE is now declining to the point where soon virtually none of the money created by the Fed out of thin air will enter the economy and instead will be stuck in capital markets, resulting in hyperinflation for asset prices even as the broader economy collapses. Or, as BMO's Daniel Krieter writes, "QE has fed through to the real economy in a slower manner than previous QE campaigns" and for each dollar the Fed's balance sheet has grown, M1 money supply has increased about $0.32, compared to $0.96 and $0.74 in QE1 and QE2. "The expansionary policy thus far has mostly resulted in increased asset prices", BMO writes concluding what had been obvious to us and our readers since 2009. Only now we are ten years closer to what is the inevitable endgame, one where the Fed has no impact on M1, which will also be known as the "game over" phase.

But let's back up.

Traditionally, as BMO explains, we analyze the business cycle from a classical economic perspective where monetary authorities are more passive and "the invisible hand" guides economies (this used to be the case before the Fed went all Politburo on the USSA and decided to nationalize capital markets, crushing any "signal" the bond market may have; the final step will be the launch of Yield Curve Control which will be game over for the market). In this context, we look at interest rates, which can theoretically be defined as the rate that makes the consumer indifferent between consumption today and consumption tomorrow. R* is the (unknowable) natural rate of interest that supports full employment and stable interest rates. In theory, if r<r*, then consumption today is preferable and the economy is expanding. If r>r*, consumption saving is preferable and the economy is contracting.

In an expansionary phase, prices and consumption are increasing. Because prices and investment opportunities are high, demand for money among consumers/businesses is high, and interest rates (r) increase alongside borrowing . When r rises to the rate of r*, consumption slows, earnings fall, and a recession ensues. R* falls as uncertainty and risk aversion grow. This is a "business cycle" recession (and as long as the Fed is around, we will never have one of those again as the Fed has now also killed the business cycle... just as the USSR tried to do).

However, a recession can also be caused by some external shock to the economy that produced further declines in r*. This is because r* is reactive to uncertainty with a strong negative correlation. The greater the uncertainty, the lower r* falls.

In recession, r falls as consumption remains low as long as it is greater than r*. Defaults accelerate the drop in r. With the passage of time, r* rises slowly as the uncertainty/risk aversion surrounding the shock and/or end of business cycle fades. However the longer firms go without earnings due to low consumption, the more defaults are realized and the more r drops. At some point, the combination of falling r and rising r* results in r <= r*. Once this happens, consumption/ investment picks up and the economy enters recovery.

In addition to accelerating declines in r, defaults experienced during recession also lower the cost of labor and capital goods as the resources of failed companies are returned to the economy. In addition, barriers to entry in certain industries fall as "old guard" firms go out of business. Thus, as the economy enters recovery, this combination of cheaper labor/capital goods and lower barriers to entry leads to strong business investment and increases growth potential during the ensuing expansion.

This is how the world works in theory. Unfortunately, since 1913, theory has not worked due to the intervention of the Fed. So now let's look at how all this works in reality, and introduce an active central bank with a wider range of monetary policy tools at its disposal.

As the economy cools, the central bank lowers r in an attempt to spur consumption by forcing r<r*. Consumption increases in response, and recession/defaults are avoided. But business resources aren't returned to the economy. Recovery will be less robust due to fewer relative attractive investment opportunities. As Krieter argues, this was the experience of 2001.

Now in 2008, a shock in the form of subprime mortgages hits the economy and uncertainty skyrockets. R* moves into negative territory as shown in a recent San Francisco Fed study. The Fed moves rates lower, but is constrained by the zero bound. In order to further "lower r", the Fed embarks on asset purchases during QE and is successful in spurring consumption, as evidenced by the strong correlation between increases in excess reserves and increases in M1. M1 is the most basic measure of money supply and includes essentially only cash and checking/demand bank accounts.
The theory is that for a good or service to be consumed, it must be paid for out of M1. Therefore, the increase in M1
following QE is a measure of the degree to which QE results in actual consumption.

Note "lower r" in quotation marks in the previous bullet because r is at the zero bound and cannot (at least in the United States) be lowered further. Therefore QE increases money supply which is meant to spur consumption, which is the same desired effect of lower interest rates. In a sense, money supply increases are synthetic interest rate decreases (and synthetic capital market increases) .

The combination of QE-driven consumption (r falling) and fading uncertainty after a trillion dollar fiscal stimulus package (r* rising) ultimately pulls the economy out of recession. However, the pace of response in 08/09 was slower. QE was not announced until late November 2008, after large defaults were already experienced. Fiscal stimulus in the form of the ARRA package didn't arrive until February 2009 with an additional lag in implementation that featured incremental defaults. In the end, almost a trillion dollars' worth of debt was affected by default in 2008/09, but QE certainly prevented actual defaults from being likely exponentially greater. BMO notes however that defaults avoided were once again economic resources that were not returned to the economy and barriers to entry that are not lowered. This argues that attractive investment opportunities following the financial crisis were not as abundant as the depth of recession would suggest.

As a result, the recovery was slow, ultimately prompting the Fed to embark on additional rounds of quantitative easing in an attempt to spur increased consumption.

Which brings us to the seeds of the Fed's own demise: the problem is that QE appears to be experiencing diminishing returns, as evidenced by a falling correlation between excess reserves and M1 in successive episodes of QE following the financial crisis. As QE leads to a direct increase in bank reserves, only a fraction is translated into money supply growth, and thus potentially consumption and investment. QE1 was highly effective and an important factor behind pulling the economy out of recession. QE2 had a marginally lower, but still high, follow through of .735 indicating that on average, $0.74 of each dollar of QE translated to increased money supply. We observe elevated inflation and personal consumption rates during the period of QE2 as evidence of its effectiveness. However, during Q3, the correlation fell to just $0.28 and resulted in very little inflation of GDP growth. Through this lens, the impact of QE on the real economy has diminished over time.

How does BMO explain the diminishing impact of QE?

Following five years of no QE in the United States, it appears the utility of current QE has increased modestly in comparison to QE3. However, the follow through to consumption still remains well below levels experienced between Q1 and Q2. It is likely then that current QE is unlikely spurring much consumption as r isn't influenced lower (via money supply increase) as much as in the past and likely remains well above r*.

Worse, as we discussed last week , one can argue that r* is likely lower now than potentially any point in history, and according to Deutsche Bank it is at an all time low of -1%.

Not only is uncertainty extremely high, but the impact of COVID-19 arguably directly lowers r*. Recall r can be defined as the rate of interest that makes consumption today indifferent to consumption in the future. In all economic models, r is assumed to be positive. But when people are afraid to their leave their house for fear of infection, future consumption actually is more attractive than current consumption. So r* is arguably negative for fundamental reasons for the first time. Greatly heightened uncertainty only pushes it even further negative.

When money supply goes up, but consumption fails to be generated (because r remains well above r*), then savings rates mathematically increase. Therefore, the prices of financial assets increase generally.

During times of risk aversion, bond prices increase first, but supply of safe assets is limited, especially as the Fed buys a substantial portion of the Treasury market. Investors are therefore pushed into riskier assets. But as long as r remains below r*, the more savings go up, the greater the mechanical move in financial asset prices relative to real economic activity.

This, according to BMO, is what's driving the paradoxical relationship between bond and equity prices in recent weeks, and explains why stocks are performing so well despite the outlook for the greater economy. Money supply that doesn't translate into consumption must result in higher financial asset prices until defaults result in wealth destruction. What does this mean for the recovery? The central bank is displaying reduced capacity to further generate real economic activity as a result of accommodative policy over the past twenty years. This means that recovery is unlikely until r* increases significantly , which only happens alongside fading virus uncertainty. This will take a long time.

During that time, one of two things will happen. Either the government will continue to assist companies in avoiding
bankruptcy, or it will not. If it does, confidence (and r*) will likely return relatively more quickly at a huge cost to the government. However, there will not be a large return of economic resources at the end of this recession and the ensuing recovery will be disappointing given the degree of economic pain currently being felt.

If it does not, defaults could potentially reach historic proportions, and the recession will be long and painful. However, using the "ripping the bandaid" analogy, this scenario would result in likely the largest return of economic resources in the history of the country and lead to a very powerful economic expansion in the wake of the current recession.

Ultimately, the truth likely lies in the middle. The government will continue to provide relief, though not likely in scale large enough to save all businesses. Defaults and downgrades will be staggering, but this will increase the capacity of growth in the ensuing economic recovery.

What does this mean for risk assets? It means that risk assets are being technically supported by stimulus measures so far, particularly QE that is no longer as effective as it was. However, a large wave of defaults is unavoidable without an unlikely near-term (and complete) solution to COVID-19. Heavy defaults, the kinds described in " Biblical" Wave Of Bankruptcies Is About To Flood The US , will likely bring about another wave of risk asset price weakness as wealth is destroyed and technical upward pressure on financial asset prices and a higher percentage of savings demand is met with safe haven assets (Figure 3).

This also explains why the Fed was compelled to enter the bond market, as absent a direct intervention in the secondary market, bond prices would crater and trigger a self-fulfilling doom-loop, where lower bond prices lead to higher defaults, lead to even lower prices and so on. For now, the Fed has managed to delay this process but there is only so much Powell can do to offset the collapse in fundamentals which will lead to continued ratings erosion, and the eventual defaults of countless companies, many of which the Fed will be directly invested in. At that point, the Fed's action in the "market" will become the topic of non-stop Congressional hearings, and will culminate with doubts emerging about the viability of the dollar as a reserve currency.

Until this trigger level is reached, however, QE will continues to pose a technical tailwind, influencing financial asset prices higher. This can be sustained until default rates increase, which is likely not until June or later as government stimulus money starts to run dry, and which point assets will likely take another nosedive lower, just as reports of a second coronavirus pandemic result in (most Democratic) states shuttering again ahead of the presidential election.

What happens then? Risk assets will continue to slide into the election and into 2021, at which point as Nordea showed last week, we will hit a point where the lagged effect of the flood central bank liquidity will finally hit into the S&P500, and result in one final explosion in risk assets, sending stocks over 40% higher...

... although not of a benign nature but more of what one would expect to see in the Caracas or Weimar stock market.

[May 10, 2020] If all coronavirus-related job losses had shown up as unemployed, the unemployment rate would now be around 19.0%, not 14.7%.

May 10, 2020 | caucus99percent.com

Before the April jobs report release, Heidi Shierholz of the Economic Policy Institute (EPI) warned on Twitter that Friday would be "the most cataclysmic #JobsDay of all of our lives" and shared a chart showing how recent unemployment claims contrast with the past 80 years, before detailing current conditions in a 22-tweet thread.


BRACE YOURSELF for the most cataclysmic #JobsDay of all of our lives. This chart has monthly job changes over the past 80 years. We lost more than 20 million jobs in April. There has never been anything like this. 1/ pic.twitter.com/eODWpeAb4X

-- Heidi Shierholz (@hshierholz) May 8, 2020

While the 14.7% figure for April is significantly higher than February (3.5%) and March (4.4%), it fails to capture the full scope of how U.S. workers have been impacted by temporary business closures and hours reductions that have resulted from the ongoing global health crisis. The report says 5.1 million Americans had hours cut in April.

Shierholz, senior economist and director of policy at EPI, explained that "only about two-thirds of coronavirus-related job losses are showing up as unemployed -- the rest are showing up as having dropped out of the labor force. If all coronavirus-related job losses had shown up as unemployed, the unemployment rate would now be around 19.0%, not 14.7%."

"Further, about 7.5 million workers are likely being misclassified as 'employed, not at work' instead of 'temporarily unemployed,'" she continued. "If they were classified correctly AND all coronavirus-related job losses had shown up as unemployed, the unemployment rate would be around 23.6%."

She also highlighted EPI's estimate from April 30 that because of recent job losses, about 12.7 million Americans have lost their employer-based health insurance -- which EPI researchers called a " terrifying " indictment of the country's private, for-profit healthcare system, particularly in the midst of a pandemic.

[May 10, 2020] Former JPMorgan Economist We Are Heading Towards A Weimar Republic Inflation Setup

May 10, 2020 | www.zerohedge.com

Former JPMorgan Economist: We Are Heading Towards A Weimar Republic Inflation Setup by Tyler Durden Sat, 05/09/2020 - 21:30 Submitted by a former JPMorgan economist who wishes to remain anonymous

The everything bubble

Readers will have anticipated the bursting of the bubble that has been re-inflating ever since 2009. Ultra-loose monetary policy, coupled with deflationary pressures from increased aggregate supply and investors chasing yield at ever higher risk, meant that almost all asset classes had reached all time highs just before entering the current bear market.

That there is a bubble, a massive one, is unquestionable. Readers will further have anticipated that it didn't have to be a global pandemic to burst this bubble. This bubble was practically looking for a prick - any prick - to burst it. Whether it was a credit event, liquidity shortages that led to bankruptcies, a terrorist attack, a natural disaster or a bat: markets had reached a level of fragility where they could not cope with the materialising of such a tail risk event.

Too much had fueled this fragility: out-of-touch credit ratings, leveraged balance sheets, stock buybacks, expansionary monetary policy and as a result: out-of-control credit and debt.

📊 WATCH: Two Decades Of Growing Global Debt 📊

In 2020, a sharp upward trajectory in debt levels looks all but certain. More in the latest IIF Global Debt Monitor: https://t.co/Exj7rDDPpx pic.twitter.com/q0R1vi05DY

-- IIF (@IIF) April 14, 2020

Market outlook

Expect companies in energy to go bust first. Then retail and hospitality. At some stage their bankruptcies will push creditors into a corner where such lenders will either have to be bailed out or they will drop like flies (Lehman style). Already banks have slowed their credit lines to corporates, like in 2008/2009, anticipating that some of their debtors will fail to repay.

Sure, with more QE flooding the markets a complete wipe-out may be averted, as there is no political appetite for mass insolvencies (especially in an election year in the US).

The bubble has reached a level where systemically relevant banks will be facing their Lehman moment sooner rather than later. Lawmakers will not allow such systemically relevant lenders to go under, as this would practically imply all lights to go out. So the real question at hand is: at what cost?

Crossing the Rubicon

On April 27, 2020 CNBC ran a story on "Why the coronavirus crisis may prompt central bankers to scrap inflation targeting".

If central banks indeed abandon or modify inflation targeting we will certainly be crossing the Rubicon. Admittedly, there is no other way in answering the above questions.

Policymakers continue to be behind the curve and obviously failed to learn from 2008/2009. Their last resort is printing money and creating more debt. If central banks have no or a soft-washed inflation mandate we are heading towards a Weimar Republic style inflation setup.

With global output staying the same or declining, aggregate demand declining significantly and the quantity of money in circulation multiplying (by means of handouts or universal basic incomes), asset prices across asset classes being propped up by central banks, it becomes just a matter of time until inflation goes from 'subdued' to 'out of hand'.

Asset allocation in this new set up

With central banks either purchasing corporate bonds or accepting them as collateral, it may be soon until their mandate is being changed to facilitate the buying of equities, too. As other commentators already noted: we may have abandoned free markets and now head to a centrally planned set up.

The recent pick-up from the March 2020 lows in stock markets will be short lived. Nothing has fundamentally improved, other than emergency liquidity provisions by central banks. Expect a new selloff by year end - re-testing the lows of March - because perfidiously the Fed does not yet own enough corporate debt/equity to control asset prices!

Central banks will be printing fiat money on a unprecedented scale. With potentially negative interest rates even in the US, a slowing of global trade and thus reduced supply, the risk of a surprise inflation increases markedly. If and when this feeds through, asset allocation becomes key.

Look for uncorrelated asset classes or inflation resistant assets. There is a chance central banks will own a good part of cross-sector corporate debt/equity when the dust settles and inflation starts to go through the roof.

For questions or comments, please get in touch.

[May 10, 2020] MMT and COVID-19

May 10, 2020 | www.moonofalabama.org

financial matters , May 9 2020 22:43 utc | 34

The Fed is just following the Congressional mandate of supporting the people who fund our political system.

It should be clear that the stock market doesn't care about Main Street when you see it still going up with massive levels of unemployment.

MMT states that the Fed can create these funds that are handed out to business by the trillions but that is not what MMT 'policy' would want.

Most MMT people are actually against handouts to people in the form of a basic guaranteed income.

A major cornerstone of MMT policy though is a Job Guarantee. In times like these they would very much like to see employment supported by these government funds. Not only the basic job pool of a minimum wage job but also supporting more highly paid skilled employment such as supervising infrastructure projects etc.

MMT is more concerned with resources than money per se. It doesn't help to have money if people aren't making stuff, providing food and services etc.

[May 10, 2020] San Diego Unemployment Rate Nearly 27%, Breaking County Record Set During Great Depression

May 10, 2020 | www.zerohedge.com

With the worst jobs report in history under our belt, which saw a record 20.5 million jobs lost in April, and the stated unemployment rate at 14.7%, some cities have been hit worse than others by the economic fallout from the pandemic.

To wit, after steadily increasing 2-3% every week for the past two months, the unemployment rate in San Diego county is at an all-time high of just under 27% - exceeding the previous record from 1933 set during the Great Depression, according to a report by the San Diego Association of Governments (SANDAG).

[May 09, 2020] The Evening Blues - 5-8-20 caucus99percent

May 09, 2020 | caucus99percent.com
'Most Cataclysmic' Jobs Report of Our Lifetime Shows US Unemployment Soaring to Level Not Seen Since Great Depression

Just a day after announcing that about 33.5 million Americans have filed jobless claims since mid-March as the coronavirus pandemic has caused lockdowns worldwide, the U.S. Department of Labor on Friday revealed the nation's official unemployment rate hit 14.7% last month -- its highest level since the Great Depression.

Before the April jobs report release, Heidi Shierholz of the Economic Policy Institute (EPI) warned on Twitter that Friday would be "the most cataclysmic #JobsDay of all of our lives" and shared a chart showing how recent unemployment claims contrast with the past 80 years, before detailing current conditions in a 22-tweet thread.


BRACE YOURSELF for the most cataclysmic #JobsDay of all of our lives. This chart has monthly job changes over the past 80 years. We lost more than 20 million jobs in April. There has never been anything like this. 1/ pic.twitter.com/eODWpeAb4X

-- Heidi Shierholz (@hshierholz) May 8, 2020

While the 14.7% figure for April is significantly higher than February (3.5%) and March (4.4%), it fails to capture the full scope of how U.S. workers have been impacted by temporary business closures and hours reductions that have resulted from the ongoing global health crisis. The report says 5.1 million Americans had hours cut in April.

Shierholz, senior economist and director of policy at EPI, explained that "only about two-thirds of coronavirus-related job losses are showing up as unemployed -- the rest are showing up as having dropped out of the labor force. If all coronavirus-related job losses had shown up as unemployed, the unemployment rate would now be around 19.0%, not 14.7%."

"Further, about 7.5 million workers are likely being misclassified as 'employed, not at work' instead of 'temporarily unemployed,'" she continued. "If they were classified correctly AND all coronavirus-related job losses had shown up as unemployed, the unemployment rate would be around 23.6%."

She also highlighted EPI's estimate from April 30 that because of recent job losses, about 12.7 million Americans have lost their employer-based health insurance -- which EPI researchers called a " terrifying " indictment of the country's private, for-profit healthcare system, particularly in the midst of a pandemic.

[May 07, 2020] People will not start consuming until they feel safe

May 07, 2020 | www.moonofalabama.org

Petri Krohn , May 6 2020 20:01 utc | 7

It makes no difference if it is Corona, Cholera, or Jack the Ripper that is roaming the streets. People will not start consuming until they feel safe.

[May 06, 2020] Richard Wolff US jobless totals are about to get WORSE than during the Great Depression. It's time for a RADICAL new approach

May 06, 2020 | www.rt.com

By Richard D. Wolff, Professor of Economics Emeritus, University of Massachusetts, Amherst, and Visiting Professor in the Graduate Program in International Affairs of the New School University, NYC. Wolff's weekly show, Economic Update, is syndicated on over 100 radio stations and goes to 55 million TV receivers via Free Speech TV and his two recent books with Democracy at Work are Understanding Marxism and Understanding Socialism both available at democracyatwork.info . We are entering an even Greater Depression than the 1930s, with hundreds of millions thrown out of work across the world. Capitalism is a broken, unstable system that is beyond repair – but there are alternatives. Ninety-one years after the start of the Great Depression (capitalism's worst downturn until now), we are entering an even Greater Depression. The 1930s were so awful that leaders of capitalist economies ever since have said they had learned how to avoid any future depressions. All promised to take the steps needed to avoid them. Those promises have all been broken. Capitalism remains intrinsically unstable. Read more Richard D. Wolff: Viruses like Covid-19 are a part of nature we must accept. But Capitalism-2020 must be destroyed Richard D. Wolff: Viruses like Covid-19 are a part of nature we must accept. But Capitalism-2020 must be destroyed

That instability is revealed in its recurring cycles, recessions, downturns, depressions, crashes, etc. They have plagued capitalism wherever it has settled in as the prevailing economic system. Now that the whole world's prevailing economic system is capitalism, we suffer global instability. To date, capitalist instability has resisted every effort (monetary and fiscal policies, Keynesian economics, privatization, deregulation, etc.) to overcome or stop it. And now it is here yet again.

Across the world, hundreds of millions of workers are unemployed. The tools, equipment, and raw materials in their factories, offices and stores sit idle, gathering dust and rust. The goods and services they might have produced do not now emerge to help us through these awful times. Perishable plants and animals that cannot now be processed are destroyed even as scarcities multiply.

Workers lose their jobs if and when employers – mostly private capitalists – fire them. Employers hire workers when workers add more value to what the employer sells than the value of those workers' wages. Hiring then adds to profits. Employers fire workers when they add less than the value of the wages paid to them. Firing then reduces losses. Employers protect and reproduce their enterprises by maximizing profits and minimizing losses.

Profit, not the full employment of workers nor of means of production, is "the bottom line" of capitalists, and thus of capitalism. That is how the system works. Capitalists are rewarded when their profits are high and punished when they are not.

No-one wants unemployment. Workers want their jobs back; employers want the workers back producing profitable output; governments want the tax revenues that depend on workers and capitalist employers actively collaborating to produce.

Yet the capitalist system has regularly produced economic downturns everywhere for three centuries – on average, every four to seven years. We have had three crashes so far this century: 'dot.com' in 2000, 'sub-prime mortgage' in 2008, and now 'corona' in 2020. That averages out at one crash just under every seven years – capitalism's 'norm'. Capitalists do not want unemployment, but they regularly generate it. It is a basic contradiction of their system.

Read more ONE IN SEVEN Americans would avoid Covid-19 treatment for fear of cost, even as pricey new pill shows promise against virus ONE IN SEVEN Americans would avoid Covid-19 treatment for fear of cost, even as pricey new pill shows promise against virus

Today's massive US capitalist crisis – over 30 million unemployed and counting, a quarter of the workforce – shows dramatically that maximizing profit is not maximizing society's well-being. First and foremost, consider that the unemployed millions continue much of their consumption while ceasing much of their production. A portion of the wealth produced by those still employed must be redistributed to sustain the unemployed. Society thus suffers the usually intense struggles over the shares of profits versus wages that will be redistributed to the unemployed. These struggles, both public – over tax structures, for example – and private – for instance, over household budgets – can be profoundly destabilizing for societies.

Redistribution struggles could be alleviated if, for example, public employment replaced private unemployment. If the state became the employer of last resort, those fired by private employers could immediately be rehired by the state to do useful social work.

Then any government paying unemployment benefits would instead pay wages, obtain in return real goods and services, and distribute them to the public. The 1930s New Deal did exactly that for millions fired by private employers in the US. A similar alternative (not part of the New Deal) would be to organize the unemployed into worker co-ops performing socially useful work under contract with the government.

This last alternative is the best, because it would develop a new worker co-op sector of the US economy. That would provide the US public with direct experience in comparing the capitalist with the worker co-op sector in terms of working conditions, product quality and price, civic responsibility, etc.

On that concrete, empirical basis, societies could offer people a real, democratic choice as to what mix of capitalist and worker co-op sectors of the economy they prefer.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

[May 06, 2020] Whom Bitcoin brings together

May 06, 2020 | www.moonofalabama.org

Deltaeus , May 6 2020 9:29 utc | 63

@karlof1 | May 5 2020 21:05 utc | 18

There was an amusing quote from somewhere, something like:

Bitcoin brings together
everything people don't understand about money with
everything people don't understand about technology.

[May 06, 2020] In December the Fed's repo market had been sounding the alarms that a serious bubble recession was coming. Nothing apparently was fixed from the last wall street megadooshbaggery meltdown

May 06, 2020 | turcopolier.typepad.com

ST Harris , 04 May 2020 at 12:55 PM

Even in blissful 'pre rona' December the Fed's repo market had been sounding the alarms that a serious bubble recession was coming. Nothing apparently was fixed from the last wall street megadooshbaggery meltdown. See:

https://www.housingwire.com/articles/wells-fargo-joins-chase-in-halting-helocs/

This means that even those who built up real estate equity will have a difficult time short term liquifying that equity, which means that Chase, Wells Fargo, et al have a lot of pessimism about the US real estate market, the thing they have made so much money on last few years, and which they were supposed to have fixed.

well pilgrims ;) not only is the economy enduring sudden searing pandemic pain, it is also feeling the beginning of a big bubble popping recession, which everybody in the financial world was already freaking about well before the rona arrived. Perhaps endless Fed QE can prop up equities markets through November, perhaps, but then it's all bets off into 2021 as numerous wall street debts scams will have to be deleveraged.

[May 04, 2020] The essence of a financial parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there by Michael Hudson

The problem here is that there is no countervailing force. Marxist idea that proletariat is such a force proved to be yet another utopia.
Notable quotes:
"... istory's main engine of economic exploitation – the banking, creditor and financial systems' ever-increasing extraction of value through interest payments. The rentier class and FIRE sector – Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part of a productive economy. Yet for centuries, these sectors were recognized as being parasitic. ..."
"... The essence of a parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there. ..."
May 04, 2020 | www.unz.com

Jim Vrettos : Welcome once again to the Radical Imagination. I'm your host, Jim Vrettos. I'm a sociologist whose taught at John Jay College of Criminal Justice and Yeshiva University here in New York.

Our guest today on the Radical Imagination is Michael Hudson. He was on our March 8th show. We had such an overwhelmingly positive response to that show that we've asked him to return today, and he's been gracious enough to accept.

Unlike most economists, he's been a fierce champion and advocate for the economic rights of the poor, workers, disenfranchised and the vulnerable around the world through his scholarship and lifelong activism. His unique economic analysis has explored h istory's main engine of economic exploitation – the banking, creditor and financial systems' ever-increasing extraction of value through interest payments. The rentier class and FIRE sector – Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part of a productive economy. Yet for centuries, these sectors were recognized as being parasitic.

Now with the United States losing some 10 million jobs in just the past two weeks and the world awash in debt, the total world gross domestic product is $90 trillion. The public and private debt is a mind-boggling $260 trillion. The pandemic has given this parasitic sector yet another, even more vicious opportunity to exploit and devour humanity.

As our guest puts it, the recently passed Trump "Bank and Landlord Relief" bill, mistakenly named the Coronavirus bill, starts by providing banks with an even larger giveaway of wealth than they received from Obama in 2008. Helping the banks, financial and real estate sectors in a so-called free market system is conflated with helping the industrial economy and general living standards for most Americans. The essence of a parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there.

[May 04, 2020] Neoliberalism and neoconservatism are the two sides of the one political coin that Americans are allowed to choose

Highly recommended!
Notable quotes:
"... the nations CEO's become sort of one big club, and the top of the club is the head parasites pulling the strings on the stock market (outfits like Goldman Sachs). ..."
"... NO ONE wants to cross the head parasites, the corrupt political class turns to them as their economic brain trust, and the propaganda class (MSM) spin narratives that comport to the corrupt political class' interests and the corrupt status quo. ..."
May 04, 2020 | www.unz.com

Chris Moore says: Website Show Comment April 30, 2020 at 7:38 pm GMT 400 Words

As our guest puts it, the recently passed Trump "Bank and Landlord Relief" bill, mistakenly named the Coronavirus bill, starts by providing banks with an even larger giveaway of wealth than they received from Obama in 2008. Helping the banks, financial and real estate sectors in a so-called free market system is conflated with helping the industrial economy and general living standards for most Americans. The essence of a parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there.

One of the ways it does this is to entice most of the biggest companies onto the stock markets, which in turn subordinates them to the financial sector -- more specifically, the investment bankers. And then the nations CEO's become sort of one big club, and the top of the club is the head parasites pulling the strings on the stock market (outfits like Goldman Sachs).

NO ONE wants to cross the head parasites, the corrupt political class turns to them as their economic brain trust, and the propaganda class (MSM) spin narratives that comport to the corrupt political class' interests and the corrupt status quo.

This is why [neo]liberalism and neoconservatism are the two sides of the one political coin that Americans are allowed to choose. Lean left? You'll get a liberal who mostly uses identity politics to divide and rule. Lean right? You'll get a neocon who mostly uses foreign affairs to divide and rule. But increasingly, the two cross-over, hence you'll see liberals harping 24/7 about Russiagate and neocons harping 24/7 about Iran, Islam and now China.

