Page 4 of 6

Re: Economic Crash of 2020: The Fuckening

PostPosted: Thu Mar 26, 2020 10:26 pm
by Wombaticus Rex
Larry Fink, Master of the Universe, once again. Gillian Tett's latest:

This month, Wall Street watchers might feel as if they are living in Groundhog Day. Now, as in 2008, markets are melting down. Once again, the US Federal Reserve is frantically innovating to stop a financial freeze. And, as these wild policy experiments unfold, a familiar figure is also back in the frame: Larry Fink, chief executive of BlackRock, the $7tn asset management behemoth.

Twelve not-so-long years ago, the Fed turned to BlackRock to manage the three Maiden Lane vehicles that it created to hold assets from the defunct insurer AIG and also Bear Stearns. On Tuesday, it again tapped BlackRock’s Financial Markets Advisory, its consultancy arm, again to run three vehicles the Fed will create to buy corporate debt from the primary and secondary markets, and also commercial mortgage-backed securities.

Is this replay a smart move by the Fed? The answer depends on if you have a wartime or peacetime perspective. In calm market times, as existed a month ago (remember that?), Tuesday’s announcement would look very odd.

Never mind that the Fed has used BlackRock before, or that Mr Fink is fabulously well-connected. What is more notable is that BlackRock received this mandate without a contest. Moreover, his asset management firm has such a humungous footprint that it will inevitably collide with those Fed vehicles.

Take the $140bn world of investment grade US corporate bond exchange traded funds. On Monday the Fed pledged to invest in some ETFs to support corporate funding flows. However, as it happens a BlackRock-run ETF, called LQD, is the biggest of this type. The price of LQD, like other ETFs, has already rallied since the announcement. If the Fed does a broad ETF programme, LQD will probably be part of that mix.

This leaves some BlackRock rivals muttering about conflicts of interest — and non-American regulators caustically pointing out that since 2008 Mr Fink has been adept in persuading US regulators to refrain from sweeping regulatory reforms on asset managers, such as his.

Fair enough. But the problem the Fed faces is that it does not have the luxury of operating in peacetime; it is fighting a war to stop a financial freeze. Thankfully, the White House is letting Fed officials experiment as flexibly as they did in 2008, contrary to earlier fears among policy veterans such as Hank Paulson, the former US Treasury secretary, that the Fed’s hands would be tied.

However, even with this freedom, Fed officials face a practical problem: they do not have all the resources they need in terms of manpower and skills.

Consider, again, corporate debt. The Fed says it will only buy investment grade credit, to limit possible losses. But, as Scott Minerd of Guggenheim points out, “There are approximately $1tn worth of investment-grade corporate bonds that are in danger of being downgraded”. Indeed, $36bn of Ford debt has already become junk.

Fed officials hope they can offset these risks by using a $30bn Treasury fund to absorb future losses. But it is also imperative to have external managers, given that the Fed has never exposed itself to such credit risk. And while numerous financial groups have asset management or consultancy skills, none has the combination on BlackRock’s scale.

For the key thing to understand about the canny Mr Fink is that he has not only spent the past decade building a highly visible asset management company, he has also quietly used the Maiden Lane experience to make FMA dominant in its consultancy space. It has 280 staff, and has quietly worked for numerous public institutions, including the UK Treasury and European Central Bank.

As a result BlackRock has extensive “expertise with purchasing large amounts of all relevant types of corporate debt issuance and corporate bonds in the secondary market”, as the New York Fed notes. In plain English, BlackRock’s experience and data base make it a natural Fed partner — if it can manage those potential conflicts of interest.

Can it? Both sides insist so. BlackRock officials stress that its asset manager and consultancy units are separated by strict Chinese walls. Fed officials point out that BlackRock’s mandate is only a short-term contract, and thus will be reviewed soon. Most important, the $2tn stimulus bill in Congress stipulates that details of Fed’s actions must be published after a seven-day lag.

