The federal reserve recently announced a
$1.5 trillion dollar coronavirus “stimulus” package, $500 billion of which will
go to incentivize banks to keep lending.
Another maneuver, cutting Federal
Reserve interest rates from
an already low amount to effectively 0%, means big banks will be handed the
equivalent of interest-free cash under the assumption that they will keep
America’s heavily in-debted corporations afloat.
But where is the evidence that bank
bailouts do that? It took a decade for the 2008 bank bailouts to finally “work”
– as in put sufficient numbers of people back to work. A more pressing question
is why do ordinary people need to pay interest fixed at whatever rate middleman
shareholders at private financiers want in order to produce/consume?
Last
November, analysts found that US corporations are highly leveraged with $10 trillion dollars in
debt. The dirty secret of liberal capitalism is that economic expansion (jobs,
not just stock market numbers) is highly dependent on the privately owned
apparatus of the federal reserve and the state to invent credit bubbles for
private interests to have incentives to risk capital in a productive endeavor.
If consumer activity falls, these corporations will be unable to pay owed
interest to their creditors, since all of the above are expected to put
shareholders above maintaining employment. Banks like stimulus beneficiary
Goldman Sachs will increase the usury rate on credit loans if the market
switches into bear mode, which is bad news for all the heavily indebted
companies it loans to.
Already,
multiple major companies like AT&T, GM and CVS are barely above junk bond
rating These companies are as guilty and irresponsible as
the banks, since they have used the cheap credit largely to engage in behavior
like useless mergers, which provide quick profits to shareholders but not much else.
The outcome of having their bonds down rated any further will be exposure to
the highly speculative vultures in the junk bond market, which in the end will
cause a spike in the unemployment rate.
Credit is already dirt cheap.
The problem is that both the banks and the multi-nationals are highly corrupt,
inefficient and are run by people who do not have America’s interest in mind.
The oligarch’s strategy to keep Wall Street afloat does not take into account
globalized supply chain issues either. If the coronavirus epidemic spreads and
grinds international commerce to a halt, how will handing banks more cheap
money solve this?
The US government’s lack of direct
control over the nation’s central bank and the plutocratic nature of our weak
state means that common sense solutions are off the table. Why doesn’t the
state buy up majority shares in large corporations (or outright nationalize
them, as happened with the short successful experiment with General Motors in
2009) and use the $1.5 trillion at low interest to develop American industrial
independence?
The best
thing Trump and Congress have to offer when it comes to relieving the pandemic
burden on average citizens is a “tax-cut” that suspends Medicare and Social
Security payments by employers and workers for a year. It will cost $1 trillion dollars.
Previous suggestions, like offering federally funded paid sick leave,
were shot down by the Republicans in Congress. The current plan does nothing to
serve people who will be hit hardest either financially or health-wise: those
that get laid off, the unemployed, students, people with jobs that don’t
provide sick leave and the elderly – who have a coronavirus mortality rate
of 22%. For the
self-employed who get sick or have no business coming in, they won’t have taxes
to pay because they will be going bankrupt. If the government is willing to get
in that much debt for another “tax-cut,” why not just hand every American
citizen money and small/medium scale business’ money to tide everyone over?
The Chinese government’s
pandemic recovery plan demonstrates why they have gone from a developing nation
to economic peer of America in such a short period of time. Their
command economy is unstoppable and makes the pencil necked Jew economists that
invented neoliberalism look like fools. The People’s Bank of China, which is
run by the state, is giving underlings $79 billion in stimulus money at a
higher interest rate than the fed, but on the condition that they loan it to small and medium
enterprises and forgive their late payments so that
economic damage is reversed and production can recover quickly. Federal reserve stimulus money, in
contrast, has no strings attached, and in 2009 banks used their money to
compensate CEOs and shareholders who
helped create the economic crisis while they retrenched on loaning to firms
struggling to get by. There are numerous problems on all sides in this
equation, but the fed could at least try and fight abuses by recipient banks
who burn through their capital by paying shareholders more than they earnings
justify through a countercycle capital buffer. It won’t.
Next week, the Chinese state will be
unveiling a thorough relief plan that will likely include sending
households no strings attached money and a boost in subsidies to save small
businesses, which will reboot consumption and production.
This
strategy, along with a massive infrastructure program, was deployed during
their 2008 global financial crisis, which China recovered from much more
quickly than liberal capitalist nations. China’s swift recovery restored their
extremely high growth rates and helped raise other nations around the world from
sinking even deeper into economic malaise.
Neoliberal
economists criticized the 2008 Chinese state’s effort by claiming the program
would incur debt. This is true, China’s debt to GDP ratio is currently 47%, but
the US is in a much worse situation, where debt is over 100% of our GDP. In
America, where 10% of the population owns
80% of all stocks, the growth spurred by money injections
benefits fewer people .
In a country where 25% of the population is
afraid to see a doctor due to the cost and the government is unwilling to
implement a total travel and immigration ban, it’s clear that our system is a
house of cards waiting to get coughed on. Wall Street and Goldman Sachs are the
disease, not the cure.
(Republished
from National Justice by
permission of author or representative)