None of this is to say that Russia, China and Iran aren't competitors, because they are. But the liberal and neocon fanatics turn them into existential, kill or be killed competitors...

... ... ...

[May 04, 2020] Ordinary Americans Are Going To Get Super-Pissed by James Howard Kunstler

Looks like wishful thinking. Neoliberalism despite its trend for redistribution wealth up probably will survive this crisis. One strong argument here is that the return to the New Deal capitalism is not impossible as a weak alliance of management and trade union that existed after WWII was dissolved long ago.
So there is not countervailing force for the dominance of financial capital. It captured that state and MIC is just an extension of Wall Street -- it racketeers. The same is true about intelligence agencies, which also are pretty closely connected with Wall Street, especially CIA.
May 04, 2020 | www.zerohedge.com
Authored by James Howard Kunstler via Kunstler.com,

... ... ...

And so here we are at a fraught moment in the convergent crises of corona virus and the foundering economic system that it infected, with all its frightful pre-existing conditions. Of course, it isn't capitalism , so-called, that is failing, but the perversions of capitalism, starting with the appendage of the troublesome term: ism . It isn't a religion, or even a pseudo-religion like Zoroastrianism or communism. It's simply the management system for surplus wealth. In a hyper-complex society, the management of wealth naturally grows hyper-complex, too, with lavish opportunities and temptations for chicanery, cheating, fraud, and swindling (the perversions of capital). It's in the interest of the managers to cloak all that hyper-complex perversity in opaque language, to make it seem okay.

How many ordinary Americans have a clue what all the Municipal Liquidity Facilities, Primary Dealer Credit Facilities, Primary and Secondary Market Corporate Credit Facilities, Money Market Mutual Fund Liquidity Facilities, Main Street New Loan Facilities and Expanded Loan Facilities, Commercial Paper Funding Facilities currency swap lines, the TALFs TARPs, PPPs, SPVs represent ­- besides the movement, by keystrokes, of "money" from one netherworld to another (both conveniently located on Wall Street), usually to the loss of non-elite citizens generally and to their offspring's offspring's offspring?

Real capital is grounded in the production of real things of real value, of course, and when it's detached from all that, it's no longer real capital. Money represents capital, and when the capital isn't real, the money represents nothing!

... ... ...

All this because we just can't face the task of reorganizing our national home economics to suit new circumstances. So, nature will do it for us. Nature will furnish us with a marvelously efficient black hole where we can conveniently stash our fake money so that we'll never have to see it again.

Nature will bust up our giant institutions, our giant corporations, our giant networks of financial obligations. And after a period of confusion and social disorder, some clever humans will aggregate into smaller networks and re-organize their activities on a smaller scale that actually supports truthful relationships between the production of things deemed to hold value and money that represents those things.

The beauty of springtime is sublime and, as Edmund Burke noted, that very beauty provokes our thoughts of pain and terror.


xxx 46 minutes ago

I'm not seeing it. The Federal Gub'mint will hand out free Netflix vouchers, along with SNAP cards, and more than half of Americans will wallow in that like pigs in ****. Unfortunately, there are just too many that want everything handed to them, and are "OK" with living in a tiny shithole apartment and eating take-out the rest of their lives. Still waiting for the "Revolution" that will never happen. They can just print money to infinity, apparently. And it never inflates, or deflates.

xxx 39 minutes ago

The fed doesn't print money it creates currency ie bondage and they've created trillions as of late and they're going to create many more trillions. Deflation followed by hyperinflation, famine and a civil war that will make the last civil war look like child's play in comparison.

xxx 31 minutes ago

Yes, but one would think that would have happened by this time already. After the last printing frenzy, I was reading for years how "The End is near", "Hyperinflation", "Deflation"...hell, Stockman wrote an article a week for like 8 years about that. And it STILL hasn't happened. Why??? It's like fundamentals don't matter...economics doesn't matter...so when DOES it matter? How many more trillions from now does it start to matter?

xxx 12 minutes ago

I agree it's been quite a while since the fed killed the economy and debased the dollar and I'm surprised the thieving bastards have kept this **** show going so long. But they can't do it forever and the day of reckoning is coming.

xxx 17 minutes ago

They can only do it as long as the $ has reserve currency status. Once it loses that, all hell breaks loose.

xxx 6 minutes ago

Reserve currency status will be lost and Amerikans will know true poverty. Not the poverty we have today with obese useless people on welfare but real grinding poverty with famine. And all fiat currencies will go to zero in this depression.

[May 03, 2020] Geopolitics Post-COVID-19

May 03, 2020 | www.zerohedge.com

Before the coronavirus caused governments to impose lockdowns, whole economies, markets and even currencies were already on course to be destroyed by a vicious downturn in bank lending at a time of contracting trade and record debt. The additional strains from the virus have intensified the crisis further and quickened the pace of all aspects of monetary destruction.

The coronavirus has permitted America and other Western nations to adopt a war footing by restricting personal freedom in the interest of the state. As tensions against China rise and the global economic crisis escalates, these freedoms will be not be returned, being deemed to be against national interest.

This is an election year for America and the political system is already ramping up blame for the virus and her economic misfortunes against China. We are entering dangerous territory when politics mobilises hate against a supposed enemy by using propaganda tactics which are designed to stir up xenophobic anger.

How China responds will be crucial. Its leadership can defuse the situation with a few simple changes to its foreign policy, isolating America from her allies in the process. But does a highly bureaucratic communist leadership have the imagination to do so? Introduction

One thing is for sure: the world will be different when it emerges from the coronavirus crisis. Doubtless, on pain of likely death those over seventy years of age must remain prisoners in their own homes while the younger generations are tasked with the return to normality. All this is meant to be under government guidance of course. Over the coming months governments intend to save swathes of business sectors, such as banking, energy production, utilities and the rest, first by lending the money to pay the bills, and then by rescuing the failures, taking them into public ownership in many cases.

That is what the post-coronavirus environment can be expected to look like, if, as governments hope, the recovery is V-shaped. If not, then greater interventions will be visited on the population to protect it from itself.

While not necessarily intentioned, there has been and will continue to be a dramatic transfer of freedom from individuals to the state, which the state is always reluctant to let go when the crisis passes. The evocation of a war against the virus is to facilitate the transfer of peoples' freedom to the state, because that is what is required to fight a war. But when it's over, the bureaucrats' instincts are never to return freedoms.

In the vast majority of cases, win or lose, following a war it is usual for a nation to retain the measures adopted, dropping none of them. It might be called a transitional economy, kept in place with all the war-time restrictions until an exit path, inevitably to greater socialism, can be devised. And for America there is a war still to be fought against China for global domination, justifying yet more control.

Nanny meets fascist socialism

Welcome to the new post-coronavirus intensified socialism. As individuals we have given the state enormous power over our lives, which will almost certainly be consolidated. The direction of travel is clear. Not only can big brother censor us, but it can now track our movements more effectively than the old KGB. If you leave your home, leave your smartphone behind. Wear a wide-brimmed hat and change your gait, avoiding the cameras. Your money in the bank, or more correctly in your about-to-be-nationalised bank's money credited to your account, can only be disposed of for state-regulated products by means of traceable transactions instead of old-fashioned cash.

Instead of the soviet, we have the nanny state. Nanny knows best. This is the real world of the 2020s. It is unnatural and will therefore eventually fail. In previous articles I have written about one aspect of its failure, and that is the impending collapse of unbacked state currencies. I have pointed out that central banks, and especially the Fed responsible for the world's reserve currency, are embarking on an exercise in inflation designed, above all, to uphold the state by maintaining the values of its debt and therefore all other financial assets. If they fail, and they will because the task is too great, the currencies will fail as well, and remarkably quickly. Until then, free markets are a primal threat to the system and must not prevail.

Doubtless, deep state operatives everywhere believe that the threats from their own people can be contained. Taking that for granted, they are now moving on to contain threats from other states that don't conform to the West's democratic model. There is now much more propaganda coming out of America and the UK about the evil Chinese than the evil Chinese are disseminating about America and Britain.

The story being managed is of a devious state, somehow stealing our souls by selling us their technology. Mobile 5G puts China into our homes and controls our internet of everything. It will allow the Chinese to control us . What is not explained is why it is in China's interest to abuse its customers in this way. What is not explained is why we, as individuals, will be better off not having Chinese goods and technology. And when Britain's GCHQ intelligence and security division took Hua Wei's equipment apart, they couldn't find any evidence of Chinese state spyware anyway.

The irony in all this is that our democratic model, the nanny state, is cover for the same internal policies as those deployed by the Chinese, admittedly less vicious; but that is changing. Rather than communist-socialist, both Chinese communism and Western democracies are, properly defined, fascist-socialist. With communism, the state owns your cow and tells you what to do with it. With fascism, you own the cow and the state tells you what to do with it. In these simplistic, but not inaccurate terms, our governments increasingly follow the fascist creed adopted by the Chinese Communist Party after Mao's death. Give it time and the intense Chinese-style suppression of free speech could become the defining feature of nanny's management style as well.

Here we must note a fundamental truth. Socialists of either extreme do not see free markets as a rival, because they believe they are useful for progressing socialism towards desired ends. The true rival to your socialism is someone else's socialism. Newly energised Western state socialism is to be pitted against Chinese state socialism. The World is about to get more dangerous.

US is upping the propaganda stakes

Last week, US Secretary of State Mike Pompeo said China caused an enormous amount of pain and will pay a price for what they did with the coronavirus pandemic. On Tuesday, President Trump threatened to seek reparations from China for infecting Americans. This follows a 57-page memorandum, entitled Main Messages dated April 17, briefing Republican senators, which was headed by the following bullet points:

Clearly, the propaganda war being waged by America against China is undergoing a new lease of life. And it's not just America: anti-Chinese belligerence is being ramped up through other national intelligence agencies. Even senior MPs in the UK's Conservative Party and "useful idiots" in the media are now spouting renewed anti-Chinese propaganda.

On one level, American propaganda can be taken as a defense of President Trump, on the simplistic basis of finding someone else to blame for his administration's increasingly desperate economic plight. But the danger is that the White House train has left the station in the direction of policy escalation with no means of stopping. In this election year someone must be blamed. To improve his ratings and following an established political tradition of diverting attention from the domestic scene, Trump must blame foreigners and China is the easiest target. We are rapidly moving in the direction of unintended consequences.

Meanwhile, we have to hope that President Xi does not take the American bait and escalate tensions from his side. Xi's equanimity has set the pattern so far. He has made mistakes, and will almost certainly continue to do so, but his Sun Tzu strategy is making it difficult for the Americans: "If [the enemy] is in superior strength, evade him".

Of one thing we can be reasonably certain, and that is in a new attack the Trump administration will escalate trade protectionism against China. It is a policy which will backfire on America. Assuming no change in the American people's savings habits, the budget deficit leads almost directly to a trade deficit, the twin deficit syndrome. The trade deficit is not caused by unfair foreign competition, but as a simple matter of national accounting it is linked to inflationary funding of government spending. The temporary offset with respect to the inflationary effect on prices is the expansion of foreign production which ends up as imports at less inflated prices. Meanwhile, the US's budget deficit is now set to grow substantially from its trillion-dollar baseline and in the light of recent economic developments it could easily more than double.

If the trade deficit is to be contained, then measures must be introduced to prevent import substitution. This is in accordance with enhanced nationalism, typified by Trump's Make America Great Again slogan. Therefore, the likelihood of America extending trade protectionism beyond China as the economic crisis progresses is greater than it may currently appear.

Without lower prices for imported goods and consumption generally restricted to domestic production, inevitably prices for everything will rise at a faster pace. Therefore, at a time when food prices will almost certainly be rising sharply and causing political difficulties for Trump, price inflation for all aspects of consumer spending will be getting beyond the managed control of government statisticians.

Domestically, the combination of an escalating budget deficit and rising consumer prices will lead to higher interest rates and therefore increased US Treasury borrowing costs. The Fed will then be unable to control financial asset prices, the dollar will slide, and it could turn out to be electoral suicide. Trump may not realise it but in this election year he is conflating two opposing objectives: a geopolitical one against China to improve his political ratings and an economic one which can be expected to destroy them.

In the past, politicians in this position have responded by clamping down even further on free markets and personal freedom, evoking Hayek's prophecy of the call for stronger leadership in his The Road to Serfdom . And with respect to foreign policy, imperialistic motivation intensifies, which we are already seeing.

Meanwhile, we must hope President Xi stays calm in the face of American self-harm.

[May 03, 2020] In a Pandemic emergency fund distribution, the financial parasites and well connected institutions will get the lion share of funds

May 03, 2020 | www.bloomberg.com

"In a Pandemic, the Mob Is the Ultimate Enforcer" [John Authers, Bloomberg ].

The business perspective: "what really matters to the world's financial movers and shakers is the great mob of voters out there in the real world, and how they might respond to whatever measures they take to deal with the pandemic and the economic crisis that has come in its wake. That, in turn, might owe a lot to the Don

The optics are not good when headlines reveal that scarcely impoverished institutions such as Harvard University and the Los Angeles Lakers have received public handouts while small businesses have been unable to get their hands on any money before it runs out.

After the mistakes made in the wake of the last financial crisis, Powell rightly grasps that it is very important to get it right this time -- or face what might be a dangerous populist backlash. Or, in our Sopranos analogy, the Mob."

Yesterday when I linked to the event at Lansing, Michigan, I commented that those there had no idea what they were doing as they were protesting the wrong thing at the wrong place. Instead, they ought to be occupying the US Treasury building in DC and the NY Fed Bank in NYC to stop the fraudulent dissemination of $$Trillions to Wall Street criminals masked as bankers, hedge fund mangers and the like as those locations are where the MAJOR crimes are occurring as I type this comment. Their behavior casts them as ignorant and perhaps worse as they're being led into an assault on their own interests while doing nothing to genuinely defend their wellbeing and that of their kin and progeny. Such stupidity's been ongoing since 1980-81 when it arose during Reagan's campaign and continued afterward. That it's being directed/channeled is clear, just as who was financing the Tea Party rubes was clear--It's the same criminals doing the looting in DC and NYC.

Given the state of politics within the Outlaw US Empire, such behavior is unfortunately normal to a certain degree. If it was a gang of Occupy Wall Street Protesters, the reaction by the forces of coercion would've been vastly different and very violent. Such is the state of Machiavellianism within as it's worked for many decades dividing and ruling. With such impediments, attaining the mass solidarity required to affect the Sea-change required is made extremely difficult, which is why you observe that nothing's been done for the masses while many things have been done to further their exploitation.

Posted by: karlof1 | May 1 2020 20:55 utc | 88

[May 03, 2020] US oil consumption down 7 million barrels per day between gasoline, jet fuel and distillate

May 03, 2020 | www.moonofalabama.org

c1ue , May 3 2020 16:36 utc | 30

Wolf street: US oil consumption down 7 million barrels per day between gasoline, jet fuel and distillate EIA graph via Wolf Street

[May 03, 2020] Chevron, Exxon- the top two U.S. producers just announced their plan for combined global shut-ins of 800,000 barrels per day

May 03, 2020 | www.moonofalabama.org

Likklemore , May 1 2020 20:43 utc | 83

Chevron, Exxon- the top two U.S. producers just announced their plan for combined global shut-ins of 800,000 barrels per day in response to plunging crude prices and fuel demand.

Both companies on Friday outlined deep cuts in investments in the Permian shale basin, the top U.S. oilfield where growth in recent years made America the world's top oil producer and a net exporter for the first time in decades. They each announced global shut-ins of up to 400,000 barrels per day (bpd) this quarter due to lockdowns to fight the coronavirus pandemic.
Exxon and Chevron have been rapidly sidelining Permian drilling equipment since the market started crashing in March. U.S. crude prices have plunged nearly 70% this year, and traded in negative territory on April 20 for the first time ever.[;]

The shale oil sector bankruptcies. Wells Fargo has a tale to tell.

Sitting inside the credit-resolution group, where Wells Fargo handles struggling borrowers, the team includes many bankers who previously worked with the same oil and gas producers in its investment bank.

They work alongside bankruptcy specialists who have been reassigned to focus exclusively on energy to help Wells Fargo wade through the expected flood of restructurings.

"It's a bloodbath," said one person with knowledge of the bank's oil and gas portfolio, who was not authorized to speak publicly.[.]

Wells Fargo and JPMorgan Chase & Co (JPM.N) are considered to be the two largest lenders to U.S. energy companies. Citigroup Inc (C.N) had the largest energy loan book of any U.S. bank at the end of 2019 because of its international business.[.]

As of the end of March, Wells Fargo had $14.3 billion of oil and gas loans outstanding, according to filings.[.]

Calling Mr. Powell on the red phone please. The president is on Twitter. The CODE: Print.

[May 03, 2020] Analysis and viewpoint scenarios: COVID-19 prepare for the next 2 years

May 03, 2020 | www.moonofalabama.org

Likklemore , May 1 2020 22:30 utc | 94

Analysis and viewpoint scenarios: COVID-19 prepare for the next 2 years

Part 1:"The Future of the COVID-19 Pandemic: Lessons from Pandemic Influenza" by CIDRAP, University Minnesota.

LINK

cited by Sputniknews.


[May 03, 2020] Derivatives as per BIS: $640 Trillion, Global debt: $265 Trillion.

May 03, 2020 | www.moonofalabama.org

Likklemore , May 2 2020 4:37 utc | 117

@ karlof1 post 108

Excellent presentation on the critical issues.

The Feds, in panic mode to stave off the Depression, are unaware they have launched the Great Reset that will include Healthcare as a priority and not an afterthought as the corona crisis revealed.

Debt jubilee is on the menu as QE to Infinity for bailing the banks and billionaires takes us to a very bad ending. Implosion of derivatives will be the tsunami. Derivatives as per BIS: $640 Trillion, Global debt: $265 Trillion.

The second financial collapse began September 2019. Most were forecasting 2nd Quarter 2020 contraction would mirror 1930s. Few expected 1st Quarter2020 to be there.

A review of the DJ charts displays similarities 2008 and 2020. Two rhymes. In fact DJ 2020 chart mirrors its 2008 chart without adjustments . And again, its the banks; not a care for mainstreet.

This is truly shocking. Just imagine.
See here: 5 Banks control the U.S. economy

Imho, we will need a new currency to replace the Weimar/Zimbabwe USD. Will it be Digital? Unlikely to be digital on a global scale.

As the man said, over the next 5 years the choice will be "Surviving not Winning"

[May 03, 2020] The economic depression comes into focus

May 03, 2020 | caucus99percent.com

Roughly 41% of working-age adults say their families have experienced a job loss, a decrease in work hours or other employment-related declines in income in recent weeks, according to a new analysis by the Urban Institute.

Underscoring the jump in financial distress around the country: More than 4 in 10 of Americans whose work was affected by the pandemic said they weren't able to pay the rent, mortgage or utility bills; skipped medical care; or were at risk of going hungry.

31% of survey respondents reported their families cut spending on food.
28% were forced to use savings or take on credit card debt to pay their bills.
69% of those whose family incomes were below the poverty level were unable to pay for their housing, were food insecure or were unable to seek needed medical care.

[Apr 30, 2020] "Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organised, so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak above their breath when they speak in condemnation of it." -- Woodrow Wilson, 28th President of the United States (1856-1924)

Apr 29, 2020 | www.unz.com

Anonymous Disclaimer , says: Show Comment April 19, 2012 at 6:49 pm GMT

Thank you for an excellent article on what is happening. My only criticism is that it appears that these things "just happen". With your insight and erudition, could you please address "why" the situation has arisen. What could be the motivation behind actions and policies which so clearly will destroy not only the 99% but also the basic wealth of the1%?

This is not something new, but a recurrent theme in world affairs.

" Behind all the governments and the armies there was a big subterranean movement going on, engineered by very dangerous people." "Since I entered politics, I have chiefly had men's views confided to me privately. Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of something. They know that there is a power somewhere so organised, so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak above their breath when they speak in condemnation of it."
-- Woodrow Wilson, 28th President of the United States (1856-1924) "So you see, my dear Coningsby, that the world is governed by very different personages from what is imagined by those who are not behind the scenes." -- Benjamin Disraeli, British Prime Minister (1804-1881) President Franklin Delano Roosevelt wrote in November 1933 to Col. Edward House: "The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the government since the days of Andrew Jackson."

Many thanks

[Apr 29, 2020] China has become GREAT because the USA turned to neoliberalism and financialization of the economy and turned the USA into byzantinne, militaristic, mercenary rogue nation at service of the Globalists elites

Apr 29, 2020 | www.unz.com

which do not care about that cosmological romantic lyrical notion of America.

Anonymous [589] Disclaimer , says: Show Comment April 29, 2020 at 8:38 pm GMT

It is undeniable that China has made impressive achievements since the Maosits revolution to date. BUT lets be realistic pre1973 China still a Nation with markedly 3th world living standards, even today with a soft racist inuendos , people speak about the Chinese must adopt better hygiene standards personally and privately.

Before 1973 China had mainly 3th world status, eversince Nixon (or Kissinger?) opened China US Corporate Capitalists inundated Chinas economic landscape, in other words the real, KEY bases for Chinas economic success remain USA Corporations majority perhaps more than 70% of their industrial output, although China has wisely constraint, restrain the USA/World FINANCIAL cartels..(Soros speclation against te yuan, ans Soros Opensociety inflkuence in HongKong)

Can China remain stable internally with a growing well travel educated savvy middle class, and a POOR lower working class with meager salaries, slave like labor conditions, and oppressive political controls, that's a recipe for a social cauldron..

Will the Chinese proletariat demand more "democracy" western/eastern oriented reforms??..

... ... ...

China has become GREAT because the USA decided to become poor a Spartan, byzantinne, militaristic, mercenary rogue nation at service of the Globaloists ELITES which do not care about that cosmological romantic lyrical notion of America.

[Apr 28, 2020] The Meditations, by a Roman emperor who died in a plague named after him, has much to say about how to face fear, pain, anxiety and loss by Donald Robertson

Notable quotes:
"... First of all, because Stoics believe that our true good resides in our own character and actions, they would frequently remind themselves to distinguish between what's "up to us" and what isn't. Modern Stoics tend to call this "the dichotomy of control" and many people find this distinction alone helpful in alleviating stress. What happens to me is never directly under my control, never completely ..."
"... Marcus likes to ask himself, "What virtue has nature given me to deal with this situation?" That naturally leads to the question: "How do other people cope with similar challenges?" Stoics reflect on character strengths such as wisdom, patience and self-discipline, which potentially make them more resilient in the face of adversity. They try to exemplify these virtues and bring them to bear on the challenges they face in daily life, during a crisis like the pandemic. They learn from how other people cope. Even historical figures or fictional characters can serve as role models. ..."
"... fear does us more harm than the things of which we're afraid. ..."
"... Finally, during a pandemic, you may have to confront the risk, the possibility, of your own death. Since the day you were born, that's always been on the cards. Most of us find it easier to bury our heads in the sand. Avoidance is the No1 most popular coping strategy in the world. We live in denial of the self-evident fact that we all die eventually. ..."
"... "All that comes to pass", he tells himself, even illness and death, should be as "familiar as the rose in spring and the fruit in autumn". Marcus Aurelius, through decades of training in Stoicism, in other words, had taught himself to face death with the steady calm of someone who has done so countless times already in the past. ..."
Apr 25, 2020 | www.theguardian.com
T he Roman emperor Marcus Aurelius Antoninus was the last famous Stoic philosopher of antiquity. During the last 14 years of his life he faced one of the worst plagues in European history. The Antonine Plague, named after him, was probably caused by a strain of the smallpox virus. It's estimated to have killed up to 5 million people, possibly including Marcus himself.

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From AD166 to around AD180, repeated outbreaks occurred throughout the known world. Roman historians describe the legions being devastated, and entire towns and villages being depopulated and going to ruin. Rome itself was particularly badly affected, carts leaving the city each day piled high with dead bodies.

In the middle of this plague, Marcus wrote a book, known as The Meditations, which records the moral and psychological advice he gave himself at this time. He frequently applies Stoic philosophy to the challenges of coping with pain, illness, anxiety and loss. It's no stretch of the imagination to view The Meditations as a manual for developing precisely the mental resilience skills required to cope with a pandemic.

First of all, because Stoics believe that our true good resides in our own character and actions, they would frequently remind themselves to distinguish between what's "up to us" and what isn't. Modern Stoics tend to call this "the dichotomy of control" and many people find this distinction alone helpful in alleviating stress. What happens to me is never directly under my control, never completely up to me, but my own thoughts and actions are – at least the voluntary ones. The pandemic isn't really under my control but the way I behave in response to it is.

Much, if not all, of our thinking is also up to us. Hence, "It's not events that upset us but rather our opinions about them." More specifically, our judgment that something is really bad, awful or even catastrophic, causes our distress.

This is one of the basic psychological principles of Stoicism. It's also the basic premise of modern cognitive behavioral therapy (CBT), the leading evidence-based form of psychotherapy. The pioneers of CBT, Albert Ellis and Aaron T Beck, both describe Stoicism as the philosophical inspiration for their approach. It's not the virus that makes us afraid but rather our opinions about it. Nor is it the inconsiderate actions of others, those ignoring social distancing recommendations, that make us angry so much as our opinions about them.

Many people are struck, on reading The Meditations, by the fact that it opens with a chapter in which Marcus lists the qualities he most admires in other individuals, about 17 friends, members of his family and teachers. This is an extended example of one of the central practices of Stoicism.

Marcus likes to ask himself, "What virtue has nature given me to deal with this situation?" That naturally leads to the question: "How do other people cope with similar challenges?" Stoics reflect on character strengths such as wisdom, patience and self-discipline, which potentially make them more resilient in the face of adversity. They try to exemplify these virtues and bring them to bear on the challenges they face in daily life, during a crisis like the pandemic. They learn from how other people cope. Even historical figures or fictional characters can serve as role models.

With all of this in mind, it's easier to understand another common slogan of Stoicism: fear does us more harm than the things of which we're afraid. This applies to unhealthy emotions in general, which the Stoics term "passions" – from pathos , the source of our word "pathological". It's true, first of all, in a superficial sense. Even if you have a 99% chance, or more, of surviving the pandemic, worry and anxiety may be ruining your life and driving you crazy. In extreme cases some people may even take their own lives.

In that respect, it's easy to see how fear can do us more harm than the things of which we're afraid because it can impinge on our physical health and quality of life. However, this saying also has a deeper meaning for Stoics. The virus can only harm your body – the worst it can do is kill you. However, fear penetrates into the moral core of our being. It can destroy your humanity if you let it. For the Stoics that's a fate worse than death.

Finally, during a pandemic, you may have to confront the risk, the possibility, of your own death. Since the day you were born, that's always been on the cards. Most of us find it easier to bury our heads in the sand. Avoidance is the No1 most popular coping strategy in the world. We live in denial of the self-evident fact that we all die eventually. The Stoics believed that when we're confronted with our own mortality, and grasp its implications, that can change our perspective on life quite dramatically. Any one of us could die at any moment. Life doesn't go on forever.

We're told this was what Marcus was thinking about on his deathbed. According to one historian, his circle of friends were distraught. Marcus calmly asked why they were weeping for him when, in fact, they should accept both sickness and death as inevitable, part of nature and the common lot of mankind. He returns to this theme many times throughout The Meditations.

"All that comes to pass", he tells himself, even illness and death, should be as "familiar as the rose in spring and the fruit in autumn". Marcus Aurelius, through decades of training in Stoicism, in other words, had taught himself to face death with the steady calm of someone who has done so countless times already in the past.

Donald Robertson is cognitive behavioural therapist and the author of several books on philosophy and psychotherapy, including Stoicism and the Art of Happiness and How to Think Like a Roman Emperor: The Stoic Philosophy of Marcus Aurelius

[Apr 28, 2020] But this one literally arrived at warp speed and with orders of magnitude greater contractionary force than normal business cycle downturns by David Stockman

Apr 28, 2020 | ronpaulinstitute.org

Indeed, the unfolding collapse now underway shouldn't be called either a recession or a depression. These terms denote the macroeconomic contraction triggered by bursting credit or other financial bubbles and they usually take many months to reach full intensity.

But this one literally arrived at warp speed and with orders of magnitude greater contractionary force than normal business cycle downturns. It is therefore sui generis ; it stemmed from panicked officialdom who ordered households and businesses alike to abruptly "cease and desist" from their daily economic activity upon penalty of fine, jail and public opprobrium.

The good folks at Moody's Analytics captured the breathtaking speed of the resulting plunge in the chart below in which they tracked the number of U.S. counties falling under lockdown orders (blue bars) with an estimate of the cumulative loss in daily GDP (ascending red line).

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Whether this is accurate to the percentage point is immaterial and will be adjudicated after several years of jobs and GDP data revisions. But what can't be gainsaid is that in the short span between March 16 and April 6th depicted in the graphic -- something like one-third of US GDP ceased to happen.