If honoured, this should provide transparency about trades and BlackRock’s fees, in a welcome contrast to what happened in 2008. “We’ve learnt from the past,” insists one Fed official. “We won’t repeat the mistakes.”

Maybe so. But 2008 also shows that decisions that seem sensible in the heat of war can spark furious political backlash later. If Fed officials, and Mr Fink, want to minimise these risks, it will be crucial to maintain transparency and conduct proper beauty parades when normality returns. If, or when, we return to that point, US regulators will then need to ask another question: why did they let the asset management world become so concentrated that the ever-present Mr Fink reigns supreme?

And from the Alphaville end of the pool:

There are only a handful of global experts on how eurodollar markets, dollar swaps, shadow banks and money market funds interact with central banks. International monetary and economic expert Robert McCauley, a senior research associate at the Global History of Capitalism project, is one of them. He’s sent us a useful account of the extraordinary moves central banks like the Federal Reserve are now taking to stabilise securities markets and how exceptional they are in relation to recent precedents.

A key observation is that while the Fed hasn’t yet exhausted its options in this arena, some of the moves it is now experimenting with are on the verge of opening a new chapter in central bank support for securities markets.

McCauley cautions, however, that the objective shouldn’t just be security price support. This especially applies to the corporate bond market, where a sudden dearth of dedicated market makers for bond ETFs (known as authorised participants) is creating an urgent need for the central bank to step in as authorised participant of last resort in a bid to maintain market liquidity.

McCauley’s notes follow below.

How can a central bank stabilise security markets?

Central banks’ motivation to intervene in security markets is clear: in the face of runs on securities markets, the real economy faces threats of disruption of credit flows, unnecessary defaults and fire sales.

Fifty years ago, the Fed could respond to the default of a large issuer of commercial paper (CP) by opening the discount window to banks. Easy access to Fed credit allowed banks to fund industrial firms that were unable to roll over maturing CP. Today we see firms drawing down on the system of formal credit lines that was introduced as a backstop for the CP market following the Penn Central railroad crisis of 1970. Last week the Fed opened the discount window as wide as possible, just as it did back then.

At the time of the Penn Central crisis, however, it was possible for the big weekly reporting banks to expand their corporate loans by 3 per cent in order to offset a 10 per cent decline in nonbank CP. A bank lender of last resort could in practice therefore backstop a substantial securities market in one move.

Today, the US corporate bond market — much of it rated just a notch higher than junk — amounts to $7tn, according to the Bloomberg Barclays US corporate bond index. Its sheer size means last-resort lending to banks is likely to struggle to stop runs on security markets.

Going beyond the banking system with its last resort credit is therefore essential for central banks like the Fed.

But what options do central banks really have when it comes to stabilising securities markets?

In reality, there are only five: 1) Acting as a lender of last resort to securities firms, 2) acting as a lender of last resort to investment funds, 3) acting as a securities dealer of last resort, 4) acting as a securities underwriter of last resort and finally 5) acting as a securities buyer of last resort.

By Monday 23 March, the Fed had put in place programmes under three of those five options. It has been backing into another and it is not hard to imagine it will soon experiment with the last one.

Acting as a “lender of last resort to securities firms”

The Fed returned to its 2008 playbook last week by reprising its role as last resort lender to securities firms. The Primary Dealer Credit Facility funnels collateralised Fed credit for up to 90 days to its designated primary dealers. Collateral can include equities, which is otherwise a no-go for the bank discount window.

Acting as a “lender of last resort to investment funds”

While the holding companies of Bank of New York and Goldman Sachs recently came to the rescue of their money market funds, the Fed has not yet lent to investment funds. In the US, central bank action of this sort would require the use of emergency Section 13.3 powers with Treasury approval.

Nonetheless a recent precedent for official support of investment funds is the Treasury’s Exchange Stabilisation Fund (ESF) guarantee of the par value of money market fund liabilities after the Lehman default in September 2008.

