Eric Zuesse, originally posted at Strategic Culture
America’s bailout package to overcome the coronavirus ‘recession’ is twofold:
One part is printing money for employees and consumers, so that they won’t be thrown out onto the streets for non-payment of debts such as mortgages, car-loans, credit cards, and student loans.
Another part is printing money for bondholders and stockholders, so that their investments will still have value and there won’t be panicked selling of them as corporations accumulate soaring losses because consumers are staying home and are cutting way back on expenses.
The top-down part of the bailout (the part for investors) will merely add to the wealth of the already-wealthy, while everybody else sinks financially into oblivion. (On April 9th, the Zero Hedge financial site explained in detail why even bailing out the airlines would hurt the economy more than help the economy.) The top-down part supplies the money to the corporations instead of to their employees and consumers, and is therefore supply-boosting instead of demand-boosting. Supplying money to the corporations that the Government selects to protect will enable those corporations to buy up assets and corporations which during the crisis are being auctioned off by the ones that go out of business, and this will leave the nation’s wealth in even fewer hands than before the epidemic struck.
The bottom-up part (the part for workers and consumers) will be exactly the opposite of that: it will help prevent another Great Depression. By boosting purchases, instead of bailing-out billionaires and such, it will enable the economy to keep functioning, and it will not increase the concentration of wealth.
However, employees and consumers don’t have many lobbyists, but billionaires do, and billionaires also own (through political donations and lobbyists) almost all members of Congress (and also the mainstream press), and they not only own, but are represented by, one inside the White House, who is surrounded there by others, and by representatives of others, so that the concerns of the wealthiest will be very well represented by America’s Government, and will end up dominating the bailouts, so that only the insiders, who are well-connected in Washington, will be protected. (And Joe Biden would be no improvement over Donald Trump, though his rhetoric is different.)
Already, we see, in the ‘news’-reports, that there is ‘chaos’ etc. in the U.S. Government’s response to the crisis, but what’s not being reported in the mainstream ‘news’-media is that there very much is method to this seeming madness, and it is the method of the well-practiced and well-funded takers, definitely not of their victims, from whom they (and their Government) have been, and now increasingly are, taking. The takers own the Deep State, and are protected by it. The vast bulk of the bailouts will go to them. The vast bulk of the bailouts will go to suppliers (investors), not to their workers and consumers.
Printing money for bondholders and stockholders will predominate. It won’t be like Franklin Delano Roosevelt (FDR) did during the first Great Depression, when the federal money went to the public instead of to the megacorporations; it will be the opposite. This will be a supercharged concentration of wealth. Money is power, and the power of billionaires will thus be enormously increased; the power of the public will go to zero.
The inevitable result of this will be enormous spreading poverty, and, ultimately, so many dollars being owned by the billionaires, so that hyperinflation will result if this continues for more than a few months, and it will not be able to be overcome by any form of monetary response, because it will instead be a problem about the distribution of actual wealth (not mere money); and, as Raoul Pal phrased this problem, “Money printing does not make the dollars available. They get stuck in the financial system and hoarded” (by the wealthy), at a time like this. So: there still will be wealth, but increasing percentages of it will be owned by the super-rich; and, so, their corporations will experience plunging sales. Everything (except, perhaps, gold, etc.) will actually be worth less than it was before, even though inflation will be soaring. More dollars will be chasing fewer goods and services that are actually being purchased. The stock and bond markets will then crash. The result will be like Germany during the Weimar Republic. But the cause of it will be different; it won’t be war-reparations payments; it will instead be the almost unimaginable corruption at the very top of the U.S. Government and economy. Whereas Germany had a deeply rooted social-welfare system, America does not, and most of America’s billionaires are Republicans (unapologetically elitist psychopaths), which means they want there to be even less of that: simply dog-eat-dog (survival of the ‘fittest’) amongst everybody else — not their own class. Although Democratic politicians will probably sweep the November elections, those individuals are deeply indebted to Democratic Party billionaires, for their very careers. These billionaires must be served first — it’s the American way, “Greed is good” (at least after 1980).
One of the reasons why Weimar-era Germans gravitated politically rightward was that Germany at that time did not have a right-wing-populist Government; and, so, right-wing-populist politicians didn’t get the blame. Hitler came to power then. America now does have a right-wing-populist Government. Right-wing populism will therefore get the blame. If the leftwing-populist, democratic socialist, Bernie Sanders had been chosen by Democratic Party voters, then America would not be facing its present very dire prospects, and congressional Democrats (because their Presidential candidate would then be leading them) would now be blocking — instead of passing into law (as it now is) — the bailouts for millionaires and billionaires; but there is no such leadership, at this crucial time. (As a leader, Joe Biden is already a failure.) This is why America now faces a near certainty of another Great Depression. It comes from the leadership, and the leadership don’t represent the public.