When in the modern day world of nearly unfathomably complex economic linkages, incredibly long supply chains and interactive feed-back loops you have one-third of economic activity go dark in just 21 days, the damage is likely to be enormous, even if the interruption is comparatively short-lived.

But in the present instance the US economy was so fragile and deeply impaired owing to 30-years of debt, speculation and malinvestment-fueled false prosperity that it resembled an economic hemophiliac stumbling into a knife fight. The bleeding will be profuse and long-lasting because the American body economic had no defenses.

We shall lay out chapter and verse on the cash flow vulnerability of the preponderant share of US households and businesses in subsequent installments. But sometimes a picture is truly worth a thousand words and this– cars lined-up at a San Diego food bank -- is one of them.

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Ordinary urban poor folk don't line up at the soup kitchen in their late vintage autos and SUVs. This is the hand-to-mouth economy lined up for food in cars that will soon be nabbed by the repo man.

So the question recurs. Why did Lockdown Nation strike the everyday American economy out of the blue and who is responsible?

That is to say, Lockdown Nation itself is the product of a contagion of public policy Hysteria, so who is Patient Zero?

We think there is little doubt that it is the Donald himself, as we chronicle below. It is only his overweening, pugnacious, polarizing political persona that could have transformed a moderate public health threat into a politicized death struggle that is literally suffocating the American economy and the social life which depends upon it.

But for want of doubt let us remind that there was never any case for Lockdown Nation -- not on March 16 when the Trump White House issued its stay-at-home guidelines nor subsequently -- based on the pubic health impact of the coronavirus.

That's because Covid-19 would be considered a despicable bully if it were an animate being. It overwhelmingly brings serious illness and death upon the old, frail and already disease-ridden, not the general population.

Even many of the rare deaths among younger people appear to be attributable to an unusual genetic condition which causes the number one killer of the coronavirus -- the human immune system -- to launch an unhinged counterattack called a "cytokine storm" that ends up maiming or killing the patient, not the virus (fortunately, there are immune system suppressants that can treat these if caught early enough).

Thus, as of April 25 when the CDC had scored 40,072 "confirmed or presumed" Covid19 deaths, the breakdown by age was unassailably dispositive:

· Age 0-14: 5 deaths among 60.9 million or a mortality rate of 0.008 per 100,000;

· Age 15-34: 354 deaths among 88.7 million or a mortality rate of 0.39 per 100,000;

· Age 35-64: 7,907 deaths among 125.8 million or a mortality rate of 6.3 per 100,000;

· Age 65-84: 19,840 deaths among 45.9 million or a mortality rate of 43.2 per 100,000;

· Age 85 and older: 11,966 deaths among 6.54 million or a mortality rate of 182.9 per 100,000.
So the average mortality rate for the entire US population as of April 25, which was 12.2 deaths per 100,000, is completely meaningless from the perspective of remedial public health policy. It is a reminder of the old adage that you can drown in a river with an average depth of 3 feet if you end up in a deep, vicious eddy pool.

Likewise, you don't rationally shut down schools when the mortality rate for kids is a rounding error; and keeping the kids out of school does nothing for their grandparents and great-grandparents if they are self-isolated anyway, as the should be, when their mortality risk is 22,800 times higher!

Indeed, among the cohorts of the working age population age 35-64, there is absolutely no basis in the mortality rates for shutting down places of work. The normal, total mortality rate for this 126 million-strong core of the work force, in fact, is nearly 500 per 100,000 annually.

So the Covid death count to date amounts to just 1.3% of the normal mortality rate. What posse of fools advised the Donald, therefore, to monkey-hammer the working economy on account of that?

Moreover, our eddy pool analogy could not be more spot on. A new analysis of elderly New York hospital patients who died WITH Covid-19 showed that 94% suffered from at least one life-threatening morbidity such as hypertension or respiratory illnesses, and 88% had at least two.

That is to say, based one age alone, the Covid is a perfect case of the Pareto 20/80 rule. In this case, the 65 years and older population (52.4 million) accounts for 16% of the US total population (327.2 million) but 79% of the WITH Covid-19 deaths.

But when you overlay, the comorbidity incidence among those 16%, the real highly vulnerable population turns out to be 5% or less.

So the fact that we got to Lockdown Nation with lightening speed given these facts is surely a case of President Truman's famous sign on his Oval Office desk that read, "the buck stops here".

The truth is, the Donald is lazy, weak, indecisive, notoriously ill-informed and an atrocious chooser of advisors, and it is exactly those attributes that lead to the March 16 stay-at-home guidelines from the Oval Office.

Had the Donald not foolishly embraced the misbegotten project of the Infectious Disease Lobby to stop the spread of the coronavirus through the US population cold, which is self-evidently impossible with a ultra-contagious airborne virus, the Dem mayors and governors would not have had the political hall pass to instantly pile on the lockdown wagon.

Ironically, the Dems were desperately searching for a way to discredit the Donald's phony Greatest Economy Ever boast, and the Donald handed them what amounts to an economic bunker buster bomb on a platter.

Indeed, choosing bad advisors and listening to them is the Donald signature failing. After all, if the gravamen of your foreign policy is America First and you appoint as your top national security advisor the most unhinged apostle of Empire First on the entire planet, John Bolton, you are either stupid as hell or semi-comatose.

So the Donald is, in fact, the Patient Zero who spread the virus of Lockdown Nation because he was either too lazy or too dumb ask the obvious question, as we will amplify in Part 2.

But in the meanwhile, WSJ columnist Holman Jenkins got it right:

We started off sensibly. 'This is not something [American families] generally need to worry about,' said CDC's Dr. Nancy Messonnier in mid-January. 'It's a very, very low risk to the United States,' said Dr. Anthony Fauci a week later.

Bill de Blasio, mayor of New York, urged residents to go about their business normally as recently as March 11.

But then on March 16, the Donald entered the White House briefing room and announced a sweeping plan to slow the spread of the coronavirus.

And it was based on the extremely bad advice of Dr. Fauci and the Scarf Lady (Deborah Birx), both lifetime government bureaucrats who had absolutely no concept of the economic Mayhem that Lockdown Nation would instantly foster.

So Patient Zero thereafter droned on night after night during this reality TV show in the stupid belief that the US economy was so strong that it could handle a 15-day Spring Vacation.

Never was a US President more misguided:

Stay home for 15 days, he told Americans. Avoid groups of more than 10 people. 'If everyone makes this change, or these critical changes, and sacrifices now, we will rally together as one nation and we will defeat the virus,' he said.

On Sunday, the night before Day 15, Trump told the country to stick with the plan for another month, until April 30.

'The better you do, the faster this whole nightmare will end,' Trump said.

'We're getting rid of the virus,' he said. 'That's what we're doing. That's the best thing we can do. By the way, for the markets. For everything. It's very simple. It's a very simple solution. We want to get rid of it.'

Indeed, the Donald got so bamboozled in part because of his own massively exaggerated view of his role. He came to view the absolutely catastrophic stay-at-home guidelines as merely another case of closing things down which aren't his to close–like the border with Mexico.
Trump described the decision to issue the guidelines as 'one of the most difficult decisions I've ever made' and said he was skeptical when his medical experts came to him with the plan.

'I wasn't happy about it,' he said on Fox News last week. 'They came in -- experts -- and they said, "We are going to have to close the country." I said, "We have never closed the country before. This has never happened before." I said, "Are you serious about this?"

But without hardly a further moment of reflection, he promptly declared himself a War President, and we were off the races to Lockdown Nation.

But on this matter, the great Randolph Bourne was more than clairvoyant fully one century ago:

The moment war is declared, however, the mass of the people, through some spiritual alchemy, become convinced that they have willed and executed the deed themselves.

They then, with the exception of a few malcontents, proceed to allow themselves to be regimented, coerced, deranged in all the environments of their lives, and turned into a solid manufactory of destruction toward whatever other people may have, in the appointed scheme of things, come within the range of the Government's disapprobation.

The citizen throws off his contempt and indifference to Government, identifies himself with its purposes, revives all his military memories and symbols, and the State once more walks, an august presence, through the imaginations of men.

Reprinted with permission from David Stockman's Contra Corner .

[Apr 28, 2020] How will COVID-19 change US national security strategy? by Christopher Preble

Apr 08, 2020 | responsiblestatecraft.org
Written by

Even as Americans struggle to deal with a deadly and seemingly unprecedented pandemic, it isn't too soon to wonder how the present crisis will shape our collective understanding about the dangers that we face, and the best means for addressing them.

One thing, however, is obvious: the military and other tools of force and coercion that are generally useful against traditional threats -- from invading foreign armies to swarms of killer drones -- are essentially irrelevant against killer bugs. Indeed, as the plight of the aircraft carrier USS Theodore Roosevelt reminds us , military personnel might be more vulnerable to infectious diseases than the general population.

... ... ...

Military-centric solutions, however, may be upended by COVID-19. Americans no longer feel safe, even in their own homes. The threat posed by an invisible silent killer is even more ominous than that of terrorists who were also mostly invisible ( or perhaps non-existent ). In a time when the United States' physical security can no longer be taken for granted, will Americans be as tolerant of a national security strategy aimed at protecting others from invasion or coercion? And will they be willing to pay for a military geared to fighting foreign enemies abroad, especially when more urgent threats are already here?

Opportunity costs

The need to balance between foreign and domestic priorities is ever-present. In his " Chance for Peace " speech of April 1953, President Dwight Eisenhower famously spelled out the tradeoffs.

"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense," he said then, "a theft from those who hunger and are not fed, those who are cold and are not clothed."

He observed that a bomber cost the equivalent of 30 schools, "two fine, fully equipped hospitals" or "50 miles of concrete highway."

Teachers would later point to that speech, invoking Eisenhower's name to justify cuts in military spending to obtain increases for education. Others wished for the day when schools would have all that they needed, while the Air Force would have to hold a bake sale to buy a bomber. Doctors and nurses are now broaching similar issues with respect to intensive care units and personal protective equipment.

To critics, such calls were always silly and short-sighted. The United States could have it all, they told us. Good schools, good healthcare and a military capable of fighting many battles simultaneously, including on behalf of others.

Zero-sum thinking, and fiscal conservativism generally, they said, unnecessarily forced the United States to fight its adversaries with one arm tied behind its back. By unleashing America's growth potential, fueled by government spending -- including spending on the military -- we would create an economy that could pay for both guns and butter.

Those claims persist. When the United States was waging wars in Iraq and Afghanistan, plus hunting al-Qaida on at least four continents, defense spending advocates dismissed calls to actually pay for such wars with higher taxes or major cuts in popular social programs. Even after the 2008 financial crisis, they dismissed talk of offsets or spending caps as reckless and unnecessary.

Plus, advocates for higher defense spending are always quick to add, don't forget about the spin offs -- from the microwave to the Internet to GPS. Government investment into basic research for the military made possible a range of consumer goods that wouldn't exist in the absence of such activity.

To be sure, some military spending might be relevant in the current crisis. The lab at Fort Detrick, in Frederick, Maryland – -- officially the U.S. Army Medical Research Institute of Infectious Diseases -- is now on the frontline of the search for a vaccine against COVID-19 .

The facility represents a tiny fraction of the entire Army budget, however, and has often been a tempting target for those seeking funds for other more urgent priorities. Earlier this year, the Trump administration proposed to cut $104 million from the lab's budget. Now, they're looking to boost funding for the institute and other labs by $900 million. Is this an early indication that our priorities have actually changed?

In the post COVID-19 era, who will call for cutting the budget of an agency that might have stopped the outbreak in 2020? Who will argue that hospital beds or N-95 masks aren't needed, but that the cost of maintaining U.S. troops in Europe is an expense that we simply must bear? Who will say that more F-35s are vitally important for our security, but we don't need to research how to defeat an invisible killer?

When Americans realize that the $1.5 billion that the Trump administration requested to upgrade or modify 89 M1 Abrams tanks could have bought as many as 60,000 of the life-saving respirators that are now in such short supply, will they exact a price on the politicians who ignored the pleas to stop buying the tanks the Army didn't want?

We may get a sense soon. A poll taken just before the current crisis found a healthy plurality of Americans believing that U.S. military spending was about right . But in the just-passed $2.2 trillion aid package, the Pentagon came away with about $10 billion -- a mere 0.5 percent of the total, and a far cry from the roughly 55 percent of discretionary spending that it receives in a typical year.

All of the above

Pentagon spending advocates are likely to argue that we cannot prioritize. To take our eyes off foreign threats while addressing the one here among us, they will say, would expose the entire planet to extreme peril.

Ever since the dawning of the nuclear age, we envisioned this grave danger as a life-extinguishing mushroom cloud -- actually many mushroom clouds. In the last few weeks, we've seen glimpses of a different danger; patients gasping for air as a microbe attacks their lungs, and left in hallways, or in the streets, because there aren't enough ICU hospital beds or ventilators. Can we care for all of these people, while also spending hundreds of billions of dollars on a military that operates mostly far from our own shores?

The tradeoffs are rarely so stark. Soldiers and Marines proved commendably flexible after 9/11. Ships and planes can be moved. But the military instrument that was useful for dealing with petty tyrants from Saddam Hussein to Muammar Gaddafi, and was even suitable for use against terror group leaders, seems uniquely unsuited for defeating microscopic pathogens.

Nevertheless, the safe bet is that inertia will prevail. Strategists and policymakers will push to retain the fight-forward approach for most traditional threats, and then layer the additional expenses required to deal with infectious diseases on top of all the rest.

But while the coronavirus won't change everything, it will change many things. The response to it has already put enormous strain on the U.S. economy. Sen. Chris Murphy (D-Conn.) called on U.S. policymakers to begin preparing now for the next pandemic. It seems inevitable that measures taken to avoid a repeat of the current crisis will impose costs, much as the post-9/11 response did for nearly every person and industry.

COVID-19's more lasting effects, however, could be seen in whether, and how, we restructure our government, and what it means for civil liberties. A U.S. government strong enough to mobilize all of society's resources against all threats would compel us to depart from our founding traditions, and would ultimately threaten Americans' freedom and prosperity. We might be getting a glimpse of that today, with stay-at-home orders, compulsory business closures, and yet another massive increase in debt-funded government spending.

Sensing the danger of overreaction to crises, President Eisenhower sought "balance in and among national programs," as he explained in his farewell address , "between the private and the public economy" and "between action of the moment and the national welfare of the future."

Finding that balance post-COVID-19 will require us to revisit all of the things that we say we need to do to keep us safe. And it should entail finally shifting resources away from the military, and dropping a militarized approach to global problems, in favor of the many other instruments of American power and influence.

[Apr 28, 2020] Hudson gives him the primary credit for providing the foundation for Modern Monetary Theory

Apr 28, 2020 | www.moonofalabama.org

karlof1 , Apr 27 2020 0:25 utc | 53

Some will know who Hyman Minsky was, some won't. Hudson gives him the primary credit for providing the foundation for Modern Monetary Theory, and he gets praise from Keen, Wolfe and many others too. On the occasion of his 100th birthday, here's a long essay that seeks the following:

"But the question still stands: Was Minsky in fact a communist? Of course not. But, a century after his birth, it is useful to clarify often neglected aspects of his intellectual biography."

Since Minsky's referenced so often by Hudson particularly, I think this piece will be helpful for those of us following the serious economic issues now in play. I'd reserve an hour for a critical read.

[Apr 27, 2020] Expect unemployment rates to hit 'Great Depression' level, warns Trump's economic advisor

Apr 27, 2020 | www.rt.com

"Around 2008, we lost 8.7 million jobs and the whole thing. Right now, we're losing that many jobs about every 10 days," Hassett said. "And so the economic lift for policymakers is an extraordinary one."

NEW: White House senior adviser Kevin Hassett tells @gstephanopoulos that the economic outlook is a "really grave situation.""We're going to be looking at an unemployment rate that approaches rates that I think we saw during the Great Depression." https://t.co/vM8WcrQKg0 pic.twitter.com/ds7QtseNqe

-- This Week (@ThisWeekABC) April 26, 2020

Unemployment peaked during the Great Depression in 1933 when rates hit 25 percent. They have only topped 10 percent twice since then, once in 1982 and again in 2009.

Over 26 million Americans have filed for unemployment benefits during the Covid-19 pandemic, and it will likely top 27 million very soon once what could be millions of backlogged claims can be processed. The Congressional budget office forecasts the unemployment rate rising from 3.8 percent to 14 percent in the second quarter of 2020 and then 16 percent in quarter three and finally making its way down to 10.1 percent by the end of 2021.

[Apr 27, 2020] Randy Wray is a big fan of Minsky and brings him up in this 6 minute video talking about what led up to the 2008 financial crisis of which the current crisis constitute the second stage

Apr 27, 2020 | www.moonofalabama.org

financial matters , Apr 27 2020 18:02 utc | 106

karlof1 @ 53

Randy Wray is a big fan of Minsky and brings him up in this 6 minute video talking about what led up to the 2008 financial crisis

https://m.youtube.com/watch?v=M1smUezyFRM


financial matters , Apr 27 2020 18:02 utc | 106

juliania , Apr 27 2020 18:02 utc | 107
karlof1 @ 100, thank you. Both your links were well worth reading, especially as no interrupting ads or distracting obstructions made it possible to do so. I'll just highly recommend the Crooke article for its historical references and suggestion of hopeful outcome. I was much reminded of the Oedipus cycle which focuses on plague in Thebes as the pivotal point of ultimate pressure - that last grain of sand, so to speak. History doesn't repeat, fortunately, but it does rhyme! And knowledge is indeed power.
karlof1 , Apr 27 2020 19:25 utc | 112

juliania @107 & financial matters @106--

Thanks for your replies! There're plenty of happenings, writings and videos to keep a person very busy if that's the desire--those expressing boredom are actually confessing laziness. As April concludes, we'll soon be treated to the latest economic stats. Here's part of what the owner of Shadowstats had to say today:

"PENDING PANDEMIC AND OIL-PRICE IMPACT: Initial Contraction in First-Quarter 2020 GDP Likely Will Be Deeper Than the 3.5% (-3.5%) Consensus / ShadowStats Forecasts an Annualized 1q2020 GDP Drop of 7.1% (-7.1%), Deepest Since Great Recession Depths; Second-Quarter GDP Likely the Deepest Drop Since the Great Depression, If Not Worse / Headline April 2020 Unemployment Should Soar to About 21%, Worst Since Great Depression."

A U6 unemployment of 21% would send actual unemployment as tracked by Shadowstats to close to 40% and overall GDP shrinkage may go beyond 10% annualized. Real per capita GDP may fall below that of 1970, which will cause a fiscal crisis in every state as they fall way short of projected revenues. There's already a caustic debate happening between states and the Treasury and State Departments about bailing them out instead of the Money Power. Talk of Secession and Nullification are becoming louder rekindling arguments never really solved from the 1820s&30s. Try as they might, Trump and Pompeo's campaign to blame it all on China will fail as the economic problems have remained since 2008-9, statistical trickery notwithstanding. One thing's already certain: This election year will be like no other.

[Apr 27, 2020] Goldman Sees Imminent Momentum Crash As All S P Gains Come From Just 5 Stocks

Apr 27, 2020 | www.zerohedge.com

Going back to our thesis that " The Market Is Now Just 5 Stocks ", Kostin next notes that because many of the recent outperformers had also been market leaders prior to the coronacrisis, their recent gains have led to a surge in already- elevated market concentration.

While coming into 2020, the five largest S&P 500 stocks accounted for 18% of index market cap, matching the share at the peak of the Tech Bubble in March 2000, since then, those stocks (MSFT, AAPL, AMZN, GOOGL, FB) have risen to account for 20% of market cap, representing the highest concentration on record.

Which brings us to Goldman's ominous warning #1 : "We opined in January that the earnings power and valuations of the top five stocks suggested they could avoid the fate of the top stocks in 2000. However, the further market concentration rises, the harder it will be for the S&P 500 index to keep rising without more broad-based participation . " In other words, if the dispersion continues to soar, and if the entire upside in the S&P500 is thanks to just five stocks, not even Goldman can see a happy ending.

If that wasn't enough, Goldman also has an ominous warning #2 , namely that sharp declines in market breadth in the past, of the kind we see now, have often signaled large market drawdowns. For example, in addition to the Tech Bubble, breadth narrowed ahead of the recessions in 1990 and 2008 and the economic slowdowns of 2011 and 2016. This is also observed empirically, as historically sharply narrowing breadth has signaled below-average 1-, 3-, and 6-month S&P 500 returns as well as larger-than-average prospective drawdowns.

That said, Goldman refuses to put a timeline to its dour outlook, and notes that periods of narrow market breadth can last for extended periods. Since 1980, the breadth measure charted in Exhibit 2 has indicated 14 episodes of breadth narrowing more than one standard deviation, as it does today. The median episode persisted for three months, with the longest lasting 27 months from 1998-2000.

However, eventually, "narrow market breadth is always resolved the same way. Often, narrow rallies lead to large drawdowns as the handful of market leaders ultimately fail to generate enough fundamental earnings strength to justify elevated valuations and investor crowding. In these cases, the market leaders "catch down" to weaker peers." This is the scenario laid out by Nomura last week in our post " Spectacular Momentum Crash" Imminent As Record Human Hedge Fund Selling Meets Furious Robot CTAs Buying ." In other cases, an improving economic outlook and strengthening investor sentiment help laggards "catch up" to the market leaders, which also results in a violent drawdown as the leaders get repriced sharply lower .

The bottom line, however, is that in both cases, "on a relative basis the outperformance of market leaders eventually gives way to underperformance."

What does this mean in practical terms? As Goldman concludes, since 1980, its long/short Momentum factor has generated a median unconditional 12-month return of +400 bp "but a 12-month return of -300 bp following periods of narrow market breadth like today." In short, while it may not necessarily be "spectacular", Goldman agrees with Nomura that a momentum crash is dead ahead. And with that pessimistic view, Goldman - which just two weeks ago called the "bottom" in the S&P500, has joined Morgan Stanley's "notorious bear-turned-bull" Michael Wilson in warning that stocks are now overbought and that a "correction will begin soon."

[Apr 27, 2020] It's '08 All Over Again - Carl Icahn Warns Investors Be Extremely Careful

Apr 27, 2020 | www.zerohedge.com

This is a time to be "extremely careful," Icahn said in an interview Friday on Bloomberg Television.

The 84-year-old's reasoning is simple - and terrifying for the average commission-raker and asset-gatherer - having traded through every stock-market crash since the Great Depression, the future is just too unpredictable for the S&P 500 to be trading at almost 20 times next 12m earnings estimates ...

"You cannot really justify that multiple," Icahn said.

"Short-term, you may have some big downdrafts."

[Apr 27, 2020] The Math Is Not Pretty - COVID Concerns Spark Existential Threat For Many Colleges

Apr 26, 2020 | www.zerohedge.com

Colleges across the country are trying to figure out whether they can reopen campus this fall. Right now, it's a 50/50 shot. No one knows, and with a second coronavirus wave looming later this year, face-to-face classes might not be seen until early 2021.

Ted Mitchell, president of the American Council on Education, said reopening colleges could be a drawn-out process and lead to a 15% decline in students, resulting in billions of dollars lost for schools.

"The math is not pretty," Robert Kelchen, a student at Seton Hall University in New Jersey, told NPR News . "Colleges are stressed both on the revenue side and on the expenditure side."

The transition to virtual classes has been epic. Schools in nearly every state have moved courses online in just weeks, triggering lawsuits filed by some students that claim refunds for tuition, fees, and room and board must be seen.

Dominique Baker, a professor of education policy at Southern Methodist University in Dallas, warned that every college would feel financial stress related to coronavirus lockdowns.

NPR estimates that virus lockdowns are leading to significant losses for some universities:

"The University of Michigan estimates it may lose up to $1 billion by the end of the year. For the University of Kentucky, it's $70 million. Hundreds of schools -- including some with endowments of more than a billion dollars, like Duke University, Virginia Tech and Brown -- have announced hiring freezes. Other institutions have cut pay and have laid off staff and contractors. In Vermont, state officials have floated potential college shutdowns."

Baker said the lockdowns would affect colleges in disproportionate ways. "For some colleges, this is an existential threat that means they'll have to close," she said, while others have the financial support to weather the virus storm.

The higher education community received a bailout via the CARES Act. Congress allocated around $14 billion to colleges and universities affected by the shutdowns, though the American Council on Education said it was not enough and is calling for $46 billion more.

Campus Reform identified the top ten schools receiving the most bailout money, courtesy of the American taxpayer:

  1. Arizona State University- $63.5 million
  2. Pennsylvania State University- $54.9 million
  3. Rutgers University- $54.1 million
  4. University of Central Florida- $51 million
  5. Miami Dade College- $49 million
  6. Georgia State University- $45.2 million
  7. California State University-Northridge- $44.6 million
  8. The Ohio State University- $42.8 million
  9. California State University- Long Beach- $41.7 million
  10. California State University- Fullerton- $41 million

Kelchen described a situation that happened over a decade ago when the economy crashed in 2008, and state budgets were not able to fund schools. With a depression unfolding , it appears funding for higher education will come into question once more.

And to make matters worse, nationwide enrollment in higher education has plunged 11% in the last eight years as millennials figure out they don't need to rack up tens of thousands of dollars in debt before entering the labor force.

Nicholas Christakis, a sociologist and physician at Yale University, said colleges are not returning to normal this fall.

"This idea -- that we can somehow just get back to normal and go back to school in the fall, because we always have, it's not reasonable, actually. I think we're going to have to figure out other ways of doing this," said Christakis.

Bryan Alexander, an educational futurist at Georgetown University, said the pandemic is going to reshape everything we know about college.

"There are many ways a reconstructed fall might look, including the option of continuing everything online, though many colleges that teach in-person still think of that as a last resort. They cite online learning growing pains and an ambivalent faculty. Plus there's some fear that students and their families won't be willing to pay as much for an online offering. Among the ideas being floated for tweaking the in-person model is changing the traditional academic calendar. Instead of starting in August or September, school might open in October or even January. Instead of 16-week semesters, colleges could shift to quarter systems or even shorter, four-week courses to allow flexibility," said NPR.

Some have floated the idea of trying smaller classes and hosting larger ones online. Kim Weeden, a sociologist at Cornell, along with colleague Benjamin Cornwell, said large lecture classes should be eliminated.

"Just eliminating those 100-person or more classes didn't seem to reduce the small-world nature of the network all that much," Weeden said. Their research -- which was published recently in a white paper, but not peer reviewed -- was only looking at classes and didn't factor in dorm life or campus events such as social gatherings and athletics.

"There's just so much uncertainty," said Weeden. "You know, a big piece of this, of course, is whether there is going to be [coronavirus] testing available and what those tests can and cannot tell us. And you know, everybody wants to know the answer to that question."

The million-dollar question is if college classes will return to normal by fall. And the answer is likely no, while many schools will push for virtual classes, extended lockdowns, and a second coronavirus wave could lead to the implosion of higher education.

[Apr 24, 2020] Jobless claims still point to over 20,000,000 lost jobs in April, 15%+ unemployment rate

Apr 24, 2020 | angrybearblog.com

NewDealdemocrat | April 24, 2020 6:14 am

Jobless claims still point to over 20,000,000 lost jobs in April, 15%+ unemployment rate

As I've written in the past few weeks, the number of initial jobless claims correlates roughly with the number of net new jobs added or subtracted in any given month. Normally there is too much noise for it to be of much value, but with the huge spike in the past month, the signal will come through much more strongly.

[Apr 24, 2020] Atlantacist Method: Raw materials come into China by Ship, and finished Goods leave by ship. Globo Homo ownership class takes the increment of production and wage arbitrage as gains. Wall Street/London is a hero, main street is a zero.

Apr 24, 2020 | www.unz.com

Mefobills , says: Show Comment April 23, 2020 at 5:05 pm GMT

@anon Lets add to the bigger picture. With regards to Israel: Exceptions don't make the rule.
_______

The forces that off-shored the jobs, to then make wage arbitrage and become masters of the universe, are the very same ones that are now demonizing China.

They are "international" in outlook, and the only national country that matters to them is Israel.

In general, it is a "class" of people -sometimes called "Davos Man" who goes by other names, such as globo-homo, ZOG (zionist world government), Ne0-Con, Neo-Liberal.

Globo-Homo couldn't resist the wage arbitrage that China represented after the Berlin Wall fell in 1990. Clinton gave China effective MFN status in 1993. Wall Street begins Green Mail Coercion Techniques against American industry to then off-shore jobs.

China also runs a simultaneous gambit against the U.S. by buying up TBills instead of goods from U.S. main-street. This then insures that U.S. dollar is propped up against the Yuan e.g. currency manipulation. The China/Wall Street Gambit is in full swing, and globo-homo is happy.

Globo-Homo doesn't care about the destruction of American Mainstreet, because only prices matter, and they are getting rich. China becomes the workshop for the world.

There are still elements within Globo-Homo that like their easy money derived from ownership of transplanted industry.

If you look at today's propaganda emission center for China psy-ops you will see that it is another mouthpiece and organ of the "international." They are festooned with neo-liberals and ne0-cons.