This, in combination with the Fed’s, in effect, purchasing and underwriting of CP, successfully stopped the run on money market funds. The only other precedent was the Bank of Japan’s funding of investment trusts in the mid-1960s during the Yamaichi crisis.

Acting as a “securities dealer of last resort”

Whatever its intentions, at its March 18 balance sheet snapshot, the Fed looked very much like a securities dealer of last resort. The central bank has stepped in to intermediate on both sides of the repo market to the extent of $234bn — this is known in the industry as running a matched book. On one side are foreign central banks and money market funds as cash lenders; on the other are securities dealers as cash borrowers. It’s important to stress this balance arose as the Fed lent cash to stop market forces from lifting short-term rates rather than from an intention to keep the repo market going per se.

The Systemic Risk Council, an advisory body made up of former government officials and financial experts, is now urging central banks to take on this role more broadly.

Acting as a “securities underwriter of last resort”

The Federal Reserve reprised the role it played as underwriter of last resort for CP back in 2008-09 with its offer last week to buy CP directly from firms. For a small underwriting fee of 10 basis points, the Fed will now buy CP if the prime issuer cannot sell it in the market at less than 2 per cent over overnight rates. This time the Exchange Stabilization Fund (ESF) is providing a layer of Treasury equity to shield the Fed from losses. The last time the Fed made this offer it walked away with a profit.

On March 23, the Fed extended its role as underwriter of last resort further out the yield curve when it moved to support the issuance of investment grade corporate bonds or loans of up to four year’s maturity. Again, the ESF takes equity risk. But this intervention in the primary corporate bond market, along with the secondary market operation below, opens a new chapter in central bank support for securities markets.

Acting as a “securities buyer of last resort”

The precedent for acting as a securities buyer of last resort occurred in 2008-09 when the Federal Reserve Bank of Boston made non-recourse loans to custodians to finance the purchase of asset-backed CP from mutual funds.

On March 18, the Fed announced a similar but broader programme under which the Boston Fed would make non-recourse loans to any bank secured by CP bought from money market mutual funds.

On March 20, the Fed added municipal paper to the programme.

On March 23, the Fed announced that it would buy US investment grade corporate bonds or exchange traded funds in the secondary market. Again, the ESF would be providing a slice of equity risk.

All these actions in security markets are significant.

But it’s important to stress that the hundreds of billions of dollars of programmes announced so far may not be enough to backstop the dollar-denominated corporate bond market outright. Not only are there $7 trillion in US corporate bonds, the Bank for International Settlements (BIS) counts dollar bonds outstanding of non-US residents other than banks as having grown from $2.5 trillion at end-2008 to $6.2 trillion in September 2019. Beyond US Treasuries and agencies, the global dollar bond market amounts to tens of trillions of dollars.

And while Fed purchases of corporate bonds can prevent market seizures in the short-term by providing a bid for bonds in the face of mutual fund redemptions, over time they do little to add liquidity to the market overall. Corporate bonds purchased in the secondary market, in essence, end up parked in a Fed special purpose vehicle.

To revive liquidity the Fed could eventually repurpose the programme into a secondary market liquidity scheme. One option, in this regard, is for the Fed to buy and sell corporate bonds in the secondary market in order to narrow spreads and to encourage more private market-making. The Fed could even use such buying and selling to arbitrage the prices of highly traded exchange traded funds and the prices of the poorly traded underlying bonds, where wide gaps have apparently opened. This would see the Fed become the ETF market’s authorised participant of last resort, in so doing backstopping the liquidity of securities, not just their price.

Whether the Fed moves in that direction, of course, remains to be seen. What we can be sure of is that more measures to stabilise securities markets are coming.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Fri Mar 27, 2020 4:05 pm
by Iamwhomiam
There's talk about that 2 tn being 6 tn in reality, while other are say it's realistically more like 10 tn!!