The result when a right-wing-populist country faces collapse is a police-state, facing a revolution: military guns and tanks, facing the public. If Democrats win the November elections, then Democratic Party billionaires, and not Republican Party ones, will be making the decisions. Biden is no FDR.
Perhaps there exists no close historical precedent for understanding what the outcome of that would be. If there instead turn out to be Republican billionaires continuing to make the decisions, then there will be massive bloodshed, and increasing defections from the Government, and an increasingly unmanageable revolution, which will be a hell for any predictions. But with Democratic Party billionaires taking charge, there will be at least a possibility of fundamental reform. Perhaps someone like FDR will arise after Joe Biden’s corruption and incompetency (he won the nomination by cheating) will have been sufficiently displayed for a few years. Therefore, maybe, starting in 2024 (after Biden’s failure), things will be able to start turning around, for the better, by means of a new set of primaries for the Democratic Party’s nomination (or else by a Constitutional Amendment doing away with political parties and the Electoral College).
The fundamental problem, right now, is that the sheer corruption at the very top of the U.S. Government will cause trillions of dollars of federal bailouts to go to the very wealthiest Americans, at a time when there is soaring need by the public. The idea that America will be able to succeed no matter how corrupt its Government is, is now being tested, and I don’t see any way that such an idea will be able to pass such a test. But only time will tell. We’re now in an enormous experiment — that’s for sure.
There is one reason to hope that the bleak scenario described here might be averted. The most advanced software for predicting Covid-19 cases and fatalities in the United States provides projections at the “Health Data” site, which started on April 7th, by projecting that the peak in cases will be on April 15th and that by May 21st there will have been 81,000 deaths, and that by August 4th the final death will be recorded, at 81,766. Three days later, on April 10th, the projections were instead that the peak will be on April 11th and that by May 22nd there will have been 60,000 deaths, and that the final death will be recorded on August 4th, at 60,415. (But that estimate suddenly soared back up on April 13th to 68,841.) This 26% (or now 16%) reduction in the ultimate total death estimate, within only 3 (or 5) days, indicates that perhaps the outlook is less dire than has generally been thought to be the case. However, if optimistic projections turn out to be true, so that almost no Americans will die from Covid-19 after May 22nd, then the question will still remain: With tens of millions of Americans having gone for so long without income, what will be the consequence to the American economy? It will still be another Great Depression. In fact, on April 9th CNBC headlined “JPMorgan now sees economy contracting by 40% in second quarter, and unemployment reaching 20%”. (Total GDP-contraction during the Great Depression was a decline of 46% during 1929-1933, the steepest such plunge in U.S. history. Peak unemployment that was reached during the Great Depression — also a U.S. record — was 19%, in 1938.) But maybe it won’t last as long as the first one did. Furthermore, if the Government’s response to the crisis will be the opposite of what FDR’s was and will bail out the megacorporations instead of bail out only the public, what type of country will there be afterwards? That’s the problem — the insatiable and enormous grabbing by America’s super-rich, by means of their (not our) Government. As the liberal billionaire Warren Buffett observed in November 2006, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Now, nearly 14 years later (and especially after the current round of bailouts), we can say, simply: they won. America is a dictatorship by the rich; no longer a government “of the people, by the people, for the people.” Not only do Republican voters want to retain this dictatorship by the rich, but Joe Biden’s victory against Bernie Sanders proves that many Democratic voters also want it to continue. Sanders was the only candidate calling for “revolution,” and that call by him was spurned. That decision by the voters, which was guided by the lobbyists and news-media, which were guided by the billionaires, shapes America’s future.
Also on April 9th, the New York Times bannered “Fed’s Plan Far Exceeds Its 2008 Rescue”. That’s virtually unregulated money flowing to investors, unlike what will be going to workers and consumers. The Fed even “stopped short of applying limits on offshoring.” And, as the article also noted, this money that the Treasury will lend through the Fed includes “Help for corporations,” “Limited support for risky debt,” and “Help for state and city governments”; and any of these Fed loans that end up not being repaid will increase Americans’ future federal taxes. Though investors will be protected, “offshoring” of workers’ jobs will continue, and the public’s descendants will be left holding the bag of any losses.
Then, on April 13th was the announcement that “Morgan Stanley warns that a potential second wave of infections could strike around November/December”. The firm said “We believe the path to re-opening the economy is going to be long. It will require turning on and off various forms of social distancing and will only come to an end when vaccines are available, in the spring of 2021 at the earliest.” How will it then be possible to avoid a Second Great Depression? Will the Fed be able to continue printing money without limit? Would an immense financial crash be avoided even if it can? The realistic outlook now appears to be super-grim. Perhaps sooner than anyone now expects, every investor will start selling into paper investment-markets that suddenly have no buyers at anything like today’s prices.
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.