Why the sudden shift, where China is the golden goose, to becoming the enemy?

Summary: There are two main enemies against American Mainstreet Labor. There is the internal and international enemy of globo homo centered in Wall Street and London, and there are elements within China that used Mercantile techniques to continue imbalanced trade and theft of American patrimony and industry.

Globo homo has new marching orders, as they have belatedly realized that they got played. The jig is up, you cannot operate the usury mechanism, do speculation, and RIG THE WORLD, forever.

The U.S. military security state has communicated clearly, they don't like their "international" supply chains and loss of U.S. domestic manufacturing. Globo Homo has long used the US. military as a Golem which protected movement of ships from China's east coast.

Atlantacist Method: Raw materials come into China by Ship, and finished Goods leave by ship. Globo Homo ownership class takes the increment of production and wage arbitrage as gains. Wall Street/London is a hero, main street is a zero.

[Apr 24, 2020] How the ruling elite switches from unity to "spiders in the can" type of fights

Apr 24, 2020 | www.unz.com

A quick study of history shows that when exploiting elites are doing great, they all faithfully support each other, but when things start to go south, they immediately turn on each other. The best recent example of this phenomenon is the schism in the US ruling elites who, since the election of Trump, have immediately turned on each other and are now viciously fighting like "spiders in a can" (to use a Russian expression). In fact, this is so true that it can even be used as a very reliable diagnostic tool: when your enemies are all united, then they are probably confident in their victory, but as soon as they turn on each other, you *know* that things are looking very bad for your opponents. Likewise, we now see how southern Europeans are getting really angry with their northern "EU allies" ( Macron seems to be falling in line behind Trump even if he uses a more careful and diplomatic language). Finally, the way the US CIA has one foreign policy, the Pentagon another and Foggy Bottom one of its own (even if limited to sanctions and finger-pointing) tells you pretty much all you need to know to see how deep the systemic crisis of the Empire has become.

[Apr 24, 2020] Last, but most certainly not least, the Europeans will find out (and some already have), that the US literally does not give a damn about not only regular Europeans, but even about the European ruling classes

Apr 24, 2020 | www.unz.com

Jake , says: Show Comment April 23, 2020 at 12:27 pm GMT

This cannot be overemphasized: "Last, but most certainly not least, the Europeans will find out (and some already have), that the US literally does not give a damn about not only regular Europeans, but even about the European ruling classes."

That has been the defining pattern of WASP culture since its formation (or completion with the rise of Anglo-Saxon Puritanism). But it is more generally a hallmark of Germanic pagans/warlords. It is about endless rapine with honor given to those who help those above them secure more spoils. There is zero concern for the working man (whether he tends cattle to feed the rich or rows the viking boats), and the honor for others in the chain of command lasts only as long as they profit those above them.

The chief Elites of the Anglo-Zionist Empire are, obviously, all tied directly to the US. The Brit Elites have the honorary position of being the second most prestigious. Every other nation's Elites are on rather thin ice. The second that French Elite stop pimping for Uncle Sam is the second that the Elites of the Anglo-Zionist Empire see them as trash that must be removed.

The naive backers of the EU still assume that that alliance is what saves them from the US inflicting direct overlordship. They are damned fools, because the EU acts in concert with the Anglo-Zionist Empire on all major matters that, ultimately, will make all of Western Europe a playpen for the Anglo-Zionist Elites.

And for our VDARE crowd – that is the reality of the spread of English language and of WASP run empire. When it moves from a small local church and community, WASP culture must be perpetually imperialistic and philoSemitic. It must destroy non-WASP European cultures, forcing their leaders to bow and assimilate to WASP hegemony.

[Apr 24, 2020] The Use and Abuse of MMT

Apr 24, 2020 | www.moonofalabama.org

karlof1 , Apr 23 2020 18:19 utc | 35

Musburger @3--

I highly suggest you read "The Use and Abuse of MMT" by Michael Hudson, with Dirk Bezemer, Steve Keen and T.Sabri Öncü.


Leser , Apr 23 2020 18:55 utc | 41

MMT is brilliant and it's really embarrassing that it took The Deadliest Pandemic™ for some folks to come round to it. We all collectively print an extra bit of money - and give it to each other!

There are historic examples documented of successful applications of the concept, look no further than to the earnest witness of Baron Munchausen pulling himself out of a swamp by his own hair. https://en.wikipedia.org/wiki/Baron_Munchausen

karlof1 , Apr 23 2020 19:22 utc | 48
Hudson also has another video posted to his site , "An interview on the Radical Imagination: Imagining How Financial Parasites and Debt Bondage Are Destroying Us," which is based on his book Killing the Host . It's a recent video interview that's @50 minutes long prefaced by the Occupy Wall Street Anthem and introduction.

One aspect of MMT that must be made clear is it advocates the use of public banking or the Treasury to pump capital in the form of money into the productive economy , not the parasitic economy the Fed supports--the difference is huge and vital. For MMT to succeed within the Outlaw US Empire, the Fed must be liquidated. For more, please read the essay I linked to @35.

suzan , Apr 23 2020 19:56 utc | 50
Musburger @ 3 : "What do you folks think about MMT?"


Re-inflation of a depressed economy can be achieved by government spending into:
public investment
employment
income transfers
income support
labour
tangible capital
infrastructure.

This is "good" MMT.

"Bad" MMT, or fake MMT, is government spending into WallStreet, handouts to:
the banks
large corporations
speculators
bondholders.

The March 2020 CAREs Act is bad MMT as was the 2008 bailout. This one is same as that one but "on steroids."
Both bailouts further empower(ed):
rentiers (the landlord class),
monopolies,
the financial creditor class
and cast most of the rest of the US population into reduced circumstances, poverty and/or debt servitude. They burden the working economy with overhead and debt that cannot be paid. Bad MMT.

While the MMT school has a healthy diversity within it, USG applications have flipped the theory on its head, says Hudson. See below for link.

(Remember Cheney's, "We are all Keynesians now"? )

Worse, Bad MMT does more than simply bailout the top 1%. It also increases the parasitic power of financialization on the real economy. As we have repeatedly seen, now most dramatically, the financial sector is incapable of planning for anything other than its own fictional valorization.

Libertarians' freedom from government dogma excoriates against centralized planning and yet, ironically, the end result of their "government is bad" path forced upon us in USA led directly to central 'planning' by default -- by parasitic-on-the real-economy privatized finance sector, a form of fascism not democracy or liberty.

USA'ns public health crisis occurs as states, which are required by law to not run deficits, face huge costs that will force more austerity on their populations. More callous, they are forced to compete against each other as they purchase essential equipment and technology (from for-profit privateers) to deal with the highly infectious novel virus, and the fed indemnifies the privateer mask makers!!!

What is the root of inequality today? Debt and the monopolization of real estate.
What are solutions?
Wipe out and roll back debt overhead on production and consumption.
This is "good" MMT.
Bad MMT furthers the debt burden on society, concentrates monopolization and cements in central planning by parasitic private finance sector.


https://michael-hudson.com/2020/04/covid-plan-more-capital-gains-not-profits/

[Apr 24, 2020] They can top off the national reserves on the cheap and profit when their war sends prices up again

Apr 24, 2020 | www.moonofalabama.org

Zengine3 , Apr 23 2020 18:03 utc | 30

If ever there was a time, it's now. Oil has bottomed out. They can top off the national reserves on the cheap and profit when their war sends prices up again. Maybe it's why The Orange Goober has ordered the Navy to "shoot down" any Iranian boats that harass/approach/rudely gesture at US ships.

Musburger , Apr 23 2020 18:08 utc | 31

@30

Scott Ritter thinks this is quite possible.
https://www.rt.com/op-ed/486598-trump-iran-war-oil/

Tuyzentfloot , Apr 23 2020 18:23 utc | 36
Ritter's article worries me. There is now a sales argument for war: "don't worry about oil prices going sky high, Iran can't use that weapon against us now!".
LOL , Apr 23 2020 18:38 utc | 38
You over excitable little Iran war-monkeys really should take time out of your busy war-monkey daily-schedules to learn something about the topography of Iran and it's defensive and offensive military capabilities.

It would certainly save everyone else from having to listen to you being wrong yet again.

karlof1 , Apr 23 2020 18:53 utc | 39
dh @34--

You're on the right track. There's a huge supply glut as all forms of storage are mostly filled as proven by the negative WTI pricing. Global demand is still being destroyed. War in the Persian Gulf region will further destroy demand; and since very little oil's being shipped from there, the supply glut won't be used up anytime soon--certainly not quickly enough to see a sharp rebound in oil price. The crucial point is domestic US refineries have cut back their runs as their margins are even thinner than before, plus demand destruction is still occurring, thus the domestic storage glut. The wife and I jested last night if we only had a rail spur we could order up a couple of tank cars full of unleaded at the current very distressed price and be set for a longtime.

As The Saker notes in his latest , Trump must make the voting public look everywhere except at him and Congress, the bellowing at Iran being part of that entire theatre. Yes, a mistake could have very negative consequences for the USN and all US assets in the region as well as Occupied Palestine--the overall underlying dynamic hasn't changed since Trump broke the Iran Nuclear Treaty. Too add further insult to Trump and Pompeo, Iran's doing a much better job at containing COVID-19 than the Outlaw US Empire :

"The US pandemic death toll is this week heading above 50,000 compared with Iran's figure of 5,300. Considering the respective population numbers of 330 and 80 million that suggests Iran is doing a much better job at containing the virus. On a per-capita basis, according to publicly available data, Iran's mortality rate is less than half that of the US.

"This is while the US has sanctioned Iran to the hilt. American sanctions – arguably illegal under international law – have hit Iran's ability to import medical supplies to cope with COVID-19 and other fatal diseases, yet Iran through its own resources is evidently managing the crisis much better than the US."

As with the Tar Baby, the more wrestling the Outlaw US Empire does the weaker it gets.

Zengine3 , Apr 23 2020 18:55 utc | 40
@LOLtroll

They can't invade. That's your own moronic straw-man. And yes, it would further cut supply and prices would go up. The current bottom is due to overproduction but so long as civilization cranks along the oil gets used eventually.

[Apr 23, 2020] Some updated numbers on the economy

Apr 23, 2020 | www.moonofalabama.org

vk , Apr 23 2020 15:26 utc | 2

Some updated numbers on the economy:

Franco-German PMIs plummet, fall to single dozen territory - the EU's heart has stopped beating

UK's PMI also plummet to single dozen territory

Japan and Australia also have their PMIs at historical lows

USA also joined the party of historical low PMIs

South Korea's GDP fell 1.4% (non annualized). That emergencial swap deal by the Fed saved the day, but it can't last forever. The BoK is optimistic, and still thinks the South Korean GDP will end 2020 growing. Blind hope.

[Apr 23, 2020] Required Minimum Distributions (RMDs)

Apr 23, 2020 | www.irs.gov

These frequently asked questions and answers provide general information and should not be cited as legal authority.

  1. What are Required Minimum Distributions?
  2. What types of retirement plans require minimum distributions?
  3. When must I receive my required minimum distribution from my IRA?
  4. How is the amount of the required minimum distribution calculated?
  5. Can an account owner just take a RMD from one account instead of separately from each account?
  6. Who calculates the amount of the RMD?
  7. Can an account owner withdraw more than the RMD?
  8. What happens if a person does not take a RMD by the required deadline?
  9. Can the penalty for not taking the full RMD be waived?
  10. Can a distribution in excess of the RMD for one year be applied to the RMD for a future year?
  11. How are RMDs taxed?
  12. Can RMD amounts be rolled over into another tax-deferred account?
  13. Is an employer required to make plan contributions for an employee who has turned 70½ and is receiving required minimum distributions?
  14. What are the required minimum distribution requirements for pre-1987 contributions to a 403(b) plan?
What are Required Minimum Distributions?

Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 72 (70 ½ if you reach 70 ½ before January 1, 2020), if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 72 (70 ½ if you reach 70 ½ before January 1, 2020), regardless of whether he or she is retired.

Retirement plan participants and IRA owners, including owners of SEP IRAs and SIMPLE IRAs, are responsible for taking the correct amount of RMDs on time every year from their accounts, and they face stiff penalties for failure to take RMDs.

When a retirement plan account owner or IRA owner, who dies before January 1, 2020, dies before RMDs have begun, generally, the entire amount of the owner's benefit must be distributed to the beneficiary who is an individual either (1) within 5 years of the owner's death, or (2) over the life of the beneficiary starting no later than one year following the owner's death. For defined contribution plan participants, or Individual Retirement Account owners, who die after December 31, 2019, (with a delayed effective date for certain collectively bargained plans), the SECURE Act requires the entire balance of the participant's account be distributed within ten years. There is an exception for a surviving spouse, a child who has not reached the age of majority, a disabled or chronically ill person or a person not more than ten years younger than the employee or IRA account owner. The new 10-year rule applies regardless of whether the participant dies before, on, or after, the required beginning date, now age 72.

See Publication 590-B , Distributions from Individual Retirement Arrangements (IRAs) , for complete details on when beneficiaries must start receiving RMDs.

Return to List of FAQs What types of retirement plans require minimum distributions?

The RMD rules apply to all employer sponsored retirement plans, including

profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRAs while the owner is alive.

Return to List of FAQs When must I receive my required minimum distribution from my IRA?

You must take your first required minimum distribution for the year in which you turn age 72 (70 ½ if you reach 70 ½ before January 1, 2020). However, the first payment can be delayed until April 1 of 2020 if you turn 70½ in 2019. If you reach 70½ in 2020, you have to take your first RMD by April 1 of the year after you reach the age of 72. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.

A different deadline may apply to RMDs from pre-1987 contributions to a 403(b) plan (see FAQ 5 below).

Return to List of FAQs How is the amount of the required minimum distribution calculated?

Generally, a RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that IRS publishes in Tables in Publication 590-B , Distributions from Individual Retirement Arrangements (IRAs) . Choose the life expectancy table to use based on your situation.

See the worksheets to calculate required minimum distributions and the FAQ below for different rules that may apply to 403(b) plans.

[Apr 22, 2020] Replacing Workers Has Many Costs by Cheryl Carleton

Apr 22, 2020 | www.nakedcapitalism.com

It goes without saying that the consequences to workers are damaging to catastrophic. Normally, being unemployed for more than six months is a near-insurmountable barrier to getting hired again. Perhaps coronavirus will create a better new normal on this front, of companies taking a more understanding view of crisis-induced resume gaps.

By Cheryl Carleton, Assistant Professor of Economics, Villanova University. Originally published at The Conversation

The labor market is changing rapidly with the onset of the coronavirus pandemic.

Many organizations are laying off almost all of their workers , while others are considering which workers to lay off, which to furlough and which to keep. Alternatively, some are expanding their labor forces .

When the economy starts to open up again, employers will need to consider rehiring or replacing workers, or hiring workers with a different mix of skills. The cost of replacing an employee is high for employers, and being out of work is harmful for workers, who may be replaced with artificial intelligence or contractors and risk losing their skills.

I'm an expert in labor economics , and my work with a colleague investigates the increase in people engaging in alternative work arrangements such as contract or gig work, along with the implications such jobs have for all workers' well-being .

There is no denying that the U.S. was experiencing a tight labor market and a low rate of unemployment before the coronavirus pandemic took hold. For some fields, particularly health care and services deemed essential by local governments, the labor market continues to be tight.

A sudden massive loss of demand for their goods and services is forcing companies to make quick decisions, and some employers may underestimate the cost to replace good employees. Knowing these costs may encourage them to keep more of their workers on the payroll.

Where Are the Costs?

There are costs involved in losing a worker and replacing them, such as completing paperwork when they leave, advertising the open position, reviewing resumes, interviewing candidates and training the new worker.

Once a new worker is hired, others must also spend time training them, and it will take some time for the new worker to achieve the same level of productivity as the worker who left.

Another cost is the loss in social capital . Social capital is the relationships between individuals at work that take time to build and add to the productivity of the firm.

The Society for Human Resource Management found that departures cost about one-third of a worker's annual earnings .

The Center for American Progress drilled in deeper. They found the costs of replacing workers who earn less than US$30,000 per year to be 16% of annual salary, or $3,200 for an individual earning $20,000 per year.

For those earning $30,000 to $50,000 per year, it is estimated to cost about 20% of annual salary, or $8,000 for an individual earning $40,000. For highly educated executive positions, replacement costs are estimated to be 213% of annual salary – $213,000 for a CEO earning $100,000 per year.

The much higher cost for replacing CEOs is partly due to the fact that they require higher levels of education, greater training, and firms may lose clients and institutional knowledge with such turnovers.

Employee Alternatives

This high cost of losing and replacing workers has important implications for organizations, consumers and workers, especially now with an estimated 15 million unemployed .

For those workers where the costs to replace them are high, firms will try to accommodate them. Strategies may include maintaining pay, increasing benefits and retraining. These actions are also costly, so firms will weigh them against the cost of simply hiring new workers .

This means businesses face high costs to replace workers in the future, and high costs to retain current workers, leading to higher costs for consumers who buy the firms' goods and services.

While the above consequences might sound great for workers that organizations choose to keep, these are not the only ways in which firms can respond.

The high cost of replacing workers, along with the increased uncertainty about the economy may cause businesses to use more automation and robots . Though such switches may entail a significant upfront cost, once they are made the firms then have more control over their production processes.

Another alternative for firms is to hire fewer permanent employees and turn instead to contract workers . With contract workers, employers are not responsible for benefits, and they can more simply increase or decrease the number of workers as needed.

While this may increase employment for some workers, it will decrease it for others and it has serious implications for the availability of health and pension benefits as well as unemployment benefits, as the current crisis has revealed.

Businesses might also consider limiting the scope of what some workers do to limit the cost of replacing them. If the scope of a worker's job is limited, then fewer areas will be impacted by the individual leaving, and the costs to train a replacement will be lower. For workers, however, it means fewer opportunities to gain experience.

For example, instead of training workers on several or all parts of the production process, the business may limit them to one specific aspect. It will then be less costly for the firm to replace them and the worker will have less experience to add to their resume. This also means less bargaining power for employees.

Some Win, But Others Lose

The high cost of losing and then hiring new workers along with increased restrictions on hiring nonresidents might mean higher wages and increased benefits for some workers.

However, the high degree of uncertainty in the current labor market, along with the potential increase in contract workers and automation means that some workers will not realize these potential gains, and all of us as consumers will most likely end up paying higher prices for the goods and services we buy.

[Apr 21, 2020] Exposing The New Fault Lines In A Post-Globalized World by Marshall Auerback

Apr 18, 2020 | www.zerohedge.com
Authored by Marshall Auerback and Jan Ritch-Frel. This article was produced by Economy for All , a project of the Independent Media Institute ...

The coronavirus pandemic has upended the global economic system, and just as importantly, cast out 40 years of neoliberal orthodoxy that dominated the industrialized world.

Forget about the " new world order ." Offshoring and global supply chains are out; regional and local production is in. Market fundamentalism is passé; regulation is the norm. Public health is now more valuable than just-in-time supply systems. Stockpiling and industrial capacity suddenly make more sense, which may have future implications in the recently revived antitrust debate in the U.S.

Biodata will drive the next phase of social management and surveillance, with near-term consequences for the way countries handle immigration and customs. Health care and education will become digitally integrated the way newspapers and television were 10 years ago. Health care itself will increasingly be seen as a necessary public good, rather than a private right, until now in the U.S. predicated on age, employment or income levels. Each of these will produce political tensions within their constituencies and in the society generally as they adapt to the new normal.

This political sea change doesn't represent a sudden conversion to full-on socialism, but simply a case of minimizing our future risks of infection by providing full-on universal coverage. Beyond that, as Professor Michael Sandel has argued , one has to query the "moral logic" of providing "coronavirus treatment for the uninsured," while leaving "health coverage in ordinary times to the market" (especially when our concept of what constitutes "ordinary times" has been upended).

Internationally, there will be many positive and substantial international shifts to address overdue global public health needs and accords on mitigating climate change. And it is finally dawning on Western-allied economic planners that the military price tag that made so-called cheap oil and cheap labor possible is vastly higher than investment in advanced research and next-generation manufacturing.

This also means that the old North (developed world) versus South (emerging world) division that long preoccupied scholars and policymakers in the post–World War II period will become increasingly stark again, particularly for those emerging economies that have hitherto attracted investment largely on the grounds of being repositories of low-cost labor. They will now find themselves picking sides as they seek assistance in an increasingly divided and multipolar world.

The fault lines of the next economic era have already begun to surface, creating friction with the previous international structure of banking and finance, trade and industry. There is a force beyond elites and critical industries driving this: The proletariat has literally become the "precariat."

In the U.S. and Europe, the staggering number of service economy workers are going to be quickly politicized by the shortfalls: People have seen a collapse in income, and big failures in education, and health care. Union-busting, pension fleecing, and austerity budgets and new technologies that concentrate wealth away from labor have created a circumstance where ownership and profit models must be revisited to sustain stability. The needs are too acute to be distracted by the lies of Trump, or the inadequate responses in other parts of the industrialized world. The current crisis will likely prompt geopolitical and economic shifts and dislocations we haven't seen since World War II.

Death of Chimerica, the Rise of New Production Blocs

One of the biggest casualties of the current order is the breakdown of " Chimerica ," the decades-old nexus between the U.S. and Chinese economies, along with other leading countries' partnerships with Chinese manufacturing. While the geopolitics of blame for the origins of coronavirus continue to shake out, the process that saw a decrease in exports from China to the U.S. from $816 billion in 2018 to $757 billion in 2019 will accelerate and intensify over the next decade.

While a decoupling is unlikely to lead to armed conflict, a Cold War style of competition could emerge as a new global fault line. Much as the Cold War did not preclude some degree of collaboration between the U.S. and the former Soviet Union, so too today there may still be areas of cooperation between Washington and Beijing from climate to public health, advanced research to weapons proliferation.

Nor does this shift necessarily spell the sudden collapse of Chinese power or influence -- it has a colossal and still-growing domestic market and is on the international leaderboard for a wide range of advanced indicators. But its status as the world's most desirable offshore manufacturing hub is a thing of the past, along with the economic stability that steady inflows of foreign capital brought with it. It does show a susceptibility to domestic stress, with the Hong Kong protests last year providing a hint of what is in store as the party leadership can't pivot to new realities that include slower economic growth and declining foreign investment.

As investment flows turn inward back to industrialized countries, there will likely be corresponding diminution of the global labor arbitrage emanating from the emerging world. In general, that's a negative for the global South, but potentially a positive factor for workers elsewhere, whose wages and living standards have stagnated for decades as they lost jobs to competing overseas low-cost manufacturing centers (the increase in inequality is principally a product of 40 years of sustained attacks on unions). The jobs won't be the same, but to be sure, manufacturing incomes exceed those of the service industry.

As each country adopts a " sauve-qui-peut " mentality, businesses and investors are drawing the necessary conclusions. Coronavirus has been a wake-up call, as countries trying to import medical goods from existing global supply chains face a shortage of air and ocean freight options to ship goods back to home markets. Already, the Japanese government has announced its plans "to spend over $2 billion to help its country's firms move production out of China," according to the Spectator Index . The EU leadership is publicly indicating a policy of subsidy and state investment in companies to prevent Chinese buyouts or undercutting prices.

Two billion dollars is small potatoes compared to what is likely to be spent by the U.S. and other countries going forward. And it can't simply be done via research and development tax credits. The state can and must drive this redomiciling process in other ways: via local content requirements (LCRs) , tariffs, quotas and/or government procurement local sourcing requirements. And with a $750-billion-plus budget, the U.S. military will likely play a role here, as it ponders disruptions from overseas supply sources .

Of course, if the U.S. does this, other parts of the world -- China, the EU, Japan -- will likely do the same, which will accelerate the regionalization trends in trade. This may mean that some U.S. firms will have to operate in foreign markets through local subsidiaries with local content preferences and local workforces (that is how it worked in the 1920s -- Ford UK was a mostly local British company, different from the U.S. Ford Motor Company, but with shared profits).

An examination of U.S. planning for the post-1945 world reveals the emphasis was on free trade in raw materials mostly, not finished goods. (The U.S. only adopted one-way "free trade" with its Asian and European allies later as a Cold War measure to accelerate their development and keep them in the American orbit.)

Domestically within the U.S., as Dalia Marin writes , the coming declines in interest rates will accelerate "robot adoption" by 75.7 percent, with concentration "in the sectors that are most exposed to global value chains. In Germany, that means autos and transport equipment, electronics, and textiles -- industries that import around 12 percent of their inputs from low-wage countries. Globally, the industries where the most reshoring activity is taking place are chemicals, metal products, and electrical products and electronics."

As the coronavirus pandemic is illustrating, a viable industrial ecosystem cannot work effectively if it is dispersed to too many geographic extremities or there are insufficient redundancies built into the transportation of goods back into the home market (rail, highway, etc.). Proximity has become a significant competitive advantage for manufacturers, and a strategic advantage for governments. But the U.S. government must play an expanded role in the planning process. The U.S. is still a leader in many high-tech areas, but is suffering the consequences of a generation-long effort to undermine the government's natural role as an economic planner.

In the form of the regionalized blocs that are being sketched, in the Americas, Mexico is likely to be one of the leading recipients of American foreign direct investment (FDI). It already has a $17 billion medical device industry and is sure to absorb much more capacity from China. This has already started to happen as a result of the U.S.–Mexico–Canada Agreement (USMCA, or new NAFTA) . Furthermore, the Washington Post reports that "[a]s demand soars for medical devices and personal protective equipment in the fight against the coronavirus, the United States has turned to the phalanx of factories south of the border that are now the outfitters of many U.S. hospitals." This is in addition to the thousands of assembly plants already in place in Mexico since the establishment of NAFTA. Indeed, if the jobs that had moved to China move to Mexico, Central America, and South America, this likely addresses many long-standing social tensions in regard to immigration management, currency imbalances and corresponding black market industries (ironically, it also likely means the end of Trump's wall, as the industrial ecosystem of the Americas becomes more cohesive and widespread).

Big Business Is Good Business

But this will also have significant impacts closer to home: Much as Franklin Delano Roosevelt ultimately prioritized domestic ramp-ups in wartime production over trust-busting , so too national champions are likely to feature more prominently today, as domestic scale and balance sheet strength are given precedence to accommodate the drive to revive employment quickly, and work collaboratively to halt the spread of the coronavirus . The scale of companies will not be regarded as a political problem if they can both deliver for consumers and show the capacity of following political direction for what the public's needs are. Tech companies like Apple and Google are stepping up to fill the void left by massive federal government dysfunction . The " break up Big Tech " voices are nowhere to be heard at the moment.

We still need a more robust form of regulation for these corporate behemoths, but via a system of regulation that is "function-centric," rather than size-centric. As co-author Marshall Auerback has written before , this kind of regulation "restricts the range of corporate activities (e.g., structural separation so as to prevent companies like Amazon and Google from owning both the platform as well as participating as a seller on that platform), or the prices such companies can charge (as regulators often do for utilities or railways). These considerations would be 'size neutral': they would apply independently of corporate size per se."

Capitalism has always had its plutocrats, but scaling back America's overly financialized model (by preventing stock buybacks, to cite one example) would represent a useful reform and prevent a lot of economic waste. Instead of going to enrich executives and shareholders beyond the dreams of Croesus , that measure might help to ensure that the profits of these companies will be directed to the workers' wages (which also means supporting increased unionization), or plowed back into investment (e.g., increased robotics).

Biodata, Privacy, and an End to Pandemic Profiteering

And there are fault lines in the business world. The pharmaceutical and medical research industries face immense pressure from other businesses to end the pandemic so they can get back to profitability. That means temporarily setting aside profits and pooling intellectual property to encourage collaborative efforts on the part of biotech and pharmaceutical companies to find proper treatments for COVID-19, and make them freely available, especially if governments were to waive antitrust scrutiny in exchange for all of the data Big Pharma companies collectively hold. As the Guardian reports , "[t]here is a precedent. Last June, 10 of the world's largest pharmaceutical companies -- including Johnson & Johnson, AstraZeneca and GlaxoSmithKline -- announced they would pool data for an AI-based search for new antibiotics, which are urgently needed as antibiotic-resistant bacteria have proliferated across the world, threatening the growth of untreatable disease."

Privacy advocates are already expressing concerns about a growing and overweening medical surveillance state. These surveillance concerns lack historical context: From the 19th century on, serious health problems were met by hardline government policies to reduce them. Policies ranging from quarantine to vaccine were not always mandatory, but there was an understanding that personal concessions had to be made to manage a huge population and an advanced society; the Constitution was not a suicide pact. We can further alleviate those concerns today by ensuring that the information uncovered does not become a precondition or additional cost of receiving insurance coverage. In light of coronavirus, cost savings of incorporating biodata into immigration and customs are a no-brainer for governments, and are certain to cause friction with individuals who may not want to give blood or saliva to get a visa or work permit, and agribusiness leaders who know that safety measures cut into profitability. But the scales have tipped in the other direction.