“Total System Failure”: Congress Pushes $2 Trillion Pandemic Bill. Will Dems Allow “Corporate Coup”?

We continue our look at the massive $2 trillion coronavirus relief package — the largest stimulus bill in U.S. history — with author Matt Stoller, who argues the country will be unrecognizable after this pandemic if big corporations walk away with trillions of dollars and no strings attached. Stoller is research director at the American Economic Liberties Project and author of the book “Goliath: The 100-Year War Between Monopoly Power and Democracy.” His recent column for The Guardian is headlined “The coronavirus relief bill could turn into a corporate coup if we aren’t careful.”


Re: Economic Crash of 2020: The Fuckening

PostPosted: Fri Mar 27, 2020 4:25 pm
by JackRiddler
The last two options are quite the twist.

I like how they equate central bank buying municipal bonds with corporate bonds.

On March 23, the Fed announced that it would buy US investment grade corporate bonds or exchange traded funds in the secondary market. Again, the ESF would be providing a slice of equity risk.

Why pretend any more? Why not just proceed to buying shares? Go all the way. Fed as day trader.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Tue Mar 31, 2020 1:23 am
by stickdog99

Re: Economic Crash of 2020: The Fuckening

PostPosted: Thu Apr 09, 2020 6:23 pm
by identity
#Corona: The Collapse of the System (Ernst Wolff) (in German, with English s/t)

Re: Economic Crash of 2020: The Fuckening

PostPosted: Thu Apr 09, 2020 6:31 pm
by thrulookingglass
It's not new. It's not liberal. Complete obfuscation/misdirection. Fascist capitalist nationalistic coporataucracy.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon Apr 13, 2020 12:15 am
by identity
Anyone heard of other mayors or elected officials publicly stating in recent days or weeks that their city/province/state/country is at risk of bankruptcy?

COVID-19: City of Vancouver at risk of bankruptcy, says mayor

The City of Vancouver is at risk of going bankrupt, says the mayor, citing a recent poll showing more than half of property owners are not expecting to pay full property taxes this year as COVID-19 financial woes take hold.

In a press release issued on Sunday afternoon, Mayor Kennedy Stewart said his earlier claim that the city would lose up to $189 million in revenue and fee shortfalls in 2020 could be $325 million short of the mark. The city has already laid off 1,500 workers.

“If 25 per cent of homeowners do end up defaulting on their property taxes, we could shed up to an additional $325 million in revenues,” Stewart said. “Losing more than half-a-billion dollars in operating funds in 2020 would devastate the city’s financial position, forcing us to liquify assets and exhaust every reserve fund we have — just to avoid insolvency.”

Property taxes make up the bulk of the city’s revenues at $874 million in 2019. Stewart said that Research Co. polling commissioned by his office found that a quarter of all property owners would not be able to pay more than half their property tax owed in 2020 and that six per cent were not expecting to pay anything at all. The poll also found that 68 per cent of Vancouver home owners did not pay their full mortgage on April 1, and that 55 per cent were not expecting to make their full mortgage payment on May 1.

According to the Canadian Bankers Association, over 500,000 Canadians have asked for mortgage deferrals in the wake of the COVID-19 crisis. This comes are banks are increasing interest rates.

The Research Co. survey also found Vancouver renters were being hit hard, with 30 per cent not able to make their full April rents and 63 per cent not expecting to make full rent in May. Over one million Canadians have so far applied for the federal government’s $2,000 a month COVID-19 emergency benefit. The survey found that 46 percent of those living in the city had either lost their jobs or experienced a reduction in hours. This has led to half of all households reporting an overall decrease in income, with 24 percent experiencing a significant decrease.

“The research is clear — the city’s finances are going to be negatively affected by COVID-19 due to lost revenues and hard-hit homeowners defaulting on their property taxes,” Kennedy said.

“It’s illegal for Vancouver and other local governments to run deficits, so the only way we can stay afloat is with the help of the federal and provincial governments. Otherwise, local governments will be forced to take drastic measures that will hurt residents and businesses, and significantly slow any post-pandemic economic recovery.”

According to the city’s financial records, the city’s overall financial position improved by $300.8 million in 2019 with accumulated surplus totalling $7.9 billion. The city is carrying $1 billion in debt and last year received an extra $40 million in property tax, as payments from developers plunged. City expenses climbed over $300 million a year between 2015 and 2019. The city has $1.28 billion in reserves, including $146 million set aside for catastrophic events. Last week, Mayor Stewart called on the provincial government to give the city $200 million.

The online survey was conducted by Research Co. between April 9 and April 10, 2020. The results for employed residents are based on a sample of 421 Vancouver residents, the results for homeowners were based on a sample of 278 Vancouver residents and the results for renters were based on a sample of 301 Vancouver residents.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon Apr 13, 2020 7:52 am
by 8bitagent
I won't be posting on here anymore, or really anywhere online. Good luck to everyone. I just thought it was interesting that as the entire Meat animal slaughter industry in America, oil, postal system and basically everything people held as sacred cows that would be here yes, now in total collapse mode...DISNEY corporation is on the verge of total collapse. Wakey Wakey folks. Save yourself, help people but ultimately who knows how everything re-alligns and shapes up ... m0jrahkEk8

Re: Economic Crash of 2020: The Fuckening

PostPosted: Wed Apr 22, 2020 7:03 am
by Wombaticus Rex
Countries Starting to Hoard Food, Threatening Global Trade

Some governments are moving to secure domestic food supplies during the conoravirus pandemic.

Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others, including carrots, sugar and potatoes. Vietnam temporarily suspended new rice export contracts. Serbia has stopped the flow of its sunflower oil and other goods, while Russia is leaving the door open to shipment bans and said it’s assessing the situation weekly.

To be perfectly clear, there have been just a handful of moves and no sure signs that much more is on the horizon. Still, what’s been happening has raised a question: Is this the start of a wave of food nationalism that will further disrupt supply chains and trade flows?

“We’re starting to see this happening already -- and all we can see is that the lockdown is going to get worse,” said Tim Benton, research director in emerging risks at think tank Chatham House in London.

Though food supplies are ample, logistical hurdles are making it harder to get products where they need to be as the coronavirus unleashes unprecedented measures, panic buying and the threat of labor crunches.

Then there's a riff about how opposition to globalism is bad I'll just omit...

Some nations are adding to their strategic reserves. China, the biggest rice grower and consumer, pledged to buy more than ever before from its domestic harvest, even though the government already holds massive stockpiles of rice and wheat, enough for one year of consumption.

Key wheat importers including Algeria and Turkey have also issued new tenders, and Morocco said a suspension on wheat-import duties would last through mid-June.

As governments take nationalistic approaches, they risk disrupting an international system that has become increasingly interconnected in recent decades.

Kazakhstan had already stopped exports of other food staples, like buckwheat and onions, before the move this week to cut off wheat-flour shipments. That latest action was a much bigger step, with the potential to affect companies around the world that rely on the supplies to make bread.

For some commodities, a handful of countries, or even fewer, make up the bulk of exportable supplies. Disruptions to those shipments would have major global ramifications. Take, for example, Russia, which has emerged as the world’s top wheat exporter and a key supplier to North Africa. Vietnam is the third-largest rice exporter, sending many of its cargoes to the Philippines.

“If governments are not working collectively and cooperatively to ensure there is a global supply, if they’re just putting their nations first, you can end up in a situation where things get worse,” said Benton of Chatham House.

He warned that frenzied shopping coupled with protectionist policies could eventually lead to higher food prices -- a cycle that could end up perpetuating itself.

“If you’re panic buying on the market for next year’s harvest, then prices will go up, and as prices go up, policy makers will panic more,” he said.