North Versus South

What about the other countries in the developing world that don't have close geographic proximity to a home market, or abundant supplies of key commodities required for 21st-century manufacturing needs, or even a well-developed manufacturing base (in other words, the countries that have hitherto been large recipients of investment solely on the grounds of cheap labor)? Many of them have faced immediate pressure with the collapse in global trade, unprecedented capital flight that is sure to grow as the coronavirus spreads, all the while coping with COVID-19 with highly inadequate health systems.

In the meantime, the multi-trillion-dollar market for emerging market debt , both sovereign bonds and commercial paper, has collapsed. Many of these countries, via their state pension funds and sovereign wealth funds, have become the ultimate endpoint for many of the newer asset-backed securities that finally revived years after the 2008 financial crisis. This has become the potential new stress point in the $52 trillion " shadow banking " market. The U.S. Federal Reserve has sought to ease the funding stresses of much of the developing economies by offering central bank swap lines. It has also broadened prime dealer collateral acceptance rules, and set up commercial paper swap facilities, all of which have eased short-term funding pressures in these economies that have incurred substantial dollar liabilities.

As the emerging world central banks then start to lend on those lines to their own banks, it should start to alleviate the shortage of dollars in the offshore dollar funding markets. We are starting to see some easing of stresses, notably in Indonesia -- because it's an exporter of resources more than a cheap labor price economy.

But whereas in previous emerging markets crises, China was able to buttress these economies via initiatives such as the " Belt and Road Initiative ," Beijing itself is likely to be buffeted by the twin shocks of declining global trade and a reversal of foreign direct investment, which declined 8.6 percent in the first two months of this year .

Longer-term, many other countries face comparable challenges to China: Capital controls, collapsing domestic currencies, and widespread debt defaults are likely to become the norm. That's already happened to serial defaulter Argentina again . South Africa has been downgraded to junk status . Turkey remains vulnerable. The so-called "BRICS" economies -- Brazil, Russia, India, China and South Africa -- are all sinking like bricks. The problem is exacerbated by the fact that coronavirus and likely future pandemics will create additional stresses on developing economies that depend on their labor price advantage in the international marketplace to survive.

By contrast, countries like South Korea and Taiwan have had a "good crisis." Both have vibrant manufacturing sectors and created successful multiparty democracies. Foreign investment in South Korea continued to grow in the first quarter of this year, as it rapidly moved to contain the spread of COVID-19 through an extensive testing regime (while keeping its economy open). Similarly in Taiwan, by activating a national emergency response system launched in 2004 (following the SARS virus), that country has mounted a thoroughly competent coronavirus intervention of unprecedented effectiveness . The results speak for themselves: as of April 15, in South Korea, a mere 225 deaths , while in Taiwan, an astonishingly low total of six deaths in a country of 24 million people -- this despite far more exposure to infected Chinese visitors than Italy, Spain or the U.S.

Of course, the very success of Taiwan's response revives another potential fault line, namely the tension underlying the "One China" policy. Before COVID-19, it is noteworthy that the WHO "even refused to publicly report Taiwan's cases of SARS until public pressure prompted numbers to be published under the label of 'Taiwan, province of China,'" according to Dr. Anish Koka . At the very least, Taiwan's divergent approach and success at fighting the pandemic will bolster its pro-independence factions.

The question of foreign nations upholding Taiwan's sovereignty with regard to China is increasingly thorny, given Beijing's growing military capacities. This will present an ongoing diplomatic challenge to Western parties who seek to increase engagement with Taipei without heightening tensions in the region.

A Recalculation of 'Economic Value'

We have outlined many fault lines likely to be exposed or exacerbated as a consequence of COVID-19. Happily, there is one fault line likely to be slammed shut: namely, the false dichotomy that has long existed between economic growth and environmentalism. The Global Assessment from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services reports that "land degradation has reduced the productivity of 23 percent of the global land surface, up to US$577 billion in annual global crops are at risk from pollinator loss and 100-300 million people are at increased risk of floods and hurricanes because of loss of coastal habitats and protection." Likewise, the study cites the fact that as of 2015, 33 percent of marine fish stocks "were being harvested at unsustainable levels," and notes the rise of plastic pollution (which "has increased tenfold since 1980 "), both of which play a key role in degrading ecosystems in a manner that ultimately destroys economic growth.

Finally, repeated pandemics over the past few decades have shown these are not blips, but recurrent features of today's world. Hence, there is an increasing public appetite for regulation to deal with this ongoing problem. Some industries, such as agribusinesses, won't like this, but the concerns are well-founded. According to expert Josh Balk , 75 percent of new diseases start in domestic and wild-caught animals, and 2.2 million people die each year from illnesses transferred from animals. The majority of these are transferred from poorly regulated factory farm chickens, cows and pigs; still, the " wet markets" of Asia and Africa, and the trade in potential " transfer species ," such as pangolins, a major driver of the $19 billion-a-year global trade in illegal wildlife, must also be addressed. Beijing has suggested it will ban trade in illegal wildlife and seek tighter regulation of the wet markets . The latter in particular may be easier said than done, according to Dr. Zhenzhong Si , a research associate at Canada's University of Waterloo who specializes in Chinese food security, sustainability, and rural development. Dr. Si argued that "[b]anning wet markets is not only going to be impossible, but will also be destructive for urban food security in China as they play such a pivotal role in ensuring urban residents' access to affordable and healthy food."

To be fair, this isn't the first time that the sacred tenets of the global economic framework have dealt with a crisis that seemed to usher in a new era. The same thing happened in the aftermath of the financial crisis of 2008. But that was largely seen as a financial crisis, a product of faulty global financial plumbing that nobody truly understood, as opposed to a widespread social collapse closely approximating the conditions of the Great Depression as we have today.

Not only has the current lockdown put the entire global economy into deep freeze, but it also came amidst a backdrop of widespread political and social upheaval, and a faux recovery whose fruits were largely restricted to the top tier. A collateralized debt obligation is not intuitively easy to grasp. By contrast, being forced to stay at home, deprived of vital income and isolated from loved ones, while health care workers perish from overwork and lack of protective gear, is a different order of magnitude.

Even as we re-integrate, it is hard to envisage a return to the "old normal." Trade patterns will change. Self-sufficiency and geographic proximity will be prioritized over global integration. There will be new winners and losers, but it is worth noting that the model of capitalism we are describing -- one that does not feature obscenely overcompensated CEO pay co-existing with serf labor and the widespread offshoring of manufacturing -- has existed in different forms in the U.S. from 1945 into the 1980s, and still exists in parts of Europe (Germany) and East Asia (Japan, South Korea, Taiwan) to this day.

Our everyday lives will be impacted as selective quarantines and some forms of social distancing become the new normal (much as they were when we dealt with tuberculosis epidemics). All of this has implications for a multitude of industries: restaurants, leisure, travel, tourism, sporting events, entertainment, and media, as well as our evolving definition of "essential" industries. Even our concept of personal privacy will likely have to be amended, especially in regard to medical matters. Concerns about medical surveillance -- stigma (STDs, alcoholism, mental illness) and denial of insurance -- can be alleviated if everyone is guaranteed treatment regardless of ability to pay, which will mean greater government intrusion into the lives of citizens and activities of businesses as the public sector seeks to socialize costs.

Taken in aggregate, we are about to experience the most profound social, economic and political changes since World War II.

[Apr 21, 2020] Nothing is new under the sun: the list of the crashes of capitalism!

Apr 18, 2020 | www.moonofalabama.org

michael lacey , Apr 17 2020 21:05 utc | 111

The crashes of capitalism!

1637, 1797,1819, `37, `57,`84, 1901, `07, 1929, `37, `73, 1987 92, 97,
2000, 2008/9 2020

All had various triggers but systemic failure of a system designed for a small group over a larger group.

What made it worse is 4+ decades of neoliberalism. You need to address the problem not continually describe its consequences.

[Apr 21, 2020] The Recovery Will Not Be V-Shaped

Notable quotes:
"... The banks would be squeezed, but Trump says that although we can't save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they're not getting the mortgage payments, even if they're not able to collect on their loans ..."
"... The political consequences will be huge. A wide public demand for more social policies will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the current U.S. system? ..."
Apr 17, 2020 | www.moonofalabama.org
Realist , Apr 16 2020 20:08 utc | 19

True, the USD is (and will) only get stronger as it is the universal fiat currency - but that's only true for the USD as a financial asset.

The USA will never suffer from high inflation, but printing money indefinitely has concrete consequences even for them: the USD will still get weaker in purchase power, thanks to the Triffin Paradox , and it will still result in an equivalent in deindustrialization (as the fiat currencies of the rest of the world get even weaker vis-a-vis the USD).

Eternal and infinite printing of USD is not unconsequential to the USA. Very far from it.

Peter AU1 , Apr 16 2020 23:17 utc | 81

Ralph Reed , Apr 16 2020 18:09 utc | 2

During the last four weeks 22 million workers in the U.S. filed for unemployment insurance. Some 10 to 15 million additional workers were not eligible but also lost their jobs.

Michael Hudson extrapolates from there :

Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't afford to enter into the social norms, enter into the economy, live, put bread on the table, where does that logically finish?

Michael Hudson: With the American economy looking pretty much like Greece. It'll be austerity. There will be people who don't have jobs. They are going to be evicted from their apartments. They will have run through their savings. They will not be able to pay their credit card debt and other debts so arrears are going to rise.

The banks would be squeezed, but Trump says that although we can't save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they're not getting the mortgage payments, even if they're not able to collect on their loans . The banks can now make up for the money they're not getting by having a huge new market: lending money to private capital and to the large companies to buy out these small businesses that are going under. It's a bonanza.

A bonanza for the 1%.

But the oligarchs who rule the United States are probably miscalculating this crisis :

"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S. prove more complicated," said Edmund Shing, head of global equity derivative strategy at BNP Paribas SA.

The crisis will not be over before the fat lady sings. That lady has not even entered the house. A recovery will not be V-shaped. The economy will not spring back into action as soon as the lockdowns are over. It will be a long slog. The U.S. economy always depends on consumer resilience. But with more than 30 million people out of jobs there will be a huge fall of demand compared to before the pandemic.

It is also likely that there will be more than one wave of the pandemic. During summer the case numbers will probably recede but they are likely to go up again during the fall. In between the pandemic will slowly burn through more of the population but mostly out of view because of many asymptomatic cases . When it comes back it will be in a different way. During the first wave the infections started first in place A then in place B then place C all depending on traffic and contact pattern. But the second wave will likely come, as it did during the Spanish flu, as one big wall that will hit all places at the same time. That will make it more difficult to allocate resources.

Pandemics are, as Nassim Taleb and other have pointed out , fat tail events where normal statistics no longer apply . They are not symmetric Gaussian distributions curves where the way down from high case numbers has a similar shape as the way up had. The way down is actually much longer and more of a very slow decline which might even include additional eruptions.

To expect a V-shaped return to a normal economy under these circumstance is foolish.

The political consequences will be huge. A wide public demand for more social policies will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the current U.S. system?

There are a few signs for hope. The first two vaccines developed in China are now in their first phase of human testing and more are coming. Some of them may actually work. A mass producible effective vaccine would mean that the fat lady has started to sing.

There is also the curiosity that most children not only do not fall ill with the covid-19 disease but do not get infected at all. Further research into the phenomenon could point to a protection mechanism that might be exploitable for the protecting grown ups.

On the sad side the Economist has started to systematically cover 'excess death' from the pandemic and finds that all official death numbers are serious undercounts.

Posted by b on April 16, 2020 at 17:49 UTC | Permalink

Seems like the alternatives are a muddled rearrangement similar to the post-Soviet space with consequent criminality and social collapse or a Bonapartist administrative adventure if the US military doesn't resist demands for it to arbitrate the conflict between public and oligarchs.


Prof K , Apr 16 2020 18:57 utc | 8

Treasury Sec Mnuchin said, in early March, that the economy is fundamentally sound.

He was wrong.

The US and other advanced economies (like Germany and Japan) were seriously slowing down.

Yes, stock markets were high, inflation was low, housing was strong and unemployment was low.

But rates of corporate profit were sinking, corporate debt was at record levels, real business investment was negligible, wages were up but still at ridiculously low historical levels, and inequality kept growing. World trade had also slowed considerably. Trump's tax cuts for the rich were merely pocketed or used for stock buybacks. Low interest rates kept things afloat, and the Fed had already reversed course on monetary tightening.

The US was on the verge of a recession, and the pandemic was merely an extreme trigger.

Marxist economic theory says that a crisis is resolved when enough dead capital is purged, labor devalued, and profit rates restored.

That will mean a further concentration of capital at the top, and further immisseration of the working class.

The US state is so captured by capital that it won't manage the crisis equitably.

The pool of social misery will be a source of fascist and revolutionary socialist politics.

This will create more instability.

Lastly, we can't ignore the working out of capitalist contradictions through inter-imperialist rivalries.

In our era, that means rivalries between the US, Russia and China, with Germany and Japan included in a second tier.

Expect Trump to escalate the trade war, further restrict exports to China, block Chinese corporate requirements, and threathen China's debt holdings as some form of "reparations." Expect military saber rattling to increase around Taiwan in addition to shows of strength from Guam (B52 flights).

In other words, recall Bukharin's warning that trade wars are only "partial sorties." In the end, they will be solved by "real force...the force of arms."

What we are witnessing is an unprecedented concentration of all contradictions of global capitalism and imperialism.


karlof1 , Apr 16 2020 19:05 utc | 10
As usual, I'll point readers to Shadowstats for its most recent reporting. An example:

"Week-Ended April 11th New Unemployment Claims Continued to Surge, Consistent With April 2020 U.3 Unemployment of Over 22%, Versus 4.4% in March (April 16th, Department of Labor - DOL)."

Note those are the doctored Department of Labor stats, not those displayed by Shadowstats, whose current graph doesn't yet include the latest figures. It reported unemployment at 22.9% as of 3 April; so, we should expect real unemployment to be over 40% when its next graphic's published.

I must emphasize the importance of following what's being reported by Max and Stacy on the Keiser Report and suggest starting with the March 26 episode or earlier if possible. The meat of the program's delivered in the first 13-15 minute segment, the second half being an interview with Max and that show's guest, most of which I skip when watching with the wife; the program's synopses usually provide the guest's name. So, those 10 shows listed at the link would take @150 minutes to watch--a very short amount of time given the amount of information supplied.

The Hudson transcript b cites at the top comes from this Renegade Inc program where he's teamed with Socialist Economist Richard Wolff that I've linked to in several comments. It's under 30 minutes, too, and another excellent investment of your time. Wolff has two new items at his website , his recent RT op/ed blasting Capitalism and the video of his recent Crosstalk appearance. I also suggest following economist Steven Keen's Twitter from where you can get to his Patreon page and such for even more info.

Yes, it's close to a fulltime job just to keep abreast with current events let alone dig into the past, which is why news media is so important as is their failure. Most people are now at home and have the time to become informed. Let's all continue trying to help them and ourselves.

GeorgeV , Apr 16 2020 19:12 utc | 11
The global elites have no one to blame but themselves for the economic catastrophe that is currently unfolding as a result of the corona virus pandemic. There will also be no where to hide and probably no where to stash their ill gotten wealth. After decades of advocating and practicing discredited economic policies that can be best described as warmed-over late 19th and early 20th century economics, (aka: austerity) the chickens, so to speak, are coming home to roost. The same will apply to the political hacks, grafters and corporate greed heads who also made this economic disaster possible. What the end result will be however, is unknown. The future can go in many ways. But as the late Robert Heilbroner wrote in his book "The Worldly Philosophers" some 70 years ago: "Economics is the only science that puts men on the barricades."
/div> " Open Thread 2020-30 , Main April 16, 2020 The Recovery Will Not Be V-Shaped

During the last four weeks 22 million workers in the U.S. filed for unemployment insurance. Some 10 to 15 million additional workers were not eligible but also lost their jobs.

Michael Hudson extrapolates from there :

Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't afford to enter into the social norms, enter into the economy, live, put bread on the table, where does that logically finish?

Michael Hudson: With the American economy looking pretty much like Greece. It'll be austerity. There will be people who don't have jobs. They are going to be evicted from their apartments. They will have run through their savings. They will not be able to pay their credit card debt and other debts so arrears are going to rise. The banks would be squeezed, but Trump says that although we can't save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they're not getting the mortgage payments, even if they're not able to collect on their loans. The banks can now make up for the money they're not getting by having a huge new market: lending money to private capital and to the large companies to buy out these small businesses that are going under. It's a bonanza.

A bonanza for the 1%.

But the oligarchs who rule the United States are probably miscalculating this crisis :

"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S. prove more complicated," said Edmund Shing, head of global equity derivative strategy at BNP Paribas SA.

The crisis will not be over before the fat lady sings. That lady has not even entered the house. A recovery will not be V-shaped. The economy will not spring back into action as soon as the lockdowns are over. It will be a long slog. The U.S. economy always depends on consumer resilience. But with more than 30 million people out of jobs there will be a huge fall of demand compared to before the pandemic.

It is also likely that there will be more than one wave of the pandemic. During summer the case numbers will probably recede but they are likely to go up again during the fall. In between the pandemic will slowly burn through more of the population but mostly out of view because of many asymptomatic cases . When it comes back it will be in a different way. During the first wave the infections started first in place A then in place B then place C all depending on traffic and contact pattern. But the second wave will likely come, as it did during the Spanish flu, as one big wall that will hit all places at the same time. That will make it more difficult to allocate resources.

Pandemics are, as Nassim Taleb and other have pointed out , fat tail events where normal statistics no longer apply . They are not symmetric Gaussian distributions curves where the way down from high case numbers has a similar shape as the way up had. The way down is actually much longer and more of a very slow decline which might even include additional eruptions.

To expect a V-shaped return to a normal economy under these circumstance is foolish.

The political consequences will be huge. A wide public demand for more social policies will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the current U.S. system?

There are a few signs for hope. The first two vaccines developed in China are now in their first phase of human testing and more are coming. Some of them may actually work. A mass producible effective vaccine would mean that the fat lady has started to sing.

There is also the curiosity that most children not only do not fall ill with the covid-19 disease but do not get infected at all. Further research into the phenomenon could point to a protection mechanism that might be exploitable for the protecting grown ups.

On the sad side the Economist has started to systematically cover 'excess death' from the pandemic and finds that all official death numbers are serious undercounts.

Posted by b on April 16, 2020 at 17:49 UTC | Permalink

" Open Thread 2020-30 | Main April 16, 2020 The Recovery Will Not Be V-Shaped

During the last four weeks 22 million workers in the U.S. filed for unemployment insurance. Some 10 to 15 million additional workers were not eligible but also lost their jobs.

Michael Hudson extrapolates from there :

Ross: Ultimately, where does this end? Because if in 12 weeks time, people can't afford to enter into the social norms, enter into the economy, live, put bread on the table, where does that logically finish?

Michael Hudson: With the American economy looking pretty much like Greece. It'll be austerity. There will be people who don't have jobs. They are going to be evicted from their apartments. They will have run through their savings. They will not be able to pay their credit card debt and other debts so arrears are going to rise. The banks would be squeezed, but Trump says that although we can't save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they're not getting the mortgage payments, even if they're not able to collect on their loans. The banks can now make up for the money they're not getting by having a huge new market: lending money to private capital and to the large companies to buy out these small businesses that are going under. It's a bonanza.

A bonanza for the 1%.

But the oligarchs who rule the United States are probably miscalculating this crisis :

"U.S. stocks are pricing in a V-shaped economic recovery even more keenly than elsewhere in the world, so are vulnerable in the case that exits from lockdowns globally and in the U.S. prove more complicated," said Edmund Shing, head of global equity derivative strategy at BNP Paribas SA.

The crisis will not be over before the fat lady sings. That lady has not even entered the house. A recovery will not be V-shaped. The economy will not spring back into action as soon as the lockdowns are over. It will be a long slog. The U.S. economy always depends on consumer resilience. But with more than 30 million people out of jobs there will be a huge fall of demand compared to before the pandemic.

It is also likely that there will be more than one wave of the pandemic. During summer the case numbers will probably recede but they are likely to go up again during the fall. In between the pandemic will slowly burn through more of the population but mostly out of view because of many asymptomatic cases . When it comes back it will be in a different way. During the first wave the infections started first in place A then in place B then place C all depending on traffic and contact pattern. But the second wave will likely come, as it did during the Spanish flu, as one big wall that will hit all places at the same time. That will make it more difficult to allocate resources.

Pandemics are, as Nassim Taleb and other have pointed out , fat tail events where normal statistics no longer apply . They are not symmetric Gaussian distributions curves where the way down from high case numbers has a similar shape as the way up had. The way down is actually much longer and more of a very slow decline which might even include additional eruptions.

To expect a V-shaped return to a normal economy under these circumstance is foolish.

The political consequences will be huge. A wide public demand for more social policies will come into conflict with a recalcitrant oligarchy. Can that conflict be solved within the current U.S. system?

There are a few signs for hope. The first two vaccines developed in China are now in their first phase of human testing and more are coming. Some of them may actually work. A mass producible effective vaccine would mean that the fat lady has started to sing.

There is also the curiosity that most children not only do not fall ill with the covid-19 disease but do not get infected at all. Further research into the phenomenon could point to a protection mechanism that might be exploitable for the protecting grown ups.

On the sad side the Economist has started to systematically cover 'excess death' from the pandemic and finds that all official death numbers are serious undercounts.

Posted by b on April 16, 2020 at 17:49 UTC | Permalink

div
Piotr Berman , Apr 16 2020 18:02 utc | 1
next page " While vaccines may be problematic, a youth restoring elixir may solve the problem! This is really reassuring.
Ralph Reed , Apr 16 2020 18:09 utc | 2
Seems like the alternatives are a muddled rearrangement similar to the post-Soviet space with consequent criminality and social collapse or a Bonapartist administrative adventure if the US military doesn't resist demands for it to arbitrate the conflict between public and oligarchs.
Norwegian , Apr 16 2020 18:10 utc | 3
It is good to see an article focusing on the effects on the economy and how that effects people, because that is the real disaster from the actions of the governments.

Also good to see a reference to the Spanish flu, where 50-100 million people died world wide. Today the number is 143 thousand, a number 3 orders of magnitudes smaller.

BostonTom , Apr 16 2020 18:21 utc | 4
Canada has got UBI up and running already. Spain too
https://www.citynews1130.com/2020/04/15/feds-expand-emergency-benefit-program/
Are you a grocery or delivery worker?
"As part of expanded relief measures, Trudeau said the federal government was working with provinces to top up the pay of essential workers who earn less than $2,500 a month."
JC , Apr 16 2020 18:28 utc | 5
Thanks b, it's time to put on thinking cap. It's the "new normal" that's what one of my niece said!

Good luck everyone.....

Bob , Apr 16 2020 18:48 utc | 6
Those 1200 check that came in, my granda did not get one because my mom claims her as a dependent, also my 20 year old cousin didnt get his because his mom claim him depended on her taxes. Any excuse they can find to not give you that check they will find it, but mega corps can get trillions no problem
Lozion , Apr 16 2020 18:49 utc | 7
Is this is sign of things to come?

With assault rifles, protesters protest in #Michigan

https://twitter.com/rolandotelesur/status/1250856546894073856?s=21

Prof K , Apr 16 2020 18:57 utc | 8
Treasury Sec Mnuchin said, in early March, that the economy is fundamentally sound.

He was wrong.

The US and other advanced economies (like Germany and Japan) were seriously slowing down.

Yes, stock markets were high, inflation was low, housing was strong and unemployment was low.

But rates of corporate profit were sinking, corporate debt was at record levels, real business investment was negligible, wages were up but still at ridiculously low historical levels, and inequality kept growing. World trade had also slowed considerably. Trump's tax cuts for the rich were merely pocketed or used for stock buybacks. Low interest rates kept things afloat, and the Fed had already reversed course on monetary tightening.

The US was on the verge of a recession, and the pandemic was merely an extreme trigger.

Marxist economic theory says that a crisis is resolved when enough dead capital is purged, labor devalued, and profit rates restored.

That will mean a further concentration of capital at the top, and further immisseration of the working class.

The US state is so captured by capital that it won't manage the crisis equitably.

The pool of social misery will be a source of fascist and revolutionary socialist politics.

This will create more instability.

Lastly, we can't ignore the working out of capitalist contradictions through inter-imperialist rivalries.

In our era, that means rivalries between the US, Russia and China, with Germany and Japan included in a second tier.

Expect Trump to escalate the trade war, further restrict exports to China, block Chinese corporate requirements, and threathen China's debt holdings as some form of "reparations." Expect military saber rattling to increase around Taiwan in addition to shows of strength from Guam (B52 flights).

In other words, recall Bukharin's warning that trade wars are only "partial sorties." In the end, they will be solved by "real force...the force of arms."

What we are witnessing is an unprecedented concentration of all contradictions of global capitalism and imperialism.


Nemesiscalling , Apr 16 2020 19:03 utc | 9
I refuse to look at this situation as anything more than an opportunity for the wide change for the West that many here have advocated over the years.

There will always be the temptation to ask for mercy during this time and a return to NWO-globalist-consumer-driven Nightmare where populations outright ignore the horrible behavior around the globe that the elite spread and make victim-countries endure.

What y'all have been railing against for years is the terrible grip of the globalists and the absolute hilarious excuse for global government in the U.N. and similar supranational entities.

Why then, would you ask for relief, when what we will see in the next few years is the truth stripped bare and their narrative fall away? In order for this to happen, the U.S. and the West need to suffer. I don't see what is so hard to take from this notion.

Those who genuinely care for their neighbor will again rise to the front with the chance to reaffirm what humanity needs to do to live in balance.

Of course people will die. But life is not worth living in darkness.

karlof1 , Apr 16 2020 19:05 utc | 10
As usual, I'll point readers to Shadowstats for its most recent reporting. An example:

"Week-Ended April 11th New Unemployment Claims Continued to Surge, Consistent With April 2020 U.3 Unemployment of Over 22%, Versus 4.4% in March (April 16th, Department of Labor - DOL)."

Note those are the doctored Department of Labor stats, not those displayed by Shadowstats, whose current graph doesn't yet include the latest figures. It reported unemployment at 22.9% as of 3 April; so, we should expect real unemployment to be over 40% when its next graphic's published.

I must emphasize the importance of following what's being reported by Max and Stacy on the Keiser Report and suggest starting with the March 26 episode or earlier if possible. The meat of the program's delivered in the first 13-15 minute segment, the second half being an interview with Max and that show's guest, most of which I skip when watching with the wife; the program's synopses usually provide the guest's name. So, those 10 shows listed at the link would take @150 minutes to watch--a very short amount of time given the amount of information supplied.

The Hudson transcript b cites at the top comes from this Renegade Inc program where he's teamed with Socialist Economist Richard Wolff that I've linked to in several comments. It's under 30 minutes, too, and another excellent investment of your time. Wolff has two new items at his website , his recent RT op/ed blasting Capitalism and the video of his recent Crosstalk appearance. I also suggest following economist Steven Keen's Twitter from where you can get to his Patreon page and such for even more info.

Yes, it's close to a fulltime job just to keep abreast with current events let alone dig into the past, which is why news media is so important as is their failure. Most people are now at home and have the time to become informed. Let's all continue trying to help them and ourselves.

GeorgeV , Apr 16 2020 19:12 utc | 11
The global elites have no one to blame but themselves for the economic catastrophe that is currently unfolding as a result of the corona virus pandemic. There will also be no where to hide and probably no where to stash their ill gotten wealth. After decades of advocating and practicing discredited economic policies that can be best described as warmed-over late 19th and early 20th century economics, (aka: austerity) the chickens, so to speak, are coming home to roost. The same will apply to the political hacks, grafters and corporate greed heads who also made this economic disaster possible. What the end result will be however, is unknown. The future can go in many ways. But as the late Robert Heilbroner wrote in his book "The Worldly Philosophers" some 70 years ago: "Economics is the only science that puts men on the barricades."
albagen , Apr 16 2020 19:18 utc | 12
there will be no economy. feudalism. post-neo-feudalism?
karlof1 , Apr 16 2020 19:24 utc | 13
Nemesiscalling @9--

Of course people will die. But life is not worth living in darkness.

Stacy invokes Dicken's Tale of Two Cities in this Keiser Report episode that speaks to your above quote. The main point is things will worsen much more before any improvement occurs. Stacy being an optimist sees something better emerging from the wreckage, while Max remains cynical--mirroring the feelings of many here. IMO, invoking Dickens was masterful. We should be as lucky as the French to emerge at the end of the Napoleonic Era with a Republic; but, even that will take prodigious effort and struggle.

Mao , Apr 16 2020 19:46 utc | 14
Bill Bonner, September 7, 2018 :

You'll recall that Fed policy always consists of the same three mistakes 1) Keeping interest rates too low for too long, resulting in too much debt; 2) Raising interest rates to try to gently deflate the debt bubble; and 3) Cutting rates in a panic when stocks fall and the economy goes into recession.

Well, here comes the Big Bang: Mistake #4 – rarely seen, but always regretted.