And higher grocery bills can have major ramifications. Bread costs have a long history of kick-starting unrest and political instability. During the food price spikes of 2011 and 2008, there were food riots in more than 30 nations across Africa, Asia and the Middle East.

“Without the food supply, societies just totally break,” Benton said.

Unlike previous periods of rampant food inflation, global inventories of staple crops like corn, wheat, soybeans and rice are plentiful, said Dan Kowalski, vice president of research at CoBank, a $145 billion lender to the agriculture industry, adding he doesn’t expect “dramatic” gains for prices now.

While the spikes of the last decade were initially caused by climate problems for crops, policies exacerbated the consequences. In 2010, Russia experienced a record heat wave that damaged the wheat crop. The government responded by banning exports to make sure domestic consumers had enough.

The United Nations’ measure of global food prices reached a record high by February 2011.

“Given the problem that we are facing now, it’s not the moment to put these types of policies into place,” said Maximo Torero, chief economist at the UN’s Food and Agriculture Organization. “On the contrary, it’s the moment to cooperate and coordinate.”

Naturally, how this problem shakes out this year is the epitome of "downstream effects." On a planet where "food supplies are ample," as Bloomberg blithely informs us, two billion people are somehow in a perpetual "food insecurity," as the wonks are wont to put it. The food is here, it's just not evenly distributed yet. And those are the people who will get hit the very hardest.

Consider India, where (per FT) "although agriculture itself accounts for just 15 per cent of India’s gross domestic product, it employs nearly half the workforce." In China, it's about half that -- still a massive demographic considering both nations are members of The Billion+ Club.

Food insecurity is heavy in conflict areas, which will be doubly devastated in 2020 as the market forces described above affect the available supply for emergency x charity intervention in areas like Yemen, Afghanistan, Sudan, and Haiti. This is what Jesus what talking about when he observed that those who have nothing will even have that taken away from them.

Here in the Land of Plenty, the future is far less grim, of course. Some observations from Peter Zeihan:

The United States is by far the world’s largest agricultural producer and exporter. For America’s food supply system to truly break down in the age of coronavirus, a whole lot of things would need to go wrong.

But that is not the same thing as saying there are not challenges.

Despite all the disruption the coronavirus epidemic is causing the United States, the food supply system is working well. Disruptions are largely limited to changes in demand (such as hoarding), as opposed to challenges to supply. There is zero reason to expect the United States to need to bar food exports. No region of the country is going to starve, much less the country as a whole.

My high confidence in this projection comes down to simple economic geography. America’s agricultural capacity is absolutely unparalleled.

Vast tracts of flat, fertile, arable land in a wide variety of temperate climate subzones to support a wealth of crops. Winter weather to kill bugs and weeds. Wind currents from the Pacific and Gulf of Mexico to provide ample, reliable precipitation. And all of it overlaid with the world’s largest, interconnected, naturally navigable waterway system to ensure easy and cheap transport of the resulting product.

Much of the country’s agricultural labor force in the harvesting of fruits and vegetables, as well as in the processing of meats, is not highly spaced out and so is vulnerable to the virus. Each step of getting foodstuffs from production to processing to packaging to retail requires a different truck…with a different driver. More steps, more chances for disruption. And food producers in one part of the country might not even be aware of food demands in a different part of the country, leading them to plow under their fields or dump milk in ditches, even in times of stress.

Which brings us to two conclusions.

First, it is time to start gaming out weaknesses in the system. Trucking, meat packing, food processing, migrant labor dependency, grocery store workers. All these and more are potential failure points. For them to impact—I mean really impact—food supplies at the local level they would need to fail badly. But low risk is not the same as no risk, and coronavirus continues to…surprise.

Second, we will have product mismatches. It is less an issue of raw demand or supply, and instead an issue of preparation and packaging.

Something like one-third of the meals Americans used to eat were eaten out. The sort of food processing and packaging for IHOP is significantly different from the sorts of products you purchase at the grocery store. The food processing industry is shifting onto a new footing more appropriate for Quarantine World, but it doesn’t happen overnight. In the meantime, it isn’t that there is less food available, it is our new stay-at-home lifestyles have concentrated demand into specific product categories.

Indeed, my biggest surprise drilling down on food supply chain issues last week was how hugely dependent everything was on sizing, packaging and labeling. And also how small, proportionally, individual / grocery level demand it. The bulk of the food business in the USA is enterprise x institutions: restaurants, schools, hotels, etc.

Once again, the logic here is relentless and it favors the asshole predators of private equity, sitting on their endless piles of "dry powder" money. Small producers will be the first to get fucked and their fungible assets / capacity will be sold at fire sale prices. The big players will get bigger, consolidate control, and even consume each other through mergers and buyouts.

The end of this is just more power in the hands of fewer people.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon Apr 27, 2020 3:55 pm
by Wombaticus Rex
Wombaticus Rex » Wed Apr 22, 2020 6:03 am wrote:The end of this is just more power in the hands of fewer people.

WSJ nerds agree:

Via: ... 1587930994

By Sam Long and Alexander Synkov

The Federal Reserve’s recent decision to purchase trillions in corporate debt went underreported on Main Street, but shocked credit markets. The move will cushion losses for investors in risky assets, yet it’s a dubious step for American capitalism as a whole—one that will accelerate some of the most dangerous trends in the U.S. economy.

Altogether the Fed will deploy more than $1.45 trillion in support of investors in leveraged assets—more than double the size of the 2008 Troubled Asset Relief Program, and over $7,000 for each working-age American. That includes $750 billion to purchase recently downgraded junk bonds and bond exchange-traded funds—an unprecedented intervention in the private credit markets.

Pumping trillions of dollars into corporate credit and even high-yield debt will further distort markets already shaped by a decade of easy-money policies.
This is no abstract concern. The result will be an acceleration of two economy-wide transfers of wealth: from the middle class to the affluent and from the cautious to the reckless.

The transfer from the middle class to the wealthy continues a trend begun in the wake of the 2007-09 financial crisis. Like the Fed’s combination of depressed interest rates and quantitative-easing government debt purchases, the new intervention will funnel trillions of dollars toward financial markets and the corporations able to participate in them.

Fed Chairman Jerome Powell had little to say about the move, wrapping it in with the central bank’s broader mission to keep workers employed. But bankruptcies among highly leveraged businesses often pose surprisingly little risk to employment. More often than not, creditors choose to keep businesses staffed even when restructuring to retain value for the long-term. By preventing these bankruptcies, the Fed is doing more for equity holders and junior creditors than for employees.

Inflated asset prices spurred by years of low interest rates have also expanded the gap between investors and most Americans. The Fed’s purchases of high-yield ETFs and other instruments will widen it further. At the end of 2019, the average ratio of price to unleveraged cash earnings for S&P 500 companies was 13.4, more than a quarter higher than the 30-year average of 10.6. Drastic monetary stimulus may drive cyclically adjusted multiples even higher, pushing up returns for those who bet on risky assets relative to more cautious savers, many of whom have had meager earnings since the Fed cut interest rates 12 years ago. The average return on a five-year deposit, for example, dropped from 4% to 1% in the past decade.

Low interest rates are designed to encourage risk-taking. But the Fed’s pre-emptive bailout effectively eliminates risk retroactively. A CEO took a risk when he chose to borrow for share buybacks, as did an investor who bought a portfolio of highly leveraged loans. Making such risk-taking riskless necessarily makes prudence unprofitable in comparison. This is effectively a second transfer of wealth, from the most cautious participants in the economy to the most aggressive. At a time when millions of workers are being asked to sacrifice their incomes for the nation’s health, policy makers have chosen to punish savings and penalize prudence—a move that may undermine many Americans’ already wavering faith in capitalism.

Mr. Long is a search-fund investor in Boston. Mr. Synkov is a private-equity investor in New York.