Mistake #4 is what the feds do when their backs are to the wall when they've run out of Mistakes 1 through 3.

It's a typical political trade-off. The future is sacrificed for the present. And the welfare of the public is tossed aside to buy money, power, and influence for the elite.

Every debt expansion ends in a debt contraction. Stocks crash. Jobs are lost. The economy goes into reverse, correcting the mistakes of the previous boom.

Investors see their money entombed. Householders await foreclosures. The authorities scream: Apocalypse Now!

https://www.bonnerandpartners.com/bill-bonner-diary/americas-oil-boom-is-a-fraud/

vk , Apr 16 2020 20:06 utc | 16
I have few to add to Posted by: Prof K | Apr 16 2020 18:57 utc | 8.

Only like to complement his comment on two very important aspects to pay attention to from now on:

1) This pandemic is different from 2008 for the fact that, while 2008 was a general crisis of capitalism that was triggered from the American financial system, the COVID-19 crisis is a general crisis of capitalism that was triggered from the "real economy", i.e. the producitive process of capital. This makes the COVID-19 crisis a much more formidable obstacle to capitalist reproduction than the 2008 Wall Street/European Union meltdown. And it's important to highlight 2008 also wasn't really V-shaped: it evolved into a depression after the 2010 euphoria.

2) It's very unlikely the USA will collapse in a single historical event. As a capitalist nation, the USA is much more decentralized, fragmented and anarchic (in production and distribution of the wealth it produces and consumes) than the USSR. The USSR was a centrally planned economy: when Gorbachev committed the mistake of demoralizing and destroying the CPSU, he automatically destroyed the USSR. That will not be the case of the USA: the fall of Washington D.C. - or even Wall Street - would not be the immediate end of the USA. The most likely scenario for an end of the USA would be for a gradual and constant degeneration of its social structure, with or without balkanization (probably with). This balkanization would be very violent, because local capitalists would assemble private armies and fight against each other for supremacy and the reunification of the USA (a la Roman Empire). It would be a Mad Max cum Yugoslavia scenario. The problem with this is: who would be in control of the American nuclear arsenal? Will the USAAF be capable of stopping with the balkanization process and thus keep the country united? Will the USA anihilate the rest of the world before it would disappear, in an act of nihilism? A lot of known unknowns - let alone unknown unknowns.

Realist , Apr 16 2020 20:08 utc | 19
"Dollar Demisers" will be disappointed, but then since tmany of tgem claim to know a lot of theory but seem to have absolutely zero actual experience of the practice, disappointment is something they should by used to by now.


It's not just the "petro-Dollar" you should be looking at, it's the "Debt-Dollar"

---------------

No, the dollar will only strengthen post-corona, as usual: it's a crisis, after all
by Ramin Mazaheri for the Saker Blog

"Last November, in a then-boring but now-prescient 10-part series (I socialistically re-interpreted ex-Wall Streeter Nomi Prins' book Collusion, which chronologically detailed the QE-spreading collusion between G20 central banks since 2008), I wrote the following in Part 3: QE paid for a foreign buying spree: developing countries hurt the most:

"Yet by flooding the world with trillions of dollars via QE the US was able to, paradoxically, maintain dollar dependence despite their crimes. The US dollar share of global reserves today is 62%, almost exactly what it was in 2008. Combined with the other source of the crisis – the euro – the two combine for 82% of global reserves. By comparison, the yuan – which so many predict is about to dethrone the dollar – is at below 2%; I wouldn't hold my breath."

But corona is different, right? Two percent and 62% will suddenly change places, right?

No, more QE is more of the same thing, and this is a "thing" which has worked exactly as designed; it is also a "thing" which is never broached in the Mainstream Media: "A way to create debt traps which increase Western control over their neo-imperial subjects. Neoliberal-capitalism financial policies must be viewed as a neo-imperial tool, of course."

People are acting as if Western neoliberalism hasn't worked, LOL? It has worked spectacularly well but only for their 1% and not for "the nation", exactly as designed.

Many fine semi-dissident commentators apparently do not follow high finance, nor can they interpret their actions, even though high finance is the West's vanguard party (thus the theme of my recent series – "bankocracy"); they often incorrectly focus on an easier-to-grasp storyline of nationalist competition, which (like racism, sexism or tribalism) simply cannot ultimately take precedence over class warfare.

I'm not being dogmatic – this simply provides the fullest explanation of economic events. Reject what socialists could call the "conspiracy" of the 1% via class warfare? Then you likely move on to absurd, unprovable "conspiracy theories" involving secret cults, elaborate handshakes, ritual sacrifice, etc.

This is the bottom line which (whom I will call) "dollar-demisers" simply do not understand: For better or for worse (certainly worse), the US and their greenback are still the gold standard when it comes to 1%er perceptions of a safe harbour in a crisis.

This will hold true in 2020 just as it did in 2008.

Many semi-dissident analysts unwittingly take a rather Trotskyist view that capitalism will eventually implode under the weight of its own contradictions. It won't – some rats always find a way to survive a sinking ship, eh? Thus, open socialist combat is the only way to defeat modern Western capitalism, and also to satisfyingly explain what is going on in the Western Great Recession/Depression 2.

So maybe the yuan will become the dominant currency but not in two months, nor two years – maybe two decades? That's a big "maybe". In my lifetime, I think.

Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo, clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these weapons."

Hoyeru , Apr 16 2020 20:13 utc | 21
The recovery will NOT be, but Trump will distract all Americans by screaming against China and how China is responsible for everything. Expect Americans to fall in line and the anti Russia hysteria to now turn into super anti China hysteria. Expect attacks against Asians in USA
And all because the Chinese were greedy bastards eager to make money and they quickly forgot history and how the Ango Saxon treated them just merely 150 years ago.
As somebody who grew up in Communist Eastern Europe it the 70s, I vividly remember how we were warned how the Americans will try to hurt us by spreading bio weapons. This was grilled into us over and over. The Communists knew. China better gt prepared, the West will try to rip them a brand new assholes. And they got nobody to blame but themselves!
Rich , Apr 16 2020 20:28 utc | 33
30 million jobless claims is no big deal to the federal government or Wall Street.
Average income in the United States is $63,000.
+30 million new joblessness.

30 million X 63,000 = $1.89 trillion dollars

Let's round that up to $2 trillion dollars.
We already had $2 trillion+ Overnight REPO Operations since last September...for the banks hoarding money.
We already had $2 trillion+ QE4 or whatever number it is in December or January.
The CARES Act is priced in at just over $2.4 trillion and probably more like $4.5-to-6 trillion dollars.

Face it because with that scale the Federal Government could have sent $60,000 to $100,000 to every household, prisoner and homeless person in America and I guarantee the economy would still be humming. And most importantly, the rich people never would have been seen a decline in their net worth because working people pay their bills on time

/div> "..Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo, clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these weapons."
Realist@19
I won't believe you because you are wrong.
But I do recognise the depth of the sincerity behind your trust in the imperialists. It is clear from all that you post that you cannot conceive of a future in the US is not hegemonic and its oligarchy omnipotent. It is not surprising that you consider history, even pandemic diseases, to be nothing less than the unfolding of the Imperial ruling class's Wish Lists.

Posted by: bevin , Apr 16 2020 21:02 utc | 48

"..Until then, please believe me: Western globalisation/neoliberalism has a LOT of ammo, clout, clients, banks, real money, real gold, fake money and paper gold to keep their mighty dollar on top. Socialism teaches us: it is NOT just Americans who will deploy these weapons."
Realist@19
I won't believe you because you are wrong.
But I do recognise the depth of the sincerity behind your trust in the imperialists. It is clear from all that you post that you cannot conceive of a future in the US is not hegemonic and its oligarchy omnipotent. It is not surprising that you consider history, even pandemic diseases, to be nothing less than the unfolding of the Imperial ruling class's Wish Lists.

Posted by: bevin | Apr 16 2020 21:02 utc | 48

Really?? , Apr 16 2020 21:19 utc | 51
... ... ...

The USA consists of states that are already asserting quite a few powers and prerogatives in this situation. Some of them have set themselves against the fed. govt. and the states' citizens are following their governors, not Trump. (Certainly the presidential election is looking more and more like a sideshow of some kind.) I think all American states have a strong state identity; in addition many have a strong regional identity (I can't speak for other parts of the country, but this is the case in New England; [not surprising, as this is the best part of the country (;-)]. Actually, being a small, somewhat isolated with small states and high education levels is a lot better than being stuck in a "region" that is surrounded by other US states, e.g., Tennessee has borders with I think eight states; the whole NE region borders just one US state, New York).

I think there is a good chance that balkanization could be a gradual process whereby states and regions see the emergence of politicians able to deal with the health and economic challenges statewide and regionwide, create and protect local prerogatives and populations, and are willing to stand up to DC. We have a tradition of states' rights, and this may come to be interpreted in ndw ways. I think this is already happening, de facto.

US states already have their own administrative structures and full repertoire of departments --- health, education, conservation, transportation, housing, revenue, etc.

I can imagine more clashes between states and DC than between states.

vk , Apr 16 2020 22:16 utc | 68
@

[Apr 21, 2020] Jim Chanos Says He's 'Outraged' Private Equity Giants Want Taxpayer Aid by Katherine Burton

"And if a bunch of hedge funds get wiped out - what's the big deal? Let them fail. So they don't get the summer in the Hamptons - who cares."
See also https://finance.yahoo.com/video/why-chanos-bemused-pe-push-213642036.html
Apr 10, 2020 | finance.yahoo.com

(Bloomberg) -- Legendary short-seller Jim Chanos said he's troubled that private equity is seeking financial aid from the federal government due to the economic impact of the coronavirus epidemic.

"'I'm a little bemused, puzzled and somewhat outraged, I guess, that private equity would be pushing to the front of the line to try to get taxpayer assistance," he said in an interview Thursday on Bloomberg Television.

The Federal Reserve's move Thursday to throw a lifeline to small and mid-sized businesses and fund the purchases of some types of high-yield bonds has has been seen by some market participants as helping the private equity firms who owns some of these companies. Those firms earlier this week were dealt a setback in their attempt to gain access to billions of dollars of loans that the U.S. government is doling out to help businesses hit hard by the pandemic, Bloomberg reported.

Chanos said a look at the year-end letters for the four biggest publicly-traded private equity firms showed they had more than $300 billion in dry powder to put to use.

"I think private equity is possibly at a crossroads similar to where hedge funds were post the global financial crisis," said Chanos, who runs hedge fund Kynikos Associates. "People are going to start to judge the high fees and the illiquidity and think: 'Am I really getting the return commensurate for the risk?"

For more articles like this, please visit us at bloomberg.com

[Apr 21, 2020] US Federal Budget $5,571 billion. Budget Deficit $2,130 billion.

Apr 08, 2020 | off-guardian.org

paul ,

Has anyone seen what is happening to US finances? US Federal Budget $5,571 billion. Budget Deficit $2,130 billion.
Trump is borrowing 38 cents for every dollar he spends. This will get substantially worse with the CV.

This is the prime mover for most of Trump's behaviour. Trying to solve his intractable economic and financial problems at the expense of other countries. Sometimes this is outright looting.

Finding assorted specious pretexts to steal the assets of foreign countries, Venezuela, Iraq, Iran, anyone who has anything worth stealing.

The virus may be the next excuse to seize Chinese assets. People like Rubio and Cruz are demanding that Chinese holdings of Treasury Bills be declared null and void, and $4 trillion of Chinese assets confiscated. They may try to seize Saudi assets in a similar fashion, using 9/11 as a pretext.

Otherwise Trump is quite open about running a global protection racket. "They gotta pay us! They gotta pay us!! They gotta pay us for their protection!!", croaking like a cheap Mafia hood.

He demands that other countries buy their weapons, energy and agricultural products from the US at inflated prices and give preferential access to their raw materials and markets.

This is the rationale for the trade wars and sanctions, nou just against countries like China and Iran, but even the most obsequious satellites, Canada, Mexico, Germany, the EU, Japan and S, Korea.

This crude looting and extortion is extremely unlikely to be successful, even in the short term.

It is said that one of the reasons the Roman Empire collapsed is simply that they ran out of people to rob and enslave.
Trump's America is rapidly reaching that point.

[Apr 21, 2020] Post-coronavirus, we will once more emerge into the sunshine land of mass migration, low wages, cheap foreign labor, and the meaningless gluttony of consumerism

Apr 21, 2020 | www.unz.com

All financial assistance for the average man is being offered on the basis of massive future debt. Everything handed to us now will eventually need to be paid back, and if the sums become high enough, and I believe they already have, that debt will remain for our children and grandchildren.

The system is coming to the rescue of itself, even enriching itself, while posturing as saving us. Post-coronavirus, we will once more emerge into the sunshine land of mass migration, low wages, cheap foreign labor, and the meaningless gluttony of consumerism, only this time our taxes will be higher, our children will be poorer, and our governments, staffed with hostile elites, will have more powers of surveillance and coercion than at any time in history.

It is here, I think, in the dismal aftermath rather than in the eye of the coronavirus storm, that resource competition will intensify. I hesitate to offer such a theory, for fear that it might be construed as yet another instance of kicking the can of revolution down the road, making of it an event of religious expectation always on the horizon but never coming to fruition.

And yet I can't escape the feeling that no matter what rule changes are brought into the game, when we once more emerge from our homes to resume play there will be less to lose and we will be against an opponent that, if not staggered, will be weakened by having had to redraw its game plan during half-time.

Dr. E. Black , says: Show Comment April 20, 2020 at 8:54 am GMT

" Forget the politicians. The politicians are put there to give you the idea you have freedom of choice. You don't. You have no choice. You have owners. They own you. They own everything . They own all the important land, they own and control the corporations that've long since bought and paid for, the senate, the congress, the state houses, the city halls, they got the judges in their back pocket, and they own all the big media companies so they control just about all of the news and the information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else. But I'll tell you what they don't want. They don't want a population of citizens capable of critical thinking. They don't want well informed, well educated people capable of critical thinking. They're not interested in that. That doesn't help them." ― George Carlin

[Apr 21, 2020] Americans need to call their Senators and Reps in Congress and demand the separation of federally-insured, deposit-taking banks from the casinos on Wall Street.

Apr 21, 2020 | www.moonofalabama.org

ADKC , Apr 20 2020 11:04 utc | 262

Regarding the bail-out.

Americans Are Paying A Tragic Price For Allowing Five Banks To Control The U.S. Economy (Wall Street On Parade)

"Americans need to use this time at home to call their Senators and Reps in Congress and demand the separation of federally-insured, deposit-taking banks from the casinos on Wall Street. We're talking about nothing less than the survival of this country and how the next generation is going to view the character and courage of our generation."

[Apr 21, 2020] We should dismiss all of Bill Gates' recent pandemic related public actions, statements

Notable quotes:
"... The B&M Gates Foundation was likely originally set up with some good intentions (to combat malaria and other Third World diseases), but probably mainly as a legal vehicle to shield some of his mega-wealth. ..."
Apr 06, 2020 | www.moonofalabama.org

gm , Apr 5 2020 17:35 utc | 29

I tend to dismiss ALL of Bill Gates' recent pandemic related public actions, statements (eg.: TED talks, Event 201 pro/con buzz, funding Covid vacccine factories (sheesh! There's been ~17 years of coronavirus vaccine r&d failures since cov-SARS popped up 2003 and cov-MERV in 2013) as just more PSYOPS distraction foisted upon the public by the "Intelligence Community", for their own purposes.

The B&M Gates Foundation was likely originally set up with some good intentions (to combat malaria and other Third World diseases), but probably mainly as a legal vehicle to shield some of his mega-wealth.

But then, after Gates got snared, perhaps in 2011? at one or more of the Intel community's "Epstein pedo-trap" blackmail factories, he became their bitch-tool for evermore.

That's just how they (whoever kept Epstein and his operations protected) roll.

And now Gates is their captive asset, and everything he says or does is according to the Invisible Hand's plans.

[Apr 21, 2020] The Global Repricing of Assets Can't Be Stopped

Mar 18, 2020 | www.oftwominds.com

All bubbles pop, period.

The financial elites are pushing a narrative that asset prices, sales and profits will all return to January 2020 levels as soon as the Covid-19 pandemic fades. Get real, baby. Nothing is going back to January 2020 levels. Rather than the "V-shaped recovery" expected by Goldman Sachs et al., the crash in asset prices will eventually gather momentum.

Why? It's simple: for 20 years we've over-invested in speculative bubbles and squandered borrowed money on consumption and under-invested in productivity-increasing assets. To understand why the market value of assets will relentlessly reprice lower--a process sure to be interrupted with manic rallies and false dawns of hope that a return to speculative good times is just around the corner--let's start with the basics: the only sustainable way to increase broad-based wealth is to boost productivity across the entire economy.

That means producing more goods and services with less capital, less labor and fewer inputs such as energy.

Rather than boost productivity, we've lowered productivity via mal-investment and by propping up unproductive sectors with immense sums of borrowed money --money that accrues interest.

The poster child for this dynamic is higher education : rather than being pushed to innovate as costs skyrocketed, the higher education cartel passed its inefficiencies and bloated cost structure onto students, who have paid for the bloat with $1. 6 trillion in student loans few can afford. (See chart below.)

As for Corporate America squandering $4.5 trillion on stock buybacks (Wolf Richter)-- the effective gains on productivity from this stupendous sum is not just zero--it's negative, as the resulting speculative bubble suckered in institutions and individuals who'd been stripped of safe returns by the Federal Reserve's low-interest-rates-forever policy.

What could that $4.5 trillion have purchased in terms of increasing the productivity of the entire economy? Considerably more than the zero productivity generated by stock buybacks.

The net result of uneven gains in productivity and the asymmetric distribution of whatever gains have been made is stagnant wages for the bottom 90% and rising costs for everyone. Those of us who are self-employed or owners of small businesses know that healthcare insurance costs have been ratcheting higher by 10% or more annually for years.

Whatever gains in health that have been purchased with the additional trillions of dollars poured into the healthcare cartels have been offset with declining life spans, soaring addictions to opioids and numerous broad-based declines in overall health.

The widespread addiction to smartphones and social media have deranged and distracted millions, crushing productivity while greatly increasing loneliness, insecurity and a host of social ills.

Two dynamics define the economy in the 21st century:

1. We have substituted debt-driven speculation for productive investment

2. We have substituted debt for earnings

This is why the repricing of speculative-bubble assets can't be stopped: debt-driven speculation is not a sustainable substitute for investing in increasing productivity, and debt-fueled consumption masquerading as "investment" is not a sustainable substitute for limiting consumption to what we earn and save.

All bubbles pop, period. Once Corporate America's credit lines are pulled and its revenues and profits plummet, the financial manipulation of stock buybacks will end. That spells the end of the 12-year bull market in stocks.

As the tide of speculative mania ebbs and confidence wanes, the world's housing bubbles will all pop, and the $1.4 million bungalows will drift back down to their Bubble #1 highs around $400,000, and perhaps even drop from there.

As for collectibles and other play-things of the super-wealthy: the bids will soon vanish and yachts will be set adrift to avoid paying the dock fees.

[Apr 21, 2020] Fed Bailed Out Hedge Funds Facing Basis Trade Disaster

Mar 20, 2020 | www.zerohedge.com
Back in December, when the world was still confused about what exactly happened before (and after) the September repocalypse - which has since exploded thousand-fold resulting in the Fed now doing daily $1 T rillion repo operations - we said that in addition to the implicit bailout of JPM (which we described here first , and subsequently others ), by restarting its repo operations the Fed was also bailing out dozens of hedge funds engaging in highly levered trades involving a relative value compression trade in the Treasury cash/swap basis ... almost identical to what LTCM was doing ahead of its 1998 bailout, which is also why we titled the article " The Fed Was Suddenly Facing Multiple LTCMs ."

In a nutshell, the article explained why and how the return of the Fed's repo ops was nothing more than the Fed preemptively bailing out all those hedge funds that would have imploded had basis trades gone haywire. Below is a key excerpt from that post:

One increasingly popular hedge fund strategy involves buying US Treasuries while selling equivalent derivatives contracts, such as interest rate futures, and pocketing the arb, or difference in price between the two. While on its own this trade is not very profitable, given the close relationship in price between the two sides of the trade. But as LTCM knows too well, that's what leverage is for. Lots and lots and lots of leverage.

We also said that "hedge funds such as Millennium, Citadel and Point 72 are not only active in the repo market, they are also the most heavily leveraged multi-strat funds in the world, taking something like $20-$30 billion in net AUM and levering it up to $200 billion. They achieve said leverage using repo."

Needless to say, as always when this website presents something the mainstream press hasn't even considered, our explanation of what really happen ahead and during the September repocalypse was met with the traditional mockery and derision by the financial "intelligentsia."

Until today, three months later, when Bloomberg finally confirmed everything we said.

In an article discussing how and why the Fed unleashed its March 12 repo bazooka, Bloomberg writes that "when coronavirus panic kicked off unprecedented turmoil in Treasuries last week, hedge fund leverage was lurking" and goes on to "explain" something we said back in December :

The [hedge funds] use borrowed money from the repurchase market for the popular basis trade, which exploits price differences between cash Treasuries and futures. Though individual firms' borrowing is a closely guarded metric, people familiar with the transactions said some of them levered up as much as 50 times their own wagers. Leveraged funds' exposure to the basis strategy could be as much as $650 billion, JPMorgan Chase & Co. strategists said.

Does that sound like "the Fed suddenly facing multiple LTCMs"? Because to us it sure does. And more importantly, what happened in the days ahead of last week's credit market debacle is precisely what happened ahead of the September repo snafu, only with exponentially more destructive power.

The catalyst for last week's re-repocalypse was the historic surge in Treasurys that saw the 10Y drop as low as 0.31%, and the 30Y drop below 1%. As investors scrambled into Treasurys, "hedge funds got hammered" again, and the result was "a difficulty in completing trades" which as Bloomberg correctly writes "was a contributing factor to the Federal Reserve's decision to pledge $5 trillion to keep markets running smoothly."

High leverage amplifies profits and losses and can be responsible for forced liquidations -- and market fluctuations. This week, a sell-off in Treasury futures tied to margin calls pushed outstanding contracts to their lowest level since 2018. Many firms also get funding from money markets, whose problems have prompted the Fed to provide emergency funding

And there it is - just as we said, the Fed's first priority in the bailout waterfall, long before consumers and businesses were even considered, was the sanctity and stability of those multibillion hedge funds that suddenly faced a spectacular implosion... just like in the case of the original LTCM. Only it's even more poetic, because whereas with LTCM - which blew up when an economic black swan (the Russian default and the Asian crisis of 1997) blew out the LTCM basis trades, forcing the first Fed bailout in the modern era, what happened last week may have been the very last bailout cascade in Fed history, only this time it will involve everything, not just one solitary hedge fund run by idiot Nobel-prize winners.

"Too big to fail is back, and this time it's not the banks, it's levered financial institutions," said Mark Yusko, the chief executive officer of Morgan Creek Capital. Yusko - who apparently forget to the original Fed bailout was not of a bank but of a levered financial institution (LTCM) said he supported the Fed's stepping in, but added that hedge fund firms have gotten too big by borrowing too much. "It's a bailout," Yusko said, repeating what we said in December.

And whereas Bloomberg failed to connect the dots last year, this time around it actually did some original reporting and found some of the smaller funds that would have been devastated had the Fed not stepped in with its trillion-dollar a day repos:

That said, that's just three macro hedge funds out of a universe of hundreds, and what is important, is that the trade was so ubiquitous (thanks to those hedge fund idea dinners) that everyone was doing it.

"We've had 10 years of a perfect paradise and so people have been picking up pennies thinking there's no risk in holding strategies like the basis trade," said Kathryn Kaminski, chief research strategist and portfolio manager at AlphaSimplex Group. "A lot of the strategies, like the basis, that hedge funds tend to use don't work when markets aren't stable. You'll see more of these types of blowouts."

Curiously, and contrary to totally unfounded recent rumors, some of the far bigger firms fared better: as Bloomberg notes, the market unwind had a relatively small impact on multi-strategy funds Citadel and Millennium Management, although as we reported yesterday Millennium is closing several "trading pods" after weathering a modest 2.7% drop this month through March 12, and was down 1.9% for the year. In light of the S&P's 30% drop, that may seem like a stunning performance, but somehow Izzy Englander always manages to pull out a rabit out of hat (someone may want to check into what the HFT guys on the 6th floor of 666 Fifth are doing for the answer to that).

But whereas the mega-levered Millennium and Citadel, whose in house risk-management lackeys are truly draconian in their position limits, managed to avert a debacle by unwinding the positions quickly after sustaining small losses - courtesy of the Fed's massively expanded $500BN repos - others were not so lucky, and many other firms focuses on the basis trade suffered far steeper losses.

One among them was BlueCrest Capital Management, whose trader Raymond Wang was fired on March 9, the day after that historic Sunday night when the 30Y traded bidless for hours as the S&P crashed limit down, because he couldn't find a buyer for the investment firm's losing positions in the basis trade. Other firms, who had less leverage on, survived until that Thursday when the Fed launched the repo bazooka, allowing all those who had the basis trade on to quietly exit stage left, bailed out by a deceiving Fed that told the world its mission was to rescue main street when in reality it was just making sure the billionaires had someone to dump their money-losing positions to.

[Apr 21, 2020] Bill Gates "foundation" is simply a stock laundering mechanism. It was cited years ago by the government for putting out so little of its funds that it barely qualified under US law.

Apr 05, 2020 | www.moonofalabama.org

Richard Steven Hack , Apr 5 2020 22:47 utc | 83

"enlightened capitalists -- Bill Gates" People who say that just don't know this guy's history. His "foundation" is simply a stock laundering mechanism. It was cited years ago by the government for putting out so little of its funds that it barely qualified under US law.

It's a scam. You take the billions of dollars worth of stock you can't sell in large quantities to convert to cash due to laws about that and you "donate" it to a foundation - run by your father. Then the foundation sells the stock and uses it to buy control of companies you want to invest in.

It's about power, not charity.

Richard Steven Hack , Apr 5 2020 22:59 utc | 85

Posted by: gm | Apr 5 2020 17:35 utc | 29 The B&M Gates Foundation was likely originally set up with some good intentions (to combat malaria and other Third World diseases), but probably mainly as a legal vehicle to shield some of his mega-wealth.

Exactly. I read about that years ago as I indicated in my above post.

"But then, after Gates got snared, perhaps in 201? at one or more of the Intel community's "Epstein pedo-trap" blackmail factories, he became their bitch-tool for evermore."

I don't know that Gates is a pedo. I don't think he needs to be to explain his behavior. He's simply *always* been known as a greedy S.O.B. who spent his time in college taking money from his friends in poker games. His father is a big time lawyer, so you can imagine where he got his greed genes.

Not that greed per se bothers me - but I dislike greedy people who also produce crap products like Windows.

Mao , Apr 6 2020 2:21 utc | 133
https://off-guardian.org/2020/04/04/did-bill-gates-just-reveal-the-reason-behind-the-lock-downs/

In a recent candid interview, Bill Gates outlined that, despite the comparatively small threat of Coronavirus, he and his colleagues "don't want a lot of recovered people" who have acquired natural immunity. They instead are hoping we become reliant on vaccines and anti-viral medication.

Shockingly, Gates also suggests people be made to have a digital ID showing their vaccination status, and that people without this "digital immunity proof" would not be allowed to travel. Such an approach would mean very big money for vaccine producers.

https://www.youtube.com/watch?v=Xe8fIjxicoo

[Apr 21, 2020] As Coronavirus Depression Continues, Americans Are Putting Their Rent On Credit Cards

Apr 19, 2020 | www.zerohedge.com

Despite what the stock market would have you believe, the United States is sinking further into a depression. And the unemployed are now resorting to putting their rent on credit cards.

It's a temporarily solution that may help tenants get through a month or two, but it's ultimately driving an already broke consumer deeper into debt that will cripple them in the long term. About 84% of tenants in the U.S. have paid full or partial rent through April 12, the WSJ reports , a number that has risen significantly since the first week of April.

But credit cards as a form of payment are also rising by 13%, compared to the first three months of the year. The number of tenants paying with a credit card is up 30% when compared to the same period in March.

While sometimes tenants pay rent with credit cards to boost their credit score or earn rewards, this is increasingly looking like a desperation scenario, where credit cards could be the last fallback before tenants start filing for bankruptcy and wind up out on the street.

In general, electronic payments have risen since the start of the pandemic. Building owners will sometimes accept credit cards through apartment management software or third party apps. Even with interest rates near 0%, the average interest rate on a credit card is still in the double digits. It's even higher for those taking cash advances.

While some landlords and creditors have said they would make provisions for those who have lost their jobs, the credit bureaus will be far more unforgiving. They will be offering no special treatment, according to the WSJ, because a revision to the CARE act that would have prevented them from reporting negative information due to the pandemic was left out at the last minute.

Some landlords have offered to absorb the transaction costs related to using credit cards. "Once we saw where things were going with this pandemic, a lot of our rules just kind of went out the window," one landlord said.