Noam Chomsky on COVID & ECONOMY

PostPosted: Fri May 08, 2020 7:04 am
by §ê¢rꆧ

(starts 4:15)

TLDW: If we do nothing, Neoliberalism with much "harsher texture" coming; We'll get through the Coronovirus Crisis—climate change is the greater threat, with a couple of interesting cites, like 45's Department of Transportation's conclusions and advisory stating (paraphrasing a paraphrasing) that we should cut all emissions restrictions because we may as well make money before it's all over for the planet. (To me this jibes with the thinking of the Evangelical End-times mob propping up the Manbaby-in-Chief, too). Then comes Godwin's H-bomb: Trump is worse than Hitler, which, gobsmackingly trite and trolly as it is, coming from Noam bears at least momentarily considering his assertion that willfully encouraging the imminent destruction of all life on planet Earth for selfish gain is an order of magnitude greater than the Holocaust. Our only hope lies in mass organizing, like how we abolished (overt) slavery, got the women's vote (when the machines aren't rigged) and achieved (some) labor rights.

In about >40 but < 50 years I'll be 91, and it's hard for me to imagine the world lasting that long, let alone me...which may just be mental contagion/transference from Noam Chomsky contemplating his Own End Times and Azrael's saturating his otherwise cogent and learned thinking with the beauty of her inevitability and finality.

If that's the case the only way I can see a way forward is to keep Noam around and sharp enough for Elon Musk's neurolink, so we can link our new AI gods with some of Noam Chomsky's mind.

TLDR OR W: :hourglass:

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon May 11, 2020 1:37 am
by Grizzly
So where is the outrage from all of those Pulitzer prize winning newspapers across America over the second massive Wall Street bailout in 12 years? Their silence is deafening."

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon May 11, 2020 2:39 pm
by JackRiddler

Hudson outlines the moment and the real purpose of the bailout very well, also teaches the mini-Max (Ben Norton) some MMT and why it's not incompatible with Marxian thinking. On the latter, he should have gone further, beyond the idea that the financialized economy is a giant scam in which the Treasury and Fed exist to assist perpetual accumulation and concentration at the top. Norton obviously, like so many of us, is still stuck at the point where he doesn't get that money really doesn't exist except as created (not "printed") by banks or states. Anyway Hudson's explanation of how asset inflation drives economic deflation is simple and compact.

Hudson blogs all of his appearances with full transcripts, apparently.

21 APRIL 2020

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, “A debt jubilee is the only way to avoid a depression,” The Washington Post, March 21, 2020

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.

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?

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.

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?

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.

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?

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.”

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.

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.

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.

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?

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?

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.


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?

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?

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.

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 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

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 Please consider supporting us. And definitely join us in part 2. See you soon.

Re: Economic Crash of 2020: The Fuckening

PostPosted: Mon May 11, 2020 7:50 pm
by Elvis
Michael Hudson is great. I just had this up, relevant:

Why Deficits Hurt Banking Profits ... g-profits/

Re: Economic Crash of 2020: The Fuckening

PostPosted: Sat May 16, 2020 1:07 am
by Grizzly


Meanwhile, I'm watching MY local businesses lay off workers, and pocket the PPP (paycheck protection program) MONIES, just like we paid Billions to the telecons (sic) to lay fibre and build infrastructure (zero over-site or accountability) so we TAXPAYERS can have real speed, ...but after we gave them Billions, we're still ranked behind Romania in internet speed, AND WE CREATED THE FUCKING INTERNET. Then, they throw us bread crumbs of unlimited data, as if being chartable, pretending like we haven't already paid for this TEN TIMES OVER... I see serious unrest on the horizon, and the aftermath of this shock doctrine plandemic. They better hope their control grid works, cause HELL will be coming
and soon.

Unemployment claims surpass 36 MILLION, as poorest amongst us get WIPED OUT

Fuckening, indeed.