But if unemployment doesn't start to arrive by the time many of these tenants have to pay May rent, they could be faced with far more dire consequences.

Bruce McClary, spokesman for the National Foundation for Credit Counseling, said: "Your rent payment isn't the only thing you owe, and chances are you have other financial commitments you're having to keep on track as well."

Over 22 million people have applied for unemployment over the past fourweeks.

[Apr 21, 2020] Both financial systems and economies were clearly crashing beginning in early September. Now the elites get to blame all the troubles on a virus

Mar 20, 2020 | www.unz.com

bobbybobbob , says: Show Comment March 19, 2020 at 5:57 am GMT

Let me cut through all this speculative noise with Occam's Razor.

The virus is natural. The CCP elites are using it in exactly the same way the USG and EU elites are. Both financial systems and economies were clearly crashing beginning in early September. Now the elites get to blame all the troubles on a virus (which isn't actually killing anyone in interesting numbers). Absent the WuFlu they'd all risk getting strung up pretty soon. Now instead of being called out for the decade+ of ineptitude that lead to a collapsing global bubble economy, they get to be praised as heroes that saved everyone from dying.

Now that I've cleared up all that nonsense about a bioweapon and grand scheme to kneecap China, I have to say that the "China inevitably taking over" narrative is rather ridiculous, flu or not. Japan re-ascendant and taking back Manchokou is more believable.

As the USA washes its hands of these messes overseas and pulls back homeward, China is in the worst position.

All its neighbors hate it and will check it.

China has been the #1 beneficiary of Pax Americana this century. Well, Americans are rapidly losing interest in that project.

[Apr 21, 2020] There may be dramatically more deaths from the economic breakdown than from COVID-19 itself.

Apr 06, 2020 | off-guardian.org

Gates reiterates the dire consequences for the global economy later in the interview.

"We need a clear message about that," Gates said starting at 26:52 .

"It is really tragic that the economic effects of this are very dramatic. I mean, nothing like this has ever happened to the economy in our lifetimes. But bringing the economy back and doing [sic] money, that's more of a reversible thing than bringing people back to life. So we're going to take the pain in the economic dimension, huge pain, in order to minimize the pain in disease and death dimension."

However, this goes directly against the imperative to balance the benefits and costs of the screening, testing and treatment measures for each ailment – as successfully promulgated for years by, for example, the Choosing Wisely campaign – to provide the maximum benefit to individual patients and society as a whole.

Even more importantly, as noted in an April 1 article in OffGuardian , there may be dramatically more deaths from the economic breakdown than from COVID-19 itself.

Invisible Man ,

Some things I'd love to see a journalist bluntly ask Mr. Gates in the near future:

"Why are you, Mr. Gates, with no formal training in medicine or biology, no special knowledge of virology or epidemiology, suddenly the foremost expert on Covid in the world? What makes you the decider of policy? Is it just that we live in a world dominated by the golden rule, where he who has the gold makes the rules?"

"Why do you ignore the statistical evidence that Covid19 has yet to impact Europe's overall mortality rate?"

"Why do you wilfully ignore the two dozen or so experts who have come forward to vehemently criticize and refute the narrative being pushed that we're in the midst of a deadly pandemic? Their assertions are consistent with the statistical evidence. Yours are not."

[Apr 21, 2020] The ghost of a derivative implosion

Mar 17, 2020 | asiatimes.com

It's not even spring yet, and we already know it takes a virus to mercilessly shatter the Goddess of the Market. Last Friday, Goldman Sachs told no fewer than 1,500 corporations that there was no systemic risk. That was false.

New York banking sources told me the truth: systemic risk became way more severe in 2020 than in 1979, 1987 or 2008 because of the hugely heightened danger that the $1.5 quadrillion derivative market would collapse.

As the sources put it, history had never before seen anything like the Fed's intervention via its little understood elimination of commercial bank reserve requirements, unleashing a potential unlimited expansion of credit to prevent a derivative implosion stemming from a total commodity and stock market collapse of all stocks around the world.

Those bankers thought it would work, but as we know by now all the sound and fury signified nothing. The ghost of a derivative implosion – in this case not caused by the previous possibility, the shutting down of the Strait of Hormuz – remains.

We are still barely starting to understand the consequences of Covid-19 for the future of neoliberal turbo-capitalism. What's certain is that the whole global economy has been hit by an insidious, literally invisible circuit breaker. This may be just a "coincidence." Or this may be, as some are boldly arguing , part of a possible, massive psy-op creating the perfect geopolitlcal and social engineering environment for full-spectrum dominance.

[Apr 21, 2020] I cannot see how that printing money and distirbuting them to the banks will turn out well for the empire's neoliberal elite

Apr 03, 2020 | www.moonofalabama.org

William Gruff , Apr 3 2020 19:09 utc | 335

About the narrative that the pandemic is hyped to cover for robbery, that could be, if we assume that the Lords of Capital are really stupid.

Well, OK, they are really stupid, but one would think they are in a position to realize that they are just printing money and giving it to themselves. It is only among the simple plebes (that's us) that a quantity of dollars has meaning. For the Lords of Capital it is all about percentage of market share controlled. Playing this game will inflate away some of the value of cash wealth we plebes have and put it in the capitalists' pockets, but not so huge an amount that it looks like. More critically, this is cranking up the pressure in the debt bubble while giving other countries more reason to unload their dollar reserves. I cannot see how that will turn out well for the empire's capitalist elites.


information_agent , Apr 3 2020 19:30 utc | 338

Posted by: William Gruff | Apr 3 2020 19:09 utc | 335

These "Lords of Capital" have offloaded most of their bad debts onto the Fed, which means onto the taxpayer. In turn, they've fully loaded their coffers with cash so that once mortgages begin going into default they'll be well-positioned to be buying. And they'll be the only ones with the "capital" to purchase these assets, including all of the businesses both large and small which will go bankrupt during this contrived pandemic.

What if these "Lords of Capital" have decided that they already have enough wealth and now they want to create a permanent class of serfs who can never own, must always rent, can never retire, and who get no health care. What if we've got a dystopian future in store for us that even George Orwell couldn't have imagined?

This is a heist, and money isn't the only thing that's being stolen. Power, control, freedom, and futures are also being stolen right now while we debate IFC versus CFR and collectively wonder if we're actually seeing an increase in deaths or an increase in deaths attributed to "coronavirus".

Again, it's a heist, just like 9/11.

Hmpf , Apr 3 2020 19:37 utc | 340
@ William Gruff | Apr 3 2020 19:09 utc | 335

If the presumption is correct and comes to pass, which, I believe, is in the making, the game's a different one.
It is not about cash positions but about hard assets. Wealth is always only relative, if I have 1000$ you've got 10000$, then you'll be 10x 'richer' than I, no matter what. In a depression scenario with massive devaluation of assets like housing, with or without inflation, many households, small businesses, farmers ... will fail to meet their financial obligations. Then the funny money they've given to themselves will come in very very handy. They're going to buy up pretty much everything, leaving the plebs with one option: serfdom.

[Apr 21, 2020] Anyone thinking the US will have a quick recovery is delusional

This economic crisis is like effect on coronavirus on lungs.
Apr 03, 2020 | www.moonofalabama.org

Likklemore , Apr 2 2020 18:21 utc | 35

and the real conumdrum -is the fine print-impeding promised aid from the same banksters who are showered with free money:
U.S. borrowers struggle to get coronavirus relief from big banks
NEW YORK (Reuters) - U.S. borrowers seeking a reprieve from mortgage, auto or credit card payments because of coronavirus hardships are not getting the help they expected from big banks that promised assistance in recent weeks.

JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) are among lenders that announced programs to help customers whose income has suddenly dropped because of illness, layoffs or government-imposed business closures stemming from the pandemic.

But fine print can prevent customers from getting assistance, borrowers and bank sources said.

For instance, lenders offering 90-day forbearance on mortgage payments are limited in how they can structure help for customers whose loans are owned by investors.

Mortgage-bond holders are still requiring monthly payments even if borrowers do not pay. Banks have been willing to foot the bill for a few months, but will ultimately need cooperation from investors.
Some customers are finding they are expected to write a big check as soon as the grace period ends, rather than having missed payments tacked onto the end of the loan.[.]


and
Thousands of U.S. banks may sit out small-business rescue plan on liability worries:
Thousands of U.S. banks, including some of the country's largest lenders, have said they may not participate in the federal government's small-business rescue program due to concerns about taking on too much legal and financial risk, five people with direct knowledge of industry discussions told Reuters.[.]

The small business owner has a mandatory "to Close order" - no cash flow and is expected to (a) take on additional loans to stay afloat and (b) sign a document attesting to their eligibility and other requirements, thereby relieving the industry of responsibility for potential misconduct.

Anyone thinking the U.S. will have a quick recovery is delusional.

[Apr 21, 2020] Coronavirus is just a pin. A pin that bursts the bubble.

Mar 25, 2020 | www.moonofalabama.org

karlof1 , Mar 24 2020 23:15 utc | 101

Very hard to disagree :

"👉Some say reaction to CV is worse than CV (Bc Econ damage)

"I get it, but remember, CV didn't force: 👇

"1. Mkt cap/gdp 150%+
"2. Corp debt all time high
"3. Consumer debt all time high
"4. Dependency on ZIRP/QE
"5. No savings
"6. Econ built on debt+asset bubbles

"CV is just a pin."

A pin that bursts the bubble.

dennis , Mar 24 2020 23:37 utc | 103

@ Sñr karlof 101

"CV is just a pin."

A pin that bursts the bubble.

...but the pin was manufactured, and was so perfect to exactly burst the bubble. The restructuring as a consequence of this 'pop' will ripple out tsunami style for over a decade, glimpses appearing: https://www.sacbee.com/news/politics-government/the-state-worker/article241391841.html

I posted earlier of USJ indefinite detention application UK is already rolling out a version. How many coincidences does one need to validate a conspiracy - opps coincidence theory?

https://www.theguardian.com/world/2020/mar/19/coronavirus-suspects-may-be-detained-under-uk-emergency-powers

[Apr 21, 2020] Federal Reserve can print money - Dollars - or legal tender. It cannot print oil at $20/bbl

Mar 24, 2020 | www.moonofalabama.org

Tim E. , Mar 24 2020 16:46 utc | 17

Federal Reserve can print money - Dollars - or legal tender. It cannot print oil at $20/bbl.

[Apr 21, 2020] Global depression will probably be avoided this time. But a short term rcession in the USA is definitely in the cards

Mar 23, 2020 | www.moonofalabama.org

dltravers , Mar 22 2020 16:14 utc | 17

Global depression? China appears to be getting back to work, Russia appears to be acting normally, Japan appears to have streets full of shoppers, unlike here in my area. A couple of months of reduced economic activity is going to freeze up the system?

The West appears to be falling apart. Much of this is from the massive market of counter party risk and derivatives. Hedge funds were caught on the wrong side of the trade margined up to the hilt. All cash was in the market. Now there is a "dollar shortage" as everyone moves back to cash and is hoarding it.

In reality the market was falling apart before this happened. Behind the scenes and the FED was pumping liquidity into the market prior to November 2019. Capitalism was leveraged to the hilt and in no position to withstand a short term shock. They will get to socialize their risk.

I feel for the small business owners who have their lives in a business. They are hurting. Screw the hedge funds, let them die. Make the companies sell their stock back into the market or use it as collateral for a loan from the lender of last resort if needed.

Things will get back to normal and the games will go on as the system's survival depends on the rigged game.

[Apr 21, 2020] There's going to be a wholesale unemployment, homelessness will increase - if this doesn't trigger people acting in their self-interest I don't think anything will.

Apr 21, 2020 | www.moonofalabama.org

ADKC , Apr 20 2020 13:23 utc | 282

Debt Jubilee for Bankers - Keiser Report with guest, Michael Hudson

Max Keiser: Workers who are getting sub living wages, in meatpacking or in delivery services or gig economy, are now in a position to raise their wages. Are workers at a point where they can start to bring back organized labour and bring back the power of collective bargaining or are they going to blow it

Michael Hudson: They're certainly motivated to, simply over the issue of workplace safety and the protection against the virus and the fact that they're being laid off at will by the employers with really no backup. So you would think that the the whole health plan, the points raised by Bernie Sanders, are certainly going to catalyze this and if they don't organize it means that they're just going to surrender quietly and make the economy end up looking like Greece. Where everybody gets poorer and poorer, they get unhappy, they commit suicide or they emigrate, and their lifespans shorten. That's really the alternative.

Imagine what's going to happen in three months when all of a sudden, they haven't been employed, all of the rent has been in abeyance is going to fall due. And the restaurants and small businesses they work for can't afford to open because they can't afford to pay the rent, which is their largest expense, for the last three months while they've been shut down There's going to be a wholesale unemployment, homelessness will increase - if this doesn't trigger people acting in their self-interest I don't think anything will.

[Apr 21, 2020] Disbanding of Fed would be the financial equivalent of jailing the main heroin supplier of urban ghettos and rolling up the entire racket.

Mar 16, 2020 | www.moonofalabama.org

karlof1 , Mar 16 2020 19:37 utc | 20

What Trump ought to do is not just fire Powell, but every other Fed board member, disband the Fed completely, and return its duties to the Treasury from where they were pirated in 1913, which is one of the main sources of our current globalized problem--the privatization of Central Banks.

That would be the financial equivalent of jailing the main heroin supplier of urban ghettos and rolling up the entire racket. And there're plenty of prescriptions available as what to do next. Again, this discussion with Hudson and Ellen Brown has several which build on those Hudson makes in this video interview I've linked before.

Again as b shows, it's the political protectors of the Creditors who won't allow any change to occur. Recall the book touting Clinton's 1992 campaign-- Mandate for Change --and Obama's mantra--Change you can Believe in. That the NY Times and Senator Cotton were appalled is close to a Sea Change in sentiment. Most troublesome is the prognosis that this won't just dieoff come the warm heat of summer. Chinese researchers have shown the virus can survive a longtime at bodyheat temps:

"The length of time it lasts on the surface depends on factors such as temperature and the type of surface, for example at around 37C (98F), it can survive for two to three days on glass, fabric, metal, plastic or paper."

It's entirely possible that the elderly population will need to adopt a continual defense mode of behavior when out in areas of high public concentrations & transit until a confidence in resistance is attained or a vaccine becomes available.

One thing ought to becoming very clear to people everywhere: The people who got us into this mess are not at all qualified to get us out--they either need to be jailed or retired.

[Apr 21, 2020] This isn't a consumption crisis (demand).

Mar 16, 2020 | www.moonofalabama.org

GeorgeV , Mar 16 2020 19:38 utc | 21

The so-called 'new global economy' (NGE) that has been been so loudly touted for the last 40 some years by some academics, economists, Wall Street con artists and other such riff-raff, appears to be crumbling faster by each passing day because of the coronavirus pandemic.

These so-called very serious know-it-alls have shown themselves to be nothing more than a bunch of 21st century snake oil salesmen, offering up what can be best described as warmed over late 19th - early 20th century economics.

Lord John Maynard Keynes has been vindicated! However do not expect any of these to publicly or privately admit they sold a load of manure to a gullible public. No siree!

The NGE is their cherished baby and they will follow the first rule of arrogant and stupid management: Never admit you are wrong!

vk , Mar 16 2020 19:44 utc | 23

@ Posted by: GeorgeV | Mar 16 2020 19:38 utc | 21

Keynes has not been vindicated for the simple reason this isn't a consumption crisis (demand).

Evidence for this is the fact that the Fed slashed interest rate to zero and the markets tumbled down the next day.

[Apr 21, 2020] Mass quarantine has the same practical effect of a general strike

Highly recommended!
Mar 16, 2020 | www.moonofalabama.org

vk , Mar 16 2020 19:06 utc | 7

It's easy for the rich and the upper middle class to preach for the laissez-faire route: they can stay in their second houses in isolation without losing a penny.

But they lose money if production stops (because mass quarantine has the same practical effect of a general strike) - that's why they want the wheel to keep spinning.

But here's a surprise: poor people want to surivive too. So pardon the USD 80 billion loss at Wall Street, I want to enhance my chances of survival.

[Apr 21, 2020] The hardest hit sectors in the S P 500

Why energy is the worst sector is difficult to understadn. Nobody discovered new oil deposits. right ?
Mar 15, 2020 | www.mercurynews.com

Here's a look at some of the hardest hit sectors in the S&P 500, and how far they've fallen in the past 30 days.

ENERGY (-47%)

The S&P energy sector has plunged more 47% in the past month. The price of oil continues a steady decline toward $30 per barrel. Saudi Arabia on Wednesday directed its oil company Aramco to increase its maximum production capacity as it squared off with Russia, even as airlines cut flights, shippers dial back deliveries of goods and people are being told to stay home. In its monthly report Wednesday, OPEC revised down its projections for global oil demand growth this year, while raising projections for supply. That is a recipe for plunging energy prices and layoffs in the oil patch. Shares in Exxon are down about 38% in the past 30 days. Already, energy giants like Exxon and Occidental Petroleum have cut spending. The latter cut its dividend by 86% Tuesday to save cash.

FINANCE AND BANKING (-33%)

Banks have been punished by falling interest rates. Interest payments on loans are a major source of revenue. The Fed last week lowered its main borrowing rate by half a point to combat the economic drag from the outbreak. Analysts suspect another cut may be coming soon. But there is also the anticipation of slowing global economic growth, which was already underway before the pandemic hit. That would mean slowing business, and fewer fees, for banks that employ millions of people. On Thursday, the U.S. Federal Reserve injected $500 billion into short-term lending markets to address disruptions in the Treasury market. It is also broadening its ongoing purchases of Treasurys to include longer-term bonds. The action, being led by the New York Fed, is intended to keep credit markets functioning and ensure that banks can continue to provide loans to businesses and other borrowers across the economy.

INDUSTRY AND MANUFACTURING (-32%)

Manufacturers are also taking a hit as businesses pull back on orders for goods due to the impact of the spreading coronavirus. Companies like Ingersoll Rand, which makes a wide range of industrial products including many used by the oil and gas industry, has seen its shares lose a third of their value in the past 30 days. Major manufactures like Caterpillar and Deere and just beginning to stabilize from a trade war between the world's two largest economies, China and the United States. Caterpillar on Thursday reported broad declines in retail sales for the three-month rolling period ending in February, with worldwide sales slumping 11% following a 7% decline from January.

DISCRETIONARY SPENDING (-27%)

The broad sector that covers everything from the sale of a Big Mac, a Barbie doll, Gap jeans or a Disneyland vacation -- is taking a beating as people cancel trips, avoid the mall or shut in. Airlines and cruise ships have been the most notable losers amid government travel bans, infections on cruise ships and a sudden aversion to boarding a commercial aircraft. Shares in airlines are down more than 40% in the past month and cruise ships stocks, which are grouped with resorts and hotels, are down about 50%. Princess Cruises, which had one of its ships quarantined off the coast of Japan last month, said Thursday that it would suspend global operations through early May. Starbucks stores in the U.S. and Canada may become drive-thru only while others could limit the number of people allowed inside, the company said Thursday. Shares in the coffee chain plunged 7% Thursday to a 52-week low and are down almost 30% in the past month. And more bad news for anyone thinking they would self-quarantine on the couch and watch their favorite team: the NHL is following the NBA's lead and suspending its season amid the coronavirus outbreak. Major League Baseball is delaying the start of its season by at least two weeks. And the NCAA canceled the men's and women's Division I basketball tournaments. And hold off on that Disneyland vacation: Disneyland Resort said it will close Disneyland Park and Disney California Adventure Park through the end of the month, though there have been no reported cases of the new virus. The announcement doesn't affect Disney World in Florida.

TECHNOLOGY (-26%)

Technology companies have not been immune to the Wall Street coronavirus sell-off during the past 30 days. China manufactures a wide range of parts for U.S. tech companies, and when the country shut down most of its factories last month, it disrupted the supply chain and left companies without products to ship. Additionally, companies from every sector are likely trimming non-essential spending until the pandemic passes. That means fewer tech upgrades or overhauls, and individuals may pull back on spending as well for everything from iPhones to Xboxes. Alphabet, which owns Google, has lost about one-quarter of its value in the past month. Chipmaker Dell has seen its stock fall about 37% during the same stretch.

[Apr 21, 2020] When the crisi is over, apparently the USA and West in general will end up with much lower stock market

Mar 12, 2020 | www.moonofalabama.org

dltravers , Mar 11 2020 17:57 utc | 31

Apparently the West will now end up with both a much lower stock market and a large covid 19 crisis. At some levels the government is taking this very seriously, at others not so much. People have to listen and become informed and the corporate media appears to be holding back and not helping.

I am not so sure that Trump derangement syndrome is not playing out in the media coverage. How does one stop a habit of three years of derangement in an instant? So much BS has been spun off over the last three years I suspect that it is carrying over into this crisis.

There are a myriad of local, state, and federal bureaucracies assigned to the task and it is impossible to create a perfect symphony of action across all levels.

The spread across the world seems to have come from tourists from China visiting various countries. Now that the eyes are on the Western countries no one is reporting on business in China; are the factories coming back online?

[Apr 21, 2020] The coronavirus is the catalyst, not the cause, of the market crash

Mar 11, 2020 | caucus99percent.com

gjohnsit on Wed, 03/11/2020 - 2:22pm

Wall Street blames the coronavirus for the current crash for the same reason the Democratic Party blames Russia for losing in 2016: to avoid responsibility.

A month ago I said : "the stock market is massively overvalued . Right now the stock market is a bubble in search of a pin."

[Apr 21, 2020] On monetary policy: there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure

Notable quotes:
"... The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes. ..."
"... Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. ..."
Apr 21, 2020 | www.moonofalabama.org

Noah Way , Apr 21 2020 16:42 utc | 75

@ #6 Passer by

In the broadest sense the US deficit is a measure of how much money the govt has created (not entirely accurate as the creation of money - really debt - has been largely outsourced to private banks). If the national debt was 'paid off' It would suck all the money out of society and the economy would collapse.

The Fed doesn't need taxes as revenue as it just creates whatever money it needs. The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes.

Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. The deficit is 1/2 of a balance sheet, the deficit on the govt side is balanced by a surplus (money in circulation) in the economy. Note that states are revenue constrained and depend on taxes and federal outlays to operate as they cannot create their own money on demand.

But what about inflation? Too much money in circulation lowers its value. Taxes are the real federal economic regulatory mechanism. When there is inflation, higher taxes directly remove money from circulation. The disinformation campaign is that interest rates control inflation, which has a) repeatedly been demonstrated false and b) is simply another system of rewards for the banking cartel.

The best metaphor is a sink. The faucet is the creation of money, the basin is the economy, and the drain is taxes. When the sink starts to overflow (inflation) the solution is to open up the drain (raise taxes).

Note also that this is for a sovereign economy, one that is controlled by the government. The EU has effectively destroyed all the sovereign economies in Europe with its central bank. Thus Greece, Italy, Spain, etc. have no control of their own economies and as such are unable to economically regulate themselves and subject to foreign predatory forces.

gm , Apr 21 2020 16:51 utc | 77

@Posted by: Noah Way | Apr 21 2020 16:42 utc | 75

Shorter version: "Deficits Don't Matter" Dick Cheney, 2002.
https://www.chicagotribune.com/news/ct-xpm-2004-01-12-0401120168-story.html

[Apr 21, 2020] All the msm talking heads have been revealed for what they are: state propagandists. not one krugmanian friedmanite will ever say, "I didn't see this coming and I pimped myself out for the last 40 years selling snake oil and getting nobel prizes for it

Apr 21, 2020 | www.moonofalabama.org

ron , Apr 21 2020 15:59 utc | 65

" i listened to about 3 mins of some bill gates ted talkish thing, wondering, will these dim bulbs ever assume responsibility for anything?

all the msm talking heads have been revealed for what they are: state propagandists. not one krugmanian friedmanite will ever say, "I didn't see this coming and I pimped myself out for the last 40 years selling snake oil and getting nobel prizes for it and have revealed myself to be unqualified to turn on a light switch no matter how much money I have made and recognition I have received. Clearly I know nothing". why would anyone listen to an msm personality that's been sold to them as some kind of "expert"?

[Apr 20, 2020] The FED is considering purchasing equities , so as to defend the portfolio values of the already-wealthy , who own most of that equity.

Notable quotes:
"... To make this process more equitable, why not permanently place those equities into a sovereign wealth fund, and use the annual dividend flow to improve programs that benefit the broader populace, like social security and M4A ? Other countries , like Norway , have such funds and use them in this way. Heck , so does Alaska , for that matter. ..."
Apr 08, 2020 | consortiumnews.com

Marko , April 6, 2020 at 20:09

So, now the FED is considering purchasing equities , so as to defend the portfolio values of the already-wealthy , who own most of that equity. This will likely be a regular practice in every crisis going forward ( see Japan ) , and we know that we are now a distinctly crisis-prone country , and can expect at least one crisis per decade , and probably more.

To make this process more equitable, why not permanently place those equities into a sovereign wealth fund, and use the annual dividend flow to improve programs that benefit the broader populace, like social security and M4A ? Other countries , like Norway , have such funds and use them in this way. Heck , so does Alaska , for that matter.

Why don't we do it ? Most of you already know why. If you don't , just watch some old George Carlin clips on Youtube.

Mrs. Debra L. Carr de Legorreta , April 7, 2020 at 11:45

I agree Marko. Thank you for your thoughtful comment. I believe what you are proposing, or something like it, has to be done for systemically important entities, such as banks, telecoms, health, insurance, and national defense providers that own the largest share of their markets. We must do as you say, if we are not to be held hostage to the absentee landlords who currently own our nation for their sole benefit.

Dfnslblty , April 7, 2020 at 13:56

Socialization via nationalization is your excellent proposal. Privatization in public areas – education, banking, medicine, oil and water- has robbed Citizens and destroyed the environment. We can elect officials to bring equality to governance, or we can continue to live as serfs.

[Apr 20, 2020] The remote possibility of the collapse of the US dollar and/or the international trading system

Mostly wishful thinking
Notable quotes:
"... There is no reason why the collapse of the system should lead to something worse. Indeed it is hard to conceive of any worse system that could possibly survive. ..."
"... a collapse in global trade unlike anything we've seen since the 1930s. ..."
"... The Fed is already set to monetize double the total U.S. Treasury debt issuance. The global task would overwhelm it – in an avalanche of money-printing. ..."
"... "Does Mnuchin then, believe his and Trump's narrative, that the virus will soon pass, and the economy will rapidly bounce-back? If so, and it turns out that the virus does not rapidly disappear, then Mnuchin's stance portends a coming, tragic débacle. ..."
Apr 20, 2020 | www.moonofalabama.org

bevin , Apr 20 2020 13:26 utc | 283

Alistair Crooke at Strategic Culture is worth looking at today.

He's predicting the collapse of the US dollar and the international trading system.

A New World Order indeed. But also a tabula rasa.

There is no reason why the collapse of the system should lead to something worse. Indeed it is hard to conceive of any worse system that could possibly survive.

Instead of howling calamity and predicting a reality that is likely to be no worse than that already in operation for the bulk of the world's population -- does anyone think that the people scrabbling every hour to stay alive in the world's slums, care or ought to care whether our internet traffic is pouring into a imperial database? Does anyone doubt that it has been for years?

Instead of arguing how many corona virus corpses can be attributed to obesity and sugary diets we could be discussing the possibilities that Disaster Socialism opens up.

After all the rational response to calamities and collapses is always socialist in the sense that communities come together, help one another and rebuild themselves. If the world trade system does collapse there will be an immediate necessity for rationing, social distribution and the development-Cuban style- of food production. Tools will have to be appropriated, land too and labour organised.

The whole substructure of capitalism-private property and commodity production- will have to be pushed aside like rubble in an earthquake.
The current basis of petrochemical agriculture will have to be abandoned- and three cheers for that!- and organic, labour intensive horticultural techniques used in their place.

There will be, at one and the same time, mass unemployment and an urgent need for labour.

Out of such crises a new world can be born. There is no reason why it should be one designed by the enemies of life who controlled the one currently failing.

Crooke explains what is about to happen

"...the crucial point is made by Professor Rogoff: "We're looking at a commodity-price collapse – and a collapse in global trade unlike anything we've seen since the 1930s. An avalanche of government-debt crises is sure to follow, he said, and "the system just can't handle this many defaults and restructurings – at the same time".

"This simply is beyond the U.S. Fed, or the U.S. Treasury's capacities, by a long shot. The Fed is already set to monetize double the total U.S. Treasury debt issuance. The global task would overwhelm it – in an avalanche of money-printing.

"Does Mnuchin then, believe his and Trump's narrative, that the virus will soon pass, and the economy will rapidly bounce-back? If so, and it turns out that the virus does not rapidly disappear, then Mnuchin's stance portends a coming, tragic débacle. And with further massive money issuance, a collapse in confidence in the dollar. (President Putin would have been proved right, but he will not welcome, assuredly, being proved right in such a destructive manner)..."

https://www.strategic-culture.org/news/2020/04/20/revolutionary-times-and-systemic-collapse-the-system-cannot-handle-it/

[Apr 20, 2020] Wall Street Wins Again: Forces Treasury To Double Rate On Small Business Bailout Loan

Apr 05, 2020 | www.moonofalabama.org

Likklemore , Apr 2 2020 22:34 utc | 112

and as the small business owners drown the banksters get richer.

Wall Street Wins Again: Forces Treasury To Double Rate On Small Business Bailout Loan

Sick. Unconscionable. There is a shortage of lamp posts and piano wire.

[.]in a press conference late on Thursday, Steven Mnuchin said that he will double the interest rate on the SBA loan from 0.50% to 1.00% in order to appease banks seeking higher interest rates to participate in the Treasury's bailout program and lend money to the same taxpayers who bailed them out 12 years ago.

These are same banks, mind you, that just sold all $1.6 trillion in securities to the Fed to expand their balance sheets capacity in the past three weeks, and which also just benefited from the Fed's decision to remove Treasurys and deposits from the Fed's SLR test, freeing up another $1.6 trillion in liquidity.

And yet, despite all this, these banks - which include JPMorgan Chase, Bank of America, Wells Fargo Citigroup, Truist Bank and PNC - which were bailed out in 2008 and again bailed out 3 weeks ago with the Fed's various alphabet soup programs, couldn't agree to give Main Street a helping hand, and instead of offering loans at a modest 0.5%, demanded no less than 1%, which is 75-100 bps above where they can borrow cash from the Fed. Because charging America's middle class an 19.95% credit card APR is not enough, and anything less than 1.0% on a loan that is explicitly backstopped by the Treasury would be uneconomical.[.]

My harping question: Why would a small business owner, forced to close, and without a cashflow take on more debt?

[Apr 20, 2020] They have to keep the rate of profit of the wealthy one way or the other

Notable quotes:
"... The old financial capitalism of always, refurbished by the new decrees on pandemic, whose hedge funds, already present in the Mediterranean countries applying usury interests to basic needs ( and rights ) of the population, like homes market, will fall like vulture on the so longed health and pension systems of now re-indebted countries who already were doing well before the pandemic started ( and even better than their Calvinist prepotent disloyal "partners" of the north, as the graphic on the situation of main banks in the EU i posted in the week review thread so clearly show ). ..."
Apr 01, 2020 | www.moonofalabama.org

H.Schmatz , Apr 1 2020 15:31 utc | 241

@Posted by: bevin | Apr 1 2020 15:08 utc | 237

... ... ...

Simply, some countries, in the twilight of their most profiteering industries and from which they are known ( namely cars, aircrafts, fracking oil, and so on...), and the inability of easily continue plundering developing countries without entering expensive and unending wars, have thought of reconverting their "productive" fabric and thus keep profiting from medical and pharma industries ( and for this they needed to create a new strong market before...)

The old financial capitalism of always, refurbished by the new decrees on pandemic, whose hedge funds, already present in the Mediterranean countries applying usury interests to basic needs ( and rights ) of the population, like homes market, will fall like vulture on the so longed health and pension systems of now re-indebted countries who already were doing well before the pandemic started ( and even better than their Calvinist prepotent disloyal "partners" of the north, as the graphic on the situation of main banks in the EU i posted in the week review thread so clearly show ).

[Apr 20, 2020] There has been a huge amount of planning for a pandemic. But only complete idiots believe that The Crash was deliberately brought about

Notable quotes:
"... There has been a huge amount of planning for a pandemic. It seems likely that that planning has also included how a pandemic can be gamed to benefit TPTB. We are seeing plenty of CYA propaganda that excuses government failures and attempt to minimize the virus threat. But IMO they know that they're doing. ..."
"... Trump team failed to follow NSC's pandemic playbook ..."
"... In a subsequent section, the playbook details steps to take if there's evidence that the virus is spreading among humans, which the World Health Organization concluded by Jan. 22, or the U.S. government declared a public health emergency, which HHS Secretary Alex Azar did on Jan. 31. ..."
"... Under that timeline, the federal government by late January should have been taking a lead role in "coordination of workforce protection activities including [personal protective equipment] determination, procurement and deployment." Those efforts are only now getting underway, health workers and doctors say. ..."
"... The problem is that the measures that needed to be taken directly contradicted the capitalist insistence on immediate profits: building reserve capacity into the health system (or rather refraining from the temptation to slim down the system to the very minimum needed capacity) was just something that capitalist regimes, desperate to cut taxes and otherwise distribute public funds to the wealthy, could not bring themselves to do. ..."
"... A case in point-to which I gave a link to in the paywalled Toronto Star on an earlier thread -- was the revelation that, after the Sars outbreak the Province of Ontario, following the advice of a Judicial enquiry, stockpiled respirators and masks against just such an emergency as we face today. 55 million masks, in fact, were purchased and, after 2017, destroyed or sold. ..."
Mar 30, 2020 | www.moonofalabama.org
William Gruff , Mar 29 2020 23:50 utc | 88

I see no evidence of an owngoal. I see an engineered recession depression. I see enforcement of lockdown. I see laws banning large gatherings. I see complete inability of any section of the population to physically protest without incurring the full wrath of law enforcement and many of their fellow citizens. Hardly a word of protest has been uttered regarding the transfer of massive debt liabilities onto the taxpayer

karlof1 , Mar 30 2020 0:01 utc | 91
Realist @83--

One problem with your hypothesis is that 2+ years ago, Greenspan came out and admitted to the fact of an unsustainable, massive bubble in the Bond Market. I linked to this Keiser Report that noted his admission/confession , plus there are a great many other reports and essays relating to the falsity of the economic figures and what they're attempting to conceal. Furthermore as behavior by TrumpCo, particularly Pompeo's, shows, they were ecstatic in January at China's declaration of the COVID-19 attack and initially ignored what China said it would do in response--shutdown. Indeed, it took about 6 weeks for the reality of what China said to reach the tiny brains of TrumpCo and elsewhere within the West's financial matrix. As I wrote, it didn't matter if the event was natural or premeditated; what mattered was the very unanticipated Chinese and then South Korean responses--they weren't gamed whatsoever as proven by TrumpCo's response. It's as plain as day.

Jackrabbit , Mar 30 2020 0:34 utc | 104
@Realist

Deflating the Wall Street Bubble, a 'bailout' for Boeing, and accelerating 'decoupling' provide powerful reasons for creating or gaming the Covid-19 crisis.

Please see my post: The Empire Games Covid-19

Jackrabbit , Mar 29 2020 17:52 utc | 19

I'm getting more pessimistic.

Mostly because there's still no accountability.

The Western response has been slow and ineffective. The reason for this is largely neoliberal-thinking that puts capital before people. Essentially, the response has been gamed. Yet people are still reluctant to blame authorities.

TPTB allowed the virus to spread so that China could be blamed and Boeing and Wall Street could be bailed out. But apparently that wasn't enough. 'Spring Break' celebrations in USA were allowed to continue. Was that just an innocent failure? Did they really not understand that the virus could be spread widely via such a large-scale event?

Go-along to get along is still the order of the day for elites and Stockholm Syndrome is still strong in the middle-class. Until there is outrage and accountability, the gaming will continue.

Every delay, every failure means more virus infection.. more deaths.. more economic damage - and justifies more stringent measures later.

'Herd immunity' and happy talk of vaccine development justify delays and a lax response. Most consider a virus to be 12 months or more away. Long before a virus we may see severe economic and social dislocations and possible imposition of martial law in parts of the West.

<> <> <> <> <>

There has been a huge amount of planning for a pandemic. It seems likely that that planning has also included how a pandemic can be gamed to benefit TPTB. We are seeing plenty of CYA propaganda that excuses government failures and attempt to minimize the virus threat. But IMO they know that they're doing.

!!

Jackrabbit , Mar 29 2020 18:05 utc | 20
@19 Additional info

Bolded part most relevant to Spring Break (and Mardi-Gras before that).

Trump team failed to follow NSC's pandemic playbook

. . .

"The U.S. government will use all powers at its disposal to prevent, slow or mitigate the spread of an emerging infectious disease threat," according to the playbook's built-in "assumptions" about fighting future threats. "The American public will look to the U.S. government for action when multi-state or other significant events occur."

. . .

Trump has claimed that his administration could not have foreseen the coronavirus pandemic, which has spread to all 50 states and more than 180 nations, sickening more than 460,000 people around the world. "Nobody ever expected a thing like this," Trump said in a Fox News interview on Tuesday.

. . .

In a subsequent section, the playbook details steps to take if there's evidence that the virus is spreading among humans, which the World Health Organization concluded by Jan. 22, or the U.S. government declared a public health emergency, which HHS Secretary Alex Azar did on Jan. 31.

Under that timeline, the federal government by late January should have been taking a lead role in "coordination of workforce protection activities including [personal protective equipment] determination, procurement and deployment." Those efforts are only now getting underway, health workers and doctors say.


!!
bevin , Mar 29 2020 21:05 utc | 59

"There has been a huge amount of planning for a pandemic.." Jackrabbit@19

There has been a lot of planning for a pandemic. That there would be one was never in doubt. It was regarded as being inevitable.

The problem is that the measures that needed to be taken directly contradicted the capitalist insistence on immediate profits: building reserve capacity into the health system (or rather refraining from the temptation to slim down the system to the very minimum needed capacity) was just something that capitalist regimes, desperate to cut taxes and otherwise distribute public funds to the wealthy, could not bring themselves to do.

A case in point-to which I gave a link to in the paywalled Toronto Star on an earlier thread -- was the revelation that, after the Sars outbreak the Province of Ontario, following the advice of a Judicial enquiry, stockpiled respirators and masks against just such an emergency as we face today. 55 million masks, in fact, were purchased and, after 2017, destroyed or sold.

"..It seems likely that that planning has also included how a pandemic can be gamed to benefit TPTB. We are seeing plenty of CYA propaganda that excuses government failures and attempt to minimize the virus threat. But IMO they know that they're doing."

If by 'planning' you are referring to brainstorming by businesses, individuals and political interest groups you are right. But it doesn't mean much: it is of the nature of this society that there is a never ending fountain of ideas on how to make money out of disasters of every kind. In that respect the virus is simply another Bear market.

Those who infer, from the fact that capitalists and political opportunists never miss an opportunity to turn a profit, that the pandemic was deliberately shaped in order to impose an authoritarian order beg the question as to why the ruling class would want to do so.

Looking back on the 1930s it would be interesting to see how many people put forward the theory that the Wall St Crash was deliberately engineered in order to: (fill in this space according to taste.)

That is how many people apart from the Nazis who "knew" that the Jews were behind it and used it for their own nefarious purposes.

(For those with limited understanding of the language by "knew" I mean 'insisted without evidence'.

Only complete idiots believe that The Crash was deliberately brought about. Just as today only fascists and idiots believe that the pandemic was planned and implemented in order to advance the agendas of TPTB.

Realist , Mar 29 2020 22:06 utc | 67
Only complete idiots believe that The Crash was deliberately brought about. Just as today only fascists and idiots believe that the pandemic was planned and implemented in order to advance the agendas of TPTB.

Posted by: bevin | Mar 29 2020 21:05 utc | 59

Keep in mind, as you read the words of this idiot, that he spent months (if not years) polluting the comment threads on this very website, screaming words and phrases like "racist" and "useless conspiracist" at anyone correctly claiming that ISIS was a US/Anglo-Zio proxy.

The man is an idiot, his ability to correctly analyse events in realtime is completely non-existant

Realist , Mar 29 2020 22:58 utc | 75
Just as today only fascists and idiots believe that the pandemic was planned and implemented in order to advance the agendas of TPTB.

Posted by: bevin | Mar 29 2020 21:05 utc | 59

±+++++++++++++++++++

Well, the Chinese leadership seems to think so. As does Pepe Escobar. Were they the Fascist idiots you had in mind?


https://consortiumnews.com/2020/03/18/china-locked-in-hybrid-war-with-us/ (including links at source)

Adding all that to the fact that coronavirus genome variations in Iran and Italy were sequenced and it was revealed they do not belong to the variety that infected Wuhan, Chinese media are now openly asking questions and drawing a connection with the shutting down in August last year of the "unsafe" military bioweapon lab at Fort Detrick, the Military Games, and the Wuhan epidemic. Some of these questions had been asked -- with no response -- inside the U.S. itself.

Extra questions linger about the opaque Event 201 in New York on October 18, 2019: a rehearsal for a worldwide pandemic caused by a deadly virus -- which happened to be coronavirus. This magnificent coincidence happened one month before the outbreak in Wuhan.

Event 201 was sponsored by Bill & Melinda Gates Foundation, the World Economic Forum (WEF), the CIA, Bloomberg, John Hopkins Foundation and the UN. The World Military Games opened in Wuhan on the exact same day.

Irrespective of its origin, which is still not conclusively established, as much as Trump tweets about the "Chinese virus," COVID-19 already poses immensely serious questions about biopolitics (where's Foucault when we need him?) and bio-terror.

The working hypothesis of coronavirus as a very powerful but not Armageddon-provoking bio-weapon unveils it as a perfect vehicle for widespread social control -- on a global scale.

William Gruff , Mar 29 2020 23:10 utc | 76
Realist @75

I cannot speak for bevin, but I think that claiming that the pandemic -not necessarily the original outbreak in China but the spreading of the virus to the US and northern Europe- is part of the empire's plan does not make sense. Perhaps that is what bevin is saying.

Abe , Mar 29 2020 23:46 utc | 87
I don't know if virus is bioengineered (by US), time will tell. What I do believe that there is very strong evidence virus originated in US in fall last year and they decided to throw it at China using those military games to ruin it.

But US's glorious plan completely backfired, oh the horror, who could foresee that.

Except that literally every US plan, proxy, tool etc. in recent history backfired.

William Gruff , Mar 29 2020 23:50 utc | 88
"What they needed was some method of absolving themselves of all blame." --Realist @83

Could be, but if so it is still a massively incompetent own-goal. "They" may be dodging personal blame, but "they" are shifting that blame to the very economic paradigm that "they" depend upon for their power in society.

I don't think that will work out quite the way "they" hope, if indeed this is all their plan.

Realist , Mar 29 2020 23:53 utc | 89
But US's glorious plan completely backfired, oh the horror, who could foresee that.
Posted by: Abe | Mar 29 2020 23:46 utc | 87


What's your proof it backfired?

If the target was not limited, not local but global, then how has it "backfired"

A virus with a 4 to 14 day incubation period before infection became detectable, during which the host would spread it liberally, was hardly, if engineered, intended to be confined locally

Realist , Mar 30 2020 0:00 utc | 90
Could be, but if so it is still a massively incompetent own-goal. "They" may be dodging personal blame, but "they" are shifting that blame to the very economic paradigm that "they" depend upon for their power in society.

I don't think that will work out quite the way "they" hope, if indeed this is all their plan.

[Apr 20, 2020] Hmm, things don't look good. Must be time for another tax cut. Always looking for new ideas, aren't they?

Notable quotes:
"... Bear in mind yet again that the TOTAL death count from two months of this virus in US still hasn't reached ONE DAY of deaths from ordinary flu. In fact the public health folks have been doing most things right in most places. The outbreak started in Seattle, which has been in rebellion against normal public health measures (border controls, vaccines) for a long time. ..."
Mar 17, 2020 | www.theamericanconservative.com

polistra24 10 hours ago

Bear in mind yet again that the TOTAL death count from two months of this virus in US still hasn't reached ONE DAY of deaths from ordinary flu. In fact the public health folks have been doing most things right in most places. The outbreak started in Seattle, which has been in rebellion against normal public health measures (border controls, vaccines) for a long time.

>

Tom Sadlowski IanDakar 2 hours ago • edited
Last year, the CDC reports 45 million cases of Influenza in America (14% of population), with 21 million hospital visits, 810,000 hospitalizations, and 61,000 deaths. If America reaches 10,000 deaths with this virus, given the constant media exposure and policy driven towards fear; the entire nation will go into dischord. Go outside, breath fresh air, smile, soak up the sunlight, laugh, and exercise.
marku52 FND 44 minutes ago
Hmm, things don't look good. Must be time for another tax cut. Always looking for new ideas, aren't they?

[Apr 20, 2020] To me the coronavirus numbers increasingly DON'T justify the economically suicidal lock downs

Notable quotes:
"... its all looking more and more like disaster capitalism in its purest, blood-stained form, a massive smash and grab raid on ordinary people... ..."
Mar 30, 2020 | www.moonofalabama.org

Richard , Mar 29 2020 20:32 utc | 52

To me the coronavirus numbers increasingly DON'T justify the economically suicidal lock downs - its all looking more and more like disaster capitalism in its purest, blood-stained form, a massive smash and grab raid on ordinary people...

https://richardhennerley.com/2020/03/29/the-new-crown-virus-a-coronavirus-parable/

[Apr 20, 2020] S P500 could plunge to 2000 in worst case scenario, accodring to Goldman Sachs

Notable quotes:
"... Kostin forecasts 2020 S&P 500 earnings will decline by 5 percent to $157 due to "supply-chain disruption, weak US and global consumption, and lower oil prices and interest rates." He thinks earnings will collapse in the second and third quarters before rebounding in the fourth quarter and for the full year. ..."
Mar 16, 2020 | finance.yahoo.com

The COVID-19 outbreak has disrupted supply chains, eroded demand, curbed travel and prompted employee furloughs, all resulting in a hit to corporate earnings.

Kostin forecasts 2020 S&P 500 earnings will decline by 5 percent to $157 due to "supply-chain disruption, weak US and global consumption, and lower oil prices and interest rates." He thinks earnings will collapse in the second and third quarters before rebounding in the fourth quarter and for the full year.

His preferred valuation approach is to compare the S&P 500's earnings yield with the yield on the 10-year note. Assuming an earnings yield of 7.2 percent and a 10-year yield of 0.5 percent, equating to a yield gap of 665 basis points, Kostin's base case is for the S&P 500 to bottom at 2,450.

However, in the event that the gap widens to 770 basis points, as it did during the global financial crisis, the S&P 500 would fall to about 2,000, he said.

[Apr 20, 2020] Stockman: The Crony Capitalist Thieves Are Back

Notable quotes:
"... The US airline industry has spent a decade shoving itself into harm's way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options. ..."
"... For crying out loud – the reckless irresponsibility of it is mind-boggling. That's because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings. ..."
"... Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. ..."
"... If the Big Four Airlines can't raise enough cash in the high cost long term debt markets or by issuing highly dilutive preferred stock or equity, there is only one solution – and that is chapter 11. Holy moly, that's why we have this legal protection procedure. ..."
"... Of course, the airlines are only the poster boy for this long overdue moment of truth. The problem is universal ..."
Mar 22, 2020 | www.zerohedge.com

Stockman: The Crony Capitalist Thieves Are Back by Tyler Durden Sun, 03/22/2020 - 14:02 Authored by David Stockman via Contra Corner blog,

The nerve of it is a wonder to behold. The US airline industry has spent a decade shoving itself into harm's way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options.

For crying out loud – the reckless irresponsibility of it is mind-boggling. That's because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings.

Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. As Wolf Richter properly pointed out:

"These stocks are now getting crushed because they may run out of cash in a few months, yet they would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer ."

We say nothing doing!

If the Big Four Airlines can't raise enough cash in the high cost long term debt markets or by issuing highly dilutive preferred stock or equity, there is only one solution – and that is chapter 11. Holy moly, that's why we have this legal protection procedure.

The airlines will have precious little business for the duration of the great COVID spring break anyway. So let the court-appointed trustees operate with the same skeleton crews that the airlines will be running even if they get the bailout. The level of customer service and employment will be essentially the same in either case.

More importantly, let the gamblers and so-called investors who piled into these stocks get their just deserts. That is, a 100% loss on their gambling stakes because that's all it ever was when the Big Four's combined market cap hit $130 billion compared to just $43 billion now.

Even more importantly, let these bankrupt shareholders file class action suits against the idiots and clowns in the C-suites and on the boards of directors who made such foolish decisions in the first place. Hopefully, these cats would be legally stalked and harassed to the ends of the earth as an object lesson in the personal cost of imperiling corporate balance sheets to feather their own stock options nest.

Of course, the airlines are only the poster boy for this long overdue moment of truth. The problem is universal because today's rotten regime of Keynesian central banking has caused the entire financial system and main street economy to become riddled with rank speculation and reckless disregard for financial discipline and prudence.

And the crime starts right in the Eccles Building where over the last several decades an inbred posse of PhDs and Washington apparatchiks have taken it upon themselves to destroy honest price discovery in the money and capital markets in the name of levitating financial asset prices and thereby fostering more growth, jobs, incomes and spending than the main street economy would allegedly produce on its own.

Self-evidently, main street didn't need no stinkin' help from a wanna be 12-member monetary politburo. They have created serial bubbles that have gotten more inflated with each cycle, leaving the main street economy exposed to increasingly brutal episodes of correction when the proverbial Black Swan, or Black Bat, as the case may be, makes its grim appearance.

Still, the very idea that agents of the state could have enough information and wisdom to best the work of millions of traders, investors, speculators and dealers was ridiculous from the start; and the further idea that financial assets prices falsified by the FOMC to the second decimal point could cause main street to produce more output, jobs, efficiency and real living standard gains than would be the case under market determined financial asset prices was even more ludicrous.

Self-evidently, the only thing Keynesian central bankers have accomplished has been to fuel egregious speculations in the canyons of Wall Street; drain main street businesses of real productive investment; and leave businesses and households living hand-to-mouth and therefore vulnerable to even short-run interruptions of cash flow.

So we will say it again: Hand-to-mouth economics is not the natural modality on the free market; it is a malignant product of bad money and the debt-fueled speculative manias that are the consequence of Keynesian central banking.

Left to their own devices on the free market, households save and provide for rainy days, regardless of income level or social status.

Likewise, in a world not poisoned by cheap debt and falsified costs of capital, businesses nurture their balance sheets and provide for cash flow interruptions either by buying insurance or setting aside liquid reserves and equity capital based shock absorbers.

That's the real message of this – the second great financial heart attack of the last decade. But rather than allowing the rot to be purged, the central bankers are now out pouring kerosene on the fires.

That is, insisting upon even greater central bank intrusion in the financial markets and even more egregious falsification of the prices of money, debt and every manner of risk assets. In effect, they are advocating the complete euthanasia of market prices in the financial system in favor of their own administered price folly.

At some point the very chutzpah of it gets downright maddening. We are referring to this morning's missive in the FT from the Boobsie Twins, Ben Bernanke, and Janet Yellen, who were major architects of the disaster now underway.

Yet they now want the Fed to have expanded powers to buy corporate debt and who knows what else:

The Fed could ask Congress for the authority to buy limited amounts of investment-grade corporate debt . Most central banks already have this power, and the European Central Bank and the Bank of England regularly use it. The Fed's intervention could help restart that part of the corporate debt market, which is under significant stress. Such a programme would have to be carefully calibrated to minimise the credit risk taken by the Fed while still providing needed liquidity to an essential market.

The bolded part is a risible lie. There is absolutely nothing wrong with the corporate debt market that even a modicum of honest interest rates could not handle.

That's evident from the price chart of the largest corporate bond ETF shown below. It is trading no lower than in previous risk-off periods including November-December 2018, January 2016, late 2013 and during the US debt ceiling crisis of August 2011.

Yes, it has plunged from the absurd levels reached during the stock markets blow-off top a few weeks ago.

But so what? At the February extreme, the implied yield on corporate debt was hardly 2.6% , and even after the price plunge of recent days the implied yield is just 3.7% .

So what in the world are the Boobsie Twins talking about? Do they really think we are stupid enough to believe that a 3.7% investment grade yield is an end of the world crisis that requires the Fed to put its Big Fat Thumb on this sector of the rates market, too, after it has already reduced sovereign debt to yield-free status?

Indeed, when you look at the real corporate debt yield after inflation it is downright minuscule at 1.35% . So these Keynesian morons want the Fed to buy massive amounts of investment grade corporate debt with fiat credits snatched from thin air because they think, apparently, that the US economy will collapse at a real yield to just 1.35% after the current running level of inflation.

So what we have here is a far more insidious reality. Namely, the reaction function of Keynesian central bankers past and present has degenerated into an Atlas Syndrome.

These cats think they have the entire $85 trillion world economy on their shoulders and that any time there is an abrupt re-pricing of the hideous financial bubbles they have inflated, they propose to throw financial sanity to the winds lest the whole financial system and economy splatter against the wall.

It won't, of course, because re-pricing of financial assets back to quasi-sane levels is actually what is desperately needed to stop the violent boom and bust cycles that have been gaining momentum under their tutelage for three decades now.

Stated differently, if Keynesian central banks fear a 3.7% investment grade bond yield, what they actually fear is the price mechanism itself.

That's the heart of the matter: All of the emergency facilities and new legislative authority proposals emanating from the central bankers and their Wall Street acolytes and shills are designed to eviscerate and override the price mechanism in the financial markets.

The very absurdity and danger of that idea, however, is dramatized in spades by the juxtaposition of what happened yesterday. Presumably, the Boobsie Twins were emailing their draft FT op ed back and forth during market daylight hours.

Alas, the corporate bond market was so badly "broken" as they penned up their SOS proposal that, well, the largest amount of corporate debt deals of the year was brought to market!

That's right. About $28 billion of new deals were priced yesterday, of which $10 billion were was 20+ years.

Duh. If that's "broken", we truly do not understand what financial planet these Keynesian central bankers actually inhabit.

On the other hand, we know full well where drastic and sustained repression of bond yields have already led.

To wit, to a massive scramble for yield among money managers, which in turn has fueled the outbreak of epic-scale financial engineering in the C-suites. That's because they could sell ultra-cheap debt for any cockamamie purpose that pleased Wall Street, including idiotic empire-building through M&A and the depletion of corporate cash reserves and debt capacity in order to fund massive stock buybacks and other balance sheet impairments.

Indeed, from the point of view of the central banker Atlas Syndrome, financial price repression is the gift that keeps on giving. Having dissipated their balance sheet liquidity on financial engineering, corporations now allegedly are facing a liquidity squeeze owing to the COVID-19 supply-side shocks.

So without missing a beat, the Fed was out with a resurrection of the emergency commercial paper funding facility that was used during the 2008 crisis to rescue con men like General Electric's Jeff Immelt, who had loaded his $600 billion balance sheet with upwards of $200 million of cheap commercial paper.

As explained below, that particular facility ended up so malodorous even in the eyes of the fools who populate Capitol Hill that they forbade the Fed from using it in the future without the permission of the Secretary of the Treasury.

Little did they anticipate, of course, that during the next financial meltdown the office would be occupied by the greatest flunky to ever hold the post, and that his real job as the Donald's campaign finance chairman would be to tap the public till for whatever it would take to insure his re-election.

So now that Secy Mnuchin has green-flagged this abomination, just recall briefly what happened last time around.

Back then the alleged titan of corporate America didn't cotton to the idea of paying 5% or 7% or even 10% to rollover his short-term funding, least the hit to earnings would have monkey-hammered his 2008 bonus and the value of his massive stock options.

So Immelt went running to his Goldman Sachs benefactor, Hank Paulson, who soon persuaded Bernanke to open up a window at the Fed under its emergency section 13-3 authority.

That action guaranteed virtually unlimited commercial paper funding at the Fed window's ultra-cheap rates so as not to disturb the year end bonuses of Immelt or hundreds of other CEOs who had put their companies in harm's way be over-reliance on cheap short-term funding.

As it happened, the commercial paper bailout didn't help GE anyway, as perhaps indicated by the shrinkage of its market cap from $500 billion at the peak to $55 billion a present.

But more importantly, there was absolutely no shortage of cash available to GE when Immelt pulled his crony capitalist raid 12 years ago. What it needed to do was fill the approximate $30 billion hole in its balance sheet by raising long-term debt, preferred stock or even common stock.

Yet, the mere statement of the obvious underscores the entire scam behind the Fed's intrusions into the money and capital markets with these so-called emergency facilities. To wit, they have nothing to do with insuring the companies have the cash to meet their payrolls or pay other bills as is so mendaciously claimed by Wall Street and the Eccles Building.

No, it's about keeping the cost of capital ultra low and minimizing the hit to earnings that might result from tapping higher cost capital markets, which are still wide-open at a higher yield per yesterday's massive pricing of new corporate debt issues.

In more unvarnished terms, the only real function of this massive new commercial paper facility, which the Fed has stood up practically overnight, is protection of corporate earnings, CEO bonuses and stock options and the remaining winnings of Wall Street gamblers.

The chart below highlights the massive lie behind this new facility. The ostensible reason was that commercial paper yields spiked in the last few days from practically nothing to hardly much more.

In the case of AA rated three-month nonfinancial commercial paper, the yield rose from 0.86% on March 10 to 1.80% Friday afternoon.

But so f*cking what!

Back on February 27 when the stock market was just off its all-time highs, and when Powell was claiming the US economy was in a "good place "and the Donald was ballyhooing the Greatest Economy Ever the yield on this prime 90 day paper was actually higher at 1.56% !